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Exam 4: Cost Accumulation,Tracing,and Allocation

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Question 1

True/False

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The step method of allocating service department costs allocates those costs to operating departments only.

A) True
B) False

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Question 2

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Which of the following is not a

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.

E) None of the above
F) A) and C)

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Question 3

True/False

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Use of the direct method to allocate service department costs may cause distortions in the measurement of cost objects.

Volume measures serve as good cost drivers for allocating variable overhead costs because of the causal relationship that exists between those drivers and variable costs.

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

Indicate whether each of the following statements is

Select the correct statement from the following.

Humphries Cons

Joint products A and B emerge from common processing that costs $150,000 and yields 8,000 units of Product A and 4,000 units of Product B.Product A can be sold for $100 per unit.Product B can be sold for $80 per unit.What amount of the joint costs will be assigned to Product B if joint costs are allocated on the basis of number of units produced? (Do not round your intermediate calculations. )

Sturbridge Company manufactures fine furniture and grandfather clocks.Sturbridge has an excellent reputation,and each grandfather clock sells for several thousand dollars.Which of the following is an indirect cost,assuming the cost object is the Clock Department?

Great Outdoors Company makes two types of camping tents.Making a standard camping tent requires 4 hours of labor while making a deluxe camping tent requires 10 hours of labor.During the most recent accounting period the company made 2,000 standard camping tents and 500 deluxe camping tents.Indirect manufacturing costs amounted to $52,000 and are allocated based on labor hours.Based on this information:

Blanton Company wishes to allocate rent expense of $24,000 to its three operating departments,A,B,and C.Assuming the three departments occupy 10,000,20,000 and 30,000 square feet respectively,the cost allocation rate for Department C is $0.80 per square foot.

Preston Company has three divisions.The company should consider a cost to be a direct cost of a division if:

Indirect costs are often pooled,and not allocated individually because:

Jessup Company expects to incur overhead costs of $20,000 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?

Morris Company makes one product,and it expects to incur a total of $600,000 in indirect (overhead)costs during the current year.Production of the product for the year is expected to be: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ Quarter $\begin{array} { | l | l| l | l | l r | r | } \hline & 1 & 2 & 3 & 4 \\\hline \begin{array} { l } \text { Estimated } \\\text { production in } \\\text { units }\end{array} & 40,000 & 15,000 & 27,000 & 38,000 \\\hline\end{array}$ Required: 1)Calculate a predetermined overhead rate based on the number of units of product expected to be made during the current year. 2)Assuming that direct materials and direct labor costs are $10 and $15,respectively,determine the total cost per unit using the overhead rate you calculated in part (1).

Cost accumulation is used to:

Custom Quilters makes decorative comforters,quilted garments,and other products in a small sewing factory.During the upcoming,the company expects to make 2,000 comforters.With respect to the comforters how would the fabric used to make the comforters be classified?

Harrison Company expects to incur $600,000 in manufacturing overhead for the coming year.The company makes two products,A and B,and it has accumulated the following budget information for the products: $\begin{array}{|l|r|r|r|}\hline & \text { Product } \mathrm{A} & \text { Product B } & \text { Total } \\\hline \text { Number of units to be } & & & \\\text { produced } & 10,000 & 5,000 & 15,000 \\\hline \text { Direct labor hours } & 25,000 & 5,000 & 30,000 \\\hline \text { Machine hours } & 15,000 & 30,000 & 45,000 \\\hline\end{array}$ Required: 1)Use direct labor hours as the cost driver to compute the allocation rate.Determine the amount of budgeted overhead to be allocated to each unit of product A.(Round to the nearest cent. ) 2)Use machine hours as the cost driver to compute the allocation rate.Determine the amount of budgeted overhead to be allocated to each unit of product A.(Round to the nearest cent. ) 3)How should Harrison decide between machine hours and direct labor hours as the cost driver for its manufacturing overhead?

Indicate whether each of the following statements is