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Exam 4: Cost Accumulation,Tracing,and Allocation

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Question 51

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Which of the following statements is

A) Both direct and indirect costs can be assigned to a cost object.
B) Cost drivers are often selected based on the availability of information.
C) Volume measures are good drivers for fixed overhead costs.
D) Fixed costs that do not have a definitive cost driver are allocated using an allocation base that distributes a rational share of the cost to each product.

E) A) and B)
F) A) and C)

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Question 52

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A chair manufacturer makes custom chairs using hand tools,wood,glue,and varnish.Which of the following statements is

A) The costs of wood and glue would be treated as direct costs.
B) Wood,glue,and varnish would all be direct materials.
C) Wood would be accounted for as a direct cost,and glue and varnish as indirect costs.
D) The concepts of direct and indirect costs are not applicable here.

E) A) and D)
F) A) and C)

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Question 53

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Indicate whether each of the following statements is

Cost allocation is the process of dividing a total cost into its fixed and variable components.

Which of the following is not a joint product with the other products listed?

Custom Quilters makes decorative comforters,quilted garments,and other products in a small sewing factory.The company expects to make 2,000 comforters during the current year.With respect to the comforters,how would the wages of sewing machine operators be classified?

Selection of a cost driver depends on:

Joint costs are irrelevant in a decision to sell a joint product at the split-off point or process it further.

Illustrate with examples how cost definitions are independent and context sensitive.In other words,indicate how a cost can be classified as fixed or variable and direct or indirect,depending on the situation.

What should a company consider when pooling indirect costs?

The direct method of allocating service department costs does not take into account the fact that service departments often provide assistance to other service departments.

Some costs that possibly could be traced directly to cost objects are nonetheless classified as indirect costs because:

Using the step method of allocating service department costs,the costs are allocated to:

Indirect costs should not be pooled unless they share a common cost driver.

Which of the following is not an example of a cost object and its related cost driver? $\begin{array}{|l|l|l|} \hline & {\text { Cost Obiect }} & {\text { Cost Driver }} \\\hline A.&\text { Rent } & \text { Square feet } \\\hline \text { B. } & \text { Transportation } & \text { Miles driven } \\\hline \text { C. } & \text { Direct labor hours } & \text { Indirect labor } \\\hline \text { D. } & \text { Utilities } & \text { Machine hours }\\\hline \end{array}$

Managers of a discount store chain are considering whether to add a new auto service department.In reaching this decision,the managers should consider:

Which of the following costs generally can be traced directly to units of product?

Joint costs total $24,000 for a production process that yields two main products,A and A.B.If joint costs are allocated to the products on the basis of their respective $20,000 and $30,000 sales values,2/3 of the joint costs (or $16,000)would be allocated to Product

A cost pool should be made up of costs with a common cost object.

Dallas Company's human resources department provides training and other services to the company's three operating departments and to one service department.The assembly department has 75 employees;the finishing department has 15 employees;and the sales department has 10 employees.The service department to which human resources provides services is the maintenance department,which has 13 employees.The human resources department costs are allocated using the direct method and based on the number of employees,and the total amount of costs for the department is $150,000. Required: Determine the amount of human resources cost that should be allocated to each department.