Question 1

If the direct labor time estimates are met, Malone will allocate $12.59 of overhead cost to each unit of Little X.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would not be considered a product cost?

Accepted Answer

A)  Direct labor costs. 
B)  Factory supervisor's salary. 
C)  Factory line worker's salary. 
D)  Cost accountant's salary. 
E)  Manufacturing overhead costs. 
A)  Direct labor costs. 
B)  Factory supervisor's salary. 
C)  Factory line worker's salary. 
D)  Cost accountant's salary. 
E)  Manufacturing overhead costs.

Question 3

Which of the following costing systems is more accurate for overhead cost allocation and most likely to allow managers the ability to make better pricing decisions?

Accepted Answer

A)  Departmental overhead allocation rates. 
B)  Plantwide overhead rate. 
C)  Activity-based costing. 
D)  Traditional costing system. 
E)  Direct costing. 
A)  Departmental overhead allocation rates. 
B)  Plantwide overhead rate. 
C)  Activity-based costing. 
D)  Traditional costing system. 
E)  Direct costing.

Question 4

[The following information applies to the questions displayed below.]
Wall Nuts, Inc. produces paneling that requires two processes, A and B, to complete. Oak is the best-selling of all the many types of paneling produced. Information related to the 40,000 units of oak paneling produced annually is shown in the following table:
   Wall Nuts' total expected overhead costs and related overhead data are shown below.
  
-Use the data for Wall Nuts, Inc. to compute departmental overhead rates based on machine hours in Department A and machine hours in Department B.

Accepted Answer

A)  $4.50 per MH in Dept. A; $4.50 per MH in Dept. B. 
B)  $7.50 per MH in Dept. A; $7.50 per MH in Dept. B. 
C)  $4.50 per MH in Dept. A; $7.50 per MH in Dept. B. 
D)  $2.70 per MH in Dept. A; $6.00 per MH in Dept. B. 
E)  $0.60 per MH in Dept. A; $0.80 per MH in Dept. B. 
A)  $4.50 per MH in Dept. A; $4.50 per MH in Dept. B. 
B)  $7.50 per MH in Dept. A; $7.50 per MH in Dept. B. 
C)  $4.50 per MH in Dept. A; $7.50 per MH in Dept. B. 
D)  $2.70 per MH in Dept. A; $6.00 per MH in Dept. B. 
E)  $0.60 per MH in Dept. A; $0.80 per MH in Dept. B.

Question 5

[The following information applies to the questions displayed below.]
Angle Max Industries produces a product which goes through two operations, Assembly and Finishing, before it is ready to be shipped. Next year's expected costs and activities are shown below.
  
-Assume that the Assembly Department allocates overhead based on machine hours, and the Finishing Department allocates overhead based on direct labor hours. How much total overhead will be assigned to a product that requires 1 direct labor hour and 2.5 machine hours in the Assembly Department, and 3.5 direct labor hours and 0.5 machine hours in the Finishing Department?

Accepted Answer

A)  $13.00. 
B)  $10.50. 
C)  $2.50. 
D)  $11.00. 
E)  $7.50. 
A)  $13.00. 
B)  $10.50. 
C)  $2.50. 
D)  $11.00. 
E)  $7.50.

Question 6

The cost object(s) of the departmental overhead rate method is:

Accepted Answer

A)  The time period. 
B)  The production departments of the company. 
C)  The production departments in the first stage and the unit of product in the second stage. 
D)  The unit of product in the first stage and the production departments in the second stage. 
E)  The production activities of the company. 
A)  The time period. 
B)  The production departments of the company. 
C)  The production departments in the first stage and the unit of product in the second stage. 
D)  The unit of product in the first stage and the production departments in the second stage. 
E)  The production activities of the company.

Question 7

Fischer Company identified the following activities, costs, and activity drivers:
 $$\begin{array} { | l | l | l | } 
\hline \text { Activity } & \text { Expected Costs } & \text { Expected Activity } \
\hline \text { Handling parts } & \$ 425,000 & 25,000 \text { parts in stock } \
\hline \text { Inspecting product } & \$ 390,000 & 940 \text { batches } \
\hline \text { Processing purchase orders } & \$ 220,000 & 440 \text { orders } \
\hline \text { Designing packaging } & \$ 230,000 & 5 \text { models } \
\hline
\end{array}$$ a. Compute a plantwide overhead rate assuming the company assigns overhead based on 70,000 budgeted direct labor hours (Round to two decimals).
b. Compute separate rates for each of the four activities using the activity-based costing.

Accepted Answer

a. ($425,000 + $390,000 + $220,000 + $23

Question 8

[The following information applies to the questions displayed below.]
Tarnish 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 in the following table:
  
-Tarnish Industries uses departmental overhead rates and is planning on a $4.10 per machine hour overhead rate for the finishing department. Compute the estimated manufacturing overhead cost for the finishing department given the information shown in the table.

Accepted Answer

A)  $307,500 
B)  $658,050 
C)  $401,800 
D)  $334,150 
E)  $735,950 
A)  $307,500 
B)  $658,050 
C)  $401,800 
D)  $334,150 
E)  $735,950

Question 9

Products are the first stage cost objects when using a departmental overhead rate method.

Accepted Answer

A) True 
 B)False

Question 10

Multiple cost pools are used when allocating overhead using the plantwide overhead rate method.

Accepted Answer

A) True 
 B)False

Question 11

Activity-based costing involves four steps: (1) identify activities and the costs they cause, (2) group similar activities into cost pools, (3) determine an activity rate for each activity cost pool, and (4) allocate overhead costs to products using those activity rates.

Accepted Answer

A) True 
 B)False

Question 12

[The following information applies to the questions displayed below.]
Assume that a pet food manufacturer is considering adding two types of pet food to its existing product line. Research had determined that good demand exists for dog food in 40-pound bags and cat food in 0.5 pound cans.
The company identified the following partial list of activities, costs, and activity drivers expected for the next year:

-How much overhead cost will be assigned to each unit of product using activity-based costing (ABC)?

Accepted Answer

A)  Dog food: $4.62; cat food: $4.62. 
B)  Dog food: $2.64; cat food: $2.64. 
C)  Dog food: $8.60; cat food: $0.33. 
D)  Dog food: $0.26; cat food: $8.60. 
E)  Dog food: $0.12; cat food: $3.85. 
A)  Dog food: $4.62; cat food: $4.62. 
B)  Dog food: $2.64; cat food: $2.64. 
C)  Dog food: $8.60; cat food: $0.33. 
D)  Dog food: $0.26; cat food: $8.60. 
E)  Dog food: $0.12; cat food: $3.85.

Question 13

Freeze Frame, Inc. produces cameras that require three processes, A, B, and C, to complete. Digital camera model #789 is the best-selling of all the many types of cameras produced. Information related to the 550,000 units of digital camera model #789 produced annually is shown below.

Freeze Frame's total expected overhead costs and related overhead data are shown below:

$$\begin{array} { | l | l | l | l | } 
\hline & \text { Department A } & \text { Department B } & \text { Department C } \
\hline \text { Direct labor hours } & 90,000 \mathrm { DLH } & 75,000 \mathrm { DLH } & 42,000 \mathrm { DLH } \
\hline \text { Machine hours } & 67,500 \mathrm { MH } & 135,000 \mathrm { MH } & 53,200 \mathrm { MH } \
\hline \text { Manufacturing overhead costs } & \$ 540,000 & \$ 675,000 & \$ 399,000 \
\hline
\end{array}$$

a. Compute a departmental overhead rate for department A based on direct labor hours.
b. How much overhead is associated with model 789 from department A?
c. Compute a departmental overhead rate for department B based on direct labor hours.
d. How much overhead is associated with model 789 from department B?
e. Compute a departmental overhead rate for department C based on direct labor hours.
f. How much overhead is associated with model 789 from department C?
g. What is the per unit cost of the 550,000 units of model 789?

Accepted Answer

a. $540,000/90,000 DLH = $6 per DLH
b. (

Question 14

Activity-based costing often shifts overhead costs from large volume, standardized products to low-volume, specialty products that consume disproportionate resources.

Accepted Answer

A) True 
 B)False

Question 15

Machine setup costs are an example of a batch level activity.

Accepted Answer

A) True 
 B)False

Question 16

Slosh, Inc. produces washing machines that require two processes, assembling and finishing, to complete. The company's bestselling machine is the commercial washer. Information related to the 500 commercial washers produced annually is shown below.

Slosh's total expected overhead costs and related overhead data are shown below. The company uses departmental overhead rates based on direct labor hours in the Assembling Department and machine hours in the Finishing Department.
  
 Determine the total product cost of this product line and each individual commercial washer.

Accepted Answer

Assembling Dept. overhead: $4,000,000/50

Question 17

[The following information applies to the questions displayed below.]
Aztec Industries produces bread which goes through two operations, mixing and baking, before it is ready to be packaged. Next year's expected costs and activities are shown below.
  
-Compute Aztec's departmental overhead rate for the mixing department based on direct labor hours.

Accepted Answer

A)  $1.50 per DLH. 
B)  $5.00 per DLH. 
C)  $0.75 per DLH. 
D)  $0.50 per DLH. 
E)  $2.08 per DLH. 
A)  $1.50 per DLH. 
B)  $5.00 per DLH. 
C)  $0.75 per DLH. 
D)  $0.50 per DLH. 
E)  $2.08 per DLH.

Question 18

The unit of product is the cost object when the plantwide overhead rate method is used.

Accepted Answer

A) True 
 B)False

Question 19

A company produces paint that 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 per machine hour.

Accepted Answer

A) True 
 B)False

Question 20

The plantwide overhead rate is determined using volume-related measures.

Accepted Answer

A) True 
 B)False

If the direct labor time estimates are met, Malone will allocate $12.59 of overhead cost to each unit of Little X.

Which of the following would not be considered a product cost?

Which of the following costing systems is more accurate for overhead cost allocation and most likely to allow managers the ability to make better pricing decisions?

The cost object(s) of the departmental overhead rate method is:

Products are the first stage cost objects when using a departmental overhead rate method.

Multiple cost pools are used when allocating overhead using the plantwide overhead rate method.

Activity-based costing involves four steps: (1) identify activities and the costs they cause, (2) group similar activities into cost pools, (3) determine an activity rate for each activity cost pool, and (4) allocate overhead costs to products using those activity rates.

Activity-based costing often shifts overhead costs from large volume, standardized products to low-volume, specialty products that consume disproportionate resources.

Machine setup costs are an example of a batch level activity.

The unit of product is the cost object when the plantwide overhead rate method is used.

A company produces paint that 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 per machine hour.

The plantwide overhead rate is determined using volume-related measures.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Lean Principles and Accounting

Accounting for Business Transactions

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Exam 4: Activity-Based Costing and Analysis

If the direct labor time estimates are met, Malone will allocate $12.59 of overhead cost to each unit of Little X.

Which of the following would not be considered a product cost?

Which of the following costing systems is more accurate for overhead cost allocation and most likely to allow managers the ability to make better pricing decisions?

The cost object(s) of the departmental overhead rate method is:

Products are the first stage cost objects when using a departmental overhead rate method.

Multiple cost pools are used when allocating overhead using the plantwide overhead rate method.

Activity-based costing involves four steps: (1) identify activities and the costs they cause, (2) group similar activities into cost pools, (3) determine an activity rate for each activity cost pool, and (4) allocate overhead costs to products using those activity rates.

Activity-based costing often shifts overhead costs from large volume, standardized products to low-volume, specialty products that consume disproportionate resources.

Machine setup costs are an example of a batch level activity.

The unit of product is the cost object when the plantwide overhead rate method is used.

The plantwide overhead rate is determined using volume-related measures.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Lean Principles and Accounting

Accounting for Business Transactions

Filters