Exam 4: Cost Accumulation, Tracing, and Allocation

Joint products A and B emerge from common processing that costs $150,000 and yields 8,000 units of Product A and 4,000 units of Product B Product A can be sold for $100 per unit. Product B can be sold for $80 per unit. What amount of the joint costs will be assigned to Product B if joint costs are allocated on the basis of number of units produced? (Do not round your intermediate calculations.)

Harrison Company expects to incur $600,000 in manufacturing overhead for the coming year. The company makes two products, A and B, and it has accumulated the following budget information for the products: Product A Product B Total Number of units to be produced 10,000 5,000 15,000 Direct labor hours 25,000 5,000 30,000 Machine hours 15,000 30,000 45,000 Required: 1) Use direct labor hours as the cost driver to compute the allocation rate. Determine the amount of budgeted overhead to be allocated to each unit of product A. (Round to the nearest cent.)2) Use machine hours as the cost driver to compute the allocation rate. Determine the amount of budgeted overhead to be allocated to each unit of product A. (Round to the nearest cent.)3) How should Harrison decide between machine hours and direct labor hours as the cost driver for its manufacturing overhead?

Which of the following is not a true statement regarding the pooling of indirect costs?

A company may use several different cost drivers to allocate its indirect costs.

The following are Acme's production costs for the quarter ended September 30^th: What amount of costs should be traced to specific products in the process? Direct materials \ 150,000 Direct labor \ 175,000 Factory overhead \ 225,000

Biden Department Store has four departments: men's, women's, children's, and electronics. The following information is provided: The company's accountant needs to allocate the store's annual rent of $160,000. Men's Women's Chaldren's Electronics Floor space 10,000 sq. ft. 20,000 sq. ft. 8,000 sq. 2,000 sq. ft. Sales \ 35,000 \ 75,000 \ 20,000 \ 12,000 Required: 1) Compute the allocation rate that should be used to allocate the rent cost to the four departments.2) Compute the amount of rent that should be allocated to each of the four departments.3) Currently, the managers are paid a bonus based on sales. As you can see from the above table, the women's department manager will receive the largest bonus. Do you believe this bonus plan is fair to all four department managers? Why or why not?

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:

What cost driver would you use to allocate indirect materials to products?

Indicate whether each of the following statements is true or false.With the direct method of allocating service department costs, the costs are allocated to operating departments only.For a manufacturing company, service department costs are treated as part of selling and administrative expenses.The only companies that have service departments are manufacturing companies.The reciprocal method and the step method of allocating service department costs both allocate some of the costs to other service departments.Using the reciprocal method to allocate service department costs can cause some distortion of product costs.

Joint costs are irrelevant in a decision to sell a joint product at the split-off point or process it further.

Martin's is a store with three departments, Appliances, Tools, and Home Improvements. The company expects to incur the following indirect costs related to its operations: Store manager's salary Store supplies Electric bill Clerical staff salaries Payroll taxes Office supplies Water bill Sewer bill Medical insurance Vacation pay Required: 1) Organize the indirect costs into three cost pools: Store Administration, Utilities, and Fringe Benefit Costs, assuming that each department is a cost object 2) Identify an appropriate cost driver for each cost pool.

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.

Which of the following statements is true regarding the salary of the manager of a fast food hamburger restaurant?

Sturbridge Company manufactures fine furniture and grandfather clocks. Sturbridge has an excellent reputation, and each grandfather clock sells for several thousand dollars. Which of the following is an indirect cost, assuming the cost object is the Clock Department?

Overhead costs:

A cost object is anything for which management desires a separate tracking of costs, while a cost driver is the factor that causes the cost object to increase or decrease.

Custom Quilters makes decorative comforters, quilted garments, and other products in a small sewing factory. During the upcoming, the company expects to make 2,000 comforters. With respect to the comforters how would the fabric used to make the comforters be classified?

The split off point:

Indicate whether each of the following statements is true or false.Information prepared using allocated costs often is used in evaluating the performance of managers.Information prepared using allocated costs should not be used in budgeting and resource allocation decisions within a company.A cost that is indirect with respect to one cost object may be direct with respect to other cost objects.Fixed costs generally are direct costs, and variable costs generally are indirect.An allocation base causes a cost to be incurred.

Financial reporting standards require that joint costs: