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
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.
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
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
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
Operating income calculations use:
Income tax expense
Cost of goods sold and operating costs
Non-operating revenues and non-operating expenses
Contribution margin equals:
Revenues minus period costs
Revenues minus product costs
Revenues minus variable costs
Revenues minus fixed costs
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.
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.
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
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.
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
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
Quality management provides an important competitive edge because it:
Increases customer satisfaction
Often results in substantial savings and higher revenues in the short run
All of these answers are correct.
An example of a nonfinancial measure for customer satisfaction is:
Average manufacturing time for key products
Percentage of products that fail soon after delivery
Number of employees trained on managing bottleneck operations
A tool which indicates how frequently each type of defect occurs is a:
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.
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:
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:
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
D. $5.25 $4.67
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
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:
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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