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Exam 4: Cost Accumulation,tracing,and Allocation

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Question 61

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Indirect costs are often pooled,and not allocated individually because:

A) individual allocation would be more timely.
B) individual allocation would be more accurate.
C) individual allocation would be tedious.
D) the benefits of individual allocation of indirect costs are greater than the costs.

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

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Question 62

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It is possible that the same cost might be direct with respect to one cost object but indirect with respect to another cost object.

A) True
B) False

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Question 63

Multiple Choice

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Selection of a cost driver depends on:

Joint products A and B emerge from common processing that costs $200,000 and yields 2,000 units of Product A and 1,000 units of Product B.Product A can be sold for $100 per unit.Product B can be sold for $120 per unit.How much of the joint cost will be assigned to Product A if joint costs are allocated on the basis of relative sales values? (Do not round intermediate calculations.)

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

Parr Corporation makes three products,X,Y,and Z.Expected overhead costs for the coming year include: $\begin{array} { l r } \text { Depreciation on factory building } & \$ 140,000 \\\text { Factory utility costs } & 160,000 \\\text { Supervisory salaries } & 250,000 \\\text { Factory supplies } & \underline{ 50,000} \\ \text { Total } & \underline{\$ 600,000} \\\end{array}$ Parr uses direct labor hours as the cost driver to allocate overhead costs.Budgeted direct labor hours for each product are: Product X,15,000 direct labor hours Product Y,10,000 direct labor hours Product Z,5,000 direct labor hours Required: 1)Determine the amount of manufacturing overhead that should be allocated to each of the three products. 2)Assume that each unit of Product X requires $40 in direct materials and three direct labor hours at a rate of $15 per hour.Calculate the budgeted or expected cost of each unit of X.

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:

The first step in cost accumulation is to identify cost objects.

The process of dividing a total cost into parts and assigning it to cost objects is known as:

Because Fenwick Company has significant swings in its monthly production,the best way to allocate its plant manager's $58,000 annual salary is to allocate 1/12^th of the cost each month.

Some costs that possibly could be traced directly to cost objects are nonetheless classified as indirect costs because:

A cost object is anything for which management desires a separate tracking of costs,while a cost driver is the factor that causes the cost object to increase or decrease.

Michael & Co.expects overhead costs of $60,000 per month and direct production costs of $24 per unit.The estimated production activity for the current accounting period is as follows: $\begin{array} { l c r r r } & \text { 1st Quarter } & \text { 2nd Quarter } & \text { 3rd Quarter } & \text { 4th Quarter } \\\text { Units produced } & 11,500 & 9,000 & 8,250 & 11,250\end{array}$ The predetermined overhead rate based on units produced is: (Round the answer to 2 decimal places.)

Cobalt Company management has identified the following cost objects: Cost Object 1: The cost of operating the finishing department Cost Object 2: The cost of operating the factory Cost Object 3: The cost of a particular product made in June With respect to these cost objectives,how would rent paid by the finishing department for storage space be classified?

A company's total profit can be affected by the method used to allocate joint costs.

Harrison Company expects to incur $600,000 in manufacturing overhead for the coming year.The company makes two products,A and B,and it has accumulated the following budget information for the products: $\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Nurnber of units to be produced } & 10,000 & 5,000 & 15,000 \\\hline \text { Direct labor hours } & 25,000 & 5,000 & 30,000 \\\hline \text { Machine hours } & 15,000 & 30,000 & 45,000 \\\hline\end{array}$ Required: 1)Use direct labor hours as the cost driver to compute the allocation rate.Determine the amount of budgeted overhead to be allocated to each unit of product A.(Round to the nearest cent.) 2)Use machine hours as the cost driver to compute the allocation rate.Determine the amount of budgeted overhead to be allocated to each unit of product A.(Round to the nearest cent.) 3)How should Harrison decide between machine hours and direct labor hours as the cost driver for its manufacturing overhead?

How do you account for costs incurred before the split-off point? How do you account for costs incurred after the split-off point?

The split-off point is the point at which individual products resulting from a joint process can be identified.

Old Virginia Meat Processing Plant processes hogs to produce three joint products: bacon,sausage,and pork chops.The company incurs common processing costs of $100,000 per batch.Each batch yields 15,000 pounds of bacon,18,000 pounds of sausage,and 7,000 pounds of pork chops.Pork chops can be sold for $3.00 per pound.The bacon and sausage products are sold at the split-off point for $3.25 per pound and $3.50 per pound,respectively. Required: 1)Allocate Old Virginia's joint costs using pounds produced as the allocation base.(Do not round intermediate calculations.) 2)Allocate Old Virginia's joint costs using the relative sales value at split-off method.(Do not round intermediate calculations.) 3)Assume that the pork chops are processed further after the split-off point at an additional cost of $4,000 and that joint costs are allocated based on pounds produced.What would be the total cost assigned to pork chops?

Jefferson Company expects to incur $450,000 in manufacturing overhead costs during the current year.Other budget information follows: $\begin{array} { | l | r | r | r | } \hline & \text { Department A } & \text { Department B } & \text { Department C } \\\hline \text { Direct labor hours } & 15,000 & 5,000 & 20,000 \\\hline \text { Machine hours } & 8 , 0 0 0& 10,000 & 12,000 \\\hline\end{array}$ Required: 1)Use direct labor hours as the cost driver to compute the allocation rate.Determine the amount of budgeted overhead cost for each department. 2)Use machine hours as the cost driver to compute the allocation.Determine the amount of budgeted overhead cost for each department. 3)Assume that Department A manufactured a product that required 160 direct labor hours and 85 machine hours.If overhead is allocated based on direct labor hours,how much overhead would be allocated to this product? 4)Assume that Department A manufactured a product that required 160 direct labor hours and 85 machine hours.If overhead is allocated based on machine hours,how much overhead would be allocated to this product?