Expert Answers

Expert Answers

Question 1
Cost allocation is:
 The process of tracking both direct and indirect costs associated with a cost object
 The process of determining the actual cost of the cost object
 The assignment of indirect costs to the chosen cost object
 A function of cost tracing
Question 2
 Which one of the following items is a direct cost? 

 Customer-service costs of a multiproduct firm; Product A is the cost object. 

 Printing costs incurred for payroll check processing; payroll check processing is the cost object. 

 The salary of a maintenance supervisor in a multiproduct manufacturing plant; Product B is the cost object. 

 Utility costs of the administrative offices; the accounting department is the cost object.

Question 3
Variable costs:
 Are always indirect costs
 Increase in total when the actual level of activity increases
 Include most personnel costs and depreciation on machinery
 Can always be traced directly to the cost object
Question 4
 The Singer Company manufactures several different products. Unit costs associated with Product ICT101 are as follows:
What are the variable costs per unit associated with Product ICT101?
 Direct materials $60  $60
 Direct manufacturing labor 10 10
 Variable manufacturing overhead 18           18
 Fixed manufacturing overhead 32    32
 Sales commissions (2% of sales) 4  4
 Administrative salaries 16    16
 Total 92         $140

            a. $18 c. $88
            b. $22 d. $92
Question 5
 Cost-volume-profit analysis is used primarily by management: 

 As a planning tool 

 For control purposes 

 To prepare external financial statements 

 Tto attain accurate financial results
Question 6
 Operating income calculations use: 

 Net income 

 Income tax expense 

 Cost of goods sold and operating costs 

 Non-operating revenues and non-operating expenses 

Question 7
 Contribution margin equals: 

 Revenues minus period costs 

 Revenues minus product costs 

 Revenues minus variable costs 

 Revenues minus fixed costs
Question 8
 Holly's Ham, Inc. sells hams during the major holiday seasons. During the current year 11,000 hams were sold resulting in $220,000 of sales revenue, $55,000 of variable costs, and $24,000 of fixed costs.
Contribution margin per ham is:




 None of these answers are correct. 

Question 9
 The actual indirect-cost rate is calculated by:

 Dividing actual total indirect costs by the actual total quantity of the cost-allocation base.

 Multiplying actual total indirect costs by the actual total quantity of the cost-allocation base.

 Dividing the actual total quantity of the cost allocation base by actual total indirect costs.

 Multiplying the actual total quantity of the cost allocation base by actual total indirect costs.

Question 10
 O'Reilly Enterprises manufactures digital video equipment. For each unit $2,950 of direct material is used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing overhead is applied at $35 per direct manufacturing labor hour. Calculate the cost of each unit.

A.        $4,950, B. $9,950, C. $8,450, D. $11,950
Question 11
 Joni's Kitty Supplies applies manufacturing overhead costs to products at a budgeted indirect-cost rate of $60 per direct manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy Mouse product. Estimates for this order include: Direct materials $40,000; 500 direct manufacturing labor-hours at $20 per hour; and a 20% markup rate on total manufacturing costs.
Manufacturing overhead cost estimates for this special order total:





 None of these answers is correct.
Question 13
 ABC systems create:


 One large cost pool 

 Homogenous activity-related cost pools 

 Activity-cost pools with a broad focus 

 activity-cost pools containing many direct costs 

Question 16
 Activity-based costing systems provide better product costs when they: 

 Employ more activity-cost drivers 

 Employ fewer activity-cost drivers 

 Identify and cost more indirect cost differences among products 

 Always yield more accurate product costs than traditional systems
Question 17
 Quality management provides an important competitive edge because it: 

 Reduces costs 

 Increases customer satisfaction 

 Often results in substantial savings and higher revenues in the short run 

 All of these answers are correct.
Question 18
 An example of a nonfinancial measure for customer satisfaction is: 

 Average manufacturing time for key products

 Contribution margin

 Percentage of products that fail soon after delivery 

 Number of employees trained on managing bottleneck operations
Question 19
 A tool which indicates how frequently each type of defect occurs is a: 

 Control chart 

 Pareto diagram 

 Cause-and-effect diagram 

 Fishbone diagrams
Question 20
 An important difference between financial measures of quality and nonfinancial measures of quality is that:
 Financial measures of quality tend to be useful indicators of future long-term performance, while nonfinancial measures have more of a short-term focus 

 Nonfinancial measures of quality tend to be useful indicators of future long-term performance, while financial measures of quality have more of a short-term focus
 Nonfinancial measures are generally too subjective to have any long-term value
 None of these answers is correct.

Question 12
 Bauer Manufacturing uses departmental cost driver rates to allocate manufacturing overhead costs to products. Manufacturing overhead costs are allocated on the basis of machine-hours in the Machining Department and on the basis of direct labor-hours in the Assembly Department. At the beginning of 20X3, the following estimates were provided for the coming year:
 Machining Assembly
 Direct labor-hours 30,000 60,000 60,000
 Machine-hours 80,000 20,000 20,000
 Direct labor cost $500,000 $900,000 $900,000
 Manufacturing overhead costs $420,000 $240,000 $240,000
 The accounting records of the company show the following data for Job #316:

 Machining Assembly
 Direct labor-hours 120 70 70
 Machine-hours 60 5 5
 Direct material cost $300 $200 $200
 Direct labor cost $100 $400 $400
 For Bauer Manufacturing, what is the annual manufacturing overhead cost-allocation rate for the Machining Department?



 A. $4.00, B.$4.20
 C. $4.67
 D. $5.25 $4.67 


Question 15
 Velshi Printers has contracts to complete weekly supplements required by forty-six customers.
 For the year 2010, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.
For 2010 Velshi Printers has decided to evaluate the use of additional cost pools.
 After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers.
The following information was gathered during the analysis:
            Cost Pool Manufacturing Overhead Costs Activity Level Activity Level
            Design changes $120,000 300 design changes 300 design changes
            Setups $640,000 5,000 setups 5,000 setups
            Inspections $80,000 5,000 setups 8,000 inspections
            Total manufacturing overhead costs $840,000

During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:
 ActivityMoneyManagersHospital Systems
 Pages 60,000 76,000
 Design changes 10 0
 Setups 20 10
 Inspections 30 38
What is the cost driver rate if manufacturing overhead costs are considered one large cost pool and are assigned based on 12 million pages of production capacity?

A.        $0.10 per page
B.        $0.07 per page
C.        $0.70 per page
D.        $0.05 per page
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