Deck 7: Cost Assignment

Question 1

Figure 1
Harrison Co. produces two products, AB and XY. Information about the current period's production is as follows:
Harrison uses a plantwide rate of £4 per machine hour to apply overhead to production. Budgeted overhead was £392,000, but actual overhead was £376,000.
Refer to Figure 1 above. How much of Harrison Company's overhead was applied to product AB?

A) £130,000
B) £195,000
C) £120,000
D) £187,500

Answer 1

C

Question 2

Predetermined overhead rate is calculated by

A) dividing actual overhead cost by estimated activity usage
B) dividing estimated or budgeted overhead cost by estimated usage
C) dividing actual overhead cost by actual activity usage
D) dividing estimated or budgeted overhead cost by estimated activity usage

Answer 2

D

Question 3

Zang Manufacturing Company manufactures two products (A and B). The overhead costs (£58,000) have been divided into three cost pools that use the following cost drivers: What is the amount of overhead cost to be assigned to Product A using labour hours as the cost driver ?

A) £58,000
B) £8,000
C) £9,600
D) £32,000

Answer 3

B

Question 4

When applied overhead exceeds actual overhead cost,

A) over-applied(absorbed) overhead is added to cost of goods sold
B) overapplied overhead is deducted from cost of goods sold
C) underapplied overhead is added to cost of goods sold
D) underapplied overhead is deducted from cost of goods sold

Question 5

Winter Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are listed as follows: Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. 100,000 direct labour hours are budgeted for next year.
The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent.
Estimates for the proposed job are as follows:
The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers/allocation bases. Expected activity for the four cost drivers that would be used are:
What is the amount of overhead allocated to the proposed job if Winter Manufacturing uses direct labour hours as its only cost driver?

A) £41,200
B) £30,400
C) £30,000
D) £20,800

Question 6

A(n) _____ system first traces costs to activities and then to products.

A) direct costing
B) absorption costing
C) traditional-based costing
D) activity-based costing

Question 7

Figure 1
Harrison Co. produces two products, AB and XY. Information about the current period's production is as follows:
Harrison uses a plantwide rate of £4 per machine hour to apply overhead to production. Budgeted overhead was £392,000, but actual overhead was £376,000.
Refer to Figure 1. What were Harrison Company's budgeted machine hours for the period?

A) 90,000 hours
B) 98,000 hours
C) 94,000 hours
D) 115,000 hours

Question 8

A(n) _____ is a collection of overhead costs for which cost variations can be explained by a single cost driver.

A) cost objective
B) homogeneous cost pool
C) allocation base
D) heterogeneous cost pool

Question 9

Yang Manufacturing Company manufactures two products (A and B). The overhead costs (£58,000) have been divided into three cost pools that use the following activity cost drivers/location bases: What is the amount of overhead cost to be assigned to Product B using labour hours as the allocation base?

A) £58,000
B) £43,500
C) £11,600
D) £46,400

Question 10

Zipp Company manufactures two products (X and Y). The overhead costs (£84,000) have been divided into three cost pools that use the following cost drivers: What is the amount of overhead cost to be assigned to Product X using machine hours as the cost driver ?

A) £12,000
B) £60,000
C) £48,000
D) £16,800

Question 11

Traditional-based product costing uses which of the following procedures?

A) Overhead costs are traced to departments, then costs are traced to products.
B) Overhead costs are traced to activities, then costs are traced to products.
C) Overhead costs are traced directly to products.
D) All overhead costs are expensed as incurred.

Question 12

The calculation of unit costs is important for

A) inventory valuation
B) income determination
C) pricing
D) all of the above

Question 13

If conventional manufacturing is used, which of the following would be considered direct costs?

A) setup costs
B) direct labour
C) maintenance of machinery
D) inspection costs

Question 14

The predetermined overhead rate is usually calculated

A) at the end of each month.
B) at the beginning of each month.
C) at the beginning of the year.
D) at the end of the year.

Question 15

Zang Company manufactures two products (X and Y). The overhead costs (£84,000) have been divided into three cost pools that use the following activity drivers/allocation bases: What is the amount of overhead cost to be assigned to Product X using machine hours as the allocation base?

A) £12,000
B) £60,000
C) £48,000
D) £16,800

Question 16

Winter Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are listed as follows: Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. 100,000 direct labour hours are budgeted for next year.
The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent.
Estimates for the proposed job are as follows:
The plant manager has heard of a new way of applying overhead that uses cost pools and activity cost drivers. Expected activity for the four activity drivers that would be used are:
What is the total cost of the proposed job if Winter Manufacturing uses direct labour hours as its only activity driver?

A) £72,000
B) £68,200
C) £56,200
D) £53,200

Question 17

What is the rationale for the use of departmental rates rather than plantwide rates?

A) less overapplied or underapplied overhead
B) easier to apply than plantwide rates
C) applying overhead more equitably because plantwide rates are average rates
D) none of the above

Question 18

When actual overhead cost exceeds overhead applied to production,

A) over-absorbed overhead is added to cost of goods sold
B) over-absorbed overhead is deducted from cost of goods sold
C) under-absorbed overhead is added to cost of goods sold
D) under-absorbed overhead is deducted from cost of goods sold

Question 19

Figure 1
Harrison Co. produces two products, AB and XY. Information about the current period's production is as follows:
Harrison uses a plantwide rate of £4 per machine hour to apply overhead to production. Budgeted overhead was £392,000, but actual overhead was £376,000.
Refer to Figure 1 above. What was Harrison Company's total cost to produce product XY?

A) £650,000
B) £910,000
C) £900,000
D) £890,000

Question 20

The Xiang plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows: The plant currently applies overhead using direct labour hours and expected capacity of 50,000 direct labour hours. The following data have been assembled for use in developing a bid for a proposed job:
Total expected machine hours for all jobs during the year is 25,000, and the total expected number of inspections is 1,500.
Using direct labour hours to assign overhead, the total cost of the potential job would be

A) £2,500.
B) £5,500.
C) £4,000.
D) £4,500.

Question 21

Figure 3
Ray Manufacturing has four categories of overhead. The four categories and the expected overhead costs for each category for next year are as follows:
Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. For next year, 100,000 direct labour hours are budgeted.
The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent.
Estimates for the proposed job are as follows:
The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers. Expected activity for the four activity-based cost drivers that would be used are as follows:

Refer to Figure 3 above. If Ray Manufacturing used number of setups to assign setup costs, the amount of setup costs allocated to the proposed job would be

A) £2,880
B) £1,920
C) £480
D) £300

Question 22

Walter Company uses a job-order costing system to account for product costs. The following information pertains to 2004: Factory overhead rate is £18 per direct labour hour.
What is the amount of under- or overapplied overhead for Walter Company in 2004?

A) £40,000 underapplied
B) £20,000 underapplied
C) £40,000 overapplied
D) £20,000 overapplied

Question 23

The Underhill plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows: The plant currently applies overhead using direct labour hours and expected capacity of 70,000 direct labour hours. The following data has been assembled for use in developing a bid for a proposed job:
Total expected machine hours for all jobs during the year are 25,000, and the total expected number of inspections is 1,900. Using direct labour hours to assign overhead, the total cost of the potential job would be

A) £8,000
B) £14,400
C) £8,000
D) £6,400

Question 24

Figure 3
Ray Manufacturing has four categories of overhead. The four categories and the expected overhead costs for each category for next year are as follows:
Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. For next year, 100,000 direct labour hours are budgeted.
The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent.
Estimates for the proposed job are as follows:
The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers. Expected activity for the four activity-based cost drivers that would be used are as follows:

Refer to Figure 3 above. If Ray Manufacturing used machine hours to assign maintenance costs, the amount of maintenance costs allocated to the proposed job would be

A) £102,000
B) £48,800
C) £37,400
D) £34,000

Question 25

Figure 3
Ray Manufacturing has four categories of overhead. The four categories and the expected overhead costs for each category for next year are as follows:
Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. For next year, 100,000 direct labour hours are budgeted.
The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent.
Estimates for the proposed job are as follows:
The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers. Expected activity for the four activity-based cost drivers that would be used are as follows:

Refer to Figure 3 above. If Ray Manufacturing used direct labour hours as the cost driver and the company's bid is full cost plus 10 percent, the company's bid would be

A) £158,400
B) £123,640
C) £117,040
D) £150,040

Question 26

Figure 1
Harrison Co. produces two products, AB and XY. Information about the current period's production is as follows:
Harrison uses a plantwide rate of £4 per machine hour to apply overhead to production. Budgeted overhead was £392,000, but actual overhead was £376,000.
Refer to Figure 1 above. What was Harrison Company's unit manufacturing cost for product XY?

A) £10.00
B) £13.69
C) £3.69
D) £13.38

Question 27

Figure 5 Peach, Inc., has identified the following overhead costs and cost drivers for next year:
The following are two of the jobs completed during the year:
The company's normal activity is 4,000 direct labour hours.
Refer to Figure 5. If Peach, Inc., used direct labour hours to assign overhead, the unit cost for Job 401 would be

A) £117.50
B) £111.88
C) £105.00
D) £102.50

Question 28

Figure 3
Ray Manufacturing has four categories of overhead. The four categories and the expected overhead costs for each category for next year are as follows:
Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. For next year, 100,000 direct labour hours are budgeted.
The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent.
Estimates for the proposed job are as follows:
The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers. Expected activity for the four activity-based cost drivers that would be used are as follows:

Refer to Figure 3. If Ray Manufacturing used direct labour hours as the cost driver, the amount of overhead allocated to the proposed job would be

A) £82,400
B) £60,800
C) £60,000
D) £41,600

Question 29

Figure 1
Harrison Co. produces two products, AB and XY. Information about the current period's production is as follows:
Harrison uses a plantwide rate of £4 per machine hour to apply overhead to production. Budgeted overhead was £392,000, but actual overhead was £376,000.
Refer to Figure 1 above. What was Harrison Company's unit manufacturing cost for product AB?

A) £15.00
B) £2.40
C) ££17.40
D) £17.80

Question 30

Which of the following methods of assigning costs is based on convenience or some assumed linkage, and reduces the overall accuracy of the cost assignments?

A) direct tracing
B) cost driver tracing
C) allocation
D) all of the above

Question 31

The following information is provided for the year: The budgeted overhead used to calculate the predetermined rate must have been

A) £160,000
B) £250,000
C) £225,000
D) £200,000

Question 32

Figure 1
Harrison Co. produces two products, AB and XY. Information about the current period's production is as follows:
Harrison uses a plantwide rate of £4 per machine hour to apply overhead to production. Budgeted overhead was £392,000, but actual overhead was £376,000.
Refer to Figure 1 above. What was Harrison Company's total cost to produce product AB?

A) £870,000
B) £910,000
C) £900,000
D) £890,000

Question 33

The optimal level in the trade-off between measurement and error costs is when

A) measurement costs are greater than error costs.
B) measurement costs are less than error costs.
C) measurement costs equal error costs.
D) the total of measurement costs and error costs are maximized.

Question 34

_____ refers to the assignment of indirect costs to cost objects.

A) Allocation
B) Direct tracing
C) Physical observation
D) Cost management

Question 35

For a labour-intensive manufacturing operation, which of the following would be the most appropriate cost driver?

A) machine hours
B) direct labour hours
C) number of employees
D) units of output

Question 36

The following information is provided: The company uses a predetermined overhead rate to apply overhead. Manufacturing overhead applied is

A) £750,000.
B) £700,000.
C) £690,000.
D) £648,000.

Question 37

A department that is capital-intensive most likely would use a predetermined departmental overhead rate based on which of the following activity bases?

A) units of direct material used
B) direct labour hours
C) direct labour cost
D) machine hours

Question 38

Figure 2 The Overdale plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows:
The plant currently applies overhead using direct labour hours and expected capacity of 80,000 direct labour hours. The following data has been assembled for use in developing a bid for a proposed job:
Total expected machine hours for all jobs during the year are 40,000, and the total expected number of inspections is 2,500.
Refer to Figure 2. Using direct labour hours to assign overhead, the total cost of the potential job would be

A) £9,500
B) £6,000
C) £3,000
D) £1,600

Question 39

Figure 3
Ray Manufacturing has four categories of overhead. The four categories and the expected overhead costs for each category for next year are as follows:
Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. For next year, 100,000 direct labour hours are budgeted.
The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent.
Estimates for the proposed job are as follows:
The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers. Expected activity for the four activity-based cost drivers that would be used are as follows:

Refer to Figure 3 above. If Ray Manufacturing used direct labour hours as the cost driver, the total cost of the proposed job would be

A) £144,000
B) £136,400
C) £112,400
D) £106,400

Question 40

Figure 4 Wheat Manufacturing has four categories of overhead. The four categories and the expected overhead costs for each category for next year are as follows:
Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. For next year, 20,000 direct labour hours are budgeted.
The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 15 percent.
Estimates for the proposed job are as follows:
In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based cost driver--direct labour hours. The plant manager has heard of a new way of applying overhead that uses cost pools and cost drivers.
Expected activity for the four activity-based cost drivers that would be used are as follows:
Refer to Figure 4. If Wheat Manufacturing used direct labour hours as the cost driver and the company's bid is full cost plus 15 percent, the company's bid would be

A) £17,480
B) £16,583
C) £13,110
D) £12,765

Question 41

The following information pertains to Victor Company: Victor Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labour hours.
What is the amount of maintenance costs allocated to the Assembly Department using the direct method? (Round amounts to pounds.)

A) £57,600
B) £96,000
C) £28,800
D) £76,320

Question 42

A company incurred £120,000 of common fixed costs and £180,000 of common variable costs. These costs are to be allocated to Departments XX and YY. Data on capacity provided and capacity used are as follows: Assume that common fixed costs are to be allocated to Departments XX and YY on the basis of capacity provided and that common variable costs are to be allocated to Departments XX and YY on the basis of capacity used. The fixed and variable costs allocated to Department XX are

A) £75,000 £112,500
B) £75,000 £90,000
C) £60,000 £112,500
D) £60,000 £90,000

Question 43

Which of the following is a key consideration in selecting an allocation base?

A) The allocation base should have an indirect association with the cost objective.
B) The allocation base should be difficult to measure.
C) There should be logical association between the allocation base and the incidence of costs.
D) The allocation base should be out of the control of management.

Question 44

The following information pertains to Utter Company: Utter Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labour hours.
What is the amount of maintenance costs allocated to the Assembly Department using the direct method? (Round amounts to pounds.)

A) £28,800
B) £48,000
C) £14,400
D) £38,160

Question 45

Which of the following accurately describes advantages and disadvantages of employing a system of allocation that uses a plant-wide rate.

A) The plant-wide rate approach is the simplest to apply, but it is also the most costly to implement.
B) The plant-wide rate approach is the simplest to apply, but most likely provides the least accurate product costs.
C) The plant-wide rate may be straightforward, but it is not appropriate for small businesses that offer a single service or product.
D) The plant-wide rate really offers no advantage whatsoever.

Question 46

Which of the following characteristics is a consequence of the implementation of a plant-wide allocation rate?

A) The uniqueness of individual departments is not reflected in the cost numbers.
B) Allocations are first conducted among departments, and then aggregated for the plant as a whole.
C) Downstream costs are not measured at all.
D) Managers have absolutely no incentive to control costs.

Question 47

The method of accounting for inventory that assigns all manufacturing costs to inventory is sometimes referred to as:

A) absorption costing.
B) FIFO.
C) the weighted average cost method.
D) conversion costing.

Question 48

Support department costs are accounted for in which one of the following ways?

A) They are allocated directly to units of product.
B) They are allocated to producing departments and then allocated to units of product.
C) They are allocated to units of product and then allocated to the producing departments.
D) They are expensed as incurred.

Question 49

Which of the following would be the most appropriate base for allocating the costs of the maintenance department?

A) machine hours
B) direct labour hours
C) number of employees
D) square feet

Question 50

Service departments:

A) are responsible for manufacturing the products sold to customers.
B) work directly on the firm's products.
C) provide services directly to customers.
D) provide support services to the producing departments.

Question 51

Newton Company has two support departments, Maintenance Department (MD) and Personnel Department (PD), and two producing departments, P1 and P2. The Maintenance Department costs of £120,000 are allocated on the basis of standard service used. The Personnel Department costs of £18,000 are allocated on the basis of number of employees. The direct costs of Departments P1 and P2 are £36,000 and £60,000, respectively. Data on standard service hours and number of employees are as follows:
Using the direct method, the cost of the Maintenance Department allocated to Department P1 is

A) £80,000.
B) £40,000.
C) £60,000.
D) £120,000.

Question 52

Which of the following departments is NOT a support department?

A) food services
B) bottling
C) health services
D) security

Question 53

A possible causal factor to use when allocating cafeteria costs would be

A) number of square feet.
B) number of direct labour hours.
C) number of employees.
D) appraised value of square footage.

Question 54

Which of the following is a reason to accumulate and separately assign costs by departments?

A) The company wants to reduce the complexity of its cost accounting system.
B) The company is comprised of multiple departments, each of which exhibit unique cost behaviour patterns.
C) The company wishes to implement an activity based costing system.
D) The company has a large amount of capital invested in human resource training.

Question 55

Which of the following describes the product costing continuum?

A) It describes the range of options for allocating overhead to products from simplest to most complex.
B) It is an activity based costing model that considers all costs along the value chain as part of a product's cost.
C) It is an approach to assigning direct and indirect costs that considers the full range of. products and services offered.
D) It refers to the continuous improvement mentality needed to achieve lower product costs.

Question 56

The following information pertains to Utter Company: Utter Company does not divide costs into fixed and variable components. Personnel costs are allocated based on the number of employees, and maintenance costs are allocated based on machine hours.
Predetermined overhead rates for fabrication and assembly are based on direct labour hours. (Round amounts to dollars.)
If the direct method is used to allocate support department costs, the predetermined overhead rate for the Fabrication Department (rounded to two decimal places) would be

A) £28.80.
B) £5.40.
C) £7.28.
D) £24.78.

Question 57

Support departments

A) are responsible for manufacturing the products sold to customers.
B) work directly on the products of the firm.
C) provide services directly to customers.
D) provide essential services to the producing departments.

Question 58

Examples of support departments include all of the following EXCEPT

A) maintenance.
B) personnel.
C) machining.
D) data processing.

Question 59

Examples of producing departments include all of the following EXCEPT

A) mixing.
B) molding.
C) packaging.
D) accounting.

Question 60

A company incurred £20,000 of common fixed costs and £30,000 of common variable costs. These costs are to be allocated to Departments X and Y. Data on capacity provided and capacity used are as follows: Assume that common fixed costs are to be allocated to Departments X and Y on the basis of capacity provided and that common variable costs are to be allocated to Departments X and Y on the basis of capacity used. The fixed and variable costs allocated to Department X are

A) £12,500 £18,750
B) £12,500 £15,000
C) £10,000 £18,750
D) £10,000 £15,000

Question 61

Manchester Ltd. uses a job-order costing system and a predetermined overhead rate based on machine hours.
At the beginning of the year, the company estimated manufacturing overhead for the year would be £135,000 and 9,000 machine hours would be used.
The following information pertains to December of the current year:
Actual manufacturing overhead costs incurred in December were £31,000.
Required:

a.
Compute the predetermined overhead application rate.
b.
Determine the total cost associated with each job.

Question 62

Rounders Company used the following information when determining the appropriate overhead rates to use in its two production departments:
Two of the products in the product line were as follows:
Required:

a.
Assume that Rounders applies overhead using a plantwide rate based on direct labour hours. Determine the unit cost of Products 1 and 2.
b.
Assume that Rounders uses direct labour hours to apply overhead in the Fabrication Department and machine hours to apply overhead in the Assembly Department. Determine the unit cost of Products 1 and 2.

Question 63

Explain the advantage of using multiple overhead rates instead of a single plantwide overhead rate to apply overhead.

Question 64

Although adding more cost pools to a costing system may improve the accuracy of product costing, this increase in accuracy must be judged against:

A) the cost of the product
B) the price of the product
C) the cost of developing and maintaining the additional cost pools
D) all of the above

Question 65

The Huyden Company builds equipment to customer's specifications. On March 1, two jobs were in process with the following costs and information:
*Applied on the basis of machine hours
During March, Job 45 was started and Job 44 was completed and delivered to the customer. Job 43 was missing a part that was backordered and would be completed in June. The following costs were incurred in March:
It is Huyden's policy to bill clients at cost plus 40 percent.
Required:

a.
Calculate the overhead rate that Huyden is using.
b.
Calculate the overhead applied to each job during the month of March.
c.
Calculate the balance in work in process on March 31.
d.
What was the price of Job 44?

Question 66

The support departments typically found in manufacturing and nonmanufacturing organizations are as follows:
Cafeteria
Personnel
Maintenance
Purchasing
Accounting
Required:
For each of the preceding support departments, indicate potential bases that could be used to allocate costs to the producing departments.

Question 67

Crow Company applies factory overhead in its two producing departments using a predetermined rate based on budgeted machine hours in the Mixing Department and based on budgeted labour hours in the Packaging Department. Variable cafeteria costs are allocated to the producing departments based on budgeted number of employees, and fixed costs are allocated based on the capacity number of employees. Variable maintenance costs are allocated on the budgeted number of direct labour hours, and fixed costs are allocated on labour hour capacity. The data concerning next year's operations are as follows:
Required:

a.
Prepare a schedule showing the allocation of budgeted support department costs to producing departments.
b.
Determine the predetermined overhead rate for the producing departments.

Question 68

Describe the differences between support and producing departments. Give three examples of each.

Question 69

Explain the key considerations in establishing cost pools and in selecting an allocation base.

Question 70

The Greenbriar plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows:
The plant currently applies overhead using direct labour hours and expected capacity of 20,000 direct labour hours. The data provided below has been assembled for use in developing a bid for a proposed job. Bid prices are calculated as full manufacturing cost plus 40 percent markup.
Total expected machine hours for all jobs during the year are 10,000, and the total expected number of inspections is 1,500.
Required:

Question 71

In choosing a cost accounting system, the accountant must balance the total costs of implementing such systems. What costs must be balanced to determine total cost? How do traditional functional-based and activity-based cost systems balance the trade-offs?

Question 72

The Oakland plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows:
The plant currently applies overhead using direct labour hours and expected capacity of 100,000 direct labour hours. The following data has been assembled for use in developing a bid for a proposed job. Bid prices are calculated as full manufacturing cost plus 20 percent markup.
Total expected machine hours for all jobs during the year is 60,000, and the total expected number of inspections is 4,000.
Required:

Question 73

The Jewell plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows:
The plant currently applies overhead using direct labour hours and expected capacity of 100,000 direct labour hours. The following data has been assembled for use in developing a bid for a proposed job. Bid prices are calculated as full manufacturing cost plus a 20 percent markup.
Total expected machine hours for all jobs during the year is 60,000, and the total expected number of inspections is 4,000.
Required:

Question 74

Compare/contrast cost assignment and cost allocation. Be sure to include direct assignment (tracing) and driver tracing in your discussion.

Question 75

Kramer Company has decided to use a predetermined rate to assign factory overhead to production. The following predictions have been made for 2004:
Required:

a.
Compute the predetermined factory overhead rate under three different bases: (1) direct labour hours, (2) direct labour costs, and (3) machine hours.
b.
Assume that actual factory overhead was £152,500 and that Kramer elected to apply factory overhead to Work in Process based on direct labour hours. If actual direct labour was 42,000 hours for 2004, was factory overhead overapplied or underapplied? By how much?

Question 76

The Dewey Company uses a predetermined overhead rate to apply manufacturing overhead to production. The rate is based on direct labour hours. Estimates for the year just ended are as follows:
During the year Dewey Company used 37,000 direct labour hours.
At the end of the year, Dewey Company records revealed the following information:
Required:

a.
Calculate the predetermined overhead rate for the year.
b.
Determine the amount of overhead applied during the year.
c.
Determine the amount of underapplied or overapplied manufacturing overhead for the year.

Question 77

Explain the differences between direct assignment, driver assignments, and cost allocations.

Question 78

Why is it important to have an accurate and reliable product costing system?

Question 79

Define the terms cost objectives, cost pools, and allocation bases.

Question 80

Holbrook, Inc., has identified the following overhead costs and cost drivers for next year:
The following are two of the jobs completed during the year:
The company's normal activity is 40,000 direct labour hours.
Required: