Exam 7: A Closer Look at Overhead Costs

Which of the following statement/s is/are correct?

For management accounting purposes, the denominator volume for applying overhead to products may be:

Absorption costing profit is always equal to:

The production section of a firm is serviced by personnel and computing as follows: Personnel costs are allocated on the number of employees and computing costs on service hours. Overhead rates are based on labour hours. If the reciprocal services method is used to allocate support department costs, the total cost (rounded) allocated out of Personnel would be:

Under dual cost allocation, fixed costs are allocated based on the user departments of the support department's output:

The East Coast University uses a printing machine, the FL200, to print exam papers. According to the operation manual, FL200 can prints 2000 sets of exam papers per hour when it is operating at peak efficiency. However, Edgo Liew, the head printer, notes that in normal (but still efficient) operations, the machine can produce only 1800 sets of exam papers in an hour. Further, Edgo also notes that given the small number of students enrolled in the East Coast University, the machine is never required to print more than 1500 sets of exam papers per hour. The theoretical capacity of the FL200 is:

A reciprocal service is when a mutual service is provided between two or more departments.

Which of the following approaches combines all the manufacturing overhead costs into a single cost pool?

Assume that the predetermined fixed overhead rate per unit remains the same from 2007 to 2008 and inventory decreases in 2008. Which of the following statements is true?

Consider the following statements regarding absorption costing and variable costing. i. Profit reported under absorption costing for a year will likely differ from that reported under variable costing because production and sales differ. ii. Total profit when added together over a ten-year period will be approximately equal under absorption costing and variable costing because production and sales will be approximately the same. iii. Total profit when added together over a ten-year period will be significantly different under absorption and variable costing because fixed costs will generally increase significantly over that long. Which statement/s is/are true?

Absorption costing is a method of allocating cost to inventories such that the cost of inventory includes:

The mutual provision of service between support departments is called:

When allocating support department costs, the costs that should be used are:

If the relationship between overhead costs and the cost drivers differs substantially across production departments, the firm should use:

The following information about Monfort Manufacturing is available: Using the step-down method and starting with Training Department, the cost allocated from Training Department to Machining Department is:

If a manager in a high volume product plant is seeking more accurate product cost information, which of the following approaches are they likely to choose to allocate overheads to products?

Explain how a management accountant would identify overhead cost drivers.

Manufacturing overhead costs can be referred to as:

The following information about Monfort Manufacturing is available: Using the reciprocal method, the equations required to calculate the costs of the support departments are: (where T= the cost of Training Department; M=the cost of Maintenance Department)

The Kelsey Manufacturing Company Ltd has two production departments (Assembly and Finishing) and two support departments (Janitorial and Personnel). The usage of the two support departments in 2012 is as follows: The budgeted costs in the support departments of 2012 were as follows: Using the direct method, what is the Janitorial Department cost allocated to the Assembly Department?