Chapter M4 Accounting

25 Questions

Settings
Please wait...
Chapter M4 Accounting

Questions and Answers
  • 1. 
    When the firm tests 9,000 components during the month, based on the information in Table M4-1, the amount of overhead applied during the period for the quality pool is:
    • A. 

      $10,6440

    • B. 

      $75,000

    • C. 

      $13,500

    • D. 

      $6,750

  • 2. 
    One benefit of using activity-based costing is that it:
    • A. 

      Often easier to implement than traditional overhead allocation

    • B. 

      Uses no corporate resources or assets in its application for a manufacturer

    • C. 

      Often results in more accurate product costs

    • D. 

      None of these answers is correct.

  • 3. 
    The total estimated manufacturing overhead cost for the company is $300,000 including $100,000 for the cost of quality testing. The estimated number of direct labor hours is 5,000 and the company estimates that 25,000 components will be tested during the period. Using traditional overhead allocation rather than ABC, the overhead allocation for quality testing should:
    • A. 

      Be included in the company’s plant-wide manufacturing overhead application rate of $60 per direct labor hour

    • B. 

      Be $4.00 per component tested

    • C. 

      None of these answers is correct.

    • D. 

      Not include the $100,000 allocation to products

  • 4. 
    When ABC is used, an allocation base that would likely be used for costs associated with production quality would be the number of:
    • A. 

      Machine hours

    • B. 

      Direct labor hours

    • C. 

      Direct labor dollars

    • D. 

      Components tested

  • 5. 
    To eliminate the problems associated with using an actual overhead rate, a(n) __________ is used.
    • A. 

      Actual cost system

    • B. 

      Normal cost system

    • C. 

      Universal cost tracking system

    • D. 

      None of these answers is correct.

  • 6. 
    Using the information from Table M4-1, Rossi has produced 4,000 units of product Z this period. If each unit of Z, takes 8 parts, one machine hour and one-half hour of direct labor, the total overhead applied to each unit of Z this period is:
    • A. 

      $6.25

    • B. 

      $2.00

    • C. 

      $14.25

    • D. 

      $14.50

  • 7. 
    An item used in the traditional approach to allocate manufacturing overhead is:
    • A. 

      Machine hours

    • B. 

      Direct labor hours

    • C. 

      Direct labor cost

    • D. 

      All of these answers are correct.

  • 8. 
    Based on the information in Table M4-2, if the Sally Nelson Company uses traditional overhead allocation, the overhead application rate for the company using direct labor hours as the allocation base would be:
    • A. 

      $45.45 (rounded)

    • B. 

      $40.00

    • C. 

      $99.78

    • D. 

      None of these answers is correct.

  • 9. 
    Based on the information found in Table M4-1, the overhead cost allocation rate used to allocate Pool 2 costs is:
    • A. 

      $2,000 per run

    • B. 

      $20,000 per unit

    • C. 

      $2,000 per unit

    • D. 

      $20,000 per run

  • 10. 
    When managers begin to implement ABC, they may find unnecessary costs. This is an example of:
    • A. 

      Smaller cost pools

    • B. 

      Closer cost scrutiny

    • C. 

      Controlling the allocation base

    • D. 

      All of these answers are correct.

  • 11. 
    When comparing traditional overhead allocation to ABC, the number of cost pools are:
    • A. 

      The same under the ABC and traditional overhead methods

    • B. 

      Zero because cost pools are not used under the ABC method

    • C. 

      Less under the ABC overhead method

    • D. 

      Greater under the ABC overhead method

  • 12. 
    The amount associated with cost objects that is used to proportionately distribute costs to each cost object is known as:
    • A. 

      Period cost

    • B. 

      A cost pool

    • C. 

      An allocation base

    • D. 

      A proportionality measure

  • 13. 
    A manufacturing company should pair overhead costs:
    • A. 

      Directly with products

    • B. 

      With manufacturing inventories

    • C. 

      With cost drivers

    • D. 

      None of these answers is correct.

  • 14. 
    Rossi tests four components from each product. During the current period, Rossi made 4,000 units. Based on Table M4-1, how much was the overhead cost for testing for each unit this period?
    • A. 

      $0.75

    • B. 

      $3,000.00

    • C. 

      $12,125.00

    • D. 

      $3.00

  • 15. 
    When manufacturing diversity exists:
    • A. 

      The retail prices of a company’s products will be higher

    • B. 

      The wholesale prices of a company’s products will be lower

    • C. 

      Using ABC will almost always result in less accurate product costs

    • D. 

      Using ABC will usually result in more accurate product costs

  • 16. 
    A company uses direct labor hours as an allocation base and estimates its annual manufacturing overhead to be $1,000,000 and its expected estimated labor hours to be 10,000.  Actual manufacturing overhead was $1,153,600 and actual direct labor hours were 10,300.  The company’s allocation rate for the year should have been:
    • A. 

      A cost of $106.09 (rounded) per direct labor hour

    • B. 

      A cost of $112 per direct labor hour

    • C. 

      A cost of $100 per direct labor hour

    • D. 

      None of these answers is correct.

  • 17. 
    The denominator of the calculation used to find the overhead allocation rate based on the pairing of cost pools and cost drivers is the:
    • A. 

      Estimated overhead cost

    • B. 

      Estimated product cost

    • C. 

      Number of units produced

    • D. 

      Cost driver

  • 18. 
    The key difference between an actual and normal cost system is:
    • A. 

      A normal cost system uses an actual amount for the allocation base

    • B. 

      A normal cost system uses an annual estimated amount for the allocation base

    • C. 

      An actual cost system uses an annual estimated amount for the allocation base

    • D. 

      An actual cost system uses a universal tracking amount for the allocation base

  • 19. 
    When activity-based costing is used, the cost of manufacturing activities:
    • A. 

      Are not taken into account for cost accounting purposes

    • B. 

      Becomes a period expense on the company’s income statement

    • C. 

      Are accumulated into one cost pool

    • D. 

      Are each accumulated in its own dedicated cost pool

  • 20. 
    Using the information found in Table M4-1, the per part overhead rate is:
    • A. 

      $4.00

    • B. 

      $0.125

    • C. 

      $1.00

    • D. 

      $0.25

  • 21. 
    Managers who desire to reduce the overhead cost allocated to their products using a predetermined overhead application rate:
    • A. 

      Must reduce the occurrences of the allocation base

    • B. 

      Treat fluctuations in actual overhead costs as operating expenses for the period

    • C. 

      Change the rate in response to fluctuations in actual overhead during the year

    • D. 

      None of these answers is correct.

  • 22. 
    One benefit of using activity-based costing is that it:
    • A. 

      Views more costs as indirect costs and therefore they need to be allocated

    • B. 

      Follows established GAAP guidelines and is therefore more accepted

    • C. 

      Is easier to use than more traditional methods

    • D. 

      Reclassifies certain manufacturing overhead costs into direct components

  • 23. 
    Based on the information found in Table M4-1, the overhead allocation rate for the production pool is:
    • A. 

      $6.25

    • B. 

      $12.50

    • C. 

      $0.16

    • D. 

      $1.10

  • 24. 
    The allocation of overhead has traditionally been a:
    • A. 

      One-step process

    • B. 

      Two-stage process

    • C. 

      Three-stage process

    • D. 

      Five-stage process

  • 25. 
    Using activity-based costing, the next step after an activity-based allocation rate has been identified is that:
    • A. 

      Overhead costs can be allocated using selected cost drivers

    • B. 

      Individual product cost pools can be calculated

    • C. 

      Cost drivers must be selected

    • D. 

      A predetermined overhead allocation rate can be calculated