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Exam 4: Cost Accumulation,tracing,and Allocation

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Question 21

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The College of Business Administration needs to distribute $12,000 received from an anonymous donor and earmarked for three business student organizations,Beta Alpha Psi (BAP),Delta Sigma Pi (DSP),and Beta Gamma Sigma (BGS).Relevant information is provided below: $\begin{array} { l r r r } \text { Possible Cost Driver } & \text { BAP } & \text { DSP } & \text { BGS } \\\text { Nurnber of students } & 30 & 40 & 100 \\\text { Budgeted expenses } & 5 5 , 5 0 0 &\$4,000 &\$ 500 \\\text { Nurnber of orgarizations } & 1 & 1 & 1\end{array}$ Assume that each organization wishes to obtain the highest funding possible. Required: 1)Which cost driver will each organization recommend be used to distribute the funds? 2)Which cost driver would you recommend and why?

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1)As a reference,consider that if the fu...

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Question 22

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Blankenship Company operates a factory with two departments,X and Y.The utilities to heat and light the manufacturing facility would most likely be allocated to departments X and Y on the basis of:

A) Square footage occupied.
B) Machine hours.
C) Direct labor hours.
D) Units sold.

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

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Question 23

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During the current year,Kemp Construction Company built 23 custom homes that ranged in size from 2,500 square feet to 8,000 square feet.One home was completed each month during January,February,and March.Three homes were completed during April and May.Two homes were completed during each of the months from June through December.Based upon this information,the most appropriate allocation base (i.e.,cost driver) for the assignment of indirect overhead costs to each house would be the:

Which of the following is an appropriate cost driver for allocating indirect costs to a human resources department in a service company?

Assume that a factory seeks to allocate rent to several departments that occupy the factory.The factory is occupied by all of the departments.Which of the following is the most logical cost driver for allocating the factory rent?

The accuracy of managerial accounting information usually is more important than timeliness.

Assume that factory depreciation for the year is $240,000.What problem could result from dividing that amount by 12 and assigning $20,000 in depreciation to the products made each month?

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

Alleghany Community College operates four departments.The square footage used by each department is shown below: $\begin{array} { l r } & \text { Square } \\\text { Department } & \text { Footage } \\\text { Accounting } & 3,000 \\\text { Marketing } & 4,000 \\\text { Technology } & 6,000 \\\text { Sciences } &\underline{ 3,000} \\\text { Total } &\underline{ 16,000} \\\end{array}$ Alleghany's annual building rental cost is $320,000. What amount of rent expense should be allocated to the Sciences Department?

Jessup Company expects to incur overhead costs of $20,000 per month and direct production costs of $125 per unit.The estimated production activity for the upcoming year is 1,000 units.If the company desires to earn a gross profit of $50 per unit,the sales price per unit would be which of the following amounts?

The selection of the most appropriate cost driver often requires considerable judgment in the absence of a strong cause-and-effect relationship.

Which formula best represents the first step used to allocate an indirect cost to a cost object?

The primary advantage of establishing cost pools is reducing the number of individual cost allocations that are made.

Indicate whether each of the following statements is true or false. Estimated cost data must often be used in making decisions because actual cost information is not yet available. Managers often accumulate both estimated and actual cost data for the same cost object. A direct cost must be allocated to a cost object. For a department in a retail store, cost of goods sold is a direct cost. Determining whether a cost is direct or indirect depends on the selection of cost object.

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

The method of allocating service department costs that allocates the costs to both service departments and operating departments is the:

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

Vanguard Company makes three products,M,N,and P,which come from a joint process.The joint costs for each batch of the products are: $80,000 for direct materials,$40,000 for direct labor,and $30,000 for indirect costs (overhead).Each batch produces 10,000 pounds of product M with a market value of $6 per pound; 5,000 pounds of N with a market value of $12 per pound; and 9,000 pounds of P with a market value of $10 per pound. Required: 1)Determine the total amount of joint cost allocated to each of the products,assuming that the allocation is based on the weight of products produced.(Do not round intermediate calculations.Round each of your final answers to the nearest whole dollar.) 2)Determine the total amount of joint cost allocated to each of the products,assuming that the allocation is based on the market value of the products.(Do not round intermediate calculations.Round each of your final answers to the nearest whole dollar.)

Why is a company's selection of cost allocation methods important to individual managers?

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: