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Exam 4: Cost Accumulation,Tracing,and Allocation

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Question 71

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Overhead costs:

A) Cannot be traced to cost objects in a cost-effective manner,but are instead allocated to cost objects.
B) Cannot be allocated to cost objects.
C) Are always variable costs.
D) Are only incurred by manufacturing companies.

E) B) and C)
F) B) and D)

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Question 72

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Services performed by service departments for the benefit of an operating department are called interdepartmental services.

A) True
B) False

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Question 73

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A predetermined overhead rate is calculated using estimated or predicted cost and volume data.

Financial reporting standards require that joint costs:

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.

The split off point:

The direct method of allocating service department costs allocates those costs to operating departments only.

Parr Corporation makes three products,X,Y,and Z.Expected overhead costs for the coming year include: $\begin{array}{|l|r|}\hline \text { Depreciation on factory building } & \$ 140,000 \\\hline \text { Factory utility costs } & 160,000 \\\hline \text { Supervisory salaries } & 250,000 \\\hline \text { Factory supplies } & 50,000 \\\hline \text { Total } & \$ 600,000 \\\hline\end{array}$ Parr uses direct labor hours as the cost driver to allocate overhead costs.Budgeted direct labor hours for each product are: Product X,15,000 direct labor hours Product Y,10,000 direct labor hours Product Z,5,000 direct labor hours Required: 1)Determine the amount of manufacturing overhead that should be allocated to each of the three products. 2)Assume that each unit of Product X requires $40 in direct materials and 3 direct labor hours at a rate of $15 per hour.Calculate the budgeted or expected cost of each unit of X.

What are cost objects? List examples of cost objects.

Vance Electronics expects to make 100,000 Bluetooth speakers during 2014.Direct materials cost per unit are estimated at $12,and direct labor cost is expected to be $4 per unit.The total manufacturing overhead for the year is budgeted at $850,000. Required: 1)Calculate the amount of overhead that should be allocated to each speaker during the year. 2)Assume that,during the month of October,Vance made and sold 8,000 speakers.What would the cost of goods sold be for the month? 3)Assume that the company sells the speakers at cost plus 40% of cost.What would be the selling price for each speaker?

Sometimes,several types of costs are accumulated into a single total for the purpose of cost allocation.This single total is referred to as a joint cost.

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

The amount of joint costs allocated to a product must be considered when deciding whether to sell a joint product at the split-off point or later after additional processing.

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

Costs that can be traced to a cost object in a cost-effective way are called direct costs.

Indicate whether each of the following statements is

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

Sheddon Industries produces two products.The products' identified costs are as follows: $\begin{array}{|l|c|l|}\hline & \text { Product A } & \text { Product B } \\\hline \text { Direct matenals } & \$ 20,000 & \$ 15,000 \\\hline \text { Direct labor } & 12,000 & 24,000 \\\hline\end{array}$ 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 your intermediate calculations. )

Joint products are:

Bank's Department Store has three departments: Men's,Women's and Children's.The store incurred $50,000 of store rental costs during the current year.The departments identified the following cost drivers: $\begin{array}{|l|r|r|r|}\hline & \text { Men's } & \text { Women's } & \text { Children's } \\\hline \text { Labor dollars } & \$ 530,000 & \$ 775,000 & \$ 240,000 \\\hline \text { Number of employees } & 10 & 20 & 4 \\\hline \text { Square footage } & 3,000 & 8,000 & 1,000 \\\hline \text { Number of sales transactions } & 300,000 & 900,000 & 90,000 \\\hline\end{array}$ Using the most appropriate cost driver,how much rental cost (rounded to the nearest dollar) should be allocated to the Women's Department? (Do not round your intermediate calculations. )