Question 1

When using the plantwide overhead rate method, total budgeted overhead costs are combined into one overhead cost pool.

Accepted Answer

A) True 
 B)False

Question 2

Activity-based costing first assigns costs to products and then uses these product costs to assign costs to manufacturing activities.

Accepted Answer

A) True 
 B)False

Question 3

ABC costing might lead to:

Accepted Answer

A)  increasing the sales price of low-volume products. 
B)  increasing the sales price of high-volume products. 
C)  increasing low-volume products that appear to be profitable. 
D)  decreasing high-volume products that appear to be unprofitable. 
E)  increasing materials cost. 
A)  increasing the sales price of low-volume products. 
B)  increasing the sales price of high-volume products. 
C)  increasing low-volume products that appear to be profitable. 
D)  decreasing high-volume products that appear to be unprofitable. 
E)  increasing materials cost.

Question 4

ABC assumes all costs in a ________ can be grouped together because they all impact the activity.

Accepted Answer

A)  cost pool. 
B)  department. 
C)  time period. 
D)  organization. 
E)  product line. 
A)  cost pool. 
B)  department. 
C)  time period. 
D)  organization. 
E)  product line.

Question 5

A company's total expected overhead costs and related overhead data are shown in the following table:
 $$\begin{array} { | l | l | l | } 
\hline & \text { Department A } & \text { Department B } \
\hline \text { Direct labor hours } & 85,000 \mathrm { DLH } & 72,000 \mathrm { DLH } \
\hline \text { Machine hours } & 79,050 \mathrm { MH } & 37,395 \mathrm { MH } \
\hline \text { Manufacturing overhead costs } & ? & ? \
\hline \text { Departmental overhead rate } & \$ 4 \text { per } \mathrm { MH } & \$ 8.31 \text { per DLH } \
\hline
\end{array}$$ a. Compute estimated manufacturing overhead costs for Department A.
b. Compute estimated manufacturing overhead costs for Department B.
c. Compute the departmental overhead rate based on direct labor hours for Department A.
d. Compute the departmental overhead rate based on machine hours for Department B.

Accepted Answer

a. $4 per MH × 79,050 MH = $316,200 esti

Question 6

Superior Products Manufacturing identified the following data in its two production departments:
   Compute departmental overhead rates assuming the Assembly rate is based on machine hours and the Finishing rate is based on direct labor hours.

Accepted Answer

Assembly: $225,000/2

Question 7

Compared to the departmental overhead rate method, the plantwide overhead rate method usually results in more accurate overhead allocations.

Accepted Answer

A) True 
 B)False

Question 8

Examples of volume-related measures include direct labor hours and machine hours.

Accepted Answer

A) True 
 B)False

Question 9

What is the reason for pooling costs?

Accepted Answer

A)  To shift costs from low-volume to high-volume products. 
B)  It is a budgeting technique designed to accurately track fixed costs. 
C)  Determining a pool rate for all costs incurred by the same activity reduces the number of cost assignments required. 
D)  This procedure helps to determine which costs are directly related to production volume. 
E)  It simplifies departmental overhead costing procedures. 
A)  To shift costs from low-volume to high-volume products. 
B)  It is a budgeting technique designed to accurately track fixed costs. 
C)  Determining a pool rate for all costs incurred by the same activity reduces the number of cost assignments required. 
D)  This procedure helps to determine which costs are directly related to production volume. 
E)  It simplifies departmental overhead costing procedures.

Question 10

Which of the following are advantages of using the plantwide overhead rate method?

Accepted Answer

A)  The use of cost pools is considerably more accurate than other overhead allocations. 
B)  The necessary information is readily available. 
C)  It is more accurate than traditional overhead allocations. 
D)  Each department has its own overhead rate and its own allocation base. 
E)  It takes into account that when products differ in batch size and complexity, they usually consume different amounts of overhead resources. 
A)  The use of cost pools is considerably more accurate than other overhead allocations. 
B)  The necessary information is readily available. 
C)  It is more accurate than traditional overhead allocations. 
D)  Each department has its own overhead rate and its own allocation base. 
E)  It takes into account that when products differ in batch size and complexity, they usually consume different amounts of overhead resources.

Question 11

Activities causing overhead cost in an organization are typically separated into four levels: (1) direct activities, (2) indirect activities, (3) batch level activities, and (4) facility level activities.

Accepted Answer

A) True 
 B)False

Question 12

Kinetic Company estimates that overhead costs for the next year will be $1,600,000 for indirect labor and $400,000 for factory utilities. The company uses direct labor hours as its overhead allocation base, and plans to use 50,000 direct labor hours for this next year. If a product uses 5 direct labor hours, then it will be assigned $200 in overhead costs.

Accepted Answer

A) True 
 B)False

Question 13

Consider the following activities that take place in a medical clinic. (a) Cleaning exam rooms.
(b) Heating and air conditioning the clinic.
(c) Sending blood work to a lab.
(d) Dispensing medicine.
Which of the following statements is true?

Accepted Answer

A)  Cleaning rooms and heating the clinic are both unit level activities. 
B)  Sending blood work to the lab is a batch level activity. 
C)  Sending blood work and dispensing medicine are both batch level activities. 
D)  Cleaning rooms and dispensing medication are both product or service level activities. 
E)  Heating the clinic and dispensing medication are both batch level activities. 
A)  Cleaning rooms and heating the clinic are both unit level activities. 
B)  Sending blood work to the lab is a batch level activity. 
C)  Sending blood work and dispensing medicine are both batch level activities. 
D)  Cleaning rooms and dispensing medication are both product or service level activities. 
E)  Heating the clinic and dispensing medication are both batch level activities.

Question 14

ABC systems ________.

Accepted Answer

A)  usually will undercost complicated or complex products 
B)  will limit cost drivers to units of output 
C)  highlight the different levels of activities 
D)  will allocate costs based on volume 
E)  comply with GAAP 
A)  usually will undercost complicated or complex products 
B)  will limit cost drivers to units of output 
C)  highlight the different levels of activities 
D)  will allocate costs based on volume 
E)  comply with GAAP

Question 15

A company identified the following partial list of activities, costs, and activity drivers expected for the next year:     Calculate activity rates for each of the three activities using activity-based costing (ABC).

Accepted Answer

A)  Extrusion: $304 per batch; handling: $32 per unit; packaging: $0.03 per unit. 
B)  Extrusion: $88 per batch; handling: $32 per order; packaging: $0.03 per unit. 
C)  Extrusion: $88 per order; handling: $32 per unit; packaging: $0.03 per batch. 
D)  Extrusion: $418 per batch; handling: $117.33 per order; packaging: $0.054 per unit. 
E)  Extrusion: $118.13 per batch; handling: $44 per order; packaging: $0.0675 per unit. 
A)  Extrusion: $304 per batch; handling: $32 per unit; packaging: $0.03 per unit. 
B)  Extrusion: $88 per batch; handling: $32 per order; packaging: $0.03 per unit. 
C)  Extrusion: $88 per order; handling: $32 per unit; packaging: $0.03 per batch. 
D)  Extrusion: $418 per batch; handling: $117.33 per order; packaging: $0.054 per unit. 
E)  Extrusion: $118.13 per batch; handling: $44 per order; packaging: $0.0675 per unit.

Question 16

Which of the following is not true?

Accepted Answer

A)  The departmental overhead method assigns overhead on the basis of volume-related measures. 
B)  The departmental overhead rate method is more refined than the plantwide overhead rate method. 
C)  Overhead costing accuracy is improved by the use of multiple departmental rates rather than a single overhead rate. 
D)  The departmental overhead rate method does not assign overhead on the basis of volume-related measures. 
E)  The departmental overhead rate method is more costly to implement than the plantwide overhead rate method. 
A)  The departmental overhead method assigns overhead on the basis of volume-related measures. 
B)  The departmental overhead rate method is more refined than the plantwide overhead rate method. 
C)  Overhead costing accuracy is improved by the use of multiple departmental rates rather than a single overhead rate. 
D)  The departmental overhead rate method does not assign overhead on the basis of volume-related measures. 
E)  The departmental overhead rate method is more costly to implement than the plantwide overhead rate method.

Question 17

A cost pool is a collection of costs that are related to the same or similar activity.

Accepted Answer

A) True 
 B)False

Question 18

The following data relates to Patterson Company's estimated amounts for next year.   What is the company's plantwide overhead rate if direct labor hours are the allocation base? (Round your answer to two decimal places.)

Accepted Answer

A)  $3.45 per DLH 
B)  $5.45 per DLH 
C)  $0.29 per DLH 
D)  $0.26 per DLH 
E)  $0.20 per DLH 
A)  $3.45 per DLH 
B)  $5.45 per DLH 
C)  $0.29 per DLH 
D)  $0.26 per DLH 
E)  $0.20 per DLH

Question 19

A company uses activity-based costing to determine the costs of its three products: A, B, and C. The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table:   What are the activity rates for the three activities under activity-based costing?

Accepted Answer

A)  (1) $2.00; (2) $3.00; (3) $3.50. 
B)  (1) $3.50; (2) $1.50; (3) $32,80. 
C)  (1) $3.50; (2) $3.00; (3) $16.00. 
D)  (1) $2.00; (2) $1.50; (3) $16.00. 
E)  (1) $2.00; (2) $1.50; (3) $32.80. 
A)  (1) $2.00; (2) $3.00; (3) $3.50. 
B)  (1) $3.50; (2) $1.50; (3) $32,80. 
C)  (1) $3.50; (2) $3.00; (3) $16.00. 
D)  (1) $2.00; (2) $1.50; (3) $16.00. 
E)  (1) $2.00; (2) $1.50; (3) $32.80.

Question 20

[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 $2 per direct labor hour overhead rate for the molding department. Compute the estimated manufacturing overhead cost for the molding department given the information shown in the table.

Accepted Answer

A)  $225,000 
B)  $196,000 
C)  $150,000 
D)  $321,000 
E)  $471,000 
A)  $225,000 
B)  $196,000 
C)  $150,000 
D)  $321,000 
E)  $471,000

When using the plantwide overhead rate method, total budgeted overhead costs are combined into one overhead cost pool.

Activity-based costing first assigns costs to products and then uses these product costs to assign costs to manufacturing activities.

ABC costing might lead to:

ABC assumes all costs in a ________ can be grouped together because they all impact the activity.

Superior Products Manufacturing identified the following data in its two production departments: Compute departmental overhead rates assuming the Assembly rate is based on machine hours and the Finishing rate is based on direct labor hours.

Compared to the departmental overhead rate method, the plantwide overhead rate method usually results in more accurate overhead allocations.

Examples of volume-related measures include direct labor hours and machine hours.

What is the reason for pooling costs?

Which of the following are advantages of using the plantwide overhead rate method?

Activities causing overhead cost in an organization are typically separated into four levels: (1) direct activities, (2) indirect activities, (3) batch level activities, and (4) facility level activities.

Consider the following activities that take place in a medical clinic. (a) Cleaning exam rooms. (b) Heating and air conditioning the clinic. (c) Sending blood work to a lab. (d) Dispensing medicine. Which of the following statements is true?

ABC systems ________.

A company identified the following partial list of activities, costs, and activity drivers expected for the next year: Calculate activity rates for each of the three activities using activity-based costing (ABC).

Which of the following is not true?

A cost pool is a collection of costs that are related to the same or similar activity.

The following data relates to Patterson Company's estimated amounts for next year. What is the company's plantwide overhead rate if direct labor hours are the allocation base? (Round your answer to two decimal places.)

A company uses activity-based costing to determine the costs of its three products: A, B, and C. The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table: What are the activity rates for the three activities under activity-based costing?

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

When using the plantwide overhead rate method, total budgeted overhead costs are combined into one overhead cost pool.

Activity-based costing first assigns costs to products and then uses these product costs to assign costs to manufacturing activities.

ABC costing might lead to:

ABC assumes all costs in a ________ can be grouped together because they all impact the activity.

Superior Products Manufacturing identified the following data in its two production departments: Compute departmental overhead rates assuming the Assembly rate is based on machine hours and the Finishing rate is based on direct labor hours.

Compared to the departmental overhead rate method, the plantwide overhead rate method usually results in more accurate overhead allocations.

Examples of volume-related measures include direct labor hours and machine hours.

What is the reason for pooling costs?

Which of the following are advantages of using the plantwide overhead rate method?

Activities causing overhead cost in an organization are typically separated into four levels: (1) direct activities, (2) indirect activities, (3) batch level activities, and (4) facility level activities.

Consider the following activities that take place in a medical clinic. (a) Cleaning exam rooms. (b) Heating and air conditioning the clinic. (c) Sending blood work to a lab. (d) Dispensing medicine. Which of the following statements is true?

ABC systems ________.

A company identified the following partial list of activities, costs, and activity drivers expected for the next year: Calculate activity rates for each of the three activities using activity-based costing (ABC).

Which of the following is not true?

A cost pool is a collection of costs that are related to the same or similar activity.

The following data relates to Patterson Company's estimated amounts for next year. What is the company's plantwide overhead rate if direct labor hours are the allocation base? (Round your answer to two decimal places.)

A company uses activity-based costing to determine the costs of its three products: A, B, and C. The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table: What are the activity rates for the three activities under activity-based costing?

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