Question 1

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

Question 2

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

Accepted Answer

A)  individual allocation would be more timely. 
B)  individual allocation would be more accurate. 
C)  individual allocation would be tedious. 
D)  the benefits of individual allocation of indirect costs are greater than the costs. 
A)  individual allocation would be more timely. 
B)  individual allocation would be more accurate. 
C)  individual allocation would be tedious. 
D)  the benefits of individual allocation of indirect costs are greater than the costs. C

Question 3

During the current year, Kemp Construction Company built 23 custom homes that ranged in size from 2,500 square feet to 8,000 square feet. One home was completed each month during January, February, and March. Three homes were completed during April and May. Two homes were completed during each of the months from June through December. Based upon this information, the most appropriate allocation base (i.e., cost driver) for the assignment of indirect overhead costs to each house would be the:

Accepted Answer

A)  Number of homes built during the month. 
B)  Number of months in the year. 
C)  Number of homes built during the year. 
D)  Size of the home. 
A)  Number of homes built during the month. 
B)  Number of months in the year. 
C)  Number of homes built during the year. 
D)  Size of the home. D

Question 4

For a manufacturer, measures of volume may include:

Accepted Answer

A)  Number of units produced. 
B)  Number of square feet occupied. 
C)  Amount of direct materials used in production. 
D)  Both number of units produced and amount of direct materials used in production are correct. 
A)  Number of units produced. 
B)  Number of square feet occupied. 
C)  Amount of direct materials used in production. 
D)  Both number of units produced and amount of direct materials used in production are correct.

Question 5

Which of the following statements is correct regarding direct and indirect costs?

Accepted Answer

A)  Direct costs cannot easily be traced to a cost object, whereas indirect costs can be easily traced to a cost object. 
B)  Direct costs can be easily traced to a cost object, whereas indirect costs cannot be easily traced to a cost object. 
C)  Direct costs are always relevant to a particular cost decision, whereas indirect costs are never relevant to a cost decision. 
D)  Direct costs are never relevant to a particular cost decision, whereas indirect costs are always relevant to a cost decision. 
A)  Direct costs cannot easily be traced to a cost object, whereas indirect costs can be easily traced to a cost object. 
B)  Direct costs can be easily traced to a cost object, whereas indirect costs cannot be easily traced to a cost object. 
C)  Direct costs are always relevant to a particular cost decision, whereas indirect costs are never relevant to a cost decision. 
D)  Direct costs are never relevant to a particular cost decision, whereas indirect costs are always relevant to a cost decision.

Question 6

The selection of the most appropriate cost driver often requires considerable judgment in the absence of a strong cause-and-effect relationship.

Accepted Answer

A) True 
 B)False

Question 7

Custom Quilters makes decorative comforters, quilted garments, and other products in a small sewing factory. The company expects to make 2,000 comforters during the current year. With respect to the comforters, how would the hourly wages of sewing machine operators be classified?

Accepted Answer

A)  Direct and variable 
B)  Direct and fixed 
C)  Indirect and variable 
D)  Indirect and fixed 
A)  Direct and variable 
B)  Direct and fixed 
C)  Indirect and variable 
D)  Indirect and fixed

Question 8

Which of the following costs generally can be traced directly to units of product?

Accepted Answer

A)  Indirect materials 
B)  Overhead costs 
C)  Assembly labor 
D)  Indirect materials and assembly labor 
A)  Indirect materials 
B)  Overhead costs 
C)  Assembly labor 
D)  Indirect materials and assembly labor

Question 9

Indicate whether each of the following statements is true or false.

Accepted Answer

@#IMG-DLM&_TB3570_00

Question 10

Southeast Manufacturing Company has identified the following cost objects: Cost Object 1: The cost of operating the finishing department
Cost Object 2: The cost of a particular product made in June
Cost Object 3: The cost of operating the factory
With respect to these cost objects, the cost of the salary of the supervisor of the finishing department is directly traceable to cost objects:

Accepted Answer

A)  1 and 2. 
B)  2 and 3. 
C)  1 and 3. 
D)  1, 2, and 3. 
A)  1 and 2. 
B)  2 and 3. 
C)  1 and 3. 
D)  1, 2, and 3.

Question 11

A cost pool should be made up of costs with a common cost object.

Accepted Answer

A) True 
 B)False

Question 12

The terms "cost tracing" and "cost allocation" may be used interchangeably because they mean the same thing.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A)  It meets guidelines imposed by generally accepted accounting principles. 
B)  It can be traced to a division in a cost-effective manner. 
C)  It is a variable cost. 
D)  It can be allocated to a division. 
A)  It meets guidelines imposed by generally accepted accounting principles. 
B)  It can be traced to a division in a cost-effective manner. 
C)  It is a variable cost. 
D)  It can be allocated to a division.

Question 14

Which of the following statements is incorrect?

Accepted Answer

A)  A predetermined overhead rate may be used to allocate overhead costs when volume varies during the year. 
B)  A predetermined overhead rate is calculated using actual cost and volume data. 
C)  A predetermined overhead rate is calculated by dividing costs by volume, using a measure of volume such as direct labor hours or direct materials cost. 
D)  A company may need to allocate overhead costs to products to make pricing decisions for the products. 
A)  A predetermined overhead rate may be used to allocate overhead costs when volume varies during the year. 
B)  A predetermined overhead rate is calculated using actual cost and volume data. 
C)  A predetermined overhead rate is calculated by dividing costs by volume, using a measure of volume such as direct labor hours or direct materials cost. 
D)  A company may need to allocate overhead costs to products to make pricing decisions for the products.

Question 15

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?

Accepted Answer

A)  $175 
B)  $195 
C)  $415 
D)  $290 
A)  $175 
B)  $195 
C)  $415 
D)  $290

Question 16

Marsden Company has three departments occupying the following amount of floor space:   How much store rent should be allocated to Department 3 if total rent is equal to $200,000? (Do not round intermediate calculations.)

Accepted Answer

A)  $100,000 
B)  $50,000 
C)  $66,667 
D)  None of the answers are correct. 
A)  $100,000 
B)  $50,000 
C)  $66,667 
D)  None of the answers are correct.

Question 17

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. 
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 18

A chair manufacturer makes custom chairs using hand tools, wood, glue, and varnish. Which of the following statements is true?

Accepted Answer

A)  The costs of wood and glue would be treated as direct costs. 
B)  Wood, glue, and varnish would all be direct materials. 
C)  Wood would be accounted for as a direct cost, and glue and varnish as indirect costs. 
D)  The concepts of direct and indirect costs are not applicable here. 
A)  The costs of wood and glue would be treated as direct costs. 
B)  Wood, glue, and varnish would all be direct materials. 
C)  Wood would be accounted for as a direct cost, and glue and varnish as indirect costs. 
D)  The concepts of direct and indirect costs are not applicable here.

Question 19

Cost allocation involves:

Accepted Answer

A)  Identifying a cost driver for each cost to be allocated. 
B)  Calculating an allocation rate for each cost to be allocated. 
C)  Multiplying the allocation rate by the weight of the cost driver. 
D)  All of the answers are correct. 
A)  Identifying a cost driver for each cost to be allocated. 
B)  Calculating an allocation rate for each cost to be allocated. 
C)  Multiplying the allocation rate by the weight of the cost driver. 
D)  All of the answers are correct.

Question 20

Herald Manufacturing Company uses a predetermined overhead rate to allocate fixed manufacturing overhead to production on a monthly basis. At the end of the accounting period it was determined that actual overhead cost was less than the estimated overhead cost and that the actual volume of production was higher than estimated. Based on this information alone:

Accepted Answer

A)  The correct amount of cost was assigned to products during the accounting period. 
B)  Too much cost was assigned to products during the accounting period. 
C)  Too little cost was assigned to products during the accounting period. 
D)  The answer cannot be determined from the information provided. 
A)  The correct amount of cost was assigned to products during the accounting period. 
B)  Too much cost was assigned to products during the accounting period. 
C)  Too little cost was assigned to products during the accounting period. 
D)  The answer cannot be determined from the information provided.

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

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

For a manufacturer, measures of volume may include:

Which of the following statements is correct regarding direct and indirect costs?

The selection of the most appropriate cost driver often requires considerable judgment in the absence of a strong cause-and-effect relationship.

Custom Quilters makes decorative comforters, quilted garments, and other products in a small sewing factory. The company expects to make 2,000 comforters during the current year. With respect to the comforters, how would the hourly wages of sewing machine operators be classified?

Which of the following costs generally can be traced directly to units of product?

Indicate whether each of the following statements is true or false.

A cost pool should be made up of costs with a common cost object.

The terms "cost tracing" and "cost allocation" may be used interchangeably because they mean the same thing.

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

Which of the following statements is incorrect?

Marsden Company has three departments occupying the following amount of floor space: How much store rent should be allocated to Department 3 if total rent is equal to $200,000? (Do not round intermediate calculations.)

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

A chair manufacturer makes custom chairs using hand tools, wood, glue, and varnish. Which of the following statements is true?

Cost allocation involves:

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters

Exam 12: Cost Accumulation, Tracing, and Allocation

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

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

For a manufacturer, measures of volume may include:

Which of the following statements is correct regarding direct and indirect costs?

The selection of the most appropriate cost driver often requires considerable judgment in the absence of a strong cause-and-effect relationship.

Custom Quilters makes decorative comforters, quilted garments, and other products in a small sewing factory. The company expects to make 2,000 comforters during the current year. With respect to the comforters, how would the hourly wages of sewing machine operators be classified?

Which of the following costs generally can be traced directly to units of product?

Indicate whether each of the following statements is true or false.

A cost pool should be made up of costs with a common cost object.

The terms "cost tracing" and "cost allocation" may be used interchangeably because they mean the same thing.

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

Which of the following statements is incorrect?

Marsden Company has three departments occupying the following amount of floor space: How much store rent should be allocated to Department 3 if total rent is equal to $200,000? (Do not round intermediate calculations.)

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

A chair manufacturer makes custom chairs using hand tools, wood, glue, and varnish. Which of the following statements is true?

Cost allocation involves:

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Planning for Capital Investments

Filters