Question 1

The departmental overhead rate method allows each department to have its own overhead rate and its own ____________________.

Accepted Answer

The answer of The departmental overhead rate method allows each...

Question 2

A major disadvantage of using a plantwide overhead rate is the extreme difficulty in gathering the needed information.

Accepted Answer

A) True 
 B)False

Question 3

Which types of overhead allocation methods result in the use of more than one overhead rate during the same time period?

Accepted Answer

A)  Plantwide overhead rate method and departmental overhead rate method. 
B)  Cost pool overhead rate method and plantwide overhead rate method. 
C)  Departmental overhead rate method and activity based costing. 
D)  Activity-based costing and plantwide overhead rate method. 
E)  Departmental overhead rate method and cost pool overhead rate method. 
A)  Plantwide overhead rate method and departmental overhead rate method. 
B)  Cost pool overhead rate method and plantwide overhead rate method. 
C)  Departmental overhead rate method and activity based costing. 
D)  Activity-based costing and plantwide overhead rate method. 
E)  Departmental overhead rate method and cost pool overhead rate method.

Question 4

A company's total expected overhead costs and related overhead data are shown below.

(a.) Compute estimated manufacturing overhead costs for department A.
(b.) Compute estimated manufacturing overhead costs for department B.
(c.) Compute the departmental overhead rate based on direct labor hours for department A.
(d.) Compute the departmental overhead rate based on machine hours for department B.

Accepted Answer

(a.) $4 per MH x 79,050 MH = $316,200 es

Question 5

How does ABC differ from using multiple departmental rates?

Accepted Answer

ABC differs from using multiple departme

Question 6

Kamper Company sells two products Big Z and Little Z. 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 $475,000. 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 32,000 units of Big Z and 9,000 units of Little Z next year. 
  
What are total estimated direct labor hours for this next year?

Accepted Answer

A)  30,800 total DLH. 
B)  616,000 total DLH. 
C)  300,000 total DLH. 
D)  1,025,000 total DLH. 
E)  916,000 total DLH. 
A)  30,800 total DLH. 
B)  616,000 total DLH. 
C)  300,000 total DLH. 
D)  1,025,000 total DLH. 
E)  916,000 total DLH.

Question 7

Overhead costs:

Accepted Answer

A)  Are directly related to production. 
B)  Can be traced to units of product in the same way that direct materials can. 
C)  Cannot be traced to units of product in the same way that direct labor can. 
D)  Are period costs. 
E)  Include only fixed costs. 
A)  Are directly related to production. 
B)  Can be traced to units of product in the same way that direct materials can. 
C)  Cannot be traced to units of product in the same way that direct labor can. 
D)  Are period costs. 
E)  Include only fixed costs.

Question 8

Facility level costs vary with the number of units or batches produced.

Accepted Answer

A) True 
 B)False

Question 9

Bark Mode, Incorporated produces and distributes two types of security systems, Standard and Deluxe. Budgeted cost and activity for each of its three activity cost pools are shown below.
The company plans to produce and sell 120,000 standard units and 80,000 deluxe units.  
(a.) Compute the approximate overhead cost per unit of standard under activity-based costing.
(b.) Compute the approximate overhead cost per unit of deluxe under activity-based costing.

Accepted Answer

The answer of Bark Mode, Incorporated produces and distributes two...

Question 10

From an ABC perspective, what causes costs to be incurred?

Accepted Answer

A)  Financial transactions. 
B)  The volume of units produced. 
C)  Debits and credits. 
D)  Management decisions. 
E)  Activities. 
A)  Financial transactions. 
B)  The volume of units produced. 
C)  Debits and credits. 
D)  Management decisions. 
E)  Activities.

Question 11

What are the major advantages of using a plantwide overhead rate?

Accepted Answer

The major advantages of using a plantwid

Question 12

Which of the following is a disadvantage of the departmental overhead rate method?

Accepted Answer

A)  The departmental overhead rate method assigns overhead on the basis of volume-related measures. 
B)  The departmental overhead rate method is more refined than the plantwide overhead rate method. 
C)  The departmental overhead rate method does not assign overhead on the basis of volume-related measures. 
D)  The departmental overhead rate method is simpler and less costly to implement than the plantwide rate method. 
E)  There are no disadvantages of the departmental overhead rate method. 
A)  The departmental overhead rate method assigns overhead on the basis of volume-related measures. 
B)  The departmental overhead rate method is more refined than the plantwide overhead rate method. 
C)  The departmental overhead rate method does not assign overhead on the basis of volume-related measures. 
D)  The departmental overhead rate method is simpler and less costly to implement than the plantwide rate method. 
E)  There are no disadvantages of the departmental overhead rate method.

Question 13

Which of the following statements is true with regard to activity-based costing rates?

Accepted Answer

A)  The premise of ABC is that activities are what cause costs to be incurred. 
B)  ABC is another way to refer to a multiple departmental rate situation. 
C)  There one basic stage to ABC. 
D)  ABC is simpler and less expensive to implement than other traditional methods of allocating overhead costs. 
E)  All cost drivers used to determine the rates will be unit-level drivers. 
A)  The premise of ABC is that activities are what cause costs to be incurred. 
B)  ABC is another way to refer to a multiple departmental rate situation. 
C)  There one basic stage to ABC. 
D)  ABC is simpler and less expensive to implement than other traditional methods of allocating overhead costs. 
E)  All cost drivers used to determine the rates will be unit-level drivers.

Question 14

____________________________ is an out-growth of ABC that draws on the link between activities and cost incurrence for better management.

Accepted Answer

Activity-b

Question 15

A company allocates $7.50 overhead to each unit produced. The company uses a plantwide overhead rate with direct labor hours as the allocation base. Given the amounts below, how many direct labor hours does the company expect in department 2?
$$\begin{array} { l c c } 
\text { Estimated: } & \text { Department 1 } & \text { Department 2 } \
\text { Manufacturing overhead costs } & \$ 74,358 & \$ 49,572 \
\text { Direct labor hours } & 6,610 \mathrm { DLH } & ? \mathrm { DLH } \
\text { Machine hours } & 700 \mathrm { MH } & 800 \mathrm { MH }
\end{array}$$

Accepted Answer

A)  9,914 DLH. 
B)  6,612 DLH. 
C)  3,109 DLH. 
D)  7,454 DLH. 
E)  16,254 DLH. 
A)  9,914 DLH. 
B)  6,612 DLH. 
C)  3,109 DLH. 
D)  7,454 DLH. 
E)  16,254 DLH.

Question 16

By definition, costs classified as overhead are consumed in basically the same manner regardless of the process involved.

Accepted Answer

A) True 
 B)False

Question 17

Machine setup costs are an example of a batch level activity.

Accepted Answer

A) True 
 B)False

Question 18

Inside Out, Company designs custom showroom spaces in interior design marts across the country. The following data pertain to a recent reporting period.  
Required:
(a.) Use ABC to compute overhead rates for each activity.
(b.) Assign costs to a 3,000 square foot job that requires 70 contact hours, 20 design hours, and 14 days to complete.

Accepted Answer

The answer of Inside Out, Company designs custom showroom spaces...

Question 19

Activity-based costing involves four steps: (1) identify activities and the costs they cause, (2) group similar activities into cost pools, (3) determine an activity rate for each activity cost pool, and (4) allocate overhead costs to products using those activity rates.

Accepted Answer

A) True 
 B)False

Question 20

Sparks Company produces and distributes two types of garden sculptures, Plain and Fancy. Budgeted cost and activity for each of its three activity cost pools are shown below. The company plans to produce and sell 64,000 plain units and 49,150 fancy units.
 
(a.) Compute the approximate overhead cost per unit of Plain under activity-based costing.
(b.) Compute the approximate overhead cost per unit of Fancy under activity-based costing.

Accepted Answer

The answer of Sparks Company produces and distributes two types...

Exam 17: Activity-Based Costing and Analysis

The departmental overhead rate method allows each department to have its own overhead rate and its own ____________________.

A major disadvantage of using a plantwide overhead rate is the extreme difficulty in gathering the needed information.

Which types of overhead allocation methods result in the use of more than one overhead rate during the same time period?

How does ABC differ from using multiple departmental rates?

Overhead costs:

Facility level costs vary with the number of units or batches produced.

From an ABC perspective, what causes costs to be incurred?

What are the major advantages of using a plantwide overhead rate?

Which of the following is a disadvantage of the departmental overhead rate method?

Which of the following statements is true with regard to activity-based costing rates?

____________________________ is an out-growth of ABC that draws on the link between activities and cost incurrence for better management.

By definition, costs classified as overhead are consumed in basically the same manner regardless of the process involved.

Machine setup costs are an example of a batch level activity.

Activity-based costing involves four steps: (1) identify activities and the costs they cause, (2) group similar activities into cost pools, (3) determine an activity rate for each activity cost pool, and (4) allocate overhead costs to products using those activity rates.

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

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