Question 1

Use of the direct method to allocate service department costs may cause distortions in the measurement of cost objects.

Accepted Answer

A) True 
 B)False  True

Question 2

Custom Quilters makes decorative comforters,quilted garments,and other products in a small sewing factory.During the upcoming,the company expects to make 2,000 comforters.With respect to the comforters how would the fabric used to make the comforters be classified?

Accepted Answer

A)  Direct and variable 
B)  Direct and fixed 
C)  Indirect and variable 
D)  Indirect and fixed 
A)  Direct and variable 
B)  Direct and fixed 
C)  Indirect and variable 
D)  Indirect and fixed A

Question 3

Indicate whether each of the following statements is

Accepted Answer

Information prepared using allocated costs often is used in evaluating the performance of managers.
True
Information prepared using allocated costs should not be used in budgeting and resource allocation decisions within a company.
False
A cost that is indirect with respect to one cost object may be direct with respect to other cost objects.
True
Fixed costs generally are direct costs,and variable costs generally are indirect.
False
An allocation base causes a cost to be incurred.
False

Question 4

A factor having a "cause and effect" relationship with a cost object is called a(n):

Accepted Answer

A)  cost driver 
B)  allocation base 
C)  direct cost 
D)  indirect cost 
A)  cost driver 
B)  allocation base 
C)  direct cost 
D)  indirect cost

Question 5

Select the correct statement from the following.

Accepted Answer

A)  The allocation base determines whether a cost is classified as direct or indirect. 
B)  The same cost cannot be classified as both direct and indirect. 
C)  Relevant costs can include direct and indirect costs. 
D)  Direct costs always display a variable behavior pattern. 
A)  The allocation base determines whether a cost is classified as direct or indirect. 
B)  The same cost cannot be classified as both direct and indirect. 
C)  Relevant costs can include direct and indirect costs. 
D)  Direct costs always display a variable behavior pattern.

Question 6

Harrison Company expects to incur $600,000 in manufacturing overhead for the coming year.The company makes two products,A and B,and it has accumulated the following budget information for the products: $\begin{array}{|l|r|r|r|}
\hline & \text { Product } \mathrm{A} & \text { Product B } & \text { Total } \
\hline \text { Number of units to be } & & & \
\text { produced } & 10,000 & 5,000 & 15,000 \
\hline \text { Direct labor hours } & 25,000 & 5,000 & 30,000 \
\hline \text { Machine hours } & 15,000 & 30,000 & 45,000 \
\hline
\end{array}$ Required:
1)Use direct labor hours as the cost driver to compute the allocation rate.Determine the amount of budgeted overhead to be allocated to each unit of product
A.(Round to the nearest cent. )
2)Use machine hours as the cost driver to compute the allocation rate.Determine the amount of budgeted overhead to be allocated to each unit of product
A.(Round to the nearest cent. )
3)How should Harrison decide between machine hours and direct labor hours as the cost driver for its manufacturing overhead?

Accepted Answer

1)Allocation rate = $600,000 ÷ 30,000 di

Question 7

Blanton Company wishes to allocate rent expense of $24,000 to its three operating departments,A,B,and C.Assuming the three departments occupy 10,000,20,000 and 30,000 square feet respectively,the cost allocation rate for Department C is $0.80 per square foot.

Accepted Answer

A) True 
 B)False

Question 8

Morris Company makes one product,and it expects to incur a total of $600,000 in indirect (overhead)costs during the current year.Production of the product for the year is expected to be:  $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $ $\quad $Quarter 
$$\begin{array} { | l | l| l | l | l r | r | } 
\hline & 1 & 2 & 3 & 4 \
\hline \begin{array} { l } 
\text { Estimated } \
\text { production in } \
\text { units }
\end{array} &  40,000 & 15,000 &  27,000 & 38,000 \
\hline
\end{array}$$ Required:
1)Calculate a predetermined overhead rate based on the number of units of product expected to be made during the current year.
2)Assuming that direct materials and direct labor costs are $10 and $15,respectively,determine the total cost per unit using the overhead rate you calculated in part (1).

Accepted Answer

1)Predetermined overhead rate

Question 9

Cost accumulation is used to:

Accepted Answer

A)  Determine the cost of a particular cost object. 
B)  Identify and estimate opportunity costs. 
C)  Identify fixed and variable costs. 
D)  Set the selling price for a service. 
A)  Determine the cost of a particular cost object. 
B)  Identify and estimate opportunity costs. 
C)  Identify fixed and variable costs. 
D)  Set the selling price for a service.

Question 10

The step method of allocating service department costs allocates those costs to operating departments only.

Accepted Answer

A) True 
 B)False

Question 11

Preston Company has three divisions.The company should consider a cost to be a direct cost of a division if:

Accepted Answer

A)  It meets guidelines imposed by generally accepted accounting principles. 
B)  It can be traced to a division in a cost-effective manner. 
C)  It is a variable cost. 
D)  It can be allocated to a division. 
A)  It meets guidelines imposed by generally accepted accounting principles. 
B)  It can be traced to a division in a cost-effective manner. 
C)  It is a variable cost. 
D)  It can be allocated to a division.

Question 12

Which of the following is not a

Accepted Answer

A)  Costs that have been pooled for one purpose may require disaggregation for a different purpose. 
B)  Pooling costs that have different cost drivers may result in unreliable cost allocation. 
C)  A single cost pool will have more than one cost driver for different cost objects. 
D)  Pooled costs may require disaggregation when allocating costs for different purposes. 
A)  Costs that have been pooled for one purpose may require disaggregation for a different purpose. 
B)  Pooling costs that have different cost drivers may result in unreliable cost allocation. 
C)  A single cost pool will have more than one cost driver for different cost objects. 
D)  Pooled costs may require disaggregation when allocating costs for different purposes.

Question 13

Indirect costs are often pooled,and not allocated individually because:

Accepted Answer

A)  individual allocation would be more timely. 
B)  individual allocation would be more accurate. 
C)  individual allocation would be tedious. 
D)  the benefits of individual allocation of indirect costs are greater than the costs. 
A)  individual allocation would be more timely. 
B)  individual allocation would be more accurate. 
C)  individual allocation would be tedious. 
D)  the benefits of individual allocation of indirect costs are greater than the costs.

Question 14

Volume measures serve as good cost drivers for allocating variable overhead costs because of the causal relationship that exists between those drivers and variable costs.

Accepted Answer

A) True 
 B)False

Question 15

Jessup Company expects to incur overhead costs of $20,000 per month and direct production costs of $125 per unit.The estimated production activity for the upcoming year is 1,000 units.If the company desires to earn a gross profit of $50 per unit,the sales price per unit would be which of the following amounts?

Accepted Answer

A)  $175 
B)  $195 
C)  $415 
D)  $290 
A)  $175 
B)  $195 
C)  $415 
D)  $290

Question 16

Joint products A and B emerge from common processing that costs $150,000 and yields 8,000 units of Product A and 4,000 units of Product B.Product A can be sold for $100 per unit.Product B can be sold for $80 per unit.What amount of the joint costs will be assigned to Product B if joint costs are allocated on the basis of number of units produced? (Do not round your intermediate calculations. )

Accepted Answer

A)  $42,857 
B)  $66,667 
C)  $50,000 
D)  $100,000 
A)  $42,857 
B)  $66,667 
C)  $50,000 
D)  $100,000

Question 17

Indicate whether each of the following statements is

Accepted Answer

Companies group several individual overh

Question 18

Humphries Cons

Accepted Answer

A)  Labor hours 
B)  Direct material costs 
C)  Number of warehouses completed 
D)  Square footage of the warehouses 
A)  Labor hours 
B)  Direct material costs 
C)  Number of warehouses completed 
D)  Square footage of the warehouses

Question 19

Great Outdoors Company makes two types of camping tents.Making a standard camping tent requires 4 hours of labor while making a deluxe camping tent requires 10 hours of labor.During the most recent accounting period the company made 2,000 standard camping tents and 500 deluxe camping tents.Indirect manufacturing costs amounted to $52,000 and are allocated based on labor hours.Based on this information:

Accepted Answer

A)  $4 of overhead cost should be allocated to each camping tent regardless of the type of tent made. 
B)  $20.80 of overhead cost should be allocated to each camping tent regardless of the type of tent made. 
C)  $16 of overhead cost should be assigned to each standard camping tent and $40 of overhead cost should be assigned to each deluxe tent. 
D)  None of the answers are correct. 
A)  $4 of overhead cost should be allocated to each camping tent regardless of the type of tent made. 
B)  $20.80 of overhead cost should be allocated to each camping tent regardless of the type of tent made. 
C)  $16 of overhead cost should be assigned to each standard camping tent and $40 of overhead cost should be assigned to each deluxe tent. 
D)  None of the answers are correct.

Question 20

Sturbridge Company manufactures fine furniture and grandfather clocks.Sturbridge has an excellent reputation,and each grandfather clock sells for several thousand dollars.Which of the following is an indirect cost,assuming the cost object is the Clock Department?

Accepted Answer

A)  Salary of the clock production supervisor 
B)  Depreciation on the factory building 
C)  Depreciation on clock-making equipment 
D)  All of the answers are correct. 
A)  Salary of the clock production supervisor 
B)  Depreciation on the factory building 
C)  Depreciation on clock-making equipment 
D)  All of the answers are correct.

Use of the direct method to allocate service department costs may cause distortions in the measurement of cost objects.

Custom Quilters makes decorative comforters,quilted garments,and other products in a small sewing factory.During the upcoming,the company expects to make 2,000 comforters.With respect to the comforters how would the fabric used to make the comforters be classified?

Indicate whether each of the following statements is

A factor having a "cause and effect" relationship with a cost object is called a(n):

Select the correct statement from the following.

Blanton Company wishes to allocate rent expense of $24,000 to its three operating departments,A,B,and C.Assuming the three departments occupy 10,000,20,000 and 30,000 square feet respectively,the cost allocation rate for Department C is $0.80 per square foot.

Cost accumulation is used to:

The step method of allocating service department costs allocates those costs to operating departments only.

Preston Company has three divisions.The company should consider a cost to be a direct cost of a division if:

Which of the following is not a

Indirect costs are often pooled,and not allocated individually because:

Volume measures serve as good cost drivers for allocating variable overhead costs because of the causal relationship that exists between those drivers and variable costs.

Indicate whether each of the following statements is

Humphries Cons

Sturbridge Company manufactures fine furniture and grandfather clocks.Sturbridge has an excellent reputation,and each grandfather clock sells for several thousand dollars.Which of the following is an indirect cost,assuming the cost object is the Clock Department?

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 4: Cost Accumulation,Tracing,and Allocation

Use of the direct method to allocate service department costs may cause distortions in the measurement of cost objects.

Custom Quilters makes decorative comforters,quilted garments,and other products in a small sewing factory.During the upcoming,the company expects to make 2,000 comforters.With respect to the comforters how would the fabric used to make the comforters be classified?

Indicate whether each of the following statements is

A factor having a "cause and effect" relationship with a cost object is called a(n):

Select the correct statement from the following.

Blanton Company wishes to allocate rent expense of $24,000 to its three operating departments,A,B,and C.Assuming the three departments occupy 10,000,20,000 and 30,000 square feet respectively,the cost allocation rate for Department C is $0.80 per square foot.

Cost accumulation is used to:

The step method of allocating service department costs allocates those costs to operating departments only.

Preston Company has three divisions.The company should consider a cost to be a direct cost of a division if:

Which of the following is not a

Indirect costs are often pooled,and not allocated individually because:

Volume measures serve as good cost drivers for allocating variable overhead costs because of the causal relationship that exists between those drivers and variable costs.

Indicate whether each of the following statements is

Humphries Cons

Sturbridge Company manufactures fine furniture and grandfather clocks.Sturbridge has an excellent reputation,and each grandfather clock sells for several thousand dollars.Which of the following is an indirect cost,assuming the cost object is the Clock Department?

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters