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Exam 12: Cost Accumulation, Tracing, and Allocation

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Question 51

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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.

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Question 52

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Illustrate with examples how cost definitions are independent and context sensitive. In other words, indicate how a cost can be classified as fixed or variable and direct or indirect, depending on the situation.

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The definitions for direct and indirect ...

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Question 53

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

Blanton Company wishes to allocate rent expense of $24,000 to its three operating departments, A, B, and C. Assuming the three departments occupy 10,000, 20,000 and 30,000 square feet respectively, the cost allocation rate for Department C is $0.80 per square foot.

A manager believes that the number of units sold drives the company's selling costs. The number of units sold would be referred to as the cost driver.

Custom Quilters makes decorative comforters, quilted garments, and other products in a small sewing factory. In 2014, the company expects to make 2,000 comforters. With respect to the comforters, how would the supervisory salaries be classified?

Craig Manufacturing Company operates its three production departments within a single facility. Each department produces its own products and maintains its own production equipment. Although they share a common facility, each department is overseen by a separate supervisor. Which one of the following costs is a direct cost of each department?

Indicate whether each of the following statements is true or false. 1. Companies group several individual overhead costs into cost pools to simplify the allocation process. 2. A cost pool should include costs that will all be allocated to a single cost object. 3. When a cost pool is used, costs are allocated individually to the cost object. 4. Using cost pools to group costs generally does not reduce the usefulness of the resulting product costs.

At the beginning of the year, Rangle Company expected to incur $54,000 of overhead costs in producing 6,000 units of product. The direct material cost is $20 per unit of product. Direct labor cost is $30 per unit. During January, 600 units were produced. The total cost of the units made in January was:

Select the term from the list provided that best describes each of the following descriptions.

Indicate whether each of the following statements is true or false. 1. Estimated cost data must often be used in making decisions because actual cost information is not yet available. 2. Managers often accumulate both estimated and actual cost data for the same cost object. 3. A direct cost must be allocated to a cost object. 4. For a department in a retail store, cost of goods sold is a direct cost. 5. Determining whether a cost is direct or indirect depends on the selection of cost object.

Jiminez Company paid its annual property tax of $6,000 on its manufacturing facility in January. The company expects to make 4,000 units of product during the year. During January, 300 units of product were produced. Based on this information:

Haskins Company employs material handling employees who move materials between production divisions at a labor cost of $360,000 a year. It is estimated that these employees move 600,000 pounds of material per year. If 60,000 pounds are moved in March, how much of the material handling cost should be assigned to products made in March? (Do not round your intermediate calculations.)

Burke Company has 160 employees, 88 of whom are in Department 1 and 72 in Department 2. The company expects to incur $166,000 of office supplies costs in 2014. How much of this cost should be allocated to Department 1?

Each indirect cost should be allocated to products individually to provide the most useful cost information.

Cost accumulation is used to:

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

Which of the following is not a step in allocating indirect costs to cost objects?

A factor having a "cause and effect" relationship with a cost object is called a(n) :

Morris Company makes one product, and it expects to incur a total of $600,000 in indirect (overhead) costs during 2014. Production of the product for the year is expected to be: $\begin{array} { | l | l |r | r r | r | } \hline & { \text { Quarter } } \\\hline & 1 & 2 & 3 & 4 \\\hline \begin{array} { l } \text { Estimated } \\\text { production in } \\\text { units }\end{array} & 40,000 & 15,000 & & 27,000 & 38,000 \\\hline\end{array}$ Required: 1) Calculate a predetermined overhead rate based on the number of units of product expected to be made during 2014. 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 a.