Question 1

The direct method of allocating service department costs allocates those costs to operating departments only.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is an appropriate cost driver for allocating indirect costs to a human resources department in a service company?

Accepted Answer

A)  Number of employees 
B)  Number of customers 
C)  Square footage of office space 
D)  Either number of employees or square footage of office space depending on the nature of the indirect cost 
A)  Number of employees 
B)  Number of customers 
C)  Square footage of office space 
D)  Either number of employees or square footage of office space depending on the nature of the indirect cost

Question 3

Jessup Company expects to incur overhead costs of $20,000 per month and direct production costs of $125 per unit.The estimated production activity for the upcoming year is 1,000 units.If the company desires to earn a gross profit of $50 per unit,the sales price per unit would be which of the following amounts?

Accepted Answer

A)  $175 
B)  $195 
C)  $415 
D)  $290 
A)  $175 
B)  $195 
C)  $415 
D)  $290

Question 4

During the current year,Kemp Construction Company built 23 custom homes that ranged in size from 2,500 square feet to 8,000 square feet.One home was completed each month during January,February,and March.Three homes were completed during April and May.Two homes were completed during each of the months from June through December.Based upon this information,the most appropriate allocation base (i.e.,cost driver)for the assignment of indirect overhead costs to each house would be the:

Accepted Answer

A)  Number of homes built during the month. 
B)  Number of months in the year. 
C)  Number of homes built during the year. 
D)  Size of the home. 
A)  Number of homes built during the month. 
B)  Number of months in the year. 
C)  Number of homes built during the year. 
D)  Size of the home.

Question 5

At the beginning of the year,Barcroft Co.estimated that its total annual fixed overhead costs would amount to $25,000.Further,Barcroft estimated that its volume of production would be 2,000 units of product.Based on these estimates,Barcroft computed a predetermined overhead rate that was used to allocate overhead costs to the products made during the year.As predicted,actual fixed overhead costs did amount to $25,000.However,actual volume of production amounted to 2,200 units of product.Based on this information alone:

Accepted Answer

A)  Products were costed accurately during the year. 
B)  Products were overcosted during the year. 
C)  Products were undercosted during the year. 
D)  The answer cannot be determined from the information provided. 
A)  Products were costed accurately during the year. 
B)  Products were overcosted during the year. 
C)  Products were undercosted during the year. 
D)  The answer cannot be determined from the information provided.

Question 6

Vanguard Company makes three products,M,N,and P,which come from a joint process.The joint costs for each batch of the products are: $80,000 for direct materials,$40,000 for direct labor,and $30,000 for indirect costs (overhead).Each batch produces 10,000 pounds of product M with a market value of $6 per pound; 5,000 pounds of N with a market value of $12 per pound; and 9,000 pounds of P with a market value of $10 per pound.
Required:
1)Determine the total amount of joint cost allocated to each of the products,assuming that the allocation is based on the weight of products produced.(Do not round intermediate calculations.Round each of your final answers to the nearest whole dollar.)
2)Determine the total amount of joint cost allocated to each of the products,assuming that the allocation is based on the market value of the products.(Do not round intermediate calculations.Round each of your final answers to the nearest whole dollar.)

Accepted Answer

1)Total quantity = 10,000 + 5,000 + 9,00

Question 7

Indicate whether each of the following statements is true or false.

Accepted Answer

The answer of Indicate whether each of the following statements...

Question 8

Which formula best represents the first step used to allocate an indirect cost to a cost object?

Accepted Answer

A)  Total cost to be allocated divided by cost driver 
B)  Cost driver divided by allocation rate 
C)  Cost driver divided by total cost to be allocated 
D)  Allocation rate divided by total cost to be allocated 
A)  Total cost to be allocated divided by cost driver 
B)  Cost driver divided by allocation rate 
C)  Cost driver divided by total cost to be allocated 
D)  Allocation rate divided by total cost to be allocated

Question 9

The accuracy of managerial accounting information usually is more important than timeliness.

Accepted Answer

A) True 
 B)False

Question 10

Assume that a factory seeks to allocate rent to several departments that occupy the factory.The factory is occupied by all of 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

Question 11

Indicate whether each of the following statements is true or false.
 Estimated cost data must often be used in making decisions because actual cost information is not yet available.
Managers often accumulate both estimated and actual cost data for the same cost object.
A direct cost must be allocated to a cost object.
For a department in a retail store, cost of goods sold is a direct cost.
Determining whether a cost is direct or indirect depends on the selection of cost object.

Accepted Answer

The answer of Indicate whether each of the following statements...

Question 12

Using the step method of allocating service department costs,the costs are allocated to:

Accepted Answer

A)  service departments only. 
B)  operating departments only. 
C)  both service departments and operating departments. 
D)  neither service departments nor operating departments. 
A)  service departments only. 
B)  operating departments only. 
C)  both service departments and operating departments. 
D)  neither service departments nor operating departments.

Question 13

The method of allocating service department costs that allocates the costs to both service departments and operating departments is the:

Accepted Answer

A)  direct method. 
B)  indirect method. 
C)  weighted-average method. 
D)  step method. 
A)  direct method. 
B)  indirect method. 
C)  weighted-average method. 
D)  step method.

Question 14

Assume that factory depreciation for the year is $240,000.What problem could result from dividing that amount by 12 and assigning $20,000 in depreciation to the products made each month?

Accepted Answer

Volume of production may vary

Question 15

The selection of the most appropriate cost driver often requires considerable judgment in the absence of a strong cause-and-effect relationship.

Accepted Answer

A) True 
 B)False

Question 16

Alleghany Community College operates four departments.The square footage used by each department is shown below: $$\begin{array} { l r } 
& \text { Square } \
\text { Department } & \text { Footage } \
\text { Accounting } & 3,000 \
\text { Marketing } & 4,000 \
\text { Technology } & 6,000 \
\text { Sciences } &\underline{ 3,000} \
\text { Total } &\underline{ 16,000} \

\end{array}$$ Alleghany's annual building rental cost is $320,000.
What amount of rent expense should be allocated to the Sciences Department?

Accepted Answer

A)  $60,000 
B)  $80,000 
C)  $120,000 
D)  $106,667 
A)  $60,000 
B)  $80,000 
C)  $120,000 
D)  $106,667

Question 17

Blankenship Company operates a factory with two departments,X and Y.The utilities to heat and light the manufacturing facility would most likely be allocated to departments X and Y on the basis of:

Accepted Answer

A)  Square footage occupied. 
B)  Machine hours. 
C)  Direct labor hours. 
D)  Units sold. 
A)  Square footage occupied. 
B)  Machine hours. 
C)  Direct labor hours. 
D)  Units sold.

Question 18

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:
 $$\begin{array} { l r r r } 
\text { Possible Cost Driver } & \text { BAP } & \text { DSP } & \text { BGS } \
\text { Nurnber of students } & 30 & 40 & 100 \
\text { Budgeted expenses } & 5 5 , 5 0 0 &\$4,000 &\$  500 \
\text { Nurnber of orgarizations } & 1 & 1 & 1
\end{array}$$ 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 19

Why is a company's selection of cost allocation methods important to individual managers?

Accepted Answer

The method chosen to allocate costs can

Question 20

The primary advantage of establishing cost pools is reducing the number of individual cost allocations that are made.

Accepted Answer

A) True 
 B)False

The direct method of allocating service department costs allocates those costs to operating departments only.

Which of the following is an appropriate cost driver for allocating indirect costs to a human resources department in a service company?

Indicate whether each of the following statements is true or false.

Which formula best represents the first step used to allocate an indirect cost to a cost object?

The accuracy of managerial accounting information usually is more important than timeliness.

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

Using the step method of allocating service department costs,the costs are allocated to:

The method of allocating service department costs that allocates the costs to both service departments and operating departments is the:

Assume that factory depreciation for the year is $240,000.What problem could result from dividing that amount by 12 and assigning $20,000 in depreciation to the products made each month?

The selection of the most appropriate cost driver often requires considerable judgment in the absence of a strong cause-and-effect relationship.

Blankenship Company operates a factory with two departments,X and Y.The utilities to heat and light the manufacturing facility would most likely be allocated to departments X and Y on the basis of:

Why is a company's selection of cost allocation methods important to individual managers?

The primary advantage of establishing cost pools is reducing the number of individual cost allocations that are made.

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

The direct method of allocating service department costs allocates those costs to operating departments only.

Which of the following is an appropriate cost driver for allocating indirect costs to a human resources department in a service company?

Indicate whether each of the following statements is true or false.

Which formula best represents the first step used to allocate an indirect cost to a cost object?

The accuracy of managerial accounting information usually is more important than timeliness.

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

Using the step method of allocating service department costs,the costs are allocated to:

The method of allocating service department costs that allocates the costs to both service departments and operating departments is the:

Assume that factory depreciation for the year is $240,000.What problem could result from dividing that amount by 12 and assigning $20,000 in depreciation to the products made each month?

The selection of the most appropriate cost driver often requires considerable judgment in the absence of a strong cause-and-effect relationship.

Blankenship Company operates a factory with two departments,X and Y.The utilities to heat and light the manufacturing facility would most likely be allocated to departments X and Y on the basis of:

Why is a company's selection of cost allocation methods important to individual managers?

The primary advantage of establishing cost pools is reducing the number of individual cost allocations that are made.

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