Question 1

What should a company consider when pooling indirect costs?

Accepted Answer

Companies should only pool cos

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

A cost pool should be made up of costs with a common cost object.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements is false?

Accepted Answer

A)  Both direct and indirect costs can be assigned to a cost object. 
B)  Cost drivers are often selected based on the availability of information. 
C)  Volume measures are good drivers for fixed overhead costs. 
D)  Fixed costs that do not have a definitive cost driver are allocated using an allocation base that distributes a rational share of the cost to each product. 
A)  Both direct and indirect costs can be assigned to a cost object. 
B)  Cost drivers are often selected based on the availability of information. 
C)  Volume measures are good drivers for fixed overhead costs. 
D)  Fixed costs that do not have a definitive cost driver are allocated using an allocation base that distributes a rational share of the cost to each product.

Question 5

Michael & Co. expects overhead costs of $60,000 per month and direct production costs of $24 per unit. The estimated production activity for the 2013 accounting period is as follows:   The predetermined overhead rate based on units produced is (rounded to the nearest penny) is:

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 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

Nature's Soap manufactures Bar soap and Liquid soap. Of the following costs, which would be an indirect cost to the Liquid Department?

Accepted Answer

A)  Liquid manager's salary 
B)  Manufacturing plant insurance 
C)  Depreciation of the liquefying equipment 
D)  Liquid Fragrance 
A)  Liquid manager's salary 
B)  Manufacturing plant insurance 
C)  Depreciation of the liquefying equipment 
D)  Liquid Fragrance

Question 8

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

Accepted Answer

Some overhead costs (such as property ta

Question 9

All of the following are examples of indirect costs that can be classified as being variable costs except:

Accepted Answer

A)  Utilities. 
B)  Material handling costs. 
C)  Production supervisor salaries. 
D)  Transportation costs. 
A)  Utilities. 
B)  Material handling costs. 
C)  Production supervisor salaries. 
D)  Transportation costs.

Question 10

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 11

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

Accepted Answer

A)  Costs that have been pooled for one purpose may require disaggregation for a different purpose. 
B)  Pooling costs that have different cost drivers may result in unreliable cost allocation. 
C)  A single cost pool will have more than one cost driver for different cost objects. 
D)  Pooled costs may require disaggregation when allocating costs for different purposes. 
A)  Costs that have been pooled for one purpose may require disaggregation for a different purpose. 
B)  Pooling costs that have different cost drivers may result in unreliable cost allocation. 
C)  A single cost pool will have more than one cost driver for different cost objects. 
D)  Pooled costs may require disaggregation when allocating costs for different purposes.

Question 12

Cost allocation involves:

Accepted Answer

A)  identifying a cost driver for each cost to be allocated. 
B)  calculating an allocation rate for each cost to be allocated. 
C)  multiplying the allocation rate by the weight of the cost driver. 
D)  All of these answers are correct. 
A)  identifying a cost driver for each cost to be allocated. 
B)  calculating an allocation rate for each cost to be allocated. 
C)  multiplying the allocation rate by the weight of the cost driver. 
D)  All of these answers are correct.

Question 13

Which of the following regarding direct costs is a correct statement?

Accepted Answer

A)  Direct costs are always fixed costs. 
B)  Direct costs are always variable costs. 
C)  Direct costs are easily traced to cost objects. 
D)  Direct costs are never selling and administrative expenses. 
A)  Direct costs are always fixed costs. 
B)  Direct costs are always variable costs. 
C)  Direct costs are easily traced to cost objects. 
D)  Direct costs are never selling and administrative expenses.

Question 14

The College of Business Administration needs to distribute $12,000 received from an anonymous donor and earmarked for three business student organizations, Beta Alpha Psi (BAP), Delta Sigma Pi (DSP), and Beta Gamma Sigma (BGS). Relevant information is provided below: $$\begin{array} { | l | r | r | r | } 
\hline \text { Possible Cost Driver } & \text { BAP } & \text { DSP } & { \text { BGS } } \
\hline \text { Number of students } & 30 & 40 & 100 \
\hline \text { Budgeted expenses } & \$ 5,500 & \$ 4,000 & \$ 500 \
\hline \begin{array} { l } 
\text { Number of } \
\text { organizations }
\end{array} & 1 & 1 & 1 \
\hline
\end{array}$$ 
Assume that each organization wishes to obtain the highest funding possible.
Required:
1) Which cost driver will each organization recommend be used to distribute the funds?
2) Which cost driver would you recommend and why?

Accepted Answer

1) As a reference, consider that if the

Question 15

Selection of a cost driver depends on:

Accepted Answer

A)  The availability of information for both the cost and the potential cost driver. 
B)  A cause-and-effect relationship between the cost driver and the cost. 
C)  Judgment of management. 
D)  All of these answers are correct. 
A)  The availability of information for both the cost and the potential cost driver. 
B)  A cause-and-effect relationship between the cost driver and the cost. 
C)  Judgment of management. 
D)  All of these answers are correct.

Question 16

What is the object of allocating fixed overhead costs to products?

Accepted Answer

The object is to distribute a

Question 17

Indicate whether each of the following statements is true or false.
1. When a company can identify more than one cost driver for a particular cost, it should use the cost driver with the strongest cause-and-effect relationship to the cost.
2. Availability and cost of information are likely to influence a company's choice of cost drivers.
3. A company should never use a cost driver unless there is a strong causal relationship between the cost and the cost driver.
4. Different cost drivers almost always give about the same results when a cost is allocated to cost objects.
5. In allocating costs among departments, a company must consider how department managers are likely to respond.

Accepted Answer

1. True
2.

Question 18

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 19

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

Accepted Answer

A) True 
 B)False

Question 20

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

What should a company consider when pooling indirect costs?

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

A cost pool should be made up of costs with a common cost object.

Which of the following statements is false?

Michael & Co. expects overhead costs of $60,000 per month and direct production costs of $24 per unit. The estimated production activity for the 2013 accounting period is as follows: The predetermined overhead rate based on units produced is (rounded to the nearest penny) is:

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

Nature's Soap manufactures Bar soap and Liquid soap. Of the following costs, which would be an indirect cost to the Liquid Department?

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

All of the following are examples of indirect costs that can be classified as being variable costs except:

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

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

Cost allocation involves:

Which of the following regarding direct costs is a correct statement?

Selection of a cost driver depends on:

What is the object of allocating fixed overhead costs to products?

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

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

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

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

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Exam 12: Cost Accumulation, Tracing, and Allocation

What should a company consider when pooling indirect costs?

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

A cost pool should be made up of costs with a common cost object.

Which of the following statements is false?

Michael & Co. expects overhead costs of $60,000 per month and direct production costs of $24 per unit. The estimated production activity for the 2013 accounting period is as follows: The predetermined overhead rate based on units produced is (rounded to the nearest penny) is:

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

Nature's Soap manufactures Bar soap and Liquid soap. Of the following costs, which would be an indirect cost to the Liquid Department?

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

All of the following are examples of indirect costs that can be classified as being variable costs except:

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

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

Cost allocation involves:

Which of the following regarding direct costs is a correct statement?

Selection of a cost driver depends on:

What is the object of allocating fixed overhead costs to products?

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

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

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

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters