Question 1

For a centralized company,the major planning and controlling decisions are made by top management.

Accepted Answer

In a centralized company, decision-making authority lies with top management, who hold a significant amount of control and influence over the organization's planning and operations.

Question 2

Companies with diverse products can obtain better costing information using multiple departmental rates rather than using activity-based costing.

Accepted Answer

This statement is false. Activity-based costing is specifically designed to handle situations where a company has diverse products and multiple departmental rates may not provide accurate costing information. Activity-based costing takes into account the different activities that go into producing a product and allocates costs accordingly, providing a more accurate picture of the true cost of each product or service.

Question 3

Louie's Music Co.produces three types of harmonicas: the junior model,the standard model and the professional model.The junior model requires 8 setups,the standard model requires 12 setups and the professional model requires 20 setups.The company expects to incur overhead costs of $28,000 where the cost driver is machine setups.How much overhead is assigned to each product?
A) $$\begin{array} { | c | c | c | } 
\hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \
\hline \$ 9,333 & \$ 9,333 & \$ 9,334 \
\hline
\end{array}$$
B) $$\begin{array} { | c | c | c | } 
\hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \
\hline \$ 7,000 & \$ 7,000 & \$ 14,000 \
\hline
\end{array}$$
C) $$\begin{array} { | c | c | c | } 
\hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \
\hline \$ 5,600 & \$ 8,400 & \$ 14,000 \
\hline
\end{array}$$
D) $$\begin{array} { | c | c | c | } 
\hline \text { Junior Model } & \text { Standard Model } & \text { Professional Model } \
\hline \$ 3,500 & \$ 7,000 & \$ 17,500 \
\hline
\end{array}$$

Accepted Answer

First, calculate the total number of setups: 8 (Junior) + 12 (Standard) + 20 (Professional) = 40 setups. Then, find the cost per setup: $28,000 / 40 = $700 per setup. Multiply the cost per setup by the number of setups for each model: Junior ($700 * 8 = $5,600), Standard ($700 * 12 = $8,400), Professional ($700 * 20 = $14,000).

Question 4

In a decentralized company,all the planning and controlling decisions are made by top management.

Accepted Answer

In a decentralized company, decision-making is distributed among various levels of management and employees. Top management may still make some planning and controlling decisions, but they do not make all of them.

Question 5

In activity-based costing,the predetermined overhead allocation rate can be computed by ________.
A) dividing the total estimated overhead costs by the total estimated quantity of the overhead allocation base
B) multiplying the actual quantity of the allocation based used by the allocated manufacturing overhead cost
C) dividing the total estimated overhead costs by the total estimated direct labor costs
D) dividing each product's total manufacturing cost by the associated number of units

Accepted Answer

The predetermined overhead allocation rate is calculated by dividing the total estimated overhead costs by the total estimated quantity of the overhead allocation base. This rate is then used to allocate overhead costs to specific products or jobs. Choice B is incorrect because it describes a calculation of actual overhead allocation, rather than the predetermined rate. Choice C is incorrect because it uses direct labor costs as the allocation base, rather than a more appropriate measure of activity. Choice D is incorrect because it does not take into account the total overhead costs, which are a significant portion of the overall manufacturing cost.

Question 6

Why is using a single plantwide predetermined overhead allocation rate not always accurate?

Accepted Answer

The answer of Why is using a single plantwide predetermined...

Question 7

Archid,Inc.,a manufacturer of spare parts,has two production departments-Assembling and Packaging.The Assembling department is mechanized,while the Packaging department is labor oriented.Estimated manufacturing overhead costs for the year were $17,700,000 for Assembling and $10,000,000 for Packaging.Calculate the department predetermined overhead allocation rates for the Assembling and Packaging departments,respectively,if the total estimated machine hours were 50,000 and labor hours were 22,000 for the year.(Round your answer to the nearest cent.)
A) $804.55, $200.00
B) $354.00, $454.55
C) $200.00, $804.55
D) $354.00, $804.55

Accepted Answer

B) Calculation of department wide allocation rates: 11ea8870_3636_637f_bb89_6f3e7e80840d_TB5025_00

Question 8

Which would be an appropriate cost driver for the warranty services activity?
A) direct labor hours
B) number of service calls
C) number of purchase orders
D) number of batches

Accepted Answer

The number of service calls would be an appropriate cost driver for the warranty services activity as the cost of providing warranty services would likely increase with the number of times customers need to call for service or repair. Direct labor hours (A) and number of purchase orders (C) may not necessarily be directly related to warranty services costs, and number of batches (D) may be more relevant for manufacturing or production-related activities.

Question 9

Discuss the difference between a centralized company and a decentralized company.

Accepted Answer

The answer of Discuss the difference between a centralized company...

Question 10

Centralized operations are better for small companies due to the smaller scope of their operations.

Accepted Answer

Small companies generally have a simpler structure and smaller geographical reach, making it more efficient to operate from a centralized location. This can lead to better coordination and communication within the company. However, as the company grows and expands its operations, a decentralized approach may become more effective.

Question 11

The number of inspections,number of service calls and number of batches are all examples of ________.
A) direct labor costs
B) service costs
C) cost drivers
D) allocable costs

Accepted Answer

The number of inspections, service calls, and batches are all factors that drive costs, known as cost drivers. These factors impact the overall cost of production and influence how much the company must spend to create its products or provide its services. Direct labor costs refer to the cost of the labor used to create a product, while service costs are the expenses associated with providing a service. Allocable costs are indirect costs that cannot be traced back to a specific product or service and are allocated to different departments or products based on a predetermined formula.

Question 12

Which of the following is not an advantage of activity-based costing?
A) Activity-based costing is easier and less time consuming to calculate.
B) Activity-based costing information can be used to make decisions that will lead to improved customer satisfaction and greater profits.
C) More accurate cost information can be obtained by using activity-based costing.
D) Activity based costing considers the resources each product actually uses, so management can better control overhead costs.

Accepted Answer

Activity-based costing is actually more complex and time consuming to calculate compared to traditional costing methods. However, the other options listed are advantages of activity-based costing.

Question 13

Which would be an appropriate cost driver for the shipping and receiving activity?
A) number of inspections
B) number of machine hours
C) number of batches
D) number of pounds of product shipped

Accepted Answer

The number of pounds of product shipped would be an appropriate cost driver for shipping and receiving activity as the cost of shipping and receiving activities is likely to be driven by the volume and weight of the products being shipped. The other options, such as number of inspections, number of machine hours, or number of batches, are unlikely to have a direct correlation with the costs of shipping and receiving.

Question 14

Summarize the four steps in an activity-based costing system:
 $$\begin{array} { | l | l | } 
\hline \text { Step 1 } &\quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \
\hline \text { Step 2 } & \
\hline \text { Step 3 } & \
\hline \text { Step 4 } & \
\hline
\end{array}$$

Accepted Answer

The answer of Summarize the four steps in an activity-based...

Question 15

One of the advantages of decentralization is that it allows top management to concentrate on long-term strategic planning.

Accepted Answer

Decentralization allows for decision-making and execution to occur at lower levels within an organization, freeing up top management to focus on long-term planning and vision.

Question 16

Cardec,Inc.,a leading manufacturer of car spare parts,divided its manufacturing process into two Departments - Production and Packing.The estimated overhead costs for the Production and Packing departments amounted to $14,000,000 and $20,000,000,respectively.The company produces two types of parts - Part 1 and Part 2.The total estimated labor hours for the year were 40,000,and estimated machine hours were 35,000.The Production department is mechanized,whereas the Packing department is labor oriented.Calculate departmental predetermined overhead allocation rates.
 $$\begin{array} { | l | l | l | } 
\hline & \text { Production } & \text { Packing } \
\hline & \text { Machine hours } & \text { Labor hours } \
\hline \text { Part 1 } & 10,000 & 30,000 \
\hline \text { Part 2 } & 25,000 & 10,000 \
\hline & \underline { 35,000 } & 40,000 \
\hline
\end{array}$$

Accepted Answer

The answer of Cardec,Inc.,a leading manufacturer of car spare parts,divided...

Question 17

Centralized companies split their operations into segments and top management delegates decision making to the segment managers.

Accepted Answer

In centralized companies, decision-making authority is typically concentrated at the top level, and lower-level managers have less autonomy in decision-making.

Question 18

Activity-based management (ABM)focuses on the primary activities a business performs,determines the costs of the activities,and then uses the cost information to make decisions.

Accepted Answer

ABM is a management approach that focuses on analyzing and managing the various activities that a business performs, determining the costs associated with each activity, and using this information to make decisions about how to improve performance and reduce costs. Therefore, the statement is true.

Question 19

Aimee Cosmetics Company uses the following allocation rates from its activity-based costing system to assign overhead costs to products: $$\begin{array} { | l | l | } 
\hline \text { Activity } & \text { Allocation Rate } \
\hline \text { Purchasing raw materials } & \$ 40 \text { per purchase order } \
\hline \text { Setting up machines for production } & \$ 150 \text { per set-up } \
\hline \text { Inspecting finished products } & \$ 25 \text { per inspection } \
\hline
\end{array}$$ Product A1 uses the following:
17 purchase orders
4 set-ups
12 inspections How much overhead cost would be assigned to Product A1?
A) $7,095
B) $215
C) $600
D) $1,580

Accepted Answer

The overhead cost assigned to Product A1 is calculated by multiplying the number of each activity by its respective allocation rate and summing these products: (17 purchase orders * $40) + (4 set-ups * $150) + (12 inspections * $25) = $680 + $600 + $300 = $1,580.

Question 20

Activity-based costing (ABC)focuses on the costs of activities when allocating indirect costs to products and services.

Accepted Answer

Activity-based costing (ABC) is a cost allocation method that focuses on identifying activities and then assigning costs to those activities. It seeks to allocate indirect costs to products and services more accurately by tracing the activities that generate them. ABC is based on the principle that the costs of a product or service are related to the activities that drive those costs, rather than the volume of output. Hence, the answer is true.

Quiz 24: Cost Allocation and Responsibility Accounting

For a centralized company,the major planning and controlling decisions are made by top management.

Companies with diverse products can obtain better costing information using multiple departmental rates rather than using activity-based costing.

In a decentralized company,all the planning and controlling decisions are made by top management.

In activity-based costing,the predetermined overhead allocation rate can be computed by ________.

Why is using a single plantwide predetermined overhead allocation rate not always accurate?

Which would be an appropriate cost driver for the warranty services activity?

Discuss the difference between a centralized company and a decentralized company.

Centralized operations are better for small companies due to the smaller scope of their operations.

The number of inspections,number of service calls and number of batches are all examples of ________.

Which of the following is not an advantage of activity-based costing?

Which would be an appropriate cost driver for the shipping and receiving activity?

One of the advantages of decentralization is that it allows top management to concentrate on long-term strategic planning.

Centralized companies split their operations into segments and top management delegates decision making to the segment managers.

Activity-based management (ABM)focuses on the primary activities a business performs,determines the costs of the activities,and then uses the cost information to make decisions.

Activity-based costing (ABC)focuses on the costs of activities when allocating indirect costs to products and services.