Question 1

In an organization,departments that have tasks leading to the primary objectives of the organization are:

Accepted Answer

A)  service departments. 
B)  operating departments. 
C)  primary departments. 
D)  strategic departments 
A)  service departments. 
B)  operating departments. 
C)  primary departments. 
D)  strategic departments

Question 2

Martin's is a store with three departments,Appliances,Tools,and Home Improvements.The company expects to incur the following indirect costs related to its operations:
Store manager's salary
Store supplies
Electric bill
Clerical staff salaries
Payroll taxes
Office supplies
Water bill
Sewer bill
Medical insurance
Vacation pay
Required:
1)Organize the indirect costs into three cost pools: Store Administration,Utilities,and Fringe Benefit Costs,assuming that each department is a cost object
2)Identify an appropriate cost driver for each cost pool.

Accepted Answer

Answers will vary
1)Cost Pools
Store Adm

Question 3

Pets 'n Pals is attempting to determine the cost of operating a particular store.Which of the following costs would be classified as an indirect cost?

Accepted Answer

A)  Fees paid to external accountant for corporate audit 
B)  Cost of operating company owned vehicles by the store 
C)  Salary of store manager 
D)  Cost of aquariums used to display exotic fish 
A)  Fees paid to external accountant for corporate audit 
B)  Cost of operating company owned vehicles by the store 
C)  Salary of store manager 
D)  Cost of aquariums used to display exotic fish

Question 4

Michael & Co.expects overhead costs of $60,000 per month and direct production costs of $24 per unit.The estimated production activity for the current accounting period is as follows: $\begin{array}{|l|l|l|l|l|}
\hline & 1^{st} \text {  Quarter } &2^{nd} \text { Quarter } & 3^{nd}\text {  Quarter } &4^{th} \text {  Quarter } \
\hline \text { Unats produced } & 11,500 & 9,000 & 8,250 & 11,250 \
\hline
\end{array}$ The predetermined overhead rate based on units produced is (rounded to the nearest penny)is:

Accepted Answer

A)  $1.50 per unit. 
B)  $2.67 per unit. 
C)  $18.00 per unit. 
D)  $42.00 per unit. 
A)  $1.50 per unit. 
B)  $2.67 per unit. 
C)  $18.00 per unit. 
D)  $42.00 per unit.

Question 5

State University's College of Business is divided into three departments,accounting,marketing,and management.Relevant information for each department is provided below: $\begin{array}{|l|l|l|l|}
\hline \text { Cost Driver } & \text { Accounting } & \text { Marketing } & \text { Management } \
\hline \text { Number of students } & 700 & 400 & 200 \
\hline \begin{array}{l}
\text { Number of classes per } \
\text { semester }
\end{array} & 32 & 18 & 14 \
\hline \text { Number of faculty } & 10 & 12 & 5 \
\hline
\end{array}$ The Dean of the College of Business is trying to assign funds from the operating budget to the three departments.Assuming that the chair of each department is trying to attain the highest funding possible for his/her department,which of the following most accurately describes the allocation base that each chair will favor?

Accepted Answer

A)  The chair of the Management department will want to use the number of classes while the chair of the Marketing department will prefer the number of faculty. 
B)  The chair of the Accounting department and the chair of the Management department will want to use the number of faculty. 
C)  The chair of the Marketing department will want to use number of students,while the chair of the Accounting department will want to use number of classes per semester. 
D)  The chair of the Accounting department will want to use number of students while the chair of the Management department will want to use number of faculty. 
A)  The chair of the Management department will want to use the number of classes while the chair of the Marketing department will prefer the number of faculty. 
B)  The chair of the Accounting department and the chair of the Management department will want to use the number of faculty. 
C)  The chair of the Marketing department will want to use number of students,while the chair of the Accounting department will want to use number of classes per semester. 
D)  The chair of the Accounting department will want to use number of students while the chair of the Management department will want to use number of faculty.

Question 6

Select the term from the list provided that best describes each of the following descriptions.

Accepted Answer

The answer of Select the term from the list provided...

Question 7

The following are Acme's production costs for the quarter ended September 30th: 
 $\begin{array}{|l|l|}
\hline \text { Direct materials } & \$ 150,000 \
\hline \text { Direct labor } & \$ 175,000 \
\hline \text { Factory overhead } & \$ 225,000 \
\hline
\end{array}$ What amount of costs should be traced to specific products in the process?

Accepted Answer

A)  $150,000 
B)  $175,000 
C)  $225,000 
D)  $325,000 
A)  $150,000 
B)  $175,000 
C)  $225,000 
D)  $325,000

Question 8

Alleghany Community College operates four departments.The square footage used by each department is shown below. $\begin{array}{|l|r|}
\hline {\text { Department }} & \text { Square Footage } \
\hline \text { Accounting } & 3,000 \
\hline \text { Marketing } & 4,000 \
\hline \text { Technology } & 6,000 \
\hline \text { Sciences } & 3,000 \
\hline \text { Total } & \mathbf{1 6 , 0 0 0} \
\hline
\end{array}$ Alleghany's annual building rental cost is $320,000. What amount of rent expense that should be allocated to the Technology Department?

Accepted Answer

A)  $60,000 
B)  $80,000 
C)  $120,000 
D)  $192,000 
A)  $60,000 
B)  $80,000 
C)  $120,000 
D)  $192,000

Question 9

The process of dividing a total cost into parts and assigning it to cost objects is known as:

Accepted Answer

A)  cost tracing. 
B)  cost division. 
C)  cost allocation. 
D)  None of the answers are correct. 
A)  cost tracing. 
B)  cost division. 
C)  cost allocation. 
D)  None of the answers are correct.

Question 10

Jefferson Company expects to incur $450,000 in manufacturing overhead costs during the current year.Other budget information follows: $\begin{array}{|l|r|r|r|}
\hline & \text { Department A } & \text { Department B } & \text { Department C } \
\hline \text { Direct labor hours } & 15,000 & 5,000 & 20,000 \
\hline \text { Machine hours } & 8,000 & 10,000 & 12,000 \
\hline
\end{array}$ Required:
1)Use direct labor hours as the cost driver to compute the allocation rate.Determine the amount of budgeted overhead cost for each department.
2)Use machine hours as the cost driver to compute the allocation.Determine the amount of budgeted overhead cost for each department.
3)Assume that Department A manufactured a product that required 160 direct labor hours and 85 machine hours.If overhead is allocated based on direct labor hours,how much overhead would be allocated to this product?
4)Assume that Department A manufactured a product that required 160 direct labor hours and 85 machine hours.If overhead is allocated based on machine hours,how much overhead would be allocated to this product?

Accepted Answer

Answers:
1)Allocation rate = $450,000 ÷

Question 11

A number of costs that are commonly allocated are listed in the following table followed by two alternative cost allocation bases. \(\begin{array}{|l|l|l|}
\hline \text { Cost Description } & {\text { Allocation Base Altematives }} \
\hline \text { Cafeteria costs } & \text { Direct labor costs } & \text { Number of employees } \
\hline \text { Computer system costs } & \text { Number of departments } & \text { Amount of computer time used } \
\hline \text { Indirect labor costs } & \text { Direct labor hours } & \text { Number of supervisors } \
\hline \text { Indrrect matenals } & \text { Direct labor hours } & \text { Drrect material dollars } \
\hline \text { Factory rent } & \text { Number of departments } & \text { Square footage } \
\hline \text { Fringe benefits costs } & \text { Number of departments } & \text { Number of employees } \
\hline \text { Housekeeping costs } & \text { Square footage } & \text { Number of employees } \
\hline \text { Joint costs } & \text { Number of joint products } & \text { Sales value at split-off } \
\hline \text { Maintenance costs } & \text { Machine hours } & \text { Number of employees } \
\hline \text { Personnel department costs } & \text { Number of employees } & \text { Number of departments } \
\hline
\end{array}\) Required: For each cost listed,circle the cost allocation base that you believe would be more appropriate for allocating the cost.

Accepted Answer

\[\begin{array} { | l | l | l | } 
\hlin

Question 12

Nature's Soap manufactures Bar soap and Liquid soap.Of the following costs,which would be an indirect cost to the Liquid Department?

Accepted Answer

A)  Liquid manager's salary 
B)  Manufacturing plant insurance 
C)  Depreciation of the liquefying equipment 
D)  Liquid Fragrance 
A)  Liquid manager's salary 
B)  Manufacturing plant insurance 
C)  Depreciation of the liquefying equipment 
D)  Liquid Fragrance

Question 13

Biden Department Store has four departments: men's,women's,children's,and electronics.The following information is provided: $\begin{array}{|l|l|l|l|l|}
\hline & \text { Men's } & \text { Women's } & \text { Chaldren's } & \text { Electronics } \
\hline \text { Floof space } & 10,000 \mathrm{sq} . \mathrm{ft} & 20,000 \mathrm{sq} \text { ft. } & 8,000 \mathrm{sq} \text { ft. } & 2,000 \text { sq. ft. } \
\hline \text { Sales } & \$ 35,000 & \$ 75,000 & \$ 20,000 & \$ 12,000 \
\hline
\end{array}$ The company's accountant needs to allocate the store's annual rent of $160,000.
Required:
1)Compute the allocation rate that should be used to allocate the rent cost to the four departments.
2)Compute the amount of rent that should be allocated to each of the four departments.
3)Currently,the managers are paid a bonus based on sales.As you can see from the above table,the women's department manager will receive the largest bonus.Do you believe this bonus plan is fair to all four department managers? Why or why not?

Accepted Answer

1)Allocation rate: $160,000 ÷ 40,000 = $

Question 14

Cost allocation involves:

Accepted Answer

A)  Identifying a cost driver for each cost to be allocated. 
B)  Calculating an allocation rate for each cost to be allocated. 
C)  Multiplying the allocation rate by the weight of the cost driver. 
D)  All of the answers are correct. 
A)  Identifying a cost driver for each cost to be allocated. 
B)  Calculating an allocation rate for each cost to be allocated. 
C)  Multiplying the allocation rate by the weight of the cost driver. 
D)  All of the answers are correct.

Question 15

Craig Manufacturing Company operates its three production departments within a single facility.Each department produces its own products and maintains its own production equipment.Although they share a common facility,each department is overseen by a separate supervisor.Which one of the following costs is a direct cost of each department?

Accepted Answer

A)  Lease payment on facility 
B)  Depreciation on the facility 
C)  Production supervisor salary 
D)  Plant manager salary 
A)  Lease payment on facility 
B)  Depreciation on the facility 
C)  Production supervisor salary 
D)  Plant manager salary

Question 16

Indicate whether each of the following statements is

Accepted Answer

Indirect costs cannot be traced to a cos

Question 17

The most useful cost driver for allocating a particular cost is the one with the strongest cause-and-effect relationship.

Accepted Answer

A) True 
 B)False

Question 18

Indicate whether each of the following statements is

Accepted Answer

Estimated cost data must often be used i

Question 19

The College of Business Administration needs to distribute $12,000 received from an anonymous donor and earmarked for three business student organizations,Beta Alpha Psi (BAP),Delta Sigma Pi (DSP),and Beta Gamma Sigma (BGS).Relevant information is provided below: $\begin{array}{|l|r|l|r|}
\hline \text { Possible Cost Driver } & \text { BAP } & \text { DSP } & \text { BGS } \
\hline \text { Number of students } & 30 & 40 & 100 \
\hline \text { Budgeted expenses } & \$ 5,500 & \$ 4,000 & \$ 500 \
\hline \begin{array}{l}
\text { Number of } \
\text { organizations }
\end{array} & 1 & 1 & 1 \
\hline
\end{array}$ Assume that each organization wishes to obtain the highest funding possible.
Required:
1)Which cost driver will each organization recommend be used to distribute the funds?
2)Which cost driver would you recommend and why?

Accepted Answer

1)As a reference,consider that if the fu

Question 20

Assume that a factory seeks to allocate rent to several departments that occupy the factory.The factory is occupied by all the departments.Which of the following is the most logical cost driver for allocating the factory rent?

Accepted Answer

A)  Number of employees 
B)  Square footage occupied by each department 
C)  Machine hours 
D)  Number of labor hours in each department 
A)  Number of employees 
B)  Square footage occupied by each department 
C)  Machine hours 
D)  Number of labor hours in each department

In an organization,departments that have tasks leading to the primary objectives of the organization are:

Pets 'n Pals is attempting to determine the cost of operating a particular store.Which of the following costs would be classified as an indirect cost?

Select the term from the list provided that best describes each of the following descriptions.

The following are Acme's production costs for the quarter ended September 30^th: Direct materials \ 150,000 Direct labor \ 175,000 Factory overhead \ 225,000 What amount of costs should be traced to specific products in the process?

The process of dividing a total cost into parts and assigning it to cost objects is known as:

Nature's Soap manufactures Bar soap and Liquid soap.Of the following costs,which would be an indirect cost to the Liquid Department?

Cost allocation involves:

Indicate whether each of the following statements is

The most useful cost driver for allocating a particular cost is the one with the strongest cause-and-effect relationship.

Indicate whether each of the following statements is

Assume that a factory seeks to allocate rent to several departments that occupy the factory.The factory is occupied by all the departments.Which of the following is the most logical cost driver for allocating the factory rent?

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

In an organization,departments that have tasks leading to the primary objectives of the organization are:

Pets 'n Pals is attempting to determine the cost of operating a particular store.Which of the following costs would be classified as an indirect cost?

Select the term from the list provided that best describes each of the following descriptions.

The following are Acme's production costs for the quarter ended September 30th: Direct materials \ 150,000 Direct labor \ 175,000 Factory overhead \ 225,000 What amount of costs should be traced to specific products in the process?

The process of dividing a total cost into parts and assigning it to cost objects is known as:

Nature's Soap manufactures Bar soap and Liquid soap.Of the following costs,which would be an indirect cost to the Liquid Department?

Cost allocation involves:

Indicate whether each of the following statements is

The most useful cost driver for allocating a particular cost is the one with the strongest cause-and-effect relationship.

Indicate whether each of the following statements is

Assume that a factory seeks to allocate rent to several departments that occupy the factory.The factory is occupied by all the departments.Which of the following is the most logical cost driver for allocating the factory rent?

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

The following are Acme's production costs for the quarter ended September 30^th: Direct materials \ 150,000 Direct labor \ 175,000 Factory overhead \ 225,000 What amount of costs should be traced to specific products in the process?