Exam 7: A Closer Look at Overhead Costs

The Lots More Store has a Janitorial Department and a Personnel Department that provide services to three Sales Departments.The Janitorial Department cost is allocated based on space and the Personnel Department cost is allocated based on employees.The following information is available.Using the step-down method,calculate the amount of Janitorial Department cost allocated to Sales Department #2,if the Personnel Department is allocated first.

The process of allocating fixed and variable costs separately is called:

The following information about Monfort Manufacturing is available: Using the reciprocal method,the equations required to calculate the costs of the support departments are: (where T= the cost of Training Department;M=the cost of Maintenance Department)

Variable costing is more useful than absorption costing for: i.special order decisions ii.short-term pricing of products iii.long-term pricing of products

Each cost pool is distributed to each responsibility centre in:

When the step-down method is used to allocate support department costs,a common way to select the first support department in the sequence is to choose the support department which:

When a company is choosing between different types of volume based cost drivers,which of the following factors suggest the use of outputs as a cost driver? i.The company has only one product ii.The company is labour intensive. iii.The company uses large quantities of direct materials.

The following information relates to the Moonie Park Manufacturing Company for the year 2012.What would be the amount of underapplied or overapplied overhead at the end of the month if overhead rates were calculated based on practical capacity,normal capacity and budgeted capacity respectively.

Consider the following statements regarding cost allocation.i.Allocation of budgeted costs is preferred to actual cost as this minimises the possibility that the actions of one user department will affect the costs allocated to another user department Ii)Allocation of standard budgeted rates is preferred,so the user department does not have to bear the inefficiencies of support departments. Iii)Knowing the standard rates in advance allows the user departments to plan their activities with greater certainty.Which statement/s is/are true?

The production section of a firm is serviced by personnel and computing as follows: Personnel costs are allocated on the number of employees and computing costs on service hours.Overhead rates are based on labour hours.If the direct method is used to allocate support department costs,what is the overhead rate for the Assembly Department?

Absorption costing is a method of allocating cost to inventories such that the cost of inventory includes:

Based on the following figures,the predetermined manufacturing overhead rate is $20 per machine hour.Budgeted manufacturing overheads $240 000 Actual manufacturing overheads $250 000 Budgeted machine hours 10 000 Actual machine hours 12 000

Consider the following statements about support department cost allocations.i.In a modern manufacturing environment,it is not necessary to allocate support department costs Ii)Support department cost allocations continue to be necessary when a highly automated system is in use. Iii)In a flexible manufacturing system,the need to allocate costs diminishes because more costs have become traceable to the product.Which statement/s is/are true?

Where the fixed overhead rate in both opening and closing inventories is the same,which of the following statements is correct?

Consider the following statements about the two-stage cost allocation process.i.Costs in various cost pools are distributed to all departments,including support and production departments Ii)Support department costs are allocated to production departments. Iii)Costs are assigned to each production department that has worked on the product.Which statement/s is/are correct?

Gallison Company's net profit under absorption costing was $15 000 higher than under variable costing.During the year,the company produced 20 000 units for total variable production costs of $80 000.If fixed manufacturing overhead was $40 000,how many units were sold?

The mutual provision of service between support departments is called:

Appleford Ltd is a furniture manufacturer.It has a small range of products.Its manufacturing processes are characterised by a high level of automation.Appleford Ltd decides to choose a volume-based cost driver for its indirect manufacturing costs.Which of the following cost drivers is most appropriate?

The Kelsey Manufacturing Company Ltd has two production departments (Assembly and Finishing)and two support departments (Janitorial and Personnel).The usage of the two support departments in 2012 is as follows: The budgeted costs in the support departments of 2012 were as follows: Using the direct method,what is the Personnel Department cost allocated to the Assembly Department?

The Browning Company manufactures a single product;the standard costs per unit being variable manufacturing $8,fixed manufacturing $6.Selling and administrative costs are $2 per unit sold.The selling price is $20 per unit.Actual and budgeted fixed overhead is $900 000 for the year.Information about Browning's production activity for the year follows: What is the profit under absorption costing?