Question 1

A plantwide factory overhead rate is computed by dividing total budgeted factory overhead costs by the plantwide allocation base.

Accepted Answer

A) True 
 B)False

Question 2

The selection of the factory overhead allocation method is important because the method selected determines the accuracy of the product cost.

Accepted Answer

A) True 
 B)False

Question 3

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours.  Using a single plantwide rate, determine the overhead rate per unit for Product B:

Accepted Answer

A)  $496.00 
B)  $144.00 
C)  $640.00 
D)  $320.00 
A)  $496.00 
B)  $144.00 
C)  $640.00 
D)  $320.00

Question 4

The Dawson Company manufactures small lamps and desk lamps. The following shows the activities per product and the total overhead information:  
 
  Calculate the overhead per unit to be charged to small lamps.

Accepted Answer

A)  $75.00 
B)  $39.17 
C)  $38.33 
D)  $17.50 
A)  $75.00 
B)  $39.17 
C)  $38.33 
D)  $17.50

Question 5

Service companies can effectively use activity-based costing to compute product (service) costs.

Accepted Answer

A) True 
 B)False

Question 6

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours.   Determine the overhead rate in the Painting Department for each unit of Product B if the company uses a multiple department rate system.

Accepted Answer

A)  $12.40 per dlh 
B)  $24.80 per dlh 
C)  $7.20 per dlh 
D)  $16.00 per dlh 
A)  $12.40 per dlh 
B)  $24.80 per dlh 
C)  $7.20 per dlh 
D)  $16.00 per dlh

Question 7

Challenger Factory produces two similar products - regular widgets and deluxe widgets. The total plant overhead budget is $675,000 with 300,000 estimated direct labor hours. It is further estimated that deluxe widget production will need 3 direct labor hours for each unit and regular widget production will require 2 direct labor hours for each unit. Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will be allocated to the deluxe widget production if the budgeted production for the period is 50,000 units and actual production for the period is 58,000 units?

Accepted Answer

A)  $391,500 
B)  $225,000 
C)  $261,000 
D)  $337,500 
A)  $391,500 
B)  $225,000 
C)  $261,000 
D)  $337,500

Question 8

When a plantwide factory overhead rate is used, the total overhead costs allocated to all products is the same.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not a factory overhead allocation method?

Accepted Answer

A)  single plantwide rate 
B)  multiple departmental rates 
C)  factory costing 
D)  activity-based costing 
A)  single plantwide rate 
B)  multiple departmental rates 
C)  factory costing 
D)  activity-based costing

Question 10

ABC is used to allocate selling and administrative expenses to each product based on the product's individual differences in consuming these activities.

Accepted Answer

A) True 
 B)False

Question 11

Activity rates are determined by

Accepted Answer

A)  dividing the actual cost for each activity pool by the actual activity base for that pool. 
B)  dividing the cost budgeted for each activity pool by the estimated activity base for that pool. 
C)  dividing the actual cost for each activity pool by the estimated activity base for that pool. 
D)  dividing the cost budgeted for each activity pool by the actual activity base in that pool. 
A)  dividing the actual cost for each activity pool by the actual activity base for that pool. 
B)  dividing the cost budgeted for each activity pool by the estimated activity base for that pool. 
C)  dividing the actual cost for each activity pool by the estimated activity base for that pool. 
D)  dividing the cost budgeted for each activity pool by the actual activity base in that pool.

Question 12

If the activities causing overhead costs are different across different departments and products, use of a plantwide factory overhead rate will cause distorted product costs.

Accepted Answer

A) True 
 B)False

Question 13

Multiple production department factory overhead rates are most useful when production departments are very similar in their manufacturing processes.

Accepted Answer

A) True 
 B)False

Question 14

The Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below.   All of the machine hours take place in the Fabrication department, which has an estimated overhead of $84,000. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $72,000.
The Ramapo Company uses a single overhead rate to apply all overhead costs. What would the single plantwide rate be if it was based on machine hours instead of labor hours?

Accepted Answer

A)  $9.00 per MH 
B)  $19.50 per MH 
C)  $7.43 per MH 
D)  $4.00 per MH 
A)  $9.00 per MH 
B)  $19.50 per MH 
C)  $7.43 per MH 
D)  $4.00 per MH

Question 15

The Cunningham Factory has determined that its budgeted factory overhead budget for the year is $6,750,000 and budgeted direct labor hours are 5,000,000. If the actual direct labors for the period are 175,000 how much overhead would be allocated to the period?

Accepted Answer

A)  $675,000 
B)  $129,630 
C)  $236,250 
D)  $175,000 
A)  $675,000 
B)  $129,630 
C)  $236,250 
D)  $175,000

Question 16

Activity-based costing for selling and administrative expenses can also be beneficial in allocating expenses to various products. Which of the following is the best allocation base for help desk costs?

Accepted Answer

A)  Number of calls 
B)  Square footage of the help desk office 
C)  Number of products sold 
D)  Number of employees 
A)  Number of calls 
B)  Square footage of the help desk office 
C)  Number of products sold 
D)  Number of employees

Question 17

The Beauty Beyond Words Salon uses an activity-based costing system in its beauty salon to determine the cost of services. The salon has determined the costs of services by activity as follows:

Calculate the cost of services for a hair cut.

Accepted Answer

A)  $3.00 
B)  $6.50 
C)  $3.50 
D)  $16.50 
A)  $3.00 
B)  $6.50 
C)  $3.50 
D)  $16.50

Question 18

The Aleutian Company produces two products, Rings and Dings. They are manufactured in two departments-fabrication and assembly. Data for the products and departments are listed below.   All of the machine hours take place in the Fabrication department, which has an estimated overhead of $90,000. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $105,000.
The Aleutian Company uses a departmental overhead rates. The fabrication department uses machine hours for an allocation base, and the assembly department uses labor hours.
What is the overhead cost per unit for Dings?

Accepted Answer

A)  $65.25 
B)  $56.75 
C)  $23.25 
D)  $64.50 
A)  $65.25 
B)  $56.75 
C)  $23.25 
D)  $64.50

Question 19

Activity-based costing is much easier to apply than single plantwide factory overhead allocation.

Accepted Answer

A) True 
 B)False

Question 20

The Valhalla Company manufactures small lamps and desk lamps. The following shows the activities per product:
   Using the following information prepared by the Valhalla Company, determine (a) the activity rates for each activity and (b) the activity-based factory overhead per unit for each product.

Accepted Answer

(a) Setups: $160,000 / 40,000 = $4 per s

Exam 26: Cost Allocation and Activity-Based Costing

A plantwide factory overhead rate is computed by dividing total budgeted factory overhead costs by the plantwide allocation base.

The selection of the factory overhead allocation method is important because the method selected determines the accuracy of the product cost.

The Dawson Company manufactures small lamps and desk lamps. The following shows the activities per product and the total overhead information: Calculate the overhead per unit to be charged to small lamps.

Service companies can effectively use activity-based costing to compute product (service) costs.

When a plantwide factory overhead rate is used, the total overhead costs allocated to all products is the same.

Which of the following is not a factory overhead allocation method?

ABC is used to allocate selling and administrative expenses to each product based on the product's individual differences in consuming these activities.

Activity rates are determined by

If the activities causing overhead costs are different across different departments and products, use of a plantwide factory overhead rate will cause distorted product costs.

Multiple production department factory overhead rates are most useful when production departments are very similar in their manufacturing processes.

The Cunningham Factory has determined that its budgeted factory overhead budget for the year is $6,750,000 and budgeted direct labor hours are 5,000,000. If the actual direct labors for the period are 175,000 how much overhead would be allocated to the period?

Activity-based costing for selling and administrative expenses can also be beneficial in allocating expenses to various products. Which of the following is the best allocation base for help desk costs?

The Beauty Beyond Words Salon uses an activity-based costing system in its beauty salon to determine the cost of services. The salon has determined the costs of services by activity as follows: Calculate the cost of services for a hair cut.

Activity-based costing is much easier to apply than single plantwide factory overhead allocation.

The Valhalla Company manufactures small lamps and desk lamps. The following shows the activities per product: Using the following information prepared by the Valhalla Company, determine (a) the activity rates for each activity and (b) the activity-based factory overhead per unit for each product.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Cost Management for Just-In-Time Environments

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