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Exam 12: Cost Accumulation, Tracing, and Allocation

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Question 51

Multiple Choice

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Nature's Soap manufactures Bar soap and Liquid soap. Of the following costs, which would be an indirect cost to the Liquid Department?

A) Liquid manager's salary
B) Manufacturing plant insurance
C) Depreciation of the liquefying equipment
D) Liquid Fragrance

E) All of the above
F) C) and D)

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Question 52

True/False

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The most useful cost driver for allocating a particular cost is the one with the strongest cause-and-effect relationship.

A) True
B) False

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Question 53

Multiple Choice

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Allegheny Community College operates four departments. The square footage used by each department is shown below. Allegheny's annual building rental cost is $320,000. What amount of rent expense that should be allocated to the Technology Department?

It is possible that the same cost might be direct with respect to one cost object but indirect with respect to another cost object.

The following information was gathered for Company J, a manufacturing company with three departments, A, B, and C: Manufacturing supplies cost is expected to be $300,000. Possible cost drivers are direct labor hours, direct materials cost, and number of units completed and sold. The three departments have varying amounts for these items. Based on this information, indicate whether each of the following statements is true or false.

At the beginning of the year, Barcroft Co. estimated that its total annual fixed overhead costs would amount to $25,000. Further, Barcroft estimated that its volume of production would be 2,000 units of product. Based on these estimates, Barcroft computed a predetermined overhead rate that was used to allocate overhead costs to the products made during the year. As predicted, actual fixed overhead costs did amount to $25,000. However, actual volume of production amounted to 2,200 units of product. Based on this information alone:

Sheddon Industries produces two products. The products' identified costs are as follows: The company's overhead costs of $108,000 are allocated based on labor cost. Assume 4,000 units of product A and 5,000 units of Product B are produced. What amount of production costs would be assigned to Product A? (Do not round intermediate calculations.)

Which of the following best describes the term used to assign indirect costs to a cost object?

Which of the following is not a true statement regarding the pooling of indirect costs?

The first step in cost accumulation is to identify cost objects.

At the beginning of the year, Rangle Company expected to incur $54,000 of overhead costs in producing 6,000 units of product. The direct material cost is $20 per unit of product. Direct labor cost is $30 per unit. During January, 600 units were produced. The total cost of the units made in January was:

Because Fenwick Company has significant swings in its monthly production, the best way to allocate its plant manager's $58,000 annual salary is to allocate 1/12^th of the cost each month.

Which of the following statements is false?

All of the following are examples of indirect costs that can be classified as being variable costs except:

Haskins Company employs material handling employees who move materials between production divisions at a labor cost of $360,000 a year. It is estimated that these employees move 600,000 pounds of material per year. If 60,000 pounds are moved in March, how much of the material handling cost should be assigned to products made in March? (Do not round intermediate calculations.)

Which of the following is not an important factor in determining the appropriate cost driver to use in allocating a cost?

Which of the following is not an example of a cost object and its related cost driver?

Jiminez Company paid its annual property tax of $6,000 on its manufacturing facility in January. The company expects to make 4,000 units of product during the year. During January, 300 units of product were produced. Based on this information:

Indicate whether each of the following statements is true or false.

Indicate whether each of the following statements is true or false.