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Exam 4: Cost Accumulation,tracing,and Allocation

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Question 41

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Overhead costs include:

A) Direct and indirect costs.
B) Indirect costs only.
C) Direct costs only.
D) Neither direct nor indirect costs.

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

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Question 42

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Morris Company makes one product,and it expects to incur a total of $600,000 in indirect (overhead)costs during the current year.Production of the product for the year is expected to be: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Quarter }$ $\begin{array} { | l | c | c | c | c | } \hline & 1 & 2 & 3 & 4 \\\hline\text { Estirnated production in units } &40,000&15,000&27,000&38,000\\\hline\end{array}$ Required: 1)Calculate a predetermined overhead rate based on the number of units of product expected to be made during the current year. 2)Assuming that direct materials and direct labor costs are $10 and $15,respectively,determine the total cost per unit using the overhead rate you calculated in part (1).

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1)Predetermined overhead rate ...

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Question 43

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Sheddon Industries produces two products.The products' identified costs are as follows: $\begin{array}{lrr}&\text { Product A }&\text { Product B }\\ \text { Direct materials} &\$20,000&\$15,000\\ \text { Direct labor} &12,000&24,000\\\end{array}$ The company's overhead costs of $108,000 are allocated based on direct labor cost.Assume 4,000 units of product A and 5,000 units of Product B are produced.What is the cost per unit for product B? (Do not round intermediate calculations.)

In a manufacturing company,service department costs are:

Sturbridge Company manufactures fine furniture and grandfather clocks.Sturbridge has an excellent reputation,and each grandfather clock sells for several thousand dollars.Which of the following should not be treated as direct costs,assuming the cost object is individual clocks?

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.

In an organization,departments that have tasks leading to the primary objectives of the organization are:

Herald Manufacturing Company uses a predetermined overhead rate to allocate fixed manufacturing overhead to production on a monthly basis.At the end of the accounting period it was determined that actual overhead cost was less than the estimated overhead cost and that the actual volume of production was higher than estimated.Based on this information alone:

Once indirect costs are pooled,they must remain pooled for all allocations.

Sometimes,volume-based cost drivers are used to allocate fixed indirect costs.

Burke Company has 160 employees,88 of whom are in Department 1 and 72 of whom are in Department 2.The company expects to incur $166,000 of office supplies costs during the current year.How much of this cost should be allocated to Department 1?

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

Joint products A and B emerge from common processing that costs $150,000 and yields 8,000 units of Product A and 4,000 units of Product B.Product A can be sold for $100 per unit.Product B can be sold for $80 per unit.What amount of the joint costs will be assigned to Product B if joint costs are allocated on the basis of number of units produced? (Do not round intermediate calculations.)

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

The Flintstone Construction Company delivers dirt and stone from local quarries to its construction sites.A new truck that was purchased for a cost of $120,000 at the beginning of the year was expected to deliver 200,000 tons over its useful life.The following is a breakdown of the tons delivered during the year to each construction site: $\begin{array} { l c c c c } \text { Construction Sites: } & \text { A } & \text { B } & \text { C } & \text { D } \\\text { Tons Delivered: } & 2,000 & 3,500 & 4,000 & 1,500\end{array}$ How much truck depreciation should be allocated to Site A? (Do not round intermediate calculations.)

What is the objective of allocating fixed overhead costs to products?

Vance Electronics expects to make 100,000 Bluetooth speakers during the current year.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?

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 supervisory salaries be classified?

Which of the following statements is true?

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