Question 1

Which of the following is not an important factor in determining the appropriate cost driver to use in allocating a cost?

Accepted Answer

A)  A cause-and-effect relationship between the cost and the cost driver. 
B)  The availability of information about the cost and cost driver. 
C)  The ability of the cost driver to allocate indirect costs to cost objects. 
D)  All of the answers are important factors in determining the appropriate cost driver to use in allocating a cost.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Pets 'n Pals is attempting to determine the cost of operating a particular store. Which of the following costs would be classified as an indirect cost?

Accepted Answer

A)  Fees paid to external accountant for corporate audit 
B)  Cost of operating company-owned vehicles by the store 
C)  Salary of store manager 
D)  Cost of aquariums used to display exotic fish

Question 4

A factor having a "cause-and-effect" relationship with a cost object is called a(n):

Accepted Answer

A)  cost driver. 
B)  allocation base. 
C)  direct cost. 
D)  indirect cost.

Question 5

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.

Question 6

The following are Acme's production costs for the quarter ended September 30th: $\begin{array}{llr}
  \text {Direct materials  } &\$150,000\
 \text {Direct labor  } &\$175,000\
 \text {  Factory overhead} &\$225,000
\end{array}$
 What amount of costs should be traced to specific products in the process?

Accepted Answer

A)  $150,000 
B)  $175,000 
C)  $225,000 
D)  $325,000

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

The primary advantage of establishing cost pools is reducing the number of individual cost allocations that are made.

Accepted Answer

A) True 
 B)False

Question 9

Sheddon Industries produces two products. The products' identified costs are as follows: $\begin{array}{l}
& \text { Product A } & \text { Product B } \
\text { Direct materials }&\$ 20,000&\$15,000\
\text { Direct labor }&12,000&24,000
\end{array}$ The company's overhead costs of $108,000 are allocated based on labor cost. Assume 4,000 units of product A and 5,000 units of Product B are produced. What amount of production costs would be assigned to Product A? (Do not round intermediate calculations.)

Accepted Answer

A)  $36,000 
B)  $111,000 
C)  $68,000 
D)  None of the answers are correct.

Question 10

Humphries Construction Company builds warehouses that range in size from 12,000 to 100,000 square feet. Which of the following would not be a rational base for allocating overhead costs to the warehouses?

Accepted Answer

A)  Labor hours 
B)  Direct material costs 
C)  Number of warehouses completed 
D)  Square footage of the warehouses

Question 11

Which of the following is not an important factor in determining the appropriate cost driver to use in allocating a cost?

Accepted Answer

A)  A cause-and-effect relationship between the cost and the cost driver. 
B)  The availability of information about the cost and cost driver. 
C)  The ability of the cost driver to allocate indirect costs to cost objects. 
D)  All of the answers are important factors in determining the appropriate cost driver to use in allocating a cost.

Question 12

Jessup Company expects to incur overhead costs of $10,000 per month and direct production costs of $125 per unit. The estimated production activity for the upcoming year is 1,000 units. If the company desires to earn a gross profit of $50 per unit, the sales price per unit would be which of the following amounts?

Accepted Answer

A)  $183 
B)  $175 
C)  $295 
D)  $130

Question 13

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 14

Cost accumulation is used to:

Accepted Answer

A)  Determine the cost of a particular cost object. 
B)  Identify and estimate opportunity costs. 
C)  Identify fixed and variable costs. 
D)  Set the selling price for a service.

Question 15

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.

Question 16

The Flintstone Construction Company delivers dirt and stone from local quarries to its construction sites. A new truck that was purchased for a cost of $120,000 at the beginning of the year was expected to deliver 200,000 tons over its useful life. The following is a breakdown of the tons delivered during the year to each construction site: $\begin{array}{ccccc}
\text { Construction Sites: } & \text { A } & \text { B } & \text { C } & \text { D } \
\text { Tons Delivered: } & 2,000 & 3,500 & 4,000 & 1,500
\end{array}$ How much truck depreciation should be allocated to Site A? (Do not round intermediate calculations.)

Accepted Answer

A)  $21,818 
B)  $30,000 
C)  $2,000 
D)  None of these answers are correct.

Question 17

Cost allocation is the process of dividing a total cost into its fixed and variable components.

Accepted Answer

A) True 
 B)False

Question 18

Bank's Department Store has three departments: Men's, Women's and Children's. The store incurred $50,000 of store rental costs during the current year. The departments identified the following cost drivers: $\begin{array}{lrrr}
&\text { Men's }&\text {Women's}&\text { Children's }\
\text { Labor dollars } & \$ 530,000 & \$ 775,000 & \$ 240,000 \
\text { Number of employees } &10& 20 &4\
\text { Square footage } & 3,00 & 8,000 & 1,000 \
\text { Number of sales transactions } &300,000 & 900,000 &90,000
\end{array}$ Using the most appropriate cost driver, how much rental cost should be allocated to the Women's Department? (Do not round intermediate calculations. Round final answer to the nearest dollar.)

Accepted Answer

A)  $33,333 
B)  $29,412 
C)  $25,081 
D)  $34,884

Question 19

Both direct and indirect costs can be relevant to a particular decision.

Accepted Answer

A) True 
 B)False

Question 20

Both direct and indirect costs can be relevant to a particular decision.

Accepted Answer

A) True 
 B)False

Exam 12: Cost Accumulation, Tracing, and Allocation

Which of the following is not an important factor in determining the appropriate cost driver to use in allocating a cost?

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

Pets 'n Pals is attempting to determine the cost of operating a particular store. Which of the following costs would be classified as an indirect cost?

A factor having a "cause-and-effect" relationship with a cost object is called a(n) :

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

The following are Acme's production costs for the quarter ended September 30^th: $\begin{array}{llr} \text {Direct materials } &\$150,000\\ \text {Direct labor } &\$175,000\\ \text { Factory overhead} &\$225,000\end{array}$ What amount of costs should be traced to specific products in the process?

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

The primary advantage of establishing cost pools is reducing the number of individual cost allocations that are made.

Humphries Construction Company builds warehouses that range in size from 12,000 to 100,000 square feet. Which of the following would not be a rational base for allocating overhead costs to the warehouses?

Which of the following is not an important factor in determining the appropriate cost driver to use in allocating a cost?

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

Cost accumulation is used to:

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

Cost allocation is the process of dividing a total cost into its fixed and variable components.

Both direct and indirect costs can be relevant to a particular decision.

Both direct and indirect costs can be relevant to a particular decision.