Question 1

In a factory, all of the following would be considered service departments except:
A)Inspection and Packing
B)Assembly
C)Power
D)Human Resources

Accepted Answer

Inspection and Packing, Power and Human Resources all represent service departments. Assembly is a production department.

Question 2

The report that is prepared after the posting is completed at the end of the accounting period that shows the items of expense by department and in total, and is used to prove the balance of the Factory Overhead Control account is the:
A)Schedule of Fixed Cost.
B)Summary of Factory Overhead.
C)Flexible Budget.
D)Subsidiary Ledger.

Accepted Answer

The Summary of Factory Overhead shows the items of expense by department and in total and is used to prove the balance of the Factory Overhead Control account.

Question 3

The most appropriate basis for allocating the factory building rent to specific departments would be the:
A)Number of machines in each department.
B)Number of employees in each department.
C)Square footage of each department.
D)Amount of time the plant manager spends in the department.

Accepted Answer

Factory rent should be allocated to departments based on the amount of space each department occupies within the factory.

Question 4

When preparing a flexible budget for factory overhead costs, what will occur to fixed costs (on a per-unit basis) as production increases?
A)Fixed costs per unit will increase.
B)Fixed costs are not considered in flexible budgeting.
C)Fixed costs per unit will decrease.
D)Fixed costs per unit will remain unchanged.

Accepted Answer

As production increases, the fixed cost per unit decreases because the total fixed cost is spread over a larger number of units.

Question 5

Venus Company has developed the following flexible budget formula for annual indirect labor cost: Total annual cost = $12,000 + $.25 / unit
Operating budgets for the current month are based on 5,000 units. Indirect labor costs included in this monthly planning budget are:
A)$13,250.
B)$1,250.
C)$3,200.
D)$2,250.

Accepted Answer

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Question 6

Which of the following statements is true? I. An expense-type factory overhead analysis spreadsheet makes it possible to distribute expenses on a departmental basis as they are incurred.
II) A department-type factory overhead analysis worksheet makes it possible to distribute expenses on a departmental basis as they are incurred.
A)I only
B)II only
C)Both I and II
D)Neither I nor II

Accepted Answer

Both the expense-type and the department-type factory overhead analysis spreadsheets make it possible to distribute expenses on a departmental basis as they are incurred because they contain the same information.

Question 7

The method of distributing service department costs to production departments which distributes service department costs regressively to other service departments, and then to production departments is the:
A)Direct distribution method.
B)Sequential distribution method.
C)Service department distribution method.
D)Algebraic distribution method.

Accepted Answer

The sequential distribution method distributes service department costs regressively to other service departments and then to production departments.

Question 8

The preferred sequence for distributing the cost of service departments to production departments when using the sequential distribution method is:
A)to distribute the cost of the service department with the largest total overhead cost first.
B)to always distribute the cost of the Human Resources Department first.
C)to distribute the costs of the service departments to the production department having the largest amount of overhead cost first.
D)to distribute the costs of the service department that services the greatest number of departments first.

Accepted Answer

The preferred sequence for distributing the cost of service departments when using the sequential distribution method is to distribute the cost of the service department that services the greatest number of departments first. If there is uncertainty as to which department's costs should be distributed to the other service departments first, then the service department with the largest total overhead cost should be distributed first.

Question 9

The method of distributing service department costs to production departments that takes into consideration that service departments not only may provide service to but also may receive service from other service departments is the:
A)direct distribution method.
B)sequential distribution method.
C)service department distribution method.
D)algebraic distribution method.

Accepted Answer

The method of distributing service department costs that takes into account the services that service departments both provide to and receive from other service departments is the algebraic method.

Question 10

Stanforth Company's flexible budget for 50,000 units shows $100,000 and $150,000 in variable and fixed costs, respectively. At 60,000 units, the flexible budget would show:
A)Variable costs of $150,000 and fixed costs of $150,000.
B)Variable costs of $120,000 and fixed costs of $180,000.
C)Variable costs of $100,000 and fixed costs of $180,000.
D)Variable costs of $120,000 and fixed costs of $150,000.

Accepted Answer

Variable costs per unit = $100,000/50,000 = $2 per unit.
60,000 units x $2 = $120,000. Fixed costs of $150,000 remain constant.

Question 11

Victoria is a budget analyst at Young Industries. She used the least squares regression method to separate the plant's monthly utilities cost into its fixed and variable components. The results were as follows: Y = 3,250 + .054 X X = the number of units produced R²= .892 Based on these results, the December budget for plant utilities cost if Young Industries plans to produce 100,000 units in that month would be: A)$5,400 B)$8,650 C)$3,250 D)$8,920

Accepted Answer

If the plant plans to produce 100,000 units:
Y = 3,250 + .054 (100,000)
Y = 3,250 + 5,400
Y = 8,650

Question 12

Which of the following is most likely to be considered a service department in a manufacturing plant?
A)Assembly
B)Maintenance
C)Finishing
D)Fabrication

Accepted Answer

A maintenance department is a service provided to direct production departments, such as those listed in answers a, c, and d.

Question 13

Which of the following statements about service departments and their costs is not true?
A)Service departments rarely provide services to other service departments.
B)Some service departments may be able to precisely measure the services it provides to other departments.
C)Service department costs should be included in total product costs.
D)Allocation of service department costs should be made on an equitable basis.

Accepted Answer

It is common for service departments such as Plant Maintenance, Human Resources or Power to provide services to other service departments.

Question 14

Victoria is a budget analyst at Young Industries. She used the least squares regression method to separate the plant's monthly utilities cost into its fixed and variable components. The results were as follows: Y = 3,250 + .054 X X = the number of units produced R²= .892 How should Victoria interpret the R²of .892? A)The equation is a better predictor of fixed costs than of variable costs 89.2% of the time. B)The equation will accurately predict utility costs 89.2% of the time. C)Fixed costs make up 89.2% of the total semi-variable cost in any given month. D)The number of units produced explains 89.2% of the variation in the plant utilities cost.

Accepted Answer

R²refers to how much of the variability in the dependent variable, in this case the utilities cost, is explained by changes in the dependent variable, which is the number of units produced.

Question 15

The number of workers in the departments served would most likely be the basis for distributing the cost of which service department?
A)Human Resources
B)Tool Room
C)Building Maintenance
D)Machine Shop

Accepted Answer

The number of workers in the departments served would be an appropriate basis to distribute the costs of the Human Resource Department to other departments.

Question 16

The Lucas Manufacturing Company has two production departments (fabrication and assembly) and three service departments (general factory administration, factory maintenance, and factory cafeteria). A summary of costs and other data for each department, prior to allocation of service department costs for the year ended June 30, appears below: The costs of the general factory administration department, factory maintenance department, and factory cafeteria are allocated on the basis of direct labor hours, square footage occupied, and number of employees, respectively.  Assuming that Lucas elects to distribute service department costs to production departments using the direct distribution method, the amount of general factory administration department costs that would be allocated to the assembly department would be (round all final calculations to the nearest dollar):
A)$30,400.
B)$25,650.
C)$0.
D)$49,600.

Accepted Answer

General Factory Administration allocates its costs based on direct labor hours.
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Question 17

Flexible budgeting is a reporting system wherein the:
A)Budget shows estimated costs at different levels of production volume.
B)Budget standards may be adjusted at will.
C)Reporting dates vary according to the levels of activity reported upon.
D)Statements included in the budget report vary from period to period.

Accepted Answer

Flexible budgeting separates costs into fixed and variable elements and shows estimated costs at different levels of production volume.

Question 18

The method of distributing service department costs to production departments which makes no attempt to determine the extent to which one service department renders its services to another department is the:
A)Direct distribution method.
B)Sequential distribution method.
C)Service department distribution method.
D)Algebraic distribution method.

Accepted Answer

The direct distribution method distributes service department costs to production departments without regard to any services the service departments render to each other.

Question 19

Kilowatt hours would be an appropriate basis for distributing the cost of which of the following service departments to production departments?
A)Power
B)Machine Maintenance
C)Human Resources
D)Building Maintenance

Accepted Answer

Kilowatt hours is a measure of the power used, so this would be an appropriate basis with which to distribute the costs of the Power Department.

Question 20

If a company uses a factory overhead ledger, at the end of the month, an accountant should:
A)close the accounts in the factory overhead ledger to Work in Process.
B)total the accounts in the factory overhead ledger and compare the total to the balance in the Factory Overhead control account.
C)prepare a schedule of fixed costs.
D)All of the above are true.

Accepted Answer

At the end of the month, the accounts in the factory overhead ledger should be added up and the total compared to the balance in the Factory Overhead control account.

Quiz 4: Accounting for Factory Overhead

In a factory, all of the following would be considered service departments except:

The report that is prepared after the posting is completed at the end of the accounting period that shows the items of expense by department and in total, and is used to prove the balance of the Factory Overhead Control account is the:

The most appropriate basis for allocating the factory building rent to specific departments would be the:

When preparing a flexible budget for factory overhead costs, what will occur to fixed costs (on a per-unit basis) as production increases?

Venus Company has developed the following flexible budget formula for annual indirect labor cost: Total annual cost = $12,000 + $.25 / unit Operating budgets for the current month are based on 5,000 units. Indirect labor costs included in this monthly planning budget are:

The method of distributing service department costs to production departments which distributes service department costs regressively to other service departments, and then to production departments is the:

The preferred sequence for distributing the cost of service departments to production departments when using the sequential distribution method is:

The method of distributing service department costs to production departments that takes into consideration that service departments not only may provide service to but also may receive service from other service departments is the:

Stanforth Company's flexible budget for 50,000 units shows $100,000 and $150,000 in variable and fixed costs, respectively. At 60,000 units, the flexible budget would show:

Which of the following is most likely to be considered a service department in a manufacturing plant?

Which of the following statements about service departments and their costs is not true?

The number of workers in the departments served would most likely be the basis for distributing the cost of which service department?

Flexible budgeting is a reporting system wherein the:

The method of distributing service department costs to production departments which makes no attempt to determine the extent to which one service department renders its services to another department is the:

Kilowatt hours would be an appropriate basis for distributing the cost of which of the following service departments to production departments?

If a company uses a factory overhead ledger, at the end of the month, an accountant should: