Question 1

A cost pool is a collection of costs that are related to the same or similar activity.

Accepted Answer

A) True 
 B)False

Question 2

ABC is significantly less costly to implement and maintain than more traditional overhead costing systems.

Accepted Answer

A) True 
 B)False

Question 3

West Company estimates that overhead costs for the next year will be $5,240,000 for indirect labor and $550,000 for factory utilities.The company uses machine hours as its overhead allocation base.If 150,000 machine hours are planned for this next year,what is the company's plantwide overhead rate?

Accepted Answer

A) $0.0259 per machine hour. 
B) $34.93 per machine hour. 
C) $38.60 per machine hour. 
D) $3.67 per machine hour. 
E) $0.2727 per machine hour. 
A) $0.0259 per machine hour. 
B) $34.93 per machine hour. 
C) $38.60 per machine hour. 
D) $3.67 per machine hour. 
E) $0.2727 per machine hour.

Question 4

A company's total expected overhead costs and related overhead data are shown below.
   a.Compute estimated manufacturing overhead costs for Department A.
b.Compute estimated manufacturing overhead costs for Department B.

Accepted Answer

a.$2.40 per DLH × 75,000 DLH =

Question 5

A company estimates that overhead costs for the next year will be $3,600,000 for indirect labor,$200,000 for factory utilities,and $21,500 for depreciation on factory machinery.The company uses machine hours as its overhead allocation base.If 764,300 machine hours are planned for this next year,what is the company's plantwide overhead rate?

Accepted Answer

($3,600,000 + $200,0

Question 6

The use of a plantwide overhead rate is not acceptable for external reporting under GAAP.

Accepted Answer

A) True 
 B)False

Question 7

Activities are the cost objects of the first stage of ABC.

Accepted Answer

A) True 
 B)False

Question 8

How much overhead cost will be assigned to the ice cream sandwich product line using activity-based costing (ABC)?

Accepted Answer

A) $340,000 
B) $368,000 
C) $28,000 
D) $850.08 
E) $433,682 
A) $340,000 
B) $368,000 
C) $28,000 
D) $850.08 
E) $433,682

Question 9

Gray Company uses a plantwide overhead rate with machine hours as the allocation base.Use the following information to solve for the amount of machine hours estimated per unit of product Q.

Accepted Answer

A) 50 MH per unit of Q. 
B) 0.50 MH per unit of Q. 
C) 0.75 MH per unit of Q. 
D) 17.5 MH per unit of Q. 
E) 30 MH per unit of Q. 
A) 50 MH per unit of Q. 
B) 0.50 MH per unit of Q. 
C) 0.75 MH per unit of Q. 
D) 17.5 MH per unit of Q. 
E) 30 MH per unit of Q.

Question 10

A company produces surgical equipment that goes through three departments,1A1,2B2,and 3C3,before they are complete.Expected costs and activities for the three departments are shown below.All departments have departmental overhead rates based on direct labor hours.Therefore,the overhead rate for each department is $5 per direct labor hour.

Accepted Answer

A) True 
 B)False

Question 11

Explain cost flows for the plantwide overhead rate method.

Accepted Answer

The plantwide overhead rate me

Question 12

Batch-level costs vary with the number of units produced.

Accepted Answer

A) True 
 B)False

Question 13

Aurora Corporation produces outdoor security lighting products.All products go through three processes before completion.Use the expected overhead costs and related data shown below to compute departmental overhead rates based on machine hours in Department A1A; based on direct labor hours in Department B2B; and machine hours in Department C3C.

Accepted Answer

A) Dept.A: $10 per MH; Dept B: $2 per DLH; Dept C: $4 per MH. 
B) Dept.A: $6 per MH; Dept B: $5 per DLH; Dept C: $3 per MH. 
C) Dept.A: $10 per MH; Dept B: $5 per DLH; Dept C: $4 per MH. 
D) Dept.A: $6 per MH; Dept B: $5 per DLH; Dept C: $4 per MH. 
E) Dept.A: $10 per MH; Dept B: $2 per DLH; Dept C: $3 per MH. 
A) Dept.A: $10 per MH; Dept B: $2 per DLH; Dept C: $4 per MH. 
B) Dept.A: $6 per MH; Dept B: $5 per DLH; Dept C: $3 per MH. 
C) Dept.A: $10 per MH; Dept B: $5 per DLH; Dept C: $4 per MH. 
D) Dept.A: $6 per MH; Dept B: $5 per DLH; Dept C: $4 per MH. 
E) Dept.A: $10 per MH; Dept B: $2 per DLH; Dept C: $3 per MH.

Question 14

The departmental overhead rate method allows each department to have its own overhead rate and its own allocation base.

Accepted Answer

A) True 
 B)False

Question 15

Wall Nuts, Inc. produces paneling that requires two processes, A and B, to complete. Oak is the best-selling of all the many types of paneling produced. Information related to the 40,000 units of oak paneling produced annually is shown in the following table:
 
Wall Nuts' total expected overhead costs and related overhead data are shown below.
 
-Use the above data for Wall Nuts,Inc.to compute the total manufacturing cost per unit of oak paneling assuming the company uses departmental overhead rates based on machine hours in Department A and machine hours in Department B.

Accepted Answer

A) $8.70 
B) $18.20 
C) $21.95 
D) $27.30 
E) $36.00 
A) $8.70 
B) $18.20 
C) $21.95 
D) $27.30 
E) $36.00

Question 16

Aztec Industries produces bread which goes through two operations, mixing and baking, before it is ready to be packaged. Next year's expected costs and activities are shown below.
 
-Compute Aztec's departmental overhead rate for the mixing department based on direct labor hours.

Accepted Answer

A) $1.50 per DLH. 
B) $5.00 per DLH. 
C) $0.75 per DLH. 
D) $0.50 per DLH. 
E) $2.08 per DLH. 
A) $1.50 per DLH. 
B) $5.00 per DLH. 
C) $0.75 per DLH. 
D) $0.50 per DLH. 
E) $2.08 per DLH.

Question 17

How much overhead cost will be assigned to each product line using activity-based costing (ABC)?

Accepted Answer

A) Dog food: $462,500; cat food: $462,500. 
B) Dog food: $860,000; cat food: $65,000. 
C) Dog food: $60,000; cat food: $45,000. 
D) Dog food: $800,000; cat food: $20,000. 
E) Dog food: $320; cat food: $320. 
A) Dog food: $462,500; cat food: $462,500. 
B) Dog food: $860,000; cat food: $65,000. 
C) Dog food: $60,000; cat food: $45,000. 
D) Dog food: $800,000; cat food: $20,000. 
E) Dog food: $320; cat food: $320.

Question 18

The plantwide overhead rate is total plantwide allocation base divided by total budgeted plantwide overhead cost.

Accepted Answer

A) True 
 B)False

Question 19

Why is overhead allocation under ABC usually more accurate than either the plantwide overhead allocation method or the departmental overhead allocation method?

Accepted Answer

Overhead allocation under ABC

Question 20

If the direct labor time estimates are met,Malone will allocate $12.59 of overhead cost to each unit of Little X.

Accepted Answer

A) True 
 B)False

Exam 17: Activity-Based Costing and Analysis

A cost pool is a collection of costs that are related to the same or similar activity.

ABC is significantly less costly to implement and maintain than more traditional overhead costing systems.

West Company estimates that overhead costs for the next year will be $5,240,000 for indirect labor and $550,000 for factory utilities.The company uses machine hours as its overhead allocation base.If 150,000 machine hours are planned for this next year,what is the company's plantwide overhead rate?

A company's total expected overhead costs and related overhead data are shown below. a.Compute estimated manufacturing overhead costs for Department A. b.Compute estimated manufacturing overhead costs for Department B.

The use of a plantwide overhead rate is not acceptable for external reporting under GAAP.

Activities are the cost objects of the first stage of ABC.

How much overhead cost will be assigned to the ice cream sandwich product line using activity-based costing (ABC)?

Gray Company uses a plantwide overhead rate with machine hours as the allocation base.Use the following information to solve for the amount of machine hours estimated per unit of product Q.

Explain cost flows for the plantwide overhead rate method.

Batch-level costs vary with the number of units produced.

The departmental overhead rate method allows each department to have its own overhead rate and its own allocation base.

Aztec Industries produces bread which goes through two operations, mixing and baking, before it is ready to be packaged. Next year's expected costs and activities are shown below. -Compute Aztec's departmental overhead rate for the mixing department based on direct labor hours.

How much overhead cost will be assigned to each product line using activity-based costing (ABC)?

The plantwide overhead rate is total plantwide allocation base divided by total budgeted plantwide overhead cost.

Why is overhead allocation under ABC usually more accurate than either the plantwide overhead allocation method or the departmental overhead allocation method?

If the direct labor time estimates are met,Malone will allocate $12.59 of overhead cost to each unit of Little X.

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

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Time Value of Money

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