Exam 7: Cost Assignment

Support department costs are accounted for in which one of the following ways?

For a labour-intensive manufacturing operation, which of the following would be the most appropriate cost driver?

Rounders Company used the following information when determining the appropriate overhead rates to use in its two production departments: Two of the products in the product line were as follows: Required: a. Assume that Rounders applies overhead using a plantwide rate based on direct labour hours. Determine the unit cost of Products 1 and 2. b. Assume that Rounders uses direct labour hours to apply overhead in the Fabrication Department and machine hours to apply overhead in the Assembly Department. Determine the unit cost of Products 1 and 2.

_____ refers to the assignment of indirect costs to cost objects.

What is the rationale for the use of departmental rates rather than plantwide rates?

In choosing a cost accounting system, the accountant must balance the total costs of implementing such systems. What costs must be balanced to determine total cost? How do traditional functional-based and activity-based cost systems balance the trade-offs?

The following information is provided: The company uses a predetermined overhead rate to apply overhead. Manufacturing overhead applied is

Figure 2 The Overdale plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows: The plant currently applies overhead using direct labour hours and expected capacity of 80,000 direct labour hours. The following data has been assembled for use in developing a bid for a proposed job: Total expected machine hours for all jobs during the year are 40,000, and the total expected number of inspections is 2,500. Refer to Figure 2. Using direct labour hours to assign overhead, the total cost of the potential job would be

Figure 1 Harrison Co. produces two products, AB and XY. Information about the current period's production is as follows: Harrison uses a plantwide rate of £4 per machine hour to apply overhead to production. Budgeted overhead was £392,000, but actual overhead was £376,000. -Refer to Figure 1 above. What was Harrison Company's unit manufacturing cost for product AB?

Figure 3 Ray Manufacturing has four categories of overhead. The four categories and the expected overhead costs for each category for next year are as follows: Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. For next year, 100,000 direct labour hours are budgeted. The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent. Estimates for the proposed job are as follows: The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers. Expected activity for the four activity-based cost drivers that would be used are as follows: -Refer to Figure 3 above. If Ray Manufacturing used number of setups to assign setup costs, the amount of setup costs allocated to the proposed job would be

A(n) _____ is a collection of overhead costs for which cost variations can be explained by a single cost driver.

Figure 1 Harrison Co. produces two products, AB and XY. Information about the current period's production is as follows: Harrison uses a plantwide rate of £4 per machine hour to apply overhead to production. Budgeted overhead was £392,000, but actual overhead was £376,000. -Refer to Figure 1. What were Harrison Company's budgeted machine hours for the period?

Manchester Ltd. uses a job-order costing system and a predetermined overhead rate based on machine hours. At the beginning of the year, the company estimated manufacturing overhead for the year would be £135,000 and 9,000 machine hours would be used. The following information pertains to December of the current year: Actual manufacturing overhead costs incurred in December were £31,000. Required: a. Compute the predetermined overhead application rate. b. Determine the total cost associated with each job.

Which of the following methods of assigning costs is based on convenience or some assumed linkage, and reduces the overall accuracy of the cost assignments?

Figure 1 Harrison Co. produces two products, AB and XY. Information about the current period's production is as follows: Harrison uses a plantwide rate of £4 per machine hour to apply overhead to production. Budgeted overhead was £392,000, but actual overhead was £376,000. -Refer to Figure 1 above. What was Harrison Company's total cost to produce product XY?

The Huyden Company builds equipment to customer's specifications. On March 1, two jobs were in process with the following costs and information: *Applied on the basis of machine hours During March, Job 45 was started and Job 44 was completed and delivered to the customer. Job 43 was missing a part that was backordered and would be completed in June. The following costs were incurred in March: It is Huyden's policy to bill clients at cost plus 40 percent. Required: a. Calculate the overhead rate that Huyden is using. b. Calculate the overhead applied to each job during the month of March. c. Calculate the balance in work in process on March 31. d. What was the price of Job 44?

The following information pertains to Utter Company: Utter Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours. Predetermined overhead rates for fabrication and assembly are based on direct labour hours. What is the amount of maintenance costs allocated to the Assembly Department using the direct method? (Round amounts to pounds.)

Figure 3 Ray Manufacturing has four categories of overhead. The four categories and the expected overhead costs for each category for next year are as follows: Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. For next year, 100,000 direct labour hours are budgeted. The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent. Estimates for the proposed job are as follows: The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers. Expected activity for the four activity-based cost drivers that would be used are as follows: -Refer to Figure 3 above. If Ray Manufacturing used direct labour hours as the cost driver, the total cost of the proposed job would be

Walter Company uses a job-order costing system to account for product costs. The following information pertains to 2004: Factory overhead rate is £18 per direct labour hour. What is the amount of under- or overapplied overhead for Walter Company in 2004?

Newton Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of £120,000 are allocated on the basis of standard service used. The Personnel Department costs of £18,000 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are £36,000 and £60,000, respectively. Data on standard service hours and number of employees are as follows: Using the direct method, the cost of the Maintenance Department allocated to Department P1 is