Question 1

Compared to manufacturing firms,cost allocation in service firms:

Accepted Answer

A)  always requires greater sophistication in order to make work. 
B)  usually places a greater emphasis on direct labour costs. 
C)  emphasises direct material costs. 
D)  only requires the consideration of overhead costs. 
A)  always requires greater sophistication in order to make work. 
B)  usually places a greater emphasis on direct labour costs. 
C)  emphasises direct material costs. 
D)  only requires the consideration of overhead costs.

Question 2

Stacey Clothing
Stacey Clothing assigns overhead to clients based on total labour hours. The following information is available for the month of June:
$\begin{array}{ll}
\text { Estimated direct labour hours } & 4000 \text { hours } \
\text { Estimated indirect labour hours } & 2000 \text { hours } \
\text { Estimated overhead costs } & \$ 18000 \
\text { Actual total labour hours } & 6400 \text { hours } \
\text { Actual overhead costs } & \$ 17500
\end{array}$

-If direct labour hours were 3000,the predetermined overhead rate for the month of June would be:

Accepted Answer

A)  $4.50 per labour hour 
B)  $9.00 per labour hour 
C)  $3.00 per labour hour 
D)  $3.60 per labour hour 
A)  $4.50 per labour hour 
B)  $9.00 per labour hour 
C)  $3.00 per labour hour 
D)  $3.60 per labour hour

Question 3

By how much does the actual overhead change,if the applied overhead rate increases by $2 per hour?

Accepted Answer

A)  $12 000 
B)  $$6000 
C)  $18 000 
D)  No change 
A)  $12 000 
B)  $$6000 
C)  $18 000 
D)  No change

Question 4

Stacey Clothing
Stacey Clothing assigns overhead to clients based on total labour hours. The following information is available for the month of June:
$\begin{array}{ll}
\text { Estimated direct labour hours } & 4000 \text { hours } \
\text { Estimated indirect labour hours } & 2000 \text { hours } \
\text { Estimated overhead costs } & \$ 18000 \
\text { Actual total labour hours } & 6400 \text { hours } \
\text { Actual overhead costs } & \$ 17500
\end{array}$

-By how much was overhead over- or underapplied for the month of June?

Accepted Answer

A)  $1700 overapplied 
B)  $500 overapplied 
C)  $500 underapplied 
D)  $1700 underapplied 
A)  $1700 overapplied 
B)  $500 overapplied 
C)  $500 underapplied 
D)  $1700 underapplied

Question 5

You are considering setting up an accounting firm specialising in preparing budgets for clients.Identify five overhead costs you regard as being important to manage.Please explain why you consider these costs are important.

Accepted Answer

Five overhead costs might be:
1.Rent - o

Question 6

Brynne Graham owns a law practice.She wishes to earn an income of $350 000 from the business (ignore tax).She expects to work 3500 hours on clients in the year,if client work develops as expected.The firm incurs the following costs - rent of $2000 per month and secretarial costs of $4000 per month.
How much must Brynne charge per hour,in order to earn her target profit?

Accepted Answer

A)  $81.50 
B)  $79.43 
C)  $121.68 
D)  $100.00 
A)  $81.50 
B)  $79.43 
C)  $121.68 
D)  $100.00

Question 7

Professional services most closely relates to which of the following cost systems?

Accepted Answer

A)  Mass services costing system 
B)  Job costing system 
C)  Process costing system 
D)  Hybrid costing system 
A)  Mass services costing system 
B)  Job costing system 
C)  Process costing system 
D)  Hybrid costing system

Question 8

A service shop is characterised by:

Accepted Answer

A)  low contact time. 
B)  medium contact time. 
C)  high contact time. 
D)  low customisation. 
A)  low contact time. 
B)  medium contact time. 
C)  high contact time. 
D)  low customisation.

Question 9

Which of the following costs is the most likely to be traced to a customer in a service costing environment?

Accepted Answer

A)  Indirect labour costs 
B)  Direct labour costs 
C)  Manufacturing overhead costs 
D)  Selling and administrative costs 
A)  Indirect labour costs 
B)  Direct labour costs 
C)  Manufacturing overhead costs 
D)  Selling and administrative costs

Question 10

Party Organiser Ltd.allocates overheads to individual parties based on labour hours.At the beginning of the current year,estimated overhead costs were $3 000 000 and estimated labour hours were 1 200 000.By the end of the year,actual overhead costs were calculated to be $2 600 000 and actual labour hours were 1 050 000.
Required:
A Calculate the predetermined qverhead rate.
B. How much averhead wadd be applied to a particular job that required 200 labour hours?
C. How much total averhead was agplied during the year?
D. By how much was averhead aver- ar underapplied far the year? Be sure to indicate whether it was aver- or underagglied.

Accepted Answer

A. Predetermined rate @#LAT-DLM& 000 000 @#LAT-DLM&
B. $500.

Question 11

Which of the following costs is most likely not applicable in a service costing environment?

Accepted Answer

A)  Rent 
B)  Direct materials 
C)  Utilities expenses 
D)  Direct labour 
A)  Rent 
B)  Direct materials 
C)  Utilities expenses 
D)  Direct labour

Question 12

Which of the following statements is most incorrect regarding the service profit value chain?

Accepted Answer

A)  It explains how services result in profit in organisations. 
B)  It does not consider customer loyalty. 
C)  It is difficult to definitively measure many of its categories. 
D)  It cannot guarantee service organisation profitability. 
A)  It explains how services result in profit in organisations. 
B)  It does not consider customer loyalty. 
C)  It is difficult to definitively measure many of its categories. 
D)  It cannot guarantee service organisation profitability.

Question 13

Maria's Custom Tailoring is very labour intensive.Therefore,Maria has decided to use direct labour hours as the cost driver for assigning service overhead costs to specific jobs.During the month of February,the company incurred overhead costs of $6000.Some 600 direct labour hours were expected to be used during the month.Total actual direct labour hours during the month totalled 800.What is the predetermined overhead rate per month,if based on direct labour hours?

Accepted Answer

A)  $ 10.00 
B)  $ 7.50 
C)  $ 0.75 
D)  $ 0.101 
A)  $ 10.00 
B)  $ 7.50 
C)  $ 0.75 
D)  $ 0.101

Question 14

If I was interested in receiving a high quality,prestigious service where care is taken to ensure my every concern is addressed,I might contact a:

Accepted Answer

A)  mass services organisation. 
B)  service shop organisation. 
C)  professional services organisation. 
D)  retail organisation. 
A)  mass services organisation. 
B)  service shop organisation. 
C)  professional services organisation. 
D)  retail organisation.

Question 15

A medium level of contact time most closely relates to which of the following cost systems?

Accepted Answer

A)  Mass services costing system 
B)  Job costing system 
C)  Process costing system 
D)  Hybrid costing system 
A)  Mass services costing system 
B)  Job costing system 
C)  Process costing system 
D)  Hybrid costing system

Question 16

Jameson Inc.applies overhead using machine hours.The following data are available for the year:
$\begin{array}{lr}
  \text {Estimated direct labour hours  } &2000000\
 \text {Actual direct labour hours  } &1850000\
 \text { Overhead applied } &\$3700000\
 \text { Actual overhead  } &\$3200000\
\end{array}$

Required:
What predetermined overhead rate did Jameson Inc.use?

Accepted Answer

$2.00 per direct labour hour calculated

Question 17

Presley Products Inc.is a manufacturer of limited edition dolls.They use operations costing to measure and track the costs incurred for specific product lines.While most of the products do require some machine time,Presley has determined that direct labour hours drive its manufacturing overhead costs.During the month of April,the following data were available for a particular line of dolls:
$\begin{array}{llcc}
  \text { Direct labour } & \text {   3000 hours at $ \$ 10 $ per hour } \
 \text {Direct materials  } & \text {  4000 kilos at $ \$ 2 $ per kilo } \
\end{array}$

If total overhead costs during the month totalled $25 000 when a total of 50 000 direct labour hours were worked,what will be the total manufacturing cost for this line of dolls?

Accepted Answer

A)  $40 500 
B)  $44 000 
C)  $63 000 
D)  $39 500 
A)  $40 500 
B)  $44 000 
C)  $63 000 
D)  $39 500

Question 18

How are professional service firms different to mass service firms?

Accepted Answer

Professional service firms are highly sp

Question 19

What is the volume-variety framework? How does it help us to better understand service organisation types?

Accepted Answer

The volume-variety framework highlights

Question 20

Which of the following would probably not be a cost driver in a service environment?

Accepted Answer

A)  Machine hours 
B)  Units produced 
C)  Floor space 
D)  Inspection hours 
A)  Machine hours 
B)  Units produced 
C)  Floor space 
D)  Inspection hours

Compared to manufacturing firms,cost allocation in service firms:

By how much does the actual overhead change,if the applied overhead rate increases by $2 per hour?

You are considering setting up an accounting firm specialising in preparing budgets for clients.Identify five overhead costs you regard as being important to manage.Please explain why you consider these costs are important.

Professional services most closely relates to which of the following cost systems?

A service shop is characterised by:

Which of the following costs is the most likely to be traced to a customer in a service costing environment?

Which of the following costs is most likely not applicable in a service costing environment?

Which of the following statements is most incorrect regarding the service profit value chain?

If I was interested in receiving a high quality,prestigious service where care is taken to ensure my every concern is addressed,I might contact a:

A medium level of contact time most closely relates to which of the following cost systems?

Jameson Inc.applies overhead using machine hours.The following data are available for the year: Estimated direct labour hours 2000000 Actual direct labour hours 1850000 Overhead applied \3 700000 Actual overhead \3 200000 Required: What predetermined overhead rate did Jameson Inc.use?

How are professional service firms different to mass service firms?

What is the volume-variety framework? How does it help us to better understand service organisation types?

Which of the following would probably not be a cost driver in a service environment?

Introduction to Managerial Accounting

Product Costing: Manufacturing Processes, cost Terminology and Cost Flows

Cost Behaviour

Job Costing and Overhead Costing Systems

Process Costing Systems

Departmental Overhead Costing

Activity-Based Costing

Cost-Volume-Profit Analysis

Relevant Costs and Product Planning Decisions

Long-Term Capital Investmentdecisions

Fixed and Rolling Budgets for Planning and Decision Making

Management Accounting for Cost Control and Performance Evaluation Flexible Budgets and Variance Analysis

Decentralisation and Modern Performance Management Systems the Balanced Scorecard

Accounting for Sustainability Social Reporting,environmental Reporting and Management Accounting

Filters

Exam 6: Service and Operations Costing

Compared to manufacturing firms,cost allocation in service firms:

By how much does the actual overhead change,if the applied overhead rate increases by $2 per hour?

You are considering setting up an accounting firm specialising in preparing budgets for clients.Identify five overhead costs you regard as being important to manage.Please explain why you consider these costs are important.

Professional services most closely relates to which of the following cost systems?

A service shop is characterised by:

Which of the following costs is the most likely to be traced to a customer in a service costing environment?

Which of the following costs is most likely not applicable in a service costing environment?

Which of the following statements is most incorrect regarding the service profit value chain?

If I was interested in receiving a high quality,prestigious service where care is taken to ensure my every concern is addressed,I might contact a:

A medium level of contact time most closely relates to which of the following cost systems?

Jameson Inc.applies overhead using machine hours.The following data are available for the year: Estimated direct labour hours 2000000 Actual direct labour hours 1850000 Overhead applied \3 700000 Actual overhead \3 200000 Required: What predetermined overhead rate did Jameson Inc.use?

How are professional service firms different to mass service firms?

What is the volume-variety framework? How does it help us to better understand service organisation types?

Which of the following would probably not be a cost driver in a service environment?

Introduction to Managerial Accounting

Product Costing: Manufacturing Processes, cost Terminology and Cost Flows

Cost Behaviour

Job Costing and Overhead Costing Systems

Process Costing Systems

Departmental Overhead Costing

Activity-Based Costing

Cost-Volume-Profit Analysis

Relevant Costs and Product Planning Decisions

Long-Term Capital Investmentdecisions

Fixed and Rolling Budgets for Planning and Decision Making

Management Accounting for Cost Control and Performance Evaluation Flexible Budgets and Variance Analysis

Decentralisation and Modern Performance Management Systems the Balanced Scorecard

Accounting for Sustainability Social Reporting,environmental Reporting and Management Accounting

Filters