Question 1

What overhead driver might best relate to the total overhead cost of a Minerals extraction operating division of BHP Billiton,a large mining company?

Accepted Answer

A)  Floor space 
B)  Inspection hours 
C)  Machine hours 
D)  Quality control time 
A)  Floor space 
B)  Inspection hours 
C)  Machine hours 
D)  Quality control time

Question 2

Adelaide Manufacturing has the following overhead costs in their four departments.HR and Maintenance are the service departments,while Mixing and Fabricating are the production departments.There is currently $10 000 in HR overheads,$20 000 in Maintenance overheads,$30 000 in Mixing overheads and $40 000 in Fabricating overheads.
$\begin{array}{lllrr}
&\text { HR}& \text {Maintenance}&\text { Mixing}&\text { Fabricating }\
\text { Employees } & 20 & 60 & 50 & 150 \
\text { Machine hours } & 10 & 30 & 200 & 300
\end{array}$
 
HR overheads are allocated to production departments using number of employees,while Maintenance overheads are allocated to production departments using machine hours.The company has decided to use the direct method to allocate overhead costs to the production departments.
Required:
A.How much overhead is allocated to the production departments from the service departments?
B.What is the total overhead in the production departments after the re-allocation?

Accepted Answer

The answer of Adelaide Manufacturing has the following overhead costs...

Question 3

Motlop Manufacturing
The Motlop Manufacturing Company has two service departments and two producing departments. The following data are available for 2013.
$\begin{array}{lcccc} 
&\text { Service }&\text { Service } & \text { Producing } & \text { Producing }\
&\text { Dept. 1 }&\text { Dept. 2 }&1&2\
\hline \text { Department Costs } & \$ 10000 & \$ 15000 & \$ 90000 & \$ 70000 \
\text { Machine hours } & 10000 & 5000 & 10000 & 20000 \
\text { Labour hours } & 5000 & 5000 & 12000 & 8000
\end{array}$
The costs of service departments 1 and 2 are allocated on the basis of machine hours and labour hours respectively. Service department 1 is allocated first.
-Assuming that Motlop Manufacturing Company allocates service department 1 costs first,the amount of service department 1 costs allocated to producing 2 under the step method would be:

Accepted Answer

A)  $ 0 
B)  $1600 
C)  $5714 
D)  $2400 
A)  $ 0 
B)  $1600 
C)  $5714 
D)  $2400

Question 4

What are the two types of departments assumed to exist in departmental overhead costing?

Accepted Answer

The two types of departments are service

Question 5

Motlop Manufacturing
The Motlop Manufacturing Company has two service departments and two producing departments. The following data are available for 2013.
$\begin{array}{lcccc} 
&\text { Service }&\text { Service } & \text { Producing } & \text { Producing }\
&\text { Dept. 1 }&\text { Dept. 2 }&1&2\
\hline \text { Department Costs } & \$ 10000 & \$ 15000 & \$ 90000 & \$ 70000 \
\text { Machine hours } & 10000 & 5000 & 10000 & 20000 \
\text { Labour hours } & 5000 & 5000 & 12000 & 8000
\end{array}$
The costs of service departments 1 and 2 are allocated on the basis of machine hours and labour hours respectively. Service department 1 is allocated first.
-Assuming that Motlop Manufacturing Company uses the direct method of allocating service costs,the amount of service department 1 costs allocated to producing 1 would be: (If necessary,round your answer to the nearest whole number. )

Accepted Answer

A)  $5250 
B)  $3000 
C)  $4800 
D)  $3333 
A)  $5250 
B)  $3000 
C)  $4800 
D)  $3333

Question 6

Kleinveld Inc.
The Machinery department and Assembly department are two producing departments in Kleinveld Inc. Machinery’s total overhead is $30 000, using 200 machine hours and 500 direct labour hours. Assembly’s total overhead cost is $45 000, using 300 machine hours and 500 direct labour hours. The Machinery department overhead cost driver for product cost allocation is machine hours, while the Assembly department uses direct labour hours to allocate overhead costs to products.
-What is the overhead allocated to a product that uses 4 direct labour hours in Assembly and 4 machine hours in Machinery?

Accepted Answer

A)  $600 
B)  $0 
C)  $360 
D)  $960 
A)  $600 
B)  $0 
C)  $360 
D)  $960

Question 7

Kleinveld Inc.
The Machinery department and Assembly department are two producing departments in Kleinveld Inc. Machinery’s total overhead is $30 000, using 200 machine hours and 500 direct labour hours. Assembly’s total overhead cost is $45 000, using 300 machine hours and 500 direct labour hours. The Machinery department overhead cost driver for product cost allocation is machine hours, while the Assembly department uses direct labour hours to allocate overhead costs to products.
-What is the overhead allocated to a product that uses 3 direct labour hours in Assembly and 5 machine hours in Machinery?

Accepted Answer

A)  $960 
B)  $0 
C)  $1020 
D)  $900 
A)  $960 
B)  $0 
C)  $1020 
D)  $900

Question 8

All of the following statements about service department costs are true except:

Accepted Answer

A)  Service department costs include the costs of providing services to other departments within an organisation. 
B)  Service department costs are only allocated to producing departments. 
C)  Service department costs should be allocated using an allocation base or cost driver related to the costs incurred. 
D)  Service department costs do not include the costs of providing services to external customers. 
A)  Service department costs include the costs of providing services to other departments within an organisation. 
B)  Service department costs are only allocated to producing departments. 
C)  Service department costs should be allocated using an allocation base or cost driver related to the costs incurred. 
D)  Service department costs do not include the costs of providing services to external customers.

Question 9

Mega Manufacturing
The Mega Manufacturing Company has two service departments and two producing departments. The following data are available for 2013.
$$\begin{array} { l c c c c } 
 &\text { Service } &\text { Service } & \text { Producing } & \text { Producing } \
&\text { Dept.1 }&\text { Dept.2 }&1&2\
\hline \text { Department Costs } & \$ 40000 & \$ 30000 & \$ 90000 & \$ 70000 \
\text { Machine hours } & 8000 & 4000 & 20000 & 16000 \
\text { Square Feet Occupied } & 3000 & 6000 & 9000 & 12000
\end{array}$$
The costs of service departments 1 and 2 are allocated on the basis of machine hours and square feet occupied, respectively. Service department 1 is allocated first.
-Assuming that Mega Manufacturing Company uses the reciprocal method of allocating service costs,what is the total overhead that will be allocated from service department 1,adjusted for the reciprocal method?

Accepted Answer

A)  $40 000 
B)  $43 750 
C)  $44 304 
D)  $45 000 
A)  $40 000 
B)  $43 750 
C)  $44 304 
D)  $45 000

Question 10

Mary runs a florist store and predominantly incurs overhead costs that are proportional to the amount of effort put in by her staff members.These staff members generally receive the same pay rates.Which of the four drivers below would you consider best for allocating her overhead costs?

Accepted Answer

A)  Machine hours 
B)  Direct labour hours 
C)  Direct labour cost 
D)  Floor space 
A)  Machine hours 
B)  Direct labour hours 
C)  Direct labour cost 
D)  Floor space

Question 11

What are direct departmental overhead costs? Please give two examples in your explanation.

Accepted Answer

Direct departmental overhead costs can f

Question 12

Danville Manufacturing
The Danville Manufacturing Company has two service departments and two producing departments. The following data are available for 2006.
$$\begin{array} { l c c c c } 
& \begin{array} { c } 
\text { Service } \
\text { Dept. 1 }
\end{array} & \begin{array} { c } 
\text { Service } \
\text { Dept. 2 }
\end{array} & \begin{array} { c } 
\text { Producing } \
\text { 1 }
\end{array} & \begin{array} { c } 
\text { Producing } \
\mathbf { 2 }
\end{array} \
\hline \text { Department Costs } & \$ 12000 & \$ 8000 & \$ 60000 & \$ 70000 \
\text { Number of Transactions } & 6000 & 4000 & 6000 & 14000 \
\text { Square Feet Occupied } & 2000 & 1000 & 4000 & 6000
\end{array}$$
-Assuming that Danville Manufacturing Company allocates service department 1 costs first,the amount of service department 2 costs allocated to producing 1 under the step-down method would be:

Accepted Answer

A)  $3200 
B)  $4000 
C)  $3000 
D)  $2400 
A)  $3200 
B)  $4000 
C)  $3000 
D)  $2400

Question 13

William runs an accounting firm,and predominantly incurs overhead costs that are proportional to the amount of effort put in by her staff members.More senior staff members generally perform more complex and cost intensive overhead related efforts.Which of the four drivers below would you consider best for allocating overhead costs?

Accepted Answer

A)  Machine hours 
B)  Direct labour hours 
C)  Direct labour cost 
D)  Floor space 
A)  Machine hours 
B)  Direct labour hours 
C)  Direct labour cost 
D)  Floor space

Question 14

Kleinveld Inc.
The Machinery department and Assembly department are two producing departments in Kleinveld Inc. Machinery’s total overhead is $30 000, using 200 machine hours and 500 direct labour hours. Assembly’s total overhead cost is $45 000, using 300 machine hours and 500 direct labour hours. The Machinery department overhead cost driver for product cost allocation is machine hours, while the Assembly department uses direct labour hours to allocate overhead costs to products.
-What is the overhead allocated to a product that uses 4 direct labour hours in both departments?

Accepted Answer

A)  $240 
B)  $600 
C)  $360 
D)  $840 
A)  $240 
B)  $600 
C)  $360 
D)  $840

Question 15

Sharon Manufacturing
The Sharon Manufacturing Company has two service departments and two producing departments. The following data are available for 2013.
$\begin{array}{lcccc} 
& \text { Service } & \text { Service } & \text { Producing } & \text { Producing } \
& \text { Dept. 1 } & \text { Dept. 2 } & \text { 1 } & \text { 2 } \
\hline \text { Department Costs } & \$ 20000 & \$ 12000 & \$ 80000 & \$ 90000 \
\text { Machine hours } & 12000 & 8000 & 12000 & 60000 \
\text { Square Feet Occupied } & 3000 & 3000 & 9000 & 6000
\end{array}$
 
The costs of service departments 1 and 2 are allocated on the basis of machine hours and square feet occupied, respectively. Total overheads from producing departments are allocated to products on the basis of direct labour hours, which are 5000 in Producing Department 1 and 2000 hours in Producing Department 2. Service department 1 is allocated first.
-Assuming that Sharon Manufacturing Company allocates service department 1 costs first,the amount of service department 1 costs allocated to service department 2 under the step method would be:

Accepted Answer

A)  $ 0 
B)  $1600 
C)  $2000 
D)  $2400 
A)  $ 0 
B)  $1600 
C)  $2000 
D)  $2400

Question 16

Mudgee Manufacturing has two production departments,Mixing and Finishing.The total overhead cost in Mixing is $100?000 and Finishing is $60?000.Mixing is driven by machine hours,and Finishing by labour hours.There are 7000 labour hours and 20?000 machine hours in Mixing,while there are 10?000 labour hours and 15?000 machine hours in Finishing.
Required:
A.What is the overhead rate per unit for Mixing,and for Finishing?
B.How much overhead is applied to a product that uses 5 labour hours in Mixing and 6 labour hours in Finishing,as well as 7 machine hours in Mixing and 8 machine hours in Finishing?
C.Following on from part b,how much overhead would have been applied to the product if a plantwide overhead rate based on machine hours had been used?

Accepted Answer

A.Mixing overhead rate = $100,000 /20,00

Question 17

Melbourne Manufacturing has two production departments,Assembly and Finishing.The total overhead cost in Assembly is $200?000 and Finishing is $30?000.Assembly is driven by machine hours,and Finishing by labour hours.There are 6000 labour hours and 10?000 machine hours in Assembly,while there are 7500 labour hours and 6000 machine hours in Finishing.
Required:
A.What is the overhead rate per unit for Assembly,and for Finishing?
B.How much overhead is applied to a product that uses 3 labour hours in Assembly and 2 labour hours in Finishing,as well as 3 machine hours in Assembly and 4 machine hours in Finishing?

Accepted Answer

A Assembly overhead rate = $20

Question 18

Maximilian Cinemas has three departments.Of these,Department E occupies 55 machine hours of time per day while Department F occupies 25 machine hours per day.Department G occupies 20 machine hours.If overhead costs are allocated on the basis of machine hours,how much in overhead should be allocated to Department G if overheads are $10 500 per week?

Accepted Answer

A)  $300 
B)  $100 
C)  $400 
D)  $600 
A)  $300 
B)  $100 
C)  $400 
D)  $600

Question 19

Motlop Manufacturing
The Motlop Manufacturing Company has two service departments and two producing departments. The following data are available for 2013.
$\begin{array}{lcccc} 
&\text { Service }&\text { Service } & \text { Producing } & \text { Producing }\
&\text { Dept. 1 }&\text { Dept. 2 }&1&2\
\hline \text { Department Costs } & \$ 10000 & \$ 15000 & \$ 90000 & \$ 70000 \
\text { Machine hours } & 10000 & 5000 & 10000 & 20000 \
\text { Labour hours } & 5000 & 5000 & 12000 & 8000
\end{array}$
The costs of service departments 1 and 2 are allocated on the basis of machine hours and labour hours respectively. Service department 1 is allocated first.
-Assuming that Motlop Manufacturing Company allocates service department 1 costs first,the amount of service department 1 costs allocated to Producing 2 under the direct method would be:

Accepted Answer

A)  $6667 
B)  $3333 
C)  $6500 
D)  $3500 
A)  $6667 
B)  $3333 
C)  $6500 
D)  $3500

Question 20

Shane & Sons Watchmakers has many departments.Of these,Department A occupies 20 square metres of floor space while department B occupies 30 square metres.If rent for the whole factory totals $1000 per week and the total floor space taken up by the factory is 200 square metres,how much in rental costs must be allocated to Department B?

Accepted Answer

A)  $150 
B)  $100 
C)  $400 
D)  $600 
A)  $150 
B)  $100 
C)  $400 
D)  $600

What overhead driver might best relate to the total overhead cost of a Minerals extraction operating division of BHP Billiton,a large mining company?

What are the two types of departments assumed to exist in departmental overhead costing?

All of the following statements about service department costs are true except:

Mary runs a florist store and predominantly incurs overhead costs that are proportional to the amount of effort put in by her staff members.These staff members generally receive the same pay rates.Which of the four drivers below would you consider best for allocating her overhead costs?

What are direct departmental overhead costs? Please give two examples in your explanation.

Introduction to Managerial Accounting

Product Costing: Manufacturing Processes, cost Terminology and Cost Flows

Cost Behaviour

Job Costing and Overhead Costing Systems

Process Costing Systems

Service and Operations Costing

Activity-Based Costing

Cost-Volume-Profit Analysis

Relevant Costs and Product Planning Decisions

Long-Term Capital Investmentdecisions

Fixed and Rolling Budgets for Planning and Decision Making

Management Accounting for Cost Control and Performance Evaluation Flexible Budgets and Variance Analysis

Decentralisation and Modern Performance Management Systems the Balanced Scorecard

Accounting for Sustainability Social Reporting,environmental Reporting and Management Accounting

Filters

Exam 7: Departmental Overhead Costing

What overhead driver might best relate to the total overhead cost of a Minerals extraction operating division of BHP Billiton,a large mining company?

What are the two types of departments assumed to exist in departmental overhead costing?

All of the following statements about service department costs are true except:

Mary runs a florist store and predominantly incurs overhead costs that are proportional to the amount of effort put in by her staff members.These staff members generally receive the same pay rates.Which of the four drivers below would you consider best for allocating her overhead costs?

What are direct departmental overhead costs? Please give two examples in your explanation.

Introduction to Managerial Accounting

Product Costing: Manufacturing Processes, cost Terminology and Cost Flows

Cost Behaviour

Job Costing and Overhead Costing Systems

Process Costing Systems

Service and Operations Costing

Activity-Based Costing

Cost-Volume-Profit Analysis

Relevant Costs and Product Planning Decisions

Long-Term Capital Investmentdecisions

Fixed and Rolling Budgets for Planning and Decision Making

Management Accounting for Cost Control and Performance Evaluation Flexible Budgets and Variance Analysis

Decentralisation and Modern Performance Management Systems the Balanced Scorecard

Accounting for Sustainability Social Reporting,environmental Reporting and Management Accounting

Filters