Question 1

________ is an outgrowth of ABC that draws on the link between activities and cost incurrence for better management.

Accepted Answer

Activity-b

Question 2

Which of the following is a disadvantage of the departmental overhead rate method?

Accepted Answer

A)  The departmental overhead rate method assigns overhead on the basis of volume-related measures. 
B)  The departmental overhead rate method is more refined than the plantwide overhead rate method. 
C)  The departmental overhead rate method does not assign overhead on the basis of volume-related measures. 
D)  The departmental overhead rate method is simpler and less costly to implement than the plantwide rate method. 
E)  There are no disadvantages of the departmental overhead rate method. 
A)  The departmental overhead rate method assigns overhead on the basis of volume-related measures. 
B)  The departmental overhead rate method is more refined than the plantwide overhead rate method. 
C)  The departmental overhead rate method does not assign overhead on the basis of volume-related measures. 
D)  The departmental overhead rate method is simpler and less costly to implement than the plantwide rate method. 
E)  There are no disadvantages of the departmental overhead rate method.

Question 3

What are the main advantages of volume-based allocation methods compared to activity-based costing?

Accepted Answer

A)  Volume-based methods are easier to use and less costly to implement and maintain. 
B)  Volume-based methods are more accurate and allowed by GAAP. 
C)  Volume-based methods are less accurate and easier to use. 
D)  Volume-based methods are harder to use and more costly to implement and maintain. 
E)  There are no advantages to using volume-based methods. 
A)  Volume-based methods are easier to use and less costly to implement and maintain. 
B)  Volume-based methods are more accurate and allowed by GAAP. 
C)  Volume-based methods are less accurate and easier to use. 
D)  Volume-based methods are harder to use and more costly to implement and maintain. 
E)  There are no advantages to using volume-based methods.

Question 4

The cost object(s) of the activity-based costing method is(are):

Accepted Answer

A)  The time period. 
B)  The production departments of the company. 
C)  The production activities of the company. 
D)  The production activities in the first stage and the unit of product in the second stage. 
E)  The unit of product in the first stage and the production activities in the second stage. 
A)  The time period. 
B)  The production departments of the company. 
C)  The production activities of the company. 
D)  The production activities in the first stage and the unit of product in the second stage. 
E)  The unit of product in the first stage and the production activities in the second stage.

Question 5

Cleveland Choppers manufactures two types of motorcycles, a Base and a Loaded model. The following activity and costs have been gathered:   
The number of components and number of setups are chosen as activity-cost drivers for overhead. Assuming an ABC costing system is being used, what is the total overhead cost assigned to the Loaded model?

Accepted Answer

A)  $31,875. 
B)  $36,000. 
C)  $28,125. 
D)  $34,050. 
E)  $31,125. 
A)  $31,875. 
B)  $36,000. 
C)  $28,125. 
D)  $34,050. 
E)  $31,125.

Question 6

When calculating the departmental overhead rate, the numerator should be?

Accepted Answer

A)  The total estimated departmental overhead cost. 
B)  The total amount of departmental allocation base. 
C)  The total plantwide budgeted overhead cost. 
D)  The actual quantity of the departmental allocation base used by the job. 
E)  The actual department direct labor hours. 
A)  The total estimated departmental overhead cost. 
B)  The total amount of departmental allocation base. 
C)  The total plantwide budgeted overhead cost. 
D)  The actual quantity of the departmental allocation base used by the job. 
E)  The actual department direct labor hours.

Question 7

Product costs consist of direct labor, direct materials, and overhead (indirect) costs.

Accepted Answer

A) True 
 B)False

Question 8

A company produces heating elements that go through two operations, casting and assembling, before they are complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for the assembling department based on direct labor hours is $5 per direct labor hour.

Accepted Answer

A) True 
 B)False

Question 9

A company produces computer chips that go through two departments, department A1 and department B2, before they are complete. Expected costs and activities for the two departments are shown below. Departmental overhead rates are based on machine hours in department A1 and direct labor hours in department B2. Therefore, the overhead rates for department A1 and department B2 are $3.62 per machine hour and $5.73 per direct labor hour, respectively.

Accepted Answer

A) True 
 B)False

Question 10

Assume New Belgium Brewing Company manufactures and distributes three types of beer and that estimated per unit product costs and related information for the next year are shown in the following table:
 $$\begin{array} { | l | l | l | l | } 
\hline & \text { Blue Paddle } & \text { Somersault } & \text { Cocoa Mole Ale } \
\hline \text { Cost data per unit: } & & & \
\hline \text { Direct materials } & \$ 100,000 & \$ 500,000 & \$ 750,000 \
\hline \text { Direct labor } & \$ 3,600 & \$ 4,800 & \$ 6,000 \
\hline \text { Overhead } & \$ 12,000 & \$ 16,000 & \$ 20,000 \
\hline \text { Total product cost per unit } & \$ 115,600 & \$ 520,800 & \$ 776,000 \
\hline & & & \
\hline \text { Machine hours per unit } & 30 \mathrm { MH } & 40 \mathrm { MH } & 50 \mathrm { MH } \
\hline \text { Number of units produced per year } & 30 \text { units } & 20 \text { units } & 10 \text { units } \
\hline
\end{array}$$

a. 
If New Belgium Brewing Company uses a plantwide overhead rate based on machine hours, what is the total product cost per unit of Cocoa Mole Ale?
b. Blue Paddle is a traditional brew made in large quantities with long production runs. Somersault is a seasonal beer made in small batches. Cocoa Mole Ale is a specialty beer also made in small batches. Which of the overhead allocation methods studied in this chapter would you recommend that New Belgium Brewing Company use and why?

Accepted Answer

a.
Total overhead:
= ($12,000 x 30 units

Question 11

Explain cost flows for the departmental overhead rate method.

Accepted Answer

The departmental overhead rate method us

Question 12

The ________ overhead rate method uses a single rate for allocating overhead costs to products.

Accepted Answer

The answer of The ________ overhead rate method uses a...

Question 13

Which of the following is a disadvantage of the departmental overhead rate method?

Accepted Answer

A)  It may fail to accurately assign many overhead costs that are not driven by production volume. 
B)  Allows each department to have its own overhead rate. 
C)  Allows each department to have its own allocation base. 
D)  The departmental overhead rate is usually more accurate in overhead allocations than the plantwide overhead rate. 
E)  The departmental overhead rate is consistent with GAAP and can be used for external reporting. 
A)  It may fail to accurately assign many overhead costs that are not driven by production volume. 
B)  Allows each department to have its own overhead rate. 
C)  Allows each department to have its own allocation base. 
D)  The departmental overhead rate is usually more accurate in overhead allocations than the plantwide overhead rate. 
E)  The departmental overhead rate is consistent with GAAP and can be used for external reporting.

Question 14

The use of a plantwide overhead rate is not acceptable for external reporting under GAAP.

Accepted Answer

A) True 
 B)False

Question 15

Rising Sun, Inc. produces granola that requires two processes, mixing and baking, to complete. The best-selling type of granola is cherry almond delight. Information related to the 100,000 units of cherry almond delight produced annually is shown in the following table:

Rising Sun's total expected overhead costs and related overhead data are shown below. The company uses departmental overhead rates based on machine hours in the mixing department and direct labor hours in the baking department.

Determine the total product cost of this product line and each unit of cherry almond delight.

Accepted Answer

Mixing Dept. overhead: $80,000/4,000 MH

Question 16

A single cost pool is used when allocating overhead using the activity-based costing method.

Accepted Answer

A) True 
 B)False

Question 17

The usefulness of overhead allocations based on a plantwide overhead rate depends on two crucial assumptions: (1) the overhead cost is correlated with the allocation base; and (2) all products use overhead cost in similar proportions.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following would not be considered a product cost?

Accepted Answer

A)  Direct material costs. 
B)  Factory supervisor's salary. 
C)  Direct labor costs. 
D)  Budget accountant's salary. 
E)  Manufacturing overhead costs. 
A)  Direct material costs. 
B)  Factory supervisor's salary. 
C)  Direct labor costs. 
D)  Budget accountant's salary. 
E)  Manufacturing overhead costs.

Question 19

Kamper Company sells two products Big Z and Little Z. Current direct material and direct labor costs are detailed below. Next year, the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year's overhead is estimated to be $475,000. The direct labor and direct materials costs are estimated to be consistent with the current year.

Direct labor costs $20 per hour and the company expects to manufacture 32,000 units of Big Z and 9,000 units of Little Z next year.   What are total estimated direct labor hours for this next year?

Accepted Answer

A)  30,800 total DLH. 
B)  616,000 total DLH. 
C)  300,000 total DLH. 
D)  1,025,000 total DLH. 
E)  916,000 total DLH. 
A)  30,800 total DLH. 
B)  616,000 total DLH. 
C)  300,000 total DLH. 
D)  1,025,000 total DLH. 
E)  916,000 total DLH.

Question 20

[The following information applies to the questions displayed below.]
Aztec Industries produces bread which goes through two operations, mixing and baking, before it is ready to be packaged. Next year's expected costs and activities are shown below.
  
-Compute Aztec's departmental overhead rate for the baking department based on machine hours.

Accepted Answer

A)  $1.50 per MH 
B)  $5.00 per MH 
C)  $0.75 per MH 
D)  $0.50 per MH 
E)  $2.08 per MH 
A)  $1.50 per MH 
B)  $5.00 per MH 
C)  $0.75 per MH 
D)  $0.50 per MH 
E)  $2.08 per MH

________ is an outgrowth of ABC that draws on the link between activities and cost incurrence for better management.

Which of the following is a disadvantage of the departmental overhead rate method?

What are the main advantages of volume-based allocation methods compared to activity-based costing?

The cost object(s) of the activity-based costing method is(are):

When calculating the departmental overhead rate, the numerator should be?

Product costs consist of direct labor, direct materials, and overhead (indirect) costs.

Explain cost flows for the departmental overhead rate method.

The ________ overhead rate method uses a single rate for allocating overhead costs to products.

Which of the following is a disadvantage of the departmental overhead rate method?

The use of a plantwide overhead rate is not acceptable for external reporting under GAAP.

A single cost pool is used when allocating overhead using the activity-based costing method.

The usefulness of overhead allocations based on a plantwide overhead rate depends on two crucial assumptions: (1) the overhead cost is correlated with the allocation base; and (2) all products use overhead cost in similar proportions.

Which of the following would not be considered a product cost?

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Lean Principles and Accounting

Accounting for Business Transactions

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Exam 4: Activity-Based Costing and Analysis

________ is an outgrowth of ABC that draws on the link between activities and cost incurrence for better management.

Which of the following is a disadvantage of the departmental overhead rate method?

What are the main advantages of volume-based allocation methods compared to activity-based costing?

The cost object(s) of the activity-based costing method is(are):

When calculating the departmental overhead rate, the numerator should be?

Product costs consist of direct labor, direct materials, and overhead (indirect) costs.

Explain cost flows for the departmental overhead rate method.

The ________ overhead rate method uses a single rate for allocating overhead costs to products.

Which of the following is a disadvantage of the departmental overhead rate method?

The use of a plantwide overhead rate is not acceptable for external reporting under GAAP.

A single cost pool is used when allocating overhead using the activity-based costing method.

The usefulness of overhead allocations based on a plantwide overhead rate depends on two crucial assumptions: (1) the overhead cost is correlated with the allocation base; and (2) all products use overhead cost in similar proportions.

Which of the following would not be considered a product cost?

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Lean Principles and Accounting

Accounting for Business Transactions

Filters