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Exam 4: Cost Accumulation,tracing,and Allocation

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Question 51

Multiple Choice

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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: $\begin{array} { l r r r } & \text { Men's } & \text { Women's } & \text { Children's } \\\text { Labor dollars } & \$ 530,000 & \$ 775,000 & \$ 2 4 0 , 0 0 0 \\\text { Number of employees } & 10 & 20 & 4 \\\text { Square footage } & 3,000 & 8,000 & 1,000 \\\text { Number of sales transactions } & 300,000 & 900,000 & 90,000\end{array}$ Using the most appropriate cost driver,how much rental cost should be allocated to the Women's Department? (Do not round intermediate calculations.Round final answer to the nearest dollar.)

A) $33,333
B) $29,412
C) $25,081
D) $34,884

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

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Question 52

True/False

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The terms "cost tracing" and "cost allocation" may be used interchangeably because they mean the same thing.

A) True
B) False

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Question 53

Multiple Choice

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Which of the following costs is most likely to be directly traceable to a specific department in a retail clothing store?

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 statements is true regarding the salary of the manager of a fast-food hamburger restaurant?

Indicate whether each of the following statements is true or false. Indirect costs are traced to cost objects. Cost drivers are used to allocate indirect costs to cost objects. An allocation rate is calculated by dividing the allocation base by the total cost to be allocated. A cost driver must be identified for each cost pool that is to be allocated. Depreciation on a building might be allocated to the departments sharing the building based on the number of square feet occupied by each department.

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

The Western and Pacific Railroad has two divisions,the Western Division and the Pacific Division.The company recently invested $8,000,000 to maintain its railroad track.Pertinent data for the two divisions are as follows: Total Miles Traveled: $\begin{array} { l r } \text { Western Division } & 800,000 \text { miles } \\\text { Pacific Division } & 1,200,000 \text { miles }\end{array}$ The amount of track improvement cost that should be allocated to the Western Division is: (Do not round your intermediate calculations.)

Wayne Company wishes to allocate overhead costs in a heavily automated production department.Direct labor hours would be a less appropriate cost driver than machine hours.

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

A company may use several different cost drivers to allocate its indirect costs.

Which of the following statements is incorrect?

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

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

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

What cost driver would you use to allocate indirect materials to products?

Marsden Company has three departments occupying the following amount of floor space: $\begin{array}{ll}\text { Department 1 } & 15,000 \mathrm{sq} . \mathrm{ft} \\\text { Department } 2 & 10,000 \mathrm{sq} . \mathrm{ft} \\\text { Department } 3 & 25,000 \mathrm{sq} . \mathrm{ft}\end{array}$ How much store rent should be allocated to Department 3 if total rent is equal to $200,000? (Do not round intermediate calculations.)

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.

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

State University's College of Business is divided into three departments,accounting,marketing,and management.Relevant information for each department is provided below: $\begin{array} { l c c c } \text { Cost Driver } & \text { Accounting } & \text { Marketing } & \text { Management } \\\text { Number of students } & 700 & 400 & 200 \\\text { Number of classes per semester } & 32 & 18 & 14 \\\text { Number of faculty } & 10 & 12 & 5\end{array}$ The Dean of the College of Business is trying to assign funds from the operating budget to the three departments.Assuming that the chair of each department is trying to attain the highest funding possible for his/her department,which of the following most accurately describes the allocation base that each chair will favor?