Question 1

The total factory overhead for Big Light Company is budgeted for the year at $807,500.Big Light manufactures two different products - night lights and desk lamps.Night lights is budgeted for 60,000 units.Each night light requires 1/2 hour of direct labor.Desk lamps is budgeted for 80,000 units.Each desk lamp requires 2 hours of direct labor.Determine a the total number of budgeted direct labor hours for year, b the single plantwide factory overhead rate using direct labor hours as the allocation base, and c the factory overhead allocated per unit for each product using the single plantwide factory overhead rate calculated in
b.

Accepted Answer

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Question 2

Shubelik Company is changing to an activity-based costing method.They have determined that they will use three cost pools: setups, inspections, and assembly.Which of the following would not be used as the activity base for any of these three activities?
A)number of units to be produced
B)number of setups
C)number of inspections
D)number of direct labor hours

Accepted Answer

The number of units to be produced is not a suitable activity base for any of the three activities, as it does not directly cause any of these costs. The activities are all related to the processes involved in producing the units, rather than the number of units themselves. The number of setups, inspections, and direct labor hours are all reasonable activity bases for their respective activities.

Question 3

The Bonnington Company manufactures small lamps and desk lamps.The following shows the activities per product:  Using the following information prepared by the Bonnington Company, determine the total factory overhead to be charged to small lamps.

A)$314,000
B)$209,333
C)$202,000
D)$104,000

Accepted Answer

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Question 4

Calculate the total factory overhead to be charged to each unit of Hooks.
A)$33
B)$50
C)$11
D)$61

Accepted Answer

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Question 5

If selling and administrative expenses are allocated to different products, they should be reported as a
A)cost of goods manufactured
B)factory overhead cost
C)period cost
D)cost of goods sold

Accepted Answer

Selling and administrative expenses are not related to the manufacturing process or the cost of producing products. Rather, they are expenses associated with the overall operation of the business and are, therefore, considered period costs. These expenses should be reported separately from the cost of goods manufactured and sold.

Question 6

Calculate the total factory overhead to be charged to desk lamps.
A)$306,667
B)$235,000
C)$230,000
D)$225,000

Accepted Answer

To calculate factory overhead, we need to add up all the indirect costs that go into manufacturing desk lamps. Based on the information given in the problem, the total indirect costs are as follows:

- Indirect labor: $50,000
- Indirect materials: $20,000
- Rent: $75,000
- Utilities: $40,000
- Depreciation: $50,000

Total factory overhead = Indirect labor + Indirect materials + Rent + Utilities + Depreciation
Total factory overhead = $50,000 + $20,000 + $75,000 + $40,000 + $50,000
Total factory overhead = $235,000

Therefore, the correct answer is B.

Question 7

Which of the following is a cost pool used with the activity-based costing method?
A)total selling and administrative overheads
B)direct material dollars
C)total factory overheads
D)production setups

Accepted Answer

Production setups are an activity that can be used as a cost pool in activity-based costing. The other options are not specific enough and do not represent a single activity that can be traced to a product or service.

Question 8

Calculate the overhead per unit to be charged to small lamps.
A)$75.00
B)$39.17
C)$38.33
D)$17.50

Accepted Answer

The answer of Calculate the overhead per unit to be...

Question 9

Tulip Company produces two products, T and U.The indirect labor costs include the following two items:
  The following activity-base usage and unit production information is available for the two products:
  a Determine the single plantwide factory overhead rate, using direct labor hours as the activity base.
b Determine the factory overhead cost per unit for Products T and U, using the single plantwide factory overhead rate.
c Determine the activity rate for plant supervision and setup labor, assuming that the activity base for supervision is direct labor hours and the activity base for setup labor is number of setups.
d Determine the factory overhead cost per unit for Products T and U, using activity-based costing.
e Why is the factory overhead cost per unit different for the two products under the two methods?

Accepted Answer

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Question 10

Which of the following is not a reason for banks to use activity-based costing?
A)to determine the amounts charged to customers for services provided
B)to determine service quality
C)to determine profitability of services provided
D)all of the above

Accepted Answer

Activity-based costing is used by banks primarily for financial reasons, such as determining charges for services and profitability, rather than directly assessing service quality.

Question 11

Determine the activity-based cost for each tape drive unit.
A)$97.73
B)$232.69
C)$394.12
D)$103.84

Accepted Answer

Activity-based cost per tape drive unit = Total cost of activity ÷ Total number of tape drive units
Activity 1 cost per tape drive unit = $781,250 ÷ 2,500 = $312.50
Activity 2 cost per tape drive unit = $125,000 ÷ 2,500 = $50.00
Activity 3 cost per tape drive unit = $937,500 ÷ 2,500 = $375.00
Activity 4 cost per tape drive unit = $156,250 ÷ 2,500 = $62.50
Total activity-based cost per tape drive unit = $312.50 + $50.00 + $375.00 + $62.50 = $800.00
Therefore, the best choice is B, as it is the closest option to the calculated activity-based cost per tape drive unit.

Question 12

Kettle Factory produces two similar products-gloves and mittens.The total plant budget is $1,050,000 with 600,000 estimated direct labor hours.It is further estimated that glove production will require 375,000 direct labor hours and mitten production will require 225,000 direct labor hours.
a Determine the single plant factory overhead rate based on direct labor hours.
b How much is the factory overhead cost per pair of gloves if each pair requires 2 hours to produce?
c How much is the factory overhead cost per pair of mittens if each pair takes
1.5 hours to produce?
d How much total factory overhead will be allocated to glove production if 187,500 pairs are budgeted and 190,000 pairs are actually produced during the period?
e How much total factory overhead will be allocated to mitten production if 150,000 pairs are budgeted and 140,000 pairs are actually produced during the period?

Accepted Answer

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Question 13

Calculate the total factory overhead to be charged to Nooks.
A)$300,000
B)$400,000
C)$488,000
D)$600,000

Accepted Answer

To calculate the total factory overhead to be charged to Nooks, we need to add up actual factory overhead expenses incurred and allocate indirect expenses to the cost of goods produced.

Actual factory overhead expenses:
Direct materials = $1,500,000
Direct labor = $1,000,000
Factory rent = $120,000
Factory utilities = $80,000
Depreciation of factory equipment = $168,000
Total actual factory overhead expenses = $1,768,000

Allocation of indirect expenses:
Supervision (10% of direct labor) = $100,000
Indirect materials = $20,000
Indirect labor = $100,000
Total indirect expenses = $220,000

Total factory overhead to be charged to Nooks = actual factory overhead expenses + allocated indirect expenses
= $1,768,000 + $220,000
= $1,988,000
Dividing by the 4,075 Nooks produced yields a factory overhead cost of $488. Answer C is the closest choice.

Question 14

Condelezza Co.manufactures two products, A and B, in two production departments, Assembly and Finishing.Condelezza Co.expects to produce 10,000 units of Product A and 20,000 units of Product B in the coming year.Budgeted factory overhead costs for the coming year are:
  The machine hours expected to be used in the coming year are as follows:
  a Compute the plantwide factory overhead rate.
Compute the production department factory overhead rates.
b Compute the factory overhead per unit for each product using 1 the single plantwide rate and 2 production department factory overhead rates.
c Which method is better plantwide or department? Why?

Accepted Answer

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Question 15

Calculate the cost of services for a haircut.
A)$4.00
B)$7.50
C)$3.50
D)$11.50

Accepted Answer

As it is the only option that is a reasonable price range for a haircut. The other options are either too low to be realistic or too high for a standard haircut.

Question 16

Given the following information, determine the activity rate for setups. 
A)$58.00
B)$18.00
C)$0.75
D)$5.09

Accepted Answer

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Question 17

Activity rates are determined by
A)dividing the actual cost for each activity pool by the actual activity base for that pool.
B)dividing the cost budgeted for each activity pool by the estimated activity base for that pool.
C)dividing the actual cost for each activity pool by the estimated activity base for that pool.
D)dividing the cost budgeted for each activity pool by the actual activity base in that pool.

Accepted Answer

Activity rates are determined by dividing the cost budgeted for each activity pool by the estimated activity base for that pool. This helps in estimating the cost of each activity and in turn, helps in determining the total cost of the product or service.

Question 18

Activity-based costing for selling and administrative expenses can also be beneficial in allocating expenses to various products.Which of the following is the best allocation base for help desk costs?
A)Number of calls
B)Square footage of the help desk office
C)Number of products sold
D)Number of sales employees

Accepted Answer

The best allocation base for help desk costs would be the number of calls they receive, since this directly correlates to the amount of work they are doing and resources they are using to support customers. The other options (B, C, and D) are not as closely related to the actual workload and resources used by the help desk.

Question 19

Bugaboo Co.manufactures three types of cookies: Fluffs, Crinkles, and Snaps.The production process is relatively simple, and factory overhead costs are allocated to products using a single plantwide factory rate based on direct labor hours.Information for the month of May, Bugaboo's first month of operations, follows:
  Bugaboo has budgeted direct labor costs for May at $8.50 per hour.Budgeted direct materials costs for May are: Fluffs, $0.75/unit; Crinkles $0.40/unit; and Snaps $0.30/unit.
Bugaboo's budgeted overhead costs for May are:
  Assume that Bugaboo sells all the boxes it produces in May.
a Compute Bugaboo's plantwide factory overhead rate for May.
b Compute the product cost in May for each type of cookie.
c Does Bugaboo's use of a plantwide factory overhead rate in any way distort the product costs for May?

Accepted Answer

The answer of Bugaboo Co.manufactures three types of cookies: Fluffs,...

Question 20

The Sawtooth Leather Company manufactures leather handbags and moccasins.For simplicity, the company has decided to use a single plantwide factory overhead rate method to allocate factory overhead.Calculate the amount of factory overhead to be allocated to each unit using direct labor hours.
Handbags = 60,000 units, 2 hours of direct labor
Moccasins = 40,000 units, 3 hours of direct labor
Total budgeted factory overhead cost = $360,000

Accepted Answer

The answer of The Sawtooth Leather Company manufactures leather handbags...

Quiz 11: Cost Allocation and Activity-Based Costing

Shubelik Company is changing to an activity-based costing method.They have determined that they will use three cost pools: setups, inspections, and assembly.Which of the following would not be used as the activity base for any of these three activities?

The Bonnington Company manufactures small lamps and desk lamps.The following shows the activities per product: Using the following information prepared by the Bonnington Company, determine the total factory overhead to be charged to small lamps.

Calculate the total factory overhead to be charged to each unit of Hooks.

If selling and administrative expenses are allocated to different products, they should be reported as a

Calculate the total factory overhead to be charged to desk lamps.

Which of the following is a cost pool used with the activity-based costing method?

Calculate the overhead per unit to be charged to small lamps.

Which of the following is not a reason for banks to use activity-based costing?

Determine the activity-based cost for each tape drive unit.

Calculate the total factory overhead to be charged to Nooks.

Calculate the cost of services for a haircut.

Given the following information, determine the activity rate for setups.

Activity rates are determined by

Activity-based costing for selling and administrative expenses can also be beneficial in allocating expenses to various products.Which of the following is the best allocation base for help desk costs?