Acc310 Cost Accounting: Week 2 Quiz (10 MCQs) – Version 3

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Acc310 Cost Accounting
Week 2 Quiz (10 MCQs) – Version 3

1. The Shapely Company uses the high-low method to determine its cost equation. The following information was gathered for 2008:
Machine Hours Direct Labor Costs
Busiest month (June) 14,000 $200,000
Slowest month (December) 6,000 $120,000

If Shapely expects to use 10,000 machine hours next month, what are the estimated direct labor costs? (Points : 1)

2. The Silver Company uses a predetermined overhead rate in applying overhead to production orders on a labor cost basis in Department A and on a machine hours basis in Department B. At the beginning of 2008, the company made the following estimates:
Dept. A Dept. B
Direct labor cost $60,000 $40,000
Factory overhead $90,000 $45,000
Direct labor hours 6,000 9,000
Machine hours 2,000 15,000

What predetermined overhead rate would be used in Department A and Department B respectively? (Points : 1)
150% and 300%.
150% and $3.00.
$1.50 and 300%.
$1.50 and $3.00.

3. Given the following information, compute the total number of units for the period.
Direct labor hours 12,000
Direct labor cost $2.70 per hour
Direct materials cost $75 per unit
Total manufacturing cost $132,600
Fixed overhead cost $36,000
Variable overhead cost 50% of total labor cost (Points : 1)

4. The theory of constraints focuses on maximizing throughput contribution margin while minimizing all of the following except (Points : 1)
fixed overhead costs.
production bottlenecks.
investment in buildings.
investment in inventories.

5. Which of the following would be the least appropriate allocation base for allocating overhead in a highly automated (i.e., capital-intensive) manufacturing company? (Points : 1)
electricity used
machine hours
direct labor hours
material consumed

6. The Wiscow Manufacturing Company recorded overhead costs of $14,182 at an activity level of 4,200 machine hours and $8,748 at 2,300 machine hours. The records also indicated that overhead of $9,730 was incurred at 2,600 machine hours. What is the total estimated cost for 2,600 machine hours using the high-low method to estimate the cost equation? (Points : 1)

7. A company is considering the use of a single-stage cost allocation process. Under what conditions would this choice be justified? (Points : 1)
The company has many service departments but only one production department.
The company produces a few products with similar characteristics in a few departments.
The company has no service departments but many production departments.
The company produces a wide selection of products in a single production department.

8. In a labor intensive company in which more overhead is used by the more highly skilled and paid employees, which activity base would be most appropriate for applying overhead to production? (Points : 1)
Direct labor cost.
Direct material cost.
Direct labor hours.
Machine hours.
Sales value of the product produced.

9. Mount Company incurred a total cost of $8,600 to produce 400 units of pulp. Each unit of pulp required five (5) direct labor hours to complete. What is the total fixed cost if the variable cost was $1.50 per direct labor hour? (Points : 1)

10. The Blade Division of Axe Company produces hardened steel blades. One-third of Blade's output is sold to the Forestry Products Division of Axe; the remainder is sold to outside customers. Blades' estimated operating profit for the year is:
Forestry Outside
Division Customers
Sales $15,000 $40,000
Variable costs (10,000 ) (20,000 )
Fixed costs (3,000 ) (6,000 )
Operating profits. $2,000 $ 14,000

Unit sales 10,000 20,000

The Forestry Division has an opportunity to purchase 10,000 blades of the same quality from an outside supplier on a continuing basis. If the Blade Division is now operating at full capacity and can sell all its units to outside customers at the present selling price, what is the differential cost to Axe of requiring that the blades be made internally for the Forestry Division? (Points : 1)
A. $2,500
B. $5,000
C. $7,500
D. $10,000
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