Question 1

A department that is capital-intensive most likely would use a predetermined departmental overhead rate based on which of the following activity bases?

Accepted Answer

A)  units of direct material used 
B)  direct labour hours 
C)  direct labour cost 
D)  machine hours 
A)  units of direct material used 
B)  direct labour hours 
C)  direct labour cost 
D)  machine hours

Question 2

Describe the differences between support and producing departments. Give three examples of each.

Accepted Answer

Support departments provide essential su

Question 3

Winter Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are listed as follows: Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. 100,000 direct labour hours are budgeted for next year.
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/allocation bases. Expected activity for the four cost drivers that would be used are:
  What is the amount of overhead allocated to the proposed job if Winter Manufacturing uses direct labour hours as its only cost driver?

Accepted Answer

A)  £41,200 
B)  £30,400 
C)  £30,000 
D)  £20,800 
A)  £41,200 
B)  £30,400 
C)  £30,000 
D)  £20,800

Question 4

Explain the advantage of using multiple overhead rates instead of a single plantwide overhead rate to apply overhead.

Accepted Answer

A plantwide overhead rate uses the same

Question 5

Discuss how managerial product costing differs from product costing for financial reporting.

Accepted Answer

Product costs used for external financia

Question 6

The following information pertains to Victor Company: Victor 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.)

Accepted Answer

A)  £57,600 
B)  £96,000 
C)  £28,800 
D)  £76,320 
A)  £57,600 
B)  £96,000 
C)  £28,800 
D)  £76,320

Question 7

Service departments:

Accepted Answer

A)  are responsible for manufacturing the products sold to customers. 
B)  work directly on the firm's products. 
C)  provide services directly to customers. 
D)  provide support services to the producing departments. 
A)  are responsible for manufacturing the products sold to customers. 
B)  work directly on the firm's products. 
C)  provide services directly to customers. 
D)  provide support services to the producing departments.

Question 8

The Oakland 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 100,000 direct labour hours. The following data has been assembled for use in developing a bid for a proposed job. Bid prices are calculated as full manufacturing cost plus 20 percent markup.
   Total expected machine hours for all jobs during the year is 60,000, and the total expected number of inspections is 4,000.
Required:

Accepted Answer

The answer of The Oakland plant has two categories of...

Question 9

Although adding more cost pools to a costing system may improve the accuracy of product costing, this increase in accuracy must be judged against:

Accepted Answer

A)  the cost of the product 
B)  the price of the product 
C)  the cost of developing and maintaining the additional cost pools 
D)  all of the above 
A)  the cost of the product 
B)  the price of the product 
C)  the cost of developing and maintaining the additional cost pools 
D)  all of the above

Question 10

When actual overhead cost exceeds overhead applied to production,

Accepted Answer

A)  over-absorbed overhead is added to cost of goods sold 
B)  over-absorbed overhead is deducted from cost of goods sold 
C)  under-absorbed overhead is added to cost of goods sold 
D)  under-absorbed overhead is deducted from cost of goods sold 
A)  over-absorbed overhead is added to cost of goods sold 
B)  over-absorbed overhead is deducted from cost of goods sold 
C)  under-absorbed overhead is added to cost of goods sold 
D)  under-absorbed overhead is deducted from cost of goods sold

Question 11

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. (Round amounts to dollars.)
If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) would be

Accepted Answer

A)  £28.80. 
B)  £5.40. 
C)  £7.28. 
D)  £24.78. 
A)  £28.80. 
B)  £5.40. 
C)  £7.28. 
D)  £24.78.

Question 12

The calculation of unit costs is important for

Accepted Answer

A)  inventory valuation 
B)  income determination 
C)  pricing 
D)  all of the above 
A)  inventory valuation 
B)  income determination 
C)  pricing 
D)  all of the above

Question 13

Explain the differences between direct assignment, driver assignments, and cost allocations.

Accepted Answer

Direct tracing is the process of identif

Question 14

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 AB?

Accepted Answer

A)  £870,000 
B)  £910,000 
C)  £900,000 
D)  £890,000 
A)  £870,000 
B)  £910,000 
C)  £900,000 
D)  £890,000

Question 15

The Xiang 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 50,000 direct labour hours. The following data have been assembled for use in developing a bid for a proposed job:
  Total expected machine hours for all jobs during the year is 25,000, and the total expected number of inspections is 1,500.
Using direct labour hours to assign overhead, the total cost of the potential job would be

Accepted Answer

A)  £2,500. 
B)  £5,500. 
C)  £4,000. 
D)  £4,500. 
A)  £2,500. 
B)  £5,500. 
C)  £4,000. 
D)  £4,500.

Question 16

Explain the key considerations in establishing cost pools and in selecting an allocation base.

Accepted Answer

The key consideration in establishing co

Question 17

Figure 4 Wheat 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, 20,000 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 15 percent.
Estimates for the proposed job are as follows:
  In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based cost driver--direct labour hours. 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 4. If Wheat Manufacturing used direct labour hours as the cost driver and the company's bid is full cost plus 15 percent, the company's bid would be

Accepted Answer

A)  £17,480 
B)  £16,583 
C)  £13,110 
D)  £12,765 
A)  £17,480 
B)  £16,583 
C)  £13,110 
D)  £12,765

Question 18

Zang Manufacturing Company manufactures two products (A and B). The overhead costs (£58,000) have been divided into three cost pools that use the following cost drivers: What is the amount of overhead cost to be assigned to Product A using labour hours as the cost driver ?

Accepted Answer

A)  £58,000 
B)  £8,000 
C)  £9,600 
D)  £32,000 
A)  £58,000 
B)  £8,000 
C)  £9,600 
D)  £32,000

Question 19

Predetermined overhead rate is calculated by

Accepted Answer

A)  dividing actual overhead cost by estimated activity usage 
B)  dividing estimated or budgeted overhead cost by estimated usage 
C)  dividing actual overhead cost by actual activity usage 
D)  dividing estimated or budgeted overhead cost by estimated activity usage 
A)  dividing actual overhead cost by estimated activity usage 
B)  dividing estimated or budgeted overhead cost by estimated usage 
C)  dividing actual overhead cost by actual activity usage 
D)  dividing estimated or budgeted overhead cost by estimated activity usage

Question 20

Define the terms cost objectives, cost pools, and allocation bases.

Accepted Answer

A cost objective is anything to which co

A department that is capital-intensive most likely would use a predetermined departmental overhead rate based on which of the following activity bases?

Describe the differences between support and producing departments. Give three examples of each.

Explain the advantage of using multiple overhead rates instead of a single plantwide overhead rate to apply overhead.

Discuss how managerial product costing differs from product costing for financial reporting.

Service departments:

Although adding more cost pools to a costing system may improve the accuracy of product costing, this increase in accuracy must be judged against:

When actual overhead cost exceeds overhead applied to production,

The calculation of unit costs is important for

Explain the differences between direct assignment, driver assignments, and cost allocations.

Explain the key considerations in establishing cost pools and in selecting an allocation base.

Zang Manufacturing Company manufactures two products (A and B). The overhead costs (£58,000) have been divided into three cost pools that use the following cost drivers: What is the amount of overhead cost to be assigned to Product A using labour hours as the cost driver ?

Predetermined overhead rate is calculated by

Define the terms cost objectives, cost pools, and allocation bases.

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Pricing Decisions and Profitability Analysis

Capital Investment Decisions

Activity-Based Costing

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis

Divisional Financial Performance Measurement

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Performance Management

Filters

Exam 7: Cost Assignment

A department that is capital-intensive most likely would use a predetermined departmental overhead rate based on which of the following activity bases?

Describe the differences between support and producing departments. Give three examples of each.

Explain the advantage of using multiple overhead rates instead of a single plantwide overhead rate to apply overhead.

Discuss how managerial product costing differs from product costing for financial reporting.

Service departments:

Although adding more cost pools to a costing system may improve the accuracy of product costing, this increase in accuracy must be judged against:

When actual overhead cost exceeds overhead applied to production,

The calculation of unit costs is important for

Explain the differences between direct assignment, driver assignments, and cost allocations.

Explain the key considerations in establishing cost pools and in selecting an allocation base.

Zang Manufacturing Company manufactures two products (A and B). The overhead costs (£58,000) have been divided into three cost pools that use the following cost drivers: What is the amount of overhead cost to be assigned to Product A using labour hours as the cost driver ?

Predetermined overhead rate is calculated by

Define the terms cost objectives, cost pools, and allocation bases.

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Pricing Decisions and Profitability Analysis

Capital Investment Decisions

Activity-Based Costing

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis

Divisional Financial Performance Measurement

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Performance Management

Filters