Question 1

Overhead costs are often affected by many issues and are frequently too complex to be explained by any one factor.

Accepted Answer

A) True 
 B)False

Question 2

A company produces paint which goes through two operations, operation A and operation B, before it is complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for Department B based on machine hours is $4.00 per machine hour.
 $$\begin{array} { l c c } 
& \text { Department } & \text { Department } \
& \mathrm { A } & \mathrm { B } \
\text { Machine hours } & 50,000 \mathrm { MH } & 60,000 \mathrm { MH } \
\text { Direct labor hours } & 78,500 \mathrm { DLH } & 100,800 \mathrm { DLH } \
\text { Overhead costs } & \$ 392,500 & \$ 403,200
\end{array}$$

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

Batch level costs vary with the number of units produced.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not true?

Accepted Answer

A)  The departmental overhead 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)  Overhead costing accuracy is improved by the use of multiple departmental rates rather than a single overhead rate. 
D)  The departmental overhead rate method does not assign overhead on the basis of volume-related measures. 
E)  The departmental overhead rate method is more costly to implement than the traditional overhead rate method. 
A)  The departmental overhead 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)  Overhead costing accuracy is improved by the use of multiple departmental rates rather than a single overhead rate. 
D)  The departmental overhead rate method does not assign overhead on the basis of volume-related measures. 
E)  The departmental overhead rate method is more costly to implement than the traditional overhead rate method.

Question 6

Direct labor, direct materials and manufacturing overhead are all product costs. Why is overhead more difficult to account for than either direct labor or direct materials?

Accepted Answer

Overhead costs are not directl

Question 7

Data concerning volume-related measures are readily available in most manufacturing settings.

Accepted Answer

A) True 
 B)False

Question 8

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 $3.20 per machine hour overhead rate for the finishing department. Compute the estimated manufacturing overhead cost for the finishing department given the information above.

Accepted Answer

A)  $208,000 
B)  $312,000 
C)  $520,000 
D)  $260,000 
E)  $572,000 
A)  $208,000 
B)  $312,000 
C)  $520,000 
D)  $260,000 
E)  $572,000

Question 9

All of the following are examples of facility sustaining costs except:

Accepted Answer

A)  Costs of cleaning the workplace. 
B)  Costs of custodial work. 
C)  Costs of personnel support. 
D)  Costs of sampling product quality. 
E)  Costs of employee recreational facilities. 
A)  Costs of cleaning the workplace. 
B)  Costs of custodial work. 
C)  Costs of personnel support. 
D)  Costs of sampling product quality. 
E)  Costs of employee recreational facilities.

Question 10

The first step in using the departmental overhead rate method requires that overhead be traced to each of the company's departments.

Accepted Answer

A) True 
 B)False

Question 11

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 $3 per direct labor hour overhead rate for the molding department. Compute the estimated manufacturing overhead cost for the molding department given the information above.

Accepted Answer

A)  $487,500 
B)  $195,000 
C)  $292,500 
D)  $243,750 
E)  $692,500 
A)  $487,500 
B)  $195,000 
C)  $292,500 
D)  $243,750 
E)  $692,500

Question 12

A company identified the following partial list of activities, costs, and activity drivers expected for the next year. 
$$\begin{array}{l}
\begin{array} { | l | c | c | } 
\hline \text { Activity } & \text { Expected Costs } & \text { Cost Driver } \
\hline \text { Extrusion Costs } & \$ 83,600 & \text { Number batches made } \
\hline \text { Handling Costs } & \$ 8,800 & \text { Number of orders filled } \
\hline \text { Packaging Costs } & \$ 40,500 & \text { Number of units made } \
\hline
\end{array}\
\begin{array} { | l | c | c | } 
\hline & \text { Product A } & \text { Product B } \
\hline \text { Production volume } & 750,000 \text { units } & 600,000 \text { units } \
\hline \text { Batches made } & 200 \text { batches } & 750 \text { batches } \
\hline \text { Orders filled } & 75 & 200 \
\hline
\end{array}
\end{array}$$
How much overhead in total will be assigned to the Product A line?

Accepted Answer

A)  $42,500. 
B)  $132,900. 
C)  $90,400. 
D)  $66,000. 
E)  $66,450. 
A)  $42,500. 
B)  $132,900. 
C)  $90,400. 
D)  $66,000. 
E)  $66,450.

Question 13

A company produces surgical equipment which goes through threes processes, 1A1, 2B2 and 3C3, before they are complete. Expected costs and activities for the three departments are shown below. All departments have departmental overhead rates based on direct labor hours. Therefore, the overhead rate for each department is $5 per direct labor hour.
 $$\begin{array} { l c c c } 
& \text { Department } & \text { Department } & \text { Department } \
& 1 \mathrm {~A} 1 & 2 \mathrm {~B} 2 & 3 \mathrm { C } 3 \
\text { Machine hours } & 15,000 \mathrm { MH } & 25,000 \mathrm { MH } & 20,000 \mathrm { MH } \
\text { Direct labor hours } & 22,830 \mathrm { DLH } & 10,650 \mathrm { DLH } & 29,200 \mathrm { DLH } \
\text { Overhead costs } & \$ 114,150 & \$ 213,000 & \$ 73,000
\end{array}$$

Accepted Answer

A) True 
 B)False

Question 14

Assume that the Oregon Ice Cream Company is considering the costs of two of their product lines - ice cream sandwiches and dessert bars. The company identified the following partial list of activities, costs, and activity drivers expected for the next year.
$$\begin{array}{l}
\begin{array} { | l | c | c | } 
\hline \text { Activity } & \text { Expected Costs } & \text { Cost Driver } \
\hline \text { Extrusion Costs } & \$ 637,500 & \text { Number batches made } \
\hline \text { Packaging Costs } & \$ 44,000 & \text { Number of units made } \
\hline
\end{array}\\
\begin{array} { | l | c | c | } 
\hline & \text { Ice Cream Sandwiches } & \text { Dessert Bars } \
\hline \text { Production volume } & 350,000 \text { units } & 200,000 \text { units } \
\hline \text { Batches made } & 400 \text { batches } & 350 \text { batches } \
\hline
\end{array}
\end{array}$$
-Refer to the data above. How much overhead cost will be assigned to the ice cream sandwich product line using activity-based costing (ABC)?

Accepted Answer

A)  340,000 
B)  $368,000 
C)  $28,000 
D)  $850.08 
E)  $433,682 
A)  340,000 
B)  $368,000 
C)  $28,000 
D)  $850.08 
E)  $433,682

Question 15

The premise of ABC is that it takes activities to make products and provide services and these activities drive costs.

Accepted Answer

A) True 
 B)False

Question 16

K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 80,000 direct labor hours are planned for this next year, what is the company's plantwide overhead rate?

Accepted Answer

A)  $.02 per direct labor hour. 
B)  $46.25 per direct labor hour. 
C)  $36.25 per direct labor hour. 
D)  $10 per direct labor hour. 
E)  $.10 per direct labor hour. 
A)  $.02 per direct labor hour. 
B)  $46.25 per direct labor hour. 
C)  $36.25 per direct labor hour. 
D)  $10 per direct labor hour. 
E)  $.10 per direct labor hour.

Question 17

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

Accepted Answer

A)  Cleaning rooms and heating the clinic are both unit level activities. 
B)  Sending blood work to the lab is a batch level activity. 
C)  Sending blood work and dispensing medicine are both batch level activities. 
D)  Cleaning rooms and dispensing medication are both product or service level activities. 
E)  Heating the clinic and dispensing medication are both batch level activities. 
A)  Cleaning rooms and heating the clinic are both unit level activities. 
B)  Sending blood work to the lab is a batch level activity. 
C)  Sending blood work and dispensing medicine are both batch level activities. 
D)  Cleaning rooms and dispensing medication are both product or service level activities. 
E)  Heating the clinic and dispensing medication are both batch level activities.

Question 18

The use of a plantwide overhead rate is not acceptable for external reporting under GAAP.

Accepted Answer

A) True 
 B)False

Question 19

A _______________________ overhead rate is a single overhead rate determined by using volume-related measures.

Accepted Answer

The answer of A _______________________ overhead rate is a single...

Question 20

Allocated overhead costs vary depending upon the allocation methods used.

Accepted Answer

A) True 
 B)False

Overhead costs are often affected by many issues and are frequently too complex to be explained by any one factor.

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

Batch level costs vary with the number of units produced.

Which of the following is not true?

Direct labor, direct materials and manufacturing overhead are all product costs. Why is overhead more difficult to account for than either direct labor or direct materials?

Data concerning volume-related measures are readily available in most manufacturing settings.

All of the following are examples of facility sustaining costs except:

The first step in using the departmental overhead rate method requires that overhead be traced to each of the company's departments.

The premise of ABC is that it takes activities to make products and provide services and these activities drive costs.

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

The use of a plantwide overhead rate is not acceptable for external reporting under GAAP.

A _______________________ overhead rate is a single overhead rate determined by using volume-related measures.

Allocated overhead costs vary depending upon the allocation methods used.

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

Overhead costs are often affected by many issues and are frequently too complex to be explained by any one factor.

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

Batch level costs vary with the number of units produced.

Which of the following is not true?

Direct labor, direct materials and manufacturing overhead are all product costs. Why is overhead more difficult to account for than either direct labor or direct materials?

Data concerning volume-related measures are readily available in most manufacturing settings.

All of the following are examples of facility sustaining costs except:

The first step in using the departmental overhead rate method requires that overhead be traced to each of the company's departments.

The premise of ABC is that it takes activities to make products and provide services and these activities drive costs.

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

The use of a plantwide overhead rate is not acceptable for external reporting under GAAP.

A _______________________ overhead rate is a single overhead rate determined by using volume-related measures.

Allocated overhead costs vary depending upon the allocation methods used.

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