Exam 12: Cost Accumulation, Tracing, and Allocation

Select the false statement from the following.

Select the correct statement from the following.

An allocation rate has a cause-and-effect relationship with a cost object.

Costs that can be traced to a cost object in a cost-effective way are called direct costs.

Which formula best represents the first step used to allocate an indirect cost to a cost object?

Assume that a factory seeks to allocate rent to several departments that occupy the factory. The factory is occupied by all the departments. Which of the following is the most logical cost driver for allocating the factory rent?

Which of the following statements is true?

Wayne Company wishes to allocate overhead costs in a heavily automated production department. Direct labor hours would be a less appropriate cost driver than machine hours.

Which of the following is an appropriate cost driver for allocating indirect costs to a human resources department in a service company?

Overhead costs:

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

Craig Manufacturing Company operates its three production departments within a single facility. Each department produces its own products and maintains its own production equipment. Although they share a common facility, each department is overseen by a separate supervisor. Which one of the following costs is a direct cost of each department?

The accuracy of managerial accounting information usually is more important than timeliness.

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

How a particular cost behaves (fixed versus variable) is dependent of whether the cost is classified as direct or indirect.

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: How much truck depreciation should be allocated to Site A? (Do not round intermediate calculations.)

Blankenship Company operates a factory with two departments, X and Y. The utilities to heat and light the manufacturing facility would most likely be allocated to departments X and Y on the basis of:

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 should not be treated as direct costs, assuming the cost object is individual clocks?

A predetermined overhead rate is calculated using estimated or predicted cost and volume data.

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?