Exam 7: A Closer Look at Overhead Costs

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 Personnel Department cost allocated to the Assembly Department?

Any activity or factor that causes a cost to be incurred is known as a:

Where the fixed overhead rate in both opening and closing inventories is the same, which of the following statements is correct?

The following information about Monfort Manufacturing is available: Using the reciprocal method, the cost allocated from Training Department to Polishing Department is:

After all manufacturing overhead costs have been assigned to the production departments, the step to assign all manufacturing overhead costs accumulated in a production department to the jobs that the department has worked on is called:

The Browning Company manufactures a single product; the standard costs per unit being variable manufacturing $8, fixed manufacturing $6. Selling and administrative costs are $2 per unit sold. The selling price is $20 per unit. Actual and budgeted fixed overhead is $900 000 for the year. Information about Browning's production activity for the year is: What is the value of closing inventory of finished goods under absorption costing?

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 step-down method, what is the amount of Janitorial Department cost allocated to the Assembly Department with the Personnel Department cost allocated first?

Before any costing process can occur, it is necessary to identify the cost object.

The East Coast University uses a printing machine, the FL200, to print exam papers. According to the operation manual, FL200 can print 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 practical capacity of the FL200 is:

The Lots More Store has a Janitorial Department and a Personnel Department that provide services to three Sales Departments. The Janitorial Department cost is allocated based on space and the Personnel Department cost is allocated because of employees. The following information is available. Using the step-down method, calculate the amount of Personnel Department cost allocated to Sales Department #3, if the Personnel Department is allocated first.

The step/s used in cost allocation include/s:

A normal absorption costing system charges work in process with:

A plantwide overhead rate is used to allocate overheads when it is assumed that overheads are all driven by the same cost driver.

Consider the following statements about support department cost allocations. i. In a modern manufacturing environment, it is not necessary to allocate support department costs. ii. Support department cost allocations continue to be necessary when a highly automated system is in use. iii. In a flexible manufacturing system, the need to allocate costs diminishes because more costs have become traceable to the product. Which statement/s is/are true?

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

The support department cost allocation method that fully accounts for the mutual provision of services between support departments is called the:

Consider the following statements about support department cost allocations. i. The allocation of actual costs encourages support department managers to control the costs in their departments. ii. When budgeted costs are allocated, any efficiency in support department operations are passed along to user departments. iii. The allocation of budgeted costs rather than actual costs gives an incentive for support department managers to control costs in their departments. Which statement/s is/are true?

Conceptual advantage of reciprocal method Describe why the reciprocal method of allocating support department costs is conceptually superior to the direct and step-down methods.

An allocation base may also be referred to as a:

Each cost pool is distributed to each responsibility centre in: