Question 1

Which of the following would not be considered a product cost?

Accepted Answer

A)  Direct labor costs. 
B)  Factory supervisor's salary. 
C)  Factory line worker's salary. 
D)  Cost accountant's salary. 
E)  Manufacturing overhead costs. 
A)  Direct labor costs. 
B)  Factory supervisor's salary. 
C)  Factory line worker's salary. 
D)  Cost accountant's salary. 
E)  Manufacturing overhead costs. D

Question 2

In competitive markets, the price of a given product is established through the forces of supply and demand.

Accepted Answer

A) True 
 B)False  True

Question 3

Identify and explain the four control levels associated with activity-based costing.

Accepted Answer

The four control levels associated with activity-based costing are:
(1) Unit level activities are performed on each product unit.
(2) Batch level activities are performed only on each group of activities.
(3) Product level activities are performed on each product line and are not affected by either the numbers of units or batches.
(4) Facility level activities are performed to sustain facility capacity as a whole and are not caused by any specific product.

Question 4

The plantwide overhead rate is determined by using volume-related measures.

Accepted Answer

A) True 
 B)False

Question 5

Consider the following activities which take place in a veterinary clinic. (a.) Cleaning cages
(b)) Heating and air conditioning the clinic
(c)) Sending blood work to a lab
(d)) Dispensing medicine
Which of the following statements is(are) true?

Accepted Answer

A)  Service entities cannot use ABC for overhead allocation. 
B)  Cleaning cages is a facility level activity. 
C)  Dispensing medicine is a facility level activity. 
D)  Heating and air conditioning the clinic is a facility level activity. 
E)  Sending blood work to a lab is a facility level activity. 
A)  Service entities cannot use ABC for overhead allocation. 
B)  Cleaning cages is a facility level activity. 
C)  Dispensing medicine is a facility level activity. 
D)  Heating and air conditioning the clinic is a facility level activity. 
E)  Sending blood work to a lab is a facility level activity.

Question 6

The _______________ stage of ABC is to compute an activity rate for each cost pool and then use this rate to allocate overhead costs to products.

Accepted Answer

The answer of The _______________ stage of ABC is to...

Question 7

Superior Products Manufacturing identified the following data in its two production departments.
$$\begin{array} { | l | c | c | } 
\hline & \text { Assembly } & \text { Finishing } \
\hline \begin{array} { l } 
\text { Manufacturing overhead } \
\text { costs }
\end{array} & \$ 225,000 & \$ 420,000 \
\hline \text { Direct labor hours worked } & 6,600 \mathrm { DLH } & 10,000 \mathrm { DLH } \
\hline \text { Machine hours used } & 2,400 \mathrm { MH } & 5,200 \mathrm { MH } \
\hline
\end{array}$$
Compute departmental overhead rates assuming the Assembly rate is based on machine hours and the Finishing rate is based on direct labor hours.

Accepted Answer

Assembly: $225,000/2

Question 8

When products differ in batch size and complexity, they usually consume different amounts of overhead resources.

Accepted Answer

A) True 
 B)False

Question 9

Product pricing, product mix decisions, and cost control are examples of _________________ activities.

Accepted Answer

The answer of Product pricing, product mix decisions, and cost...

Question 10

Kudzu Company sells two products Big X and Little X. Current direct material and direct labor costs are detailed below. Next year, the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year's overhead is estimated to be $525,000. The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $20 per hour and the company expects to manufacture 16,000 units of Big X and 18,000 units of Little X next year.
$\begin{array}{|c|c|c|}
\hline & \text { Direct } & \text { Direct } \
& \text { Material } & \text { Labor Dollars } \
&\text { Per Unit } & \text { Per Unit } \
\hline \text { Big X } & \$ 5 & \$ 20 \
\hline \text { Little X } & \$ 3 & \$ 10 \
\hline
\end{array}$ 
-Kudzu's plantwide overhead rate will be $21 per direct labor hour next year.
Plantwide overhead rate = $525,000/25,000 DLH = $21 per DLH

Accepted Answer

A) True 
 B)False

Question 11

What is the basic principle underlying activity-based costing?

Accepted Answer

The basic principle underlying

Question 12

Freeze Frame, Inc. produces cameras which require three processes, A, B and C, to complete. Digital camera model #789 is the best selling of all the many types of cameras produced. Information related to the 550,000 units of digital camera model #789 produced annually is shown below.   
Freeze Frame's total expected overhead costs and related overhead data are shown below.
  
(a.) Compute a departmental overhead rate for department A based on direct labor hours.
(b.) How much overhead is associated with model 789 from department A?
(c.) Compute a departmental overhead rate for department B based on direct labor hours.
(d.) How much overhead is associated with model 789 from department B?
(e.) Compute a departmental overhead rate for department C based on direct labor hours.
(f.) How much overhead is associated with model 789 from department C?
(g) What is the per unit cost of the 550,000 units of model 789?

Accepted Answer

(a.) $540,000/90,000 DLH = $6 per DLH =

Question 13

Kinetic Company estimates that overhead costs for the next year will be $1,600,000 for indirect labor and $400,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 50,000 direct labor hours are planned for this next year, then the plantwide overhead rate is $.025 per direct labor hour.

Accepted Answer

A) True 
 B)False

Question 14

A company has two products: A and B. It uses a plantwide overhead allocation method based on activity 2 and has prepared the following analysis showing budgeted costs and activities. Use this information to compute (a) the company's plantwide overhead rate and (b) the amount of overhead allocated to Product A.

Accepted Answer

(a) $450,000/3,000 units of ac

Question 15

The ______________________ overhead rate method uses a different overhead rate for each production department.

Accepted Answer

The answer of The ______________________ overhead rate method uses a...

Question 16

The cost object of the departmental overhead rate method is:

Accepted Answer

A)  The unit of product. 
B)  The production departments of the company. 
C)  The production departments in the first stage and the unit of product in the second stage. 
D)  The unit of product in the first stage and the production departments in the second stage. 
E)  The production activities of the company. 
A)  The unit of product. 
B)  The production departments of the company. 
C)  The production departments in the first stage and the unit of product in the second stage. 
D)  The unit of product in the first stage and the production departments in the second stage. 
E)  The production activities of the company.

Question 17

Crinkle Cut Clothes Company manufactures two products CC1 and CC2. Current direct material and direct labor costs are detailed below. Next year the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year's overhead is estimated to be $338,250. The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $28 per hour and the company expects to manufacture 22,000 units of CC1 and 91,000 units of CC2 next year. 
  
Compute the plantwide overhead rate for next year.

Accepted Answer

A)  $28.00 per DLH. 
B)  $37.80 per DLH. 
C)  $1.35 per DLH. 
D)  $5.00 per DLH. 
E)  $.20 per DLH. 
A)  $28.00 per DLH. 
B)  $37.80 per DLH. 
C)  $1.35 per DLH. 
D)  $5.00 per DLH. 
E)  $.20 per DLH.

Question 18

The ________________________ overhead rate method uses a single rate for allocating overhead costs to products.

Accepted Answer

The answer of The ________________________ overhead rate method uses a...

Question 19

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 20

Heritage Industries produces miniature models of farm equipment. These collectibles are in great demand. It takes two operations, molding and finishing, to complete the miniatures. Next year's expected activities are shown below.
 
-Heritage Industries uses departmental overhead rates and is planning on a $1.60 per direct labor hour overhead rate for the finishing department. Compute the estimated manufacturing overhead cost for the finishing department given the information above.

Accepted Answer

A)  $104,000 
B)  $156,000 
C)  $260,000 
D)  $130,000 
E)  $286,000 
A)  $104,000 
B)  $156,000 
C)  $260,000 
D)  $130,000 
E)  $286,000

Which of the following would not be considered a product cost?

In competitive markets, the price of a given product is established through the forces of supply and demand.

Identify and explain the four control levels associated with activity-based costing.

The plantwide overhead rate is determined by using volume-related measures.

Consider the following activities which take place in a veterinary clinic. (a.) Cleaning cages (b)) Heating and air conditioning the clinic (c)) Sending blood work to a lab (d)) Dispensing medicine Which of the following statements is(are) true?

The _______________ stage of ABC is to compute an activity rate for each cost pool and then use this rate to allocate overhead costs to products.

When products differ in batch size and complexity, they usually consume different amounts of overhead resources.

Product pricing, product mix decisions, and cost control are examples of _________________ activities.

What is the basic principle underlying activity-based costing?

The ______________________ overhead rate method uses a different overhead rate for each production department.

The cost object of the departmental overhead rate method is:

The ________________________ overhead rate method uses a single rate for allocating overhead costs to products.

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting and Analyzing Cash Flows

Analyzing 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 Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costing

Decentralization and Performance Evaluation

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Investments and International Operations

Accounting for Partnerships

Appendix : Accounting With Special Journals

Filters

Exam 17: Activity-Based Costing and Analysis

Which of the following would not be considered a product cost?

In competitive markets, the price of a given product is established through the forces of supply and demand.

Identify and explain the four control levels associated with activity-based costing.

The plantwide overhead rate is determined by using volume-related measures.

Consider the following activities which take place in a veterinary clinic. (a.) Cleaning cages (b)) Heating and air conditioning the clinic (c)) Sending blood work to a lab (d)) Dispensing medicine Which of the following statements is(are) true?

The _______________ stage of ABC is to compute an activity rate for each cost pool and then use this rate to allocate overhead costs to products.

When products differ in batch size and complexity, they usually consume different amounts of overhead resources.

Product pricing, product mix decisions, and cost control are examples of _________________ activities.

What is the basic principle underlying activity-based costing?

The ______________________ overhead rate method uses a different overhead rate for each production department.

The cost object of the departmental overhead rate method is:

The ________________________ overhead rate method uses a single rate for allocating overhead costs to products.

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting and Analyzing Cash Flows

Analyzing 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 Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costing

Decentralization and Performance Evaluation

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Investments and International Operations

Accounting for Partnerships

Appendix : Accounting With Special Journals

Filters