Question 1

In a manufacturing company, service department costs are:

Accepted Answer

A) reported as selling and administrative expenses. 
B) allocated to the products made by the company. 
C) treated as direct costs. 
D) expensed when incurred. 
A) reported as selling and administrative expenses. 
B) allocated to the products made by the company. 
C) treated as direct costs. 
D) expensed when incurred.

Question 2

The first step in cost accumulation is to identify cost objects.

Accepted Answer

A) True 
 B)False

Question 3

Costs that can be traced to a cost object in a cost-effective way are called direct costs.

Accepted Answer

A) True 
 B)False

Question 4

Services performed by service departments for the benefit of an operating department are called interdepartmental services.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is not a step in allocating indirect costs to cost objects?

Accepted Answer

A) Multiply the allocation rate by the weight of the cost driver. 
B) Trace direct costs to individual cost pools. 
C) Compute an allocation rate by dividing the total cost to be allocated by the total cost driver volume. 
D) All of the answers are steps in allocating indirect costs. 
A) Multiply the allocation rate by the weight of the cost driver. 
B) Trace direct costs to individual cost pools. 
C) Compute an allocation rate by dividing the total cost to be allocated by the total cost driver volume. 
D) All of the answers are steps in allocating indirect costs.

Question 6

It is possible that the same cost might be direct with respect to one cost object but indirect with respect to another cost object.

Accepted Answer

A) True 
 B)False

Question 7

Wayne Company wishes to allocate overhead costs in a heavily automated production department. Direct labor hours would be a less appropriate cost driver than machine hours.

Accepted Answer

A) True 
 B)False

Question 8

Using the step method of allocating service department costs, the costs are allocated to:

Accepted Answer

A) service departments only. 
B) operating departments only. 
C) both service departments and operating departments. 
D) neither service departments nor operating departments. 
A) service departments only. 
B) operating departments only. 
C) both service departments and operating departments. 
D) neither service departments nor operating departments.

Question 9

Which of the following costs generally can be traced directly to units of product?

Accepted Answer

A) Indirect materials 
B) Overhead costs 
C) Assembly labor 
D) Indirect materials and assembly labor 
A) Indirect materials 
B) Overhead costs 
C) Assembly labor 
D) Indirect materials and assembly labor

Question 10

Michael & Co. expects overhead costs of $60,000 per month and direct production costs of $24 per unit. The estimated production activity for the current accounting period is as follows: The predetermined overhead rate based on units produced is (rounded to the nearest penny) is:
$\begin{array}{|l|l|l|l|l|}
\hline & 1^{\text {st }} \text { Quarter } & 2^{nd} \text {nuarter } & 3^{rd}\text { Quarter } & 4^{\text {th }} \text { Quarter } \
\hline \text { Units produced } & 11,500 & 9,000 & 8,250 & 11,250 \
\hline
\end{array}$

Accepted Answer

A) $1.50 per unit. 
B) $2.67 per unit. 
C) $18.00 per unit. 
D) $42.00 per unit. 
A) $1.50 per unit. 
B) $2.67 per unit. 
C) $18.00 per unit. 
D) $42.00 per unit.

Question 11

Which of the following statements is true?

Accepted Answer

A) Indirect costs can easily be traced to a cost object; direct costs cannot be easily traced to a cost object. 
B) Both direct and indirect costs can easily be traced to a cost object. 
C) Neither direct nor indirect costs are easily traced to a cost object. 
D) Direct costs can be traced easily to a cost object, but indirect costs cannot be easily traced to a cost object. 
A) Indirect costs can easily be traced to a cost object; direct costs cannot be easily traced to a cost object. 
B) Both direct and indirect costs can easily be traced to a cost object. 
C) Neither direct nor indirect costs are easily traced to a cost object. 
D) Direct costs can be traced easily to a cost object, but indirect costs cannot be easily traced to a cost object.

Question 12

Southeast Manufacturing Company has identified the following cost objects: Cost Object 1: The cost of operating the finishing department
Cost Object 2: The cost of a particular product made in June
Cost Object 3: The cost of operating the factory
With respect to these cost objects, the cost of the salary of the supervisor of the finishing department is directly traceable to cost objects:

Accepted Answer

A) 1 and 2. 
B) 2 and 3. 
C) 1 and 3. 
D) 1, 2, and 3. 
A) 1 and 2. 
B) 2 and 3. 
C) 1 and 3. 
D) 1, 2, and 3.

Question 13

The following information was gathered for Company J, a manufacturing company with three departments, A, B, and C:
Manufacturing supplies cost is expected to be $300,000. Possible cost drivers are direct labor hours, direct materials cost, and number of units completed and sold. The three departments have varying amounts for these items. $$\begin{array} { | l | r | r | r | } 
\hline & \text { Department A } & \text { Department B } & \text { Department C } \
\hline \text { Direct labor hours } & 15,000 & 40,000 & 45,000 \
\hline \text { Direct materials cost } & \$ 500,000 & \$ 2,500,000 & \$ 2,000,000 \
\hline \text { \# of units expected to be } & & & \
\text { completed and sold } & 80,000 & 30,000 & 40,000 \
\hline
\end{array}$$ Based on this information, indicate whether each of the following statements is true or false.If number of units completed and sold is selected as the cost driver, the allocation rate for manufacturing supplies cost would be $2 per unit.If direct labor hours is selected as the cost driver, the manufacturing supplies cost allocated to Department B would be $100,000.The manufacturing supplies cost allocated to Department C would be unaffected by the choice of the cost driver.If the amount of bonuses to department managers is based on income after all expenses, the manager for Department A would prefer that direct materials cost be selected as the cost driver.If the amount of bonuses to department managers is based on income after all expenses, the manager for Department B would prefer that direct labor hours be selected as the cost driver.

Accepted Answer

If number of units completed and sold is

Question 14

Both direct and indirect costs can be relevant to a particular decision.

Accepted Answer

A) True 
 B)False

Question 15

What should a company consider when pooling indirect costs?

Accepted Answer

Answers will vary
Companies sh

Question 16

Pets 'n Pals is attempting to determine the cost of operating a particular store. Which of the following costs would be classified as an indirect cost?

Accepted Answer

A) Fees paid to external accountant for corporate audit 
B) Cost of operating company owned vehicles by the store 
C) Salary of store manager 
D) Cost of aquariums used to display exotic fish 
A) Fees paid to external accountant for corporate audit 
B) Cost of operating company owned vehicles by the store 
C) Salary of store manager 
D) Cost of aquariums used to display exotic fish

Question 17

A manager believes that the number of units sold drives the company's selling costs. The number of units sold would be referred to as the cost driver.

Accepted Answer

A) True 
 B)False

Question 18

For financial reporting, joint costs are assigned to the product with the highest sales value.

Accepted Answer

A) True 
 B)False

Question 19

Great Outdoors Company makes two types of camping tents. Making a standard camping tent requires 4 hours of labor while making a deluxe camping tent requires 10 hours of labor. During the most recent accounting period the company made 2,000 standard camping tents and 500 deluxe camping tents. Indirect manufacturing costs amounted to $52,000 and are allocated based on labor hours. Based on this information:

Accepted Answer

A) $4 of overhead cost should be allocated to each camping tent regardless of the type of tent made. 
B) $20.80 of overhead cost should be allocated to each camping tent regardless of the type of tent made. 
C) $16 of overhead cost should be assigned to each standard camping tent and $40 of overhead cost should be assigned to each deluxe tent. 
D) None of the answers are correct. 
A) $4 of overhead cost should be allocated to each camping tent regardless of the type of tent made. 
B) $20.80 of overhead cost should be allocated to each camping tent regardless of the type of tent made. 
C) $16 of overhead cost should be assigned to each standard camping tent and $40 of overhead cost should be assigned to each deluxe tent. 
D) None of the answers are correct.

Question 20

Which of the following costs is most likely to be directly traceable to a specific department in a retail clothing store?

Accepted Answer

A) The cost of heating and air conditioning. 
B) The cost of supplies. 
C) The cost of the department manager's salary. 
D) Rent on the store building. 
A) The cost of heating and air conditioning. 
B) The cost of supplies. 
C) The cost of the department manager's salary. 
D) Rent on the store building.

In a manufacturing company, service department costs are:

The first step in cost accumulation is to identify cost objects.

Costs that can be traced to a cost object in a cost-effective way are called direct costs.

Services performed by service departments for the benefit of an operating department are called interdepartmental services.

Which of the following is not a step in allocating indirect costs to cost objects?

It is possible that the same cost might be direct with respect to one cost object but indirect with respect to another cost object.

Wayne Company wishes to allocate overhead costs in a heavily automated production department. Direct labor hours would be a less appropriate cost driver than machine hours.

Using the step method of allocating service department costs, the costs are allocated to:

Which of the following costs generally can be traced directly to units of product?

Which of the following statements is true?

Both direct and indirect costs can be relevant to a particular decision.

What should a company consider when pooling indirect costs?

Pets 'n Pals is attempting to determine the cost of operating a particular store. Which of the following costs would be classified as an indirect cost?

A manager believes that the number of units sold drives the company's selling costs. The number of units sold would be referred to as the cost driver.

For financial reporting, joint costs are assigned to the product with the highest sales value.

Which of the following costs is most likely to be directly traceable to a specific department in a retail clothing store?

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost, Volume, and Pricing to Increase Profitability

Cost Management in an Automated Business Environment: Abc, Abm, and Tqm

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 4: Cost Accumulation, Tracing, and Allocation

In a manufacturing company, service department costs are:

The first step in cost accumulation is to identify cost objects.

Costs that can be traced to a cost object in a cost-effective way are called direct costs.

Services performed by service departments for the benefit of an operating department are called interdepartmental services.

Which of the following is not a step in allocating indirect costs to cost objects?

It is possible that the same cost might be direct with respect to one cost object but indirect with respect to another cost object.

Wayne Company wishes to allocate overhead costs in a heavily automated production department. Direct labor hours would be a less appropriate cost driver than machine hours.

Using the step method of allocating service department costs, the costs are allocated to:

Which of the following costs generally can be traced directly to units of product?

Which of the following statements is true?

Both direct and indirect costs can be relevant to a particular decision.

What should a company consider when pooling indirect costs?

Pets 'n Pals is attempting to determine the cost of operating a particular store. Which of the following costs would be classified as an indirect cost?

A manager believes that the number of units sold drives the company's selling costs. The number of units sold would be referred to as the cost driver.

For financial reporting, joint costs are assigned to the product with the highest sales value.

Which of the following costs is most likely to be directly traceable to a specific department in a retail clothing store?

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost, Volume, and Pricing to Increase Profitability

Cost Management in an Automated Business Environment: Abc, Abm, and Tqm

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters