Question 1

The most useful cost driver for allocating a particular cost is the one with the strongest cause-and-effect relationship.

Accepted Answer

A) True 
 B)False

Question 2

Each indirect cost should be allocated to products individually to provide the most useful cost information.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is not an example of a cost object and its related cost driver? $\begin{array}{|l|l|r|}
\hline&{\text { Cost Object }} &{\text { Cost Driver }} \
\hline \text { A. } & \text { Rent } & \text { Square feet } \
\hline \text { B. } & \text { Transportation } & \text { Miles driven } \
\hline \text { C. } & \text { Direct labor hours } & \text { Indirect labor } \
\hline \text { D. } & \text { Utilities } & \text { Machine hours } \
\hline
\end{array}$

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
A) Option A 
B) Option B 
C) Option C 
D) Option D

Question 4

Which of the following is not a joint product with the other products listed?

Accepted Answer

A) Cheese 
B) Cream 
C) Butter 
D) Eggs 
A) Cheese 
B) Cream 
C) Butter 
D) Eggs

Question 5

Which of the following is an appropriate cost driver for allocating indirect costs to a human resources department in a service company?

Accepted Answer

A) Number of employees 
B) Number of customers 
C) Square footage of office space 
D) Either number of employees or square footage of office space depending on the nature of the indirect cost 
A) Number of employees 
B) Number of customers 
C) Square footage of office space 
D) Either number of employees or square footage of office space depending on the nature of the indirect cost

Question 6

Vance Electronics expects to make 100,000 Bluetooth speakers during 2014. Direct materials cost per unit are estimated at $12, and direct labor cost is expected to be $4 per unit. The total manufacturing overhead for the year is budgeted at $850,000.Required:
1) Calculate the amount of overhead that should be allocated to each speaker during the year.2) Assume that, during the month of October, Vance made and sold 8,000 speakers. What would the cost of goods sold be for the month?
3) Assume that the company sells the speakers at cost plus 40% of cost. What would be the selling price for each speaker?

Accepted Answer

1) $850,000 ÷ 100,000 units =

Question 7

A company's total profit can be affected by the method used to allocate joint costs.

Accepted Answer

A) True 
 B)False

Question 8

Haskins Company employs material handling employees who move materials between production divisions at a labor cost of $360,000 a year. It is estimated that these employees move 600,000 pounds of material per year. If 60,000 pounds are moved in March, how much of the material handling cost should be assigned to products made in March? (Do not round your intermediate calculations.)

Accepted Answer

A) $36,000 
B) $24,000 
C) $50,000 
D) $38,000 
A) $36,000 
B) $24,000 
C) $50,000 
D) $38,000

Question 9

Sometimes, volume-based cost drivers are used to allocate fixed indirect costs.

Accepted Answer

A) True 
 B)False

Question 10

A predetermined overhead rate is calculated using estimated or predicted cost and volume data.

Accepted Answer

A) True 
 B)False

Question 11

How can the use of a predetermined overhead rate prevent timing problems in determining the costs of products?

Accepted Answer

Answers will vary
Some overhead costs (s

Question 12

The goal in allocating a cost to cost objects is to achieve a rational allocation.

Accepted Answer

A) True 
 B)False

Question 13

Old Virginia Meat Processing Plant processes hogs to produce three joint products: bacon, sausage, and pork chops. The company incurs common processing costs of $100,000 per batch. Each batch yields 15,000 pounds of bacon, 18,000 pounds of sausage, and 7,000 pounds of pork chops. Pork chops can be sold for $3.00 per pound. The bacon and sausage products are sold at the split-off point for $3.25 per pound and $3.50 per pound, respectively.Required:
1) Allocate Old Virginia's joint costs using pounds produced as the allocation base. (Do not round your intermediate calculations.)2) Allocate Old Virginia's joint costs using the relative sales value at split-off method. (Do not round your intermediate calculations.)3) Assume that the pork chops are processed further after the split-off point at an additional cost of $4,000 and that joint costs are allocated based on pounds produced. What would be the total cost assigned to pork chops?

Accepted Answer

1) Allocation of joint costs using pound

Question 14

Alleghany Community College operates four departments. The square footage used by each department is shown below.Alleghany's annual building rental cost is $320,000 What amount of rent expense that should be allocated to the Sciences Department?
$$\begin{array} { | l | r | } 
\hline { \text { De partment } } & \text { Square Footage } \
\hline \text { Accounting } & 3,000 \
\hline \text { Marketing } & 4,000 \
\hline \text { Technology } & 6,000 \
\hline \text { Sciences } & 3,000 \
\hline \text { Total } & \mathbf { 1 6 , 0 0 0 } \
\hline
\end{array}$$

Accepted Answer

A) $60,000 
B) $80,000 
C) $120,000 
D) $106,667 
A) $60,000 
B) $80,000 
C) $120,000 
D) $106,667

Question 15

Bank's Department Store has three departments: Men's, Women's and Children's. The store incurred $50,000 of store rental costs during the current year. The departments identified the following cost drivers: Using the most appropriate cost driver, how much rental cost (rounded to the nearest dollar) should be allocated to the Women's Department? (Do not round your intermediate calculations.) $$\begin{array} { | l | r | r | r | } 
\hline & \text { Men's } & \text { Women's } & \text { Children's } \
\hline \text { Labor dollars } & \$ 530,000 & \$ 775,000 & \$ 240,000 \
\hline \text { Number of employees } & 10 & 20 & 4 \
\hline \text { Square footage } & 3,000 & 8,000 & 1,000 \
\hline \text { Number of sales transactions } & 300,000 & 900,000 & 90,000 \
\hline
\end{array}$$

Accepted Answer

A) $33,333 
B) $29,412 
C) $25,081 
D) $34,884 
A) $33,333 
B) $29,412 
C) $25,081 
D) $34,884

Question 16

Indirect costs are often pooled, and not allocated individually because:

Accepted Answer

A) individual allocation would be more timely. 
B) individual allocation would be more accurate. 
C) individual allocation would be tedious. 
D) the benefits of individual allocation of indirect costs are greater than the costs. 
A) individual allocation would be more timely. 
B) individual allocation would be more accurate. 
C) individual allocation would be tedious. 
D) the benefits of individual allocation of indirect costs are greater than the costs.

Question 17

Burke Company has 160 employees, 88 of whom are in Department 1 and 72 in Department 2. The company expects to incur $166,000 of office supplies costs during the current year. How much of this cost should be allocated to Department 1?

Accepted Answer

88 ÷ 160 ×

Question 18

Joint costs total $24,000 for a production process that yields two main products, A and
A.
B. If joint costs are allocated to the products on the basis of their respective $20,000 and $30,000 sales values, 2/3 of the joint costs (or $16,000) would be allocated to Product

Accepted Answer

A) True 
 B)False

Question 19

The terms "cost tracing" and "cost allocation" may be used interchangeably because they mean the same thing.

Accepted Answer

A) True 
 B)False

Question 20

The Flintstone Construction Company delivers dirt and stone from local quarries to its construction sites. A new truck that was purchased for a cost of $120,000 at the beginning of the year was expected to deliver 200,000 tons over its useful life. The following is a breakdown of the tons delivered during the year to each construction site: How much truck depreciation should be allocated to Site A? (Do not round your intermediate calculations.) $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Construction Sites: } & \text { A } & \text { B } & \text { C } & \text { D } \
\hline \text { Tons Delivered: } & 2,000 & 3,500 & 4,000 & 1,500 \
\hline
\end{array}$$

Accepted Answer

A) $21,818 
B) $30,000 
C) $2,000 
D) None of the answers are correct. 
A) $21,818 
B) $30,000 
C) $2,000 
D) None of the answers are correct.

The most useful cost driver for allocating a particular cost is the one with the strongest cause-and-effect relationship.

Each indirect cost should be allocated to products individually to provide the most useful cost information.

Which of the following is not an example of a cost object and its related cost driver? Cost Object Cost Driver A. Rent Square feet B. Transportation Miles driven C. Direct labor hours Indirect labor D. Utilities Machine hours

Which of the following is not a joint product with the other products listed?

Which of the following is an appropriate cost driver for allocating indirect costs to a human resources department in a service company?

A company's total profit can be affected by the method used to allocate joint costs.

Sometimes, volume-based cost drivers are used to allocate fixed indirect costs.

A predetermined overhead rate is calculated using estimated or predicted cost and volume data.

How can the use of a predetermined overhead rate prevent timing problems in determining the costs of products?

The goal in allocating a cost to cost objects is to achieve a rational allocation.

Indirect costs are often pooled, and not allocated individually because:

Burke Company has 160 employees, 88 of whom are in Department 1 and 72 in Department 2. The company expects to incur $166,000 of office supplies costs during the current year. How much of this cost should be allocated to Department 1?

Joint costs total $24,000 for a production process that yields two main products, A and A. B. If joint costs are allocated to the products on the basis of their respective $20,000 and $30,000 sales values, 2/3 of the joint costs (or $16,000) would be allocated to Product

The terms "cost tracing" and "cost allocation" may be used interchangeably because they mean the same thing.

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

The most useful cost driver for allocating a particular cost is the one with the strongest cause-and-effect relationship.

Each indirect cost should be allocated to products individually to provide the most useful cost information.

Which of the following is not an example of a cost object and its related cost driver? Cost Object Cost Driver A. Rent Square feet B. Transportation Miles driven C. Direct labor hours Indirect labor D. Utilities Machine hours

Which of the following is not a joint product with the other products listed?

Which of the following is an appropriate cost driver for allocating indirect costs to a human resources department in a service company?

A company's total profit can be affected by the method used to allocate joint costs.

Sometimes, volume-based cost drivers are used to allocate fixed indirect costs.

A predetermined overhead rate is calculated using estimated or predicted cost and volume data.

How can the use of a predetermined overhead rate prevent timing problems in determining the costs of products?

The goal in allocating a cost to cost objects is to achieve a rational allocation.

Indirect costs are often pooled, and not allocated individually because:

Burke Company has 160 employees, 88 of whom are in Department 1 and 72 in Department 2. The company expects to incur $166,000 of office supplies costs during the current year. How much of this cost should be allocated to Department 1?

Joint costs total $24,000 for a production process that yields two main products, A and A. B. If joint costs are allocated to the products on the basis of their respective $20,000 and $30,000 sales values, 2/3 of the joint costs (or $16,000) would be allocated to Product

The terms "cost tracing" and "cost allocation" may be used interchangeably because they mean the same thing.

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