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Exam 16: Cost Concepts and Cost Allocation

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Question 61

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Overhead can be traced to products once the products are completed.

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Question 62

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Indirect costs can be conveniently traced to a cost object.

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Question 63

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Overhead has been underapplied when the

The controller for Drisau Company is trying to decide whether or not the company should switch from the traditional approach of overhead cost allocation to the activity-based costing approach.She has gathered the following overhead data on the company's two products: estimated total overhead,$180,000 (consisting of the $70,000 for setups and $110,000 for assembly); estimated direct labor hours (Product A,6,000; Product B,3,000); estimated number of setups (Product A,750; Product B,1,250); estimated number of machine hours used in assembly (Product A,3,000; Product B,5,000); estimated number of units produced (Product A,500; Product B,200). Using the traditional approach: a. Calculate the predetermined overhead rate using direct labor hours as the cost driver. b. Compute the amount of overhead costs applied to each product in total and per unit.

Both product costs and period costs could appear on the income statement.

The following information has been made available to you.Assume that overhead is applied on the basis of direct labor hours. $\begin{array}{lr}\text { Estimated overhead } & \$ 1,638,000 \\\text { Estimated direct labor hours } & 390,000 \\\text { Actual direct labor hours } & 442,000 \\\text { Actual overhead } & \$ 1,862,000\end{array}$ a. Compute the predetermined overhead rate. b. Compute the amount of applied overhead for the year. c. Compute the amount of underapplied or overapplied overhead.

Calculate the amount of overhead costs applied to production if the predetermined overhead rate is $4 per direct labor hour and 1,200 direct labor hours were worked.

Product unit cost is computed by dividing cost of goods sold by the number of units sold.

Materials and supplies that cannot be traced conveniently to specific products are called

Cost of goods manufactured is equal to

To reconcile total manufacturing costs with the total cost of goods manufactured during the period,

(Direct Materials + Direct Labor + Overhead)/ Total Number of Units Produced = Product Unit Cost.

In the traditional manufacturing environment,overhead costs cannot be traced directly to products.

The changes in Work in Process Inventory and total manufacturing costs for a period are used to compute cost of goods manufactured.

The costs listed below are related to a manufacturer of all-natural ice cream.In the space provided,indicate whether the cost should be classified as direct materials (DM),direct labor (DL),or overhead (OH). _____ a. Maintenance on factory building _____ b. Cream _____ c. Mixing department wages _____ d. Vanilla _____ e. Factory supervisor's salary _____ _____ f. Machine oil for mixing machines _____ g. Sugar _____ h. Machine operator wages _____ i. Factory maintenance labor _____ j. Depreciation on factory equipment

In which one of the following accounts would all three product costs not be found?

The numbers of vendors,products,and engineering change orders are examples of

Which of the following is a typical example of a variable cost?

All manufacturing costs incurred and assigned to products that are being produced are classified as

As actual overhead costs are incurred,the Overhead account is debited.