Question 1

Direct labor hours would be the most appropriate cost allocation base for a Machining Department that uses machine robotics extensively.

Accepted Answer

Direct labor hours are not the most appropriate cost allocation base for a Machining Department that uses machine robotics extensively. In this case, machine hours or machine setups would be a more appropriate cost allocation base, as the machines are performing the majority of the work rather than human labor.

Question 2

When a company has established separate manufacturing overhead rates for each department, it is using:
A)departmental overhead rates.
B)cost distortion.
C)a plantwide overhead rate.
D)none of the above.

Accepted Answer

When a company establishes separate manufacturing overhead rates for each department, it is using departmental overhead rates. This allows the company to allocate overhead costs more accurately to the products or services produced by each department. Cost distortion occurs when overhead costs are not allocated properly, which can lead to inaccurate product costing and pricing decisions. A plantwide overhead rate, on the other hand, applies a single overhead rate to all products or services produced by the company, regardless of the department they come from.

Question 3

Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1,000 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plantwide overhead rate to allocate its $8,088,000 of annual manufacturing overhead. Of this amount, $2,210,000 is associated with the Large Bag line, $3,418,800 is associated with the Medium Bag line, and $2,459,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 40,000 machine hours: 13,000 in the Large Bag line, 15,400 in the Medium Bag line, and 11,600 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs. The departmental manufacturing overhead rate for the Small Bag line would be closest to
A)$202.20 per machine hour.
B)$212.00 per machine hour.
C)$170.00 per machine hour.
D)$222.00 per machine hour.

Accepted Answer

B)$2,459,000 / 11,600 hrs = 212.00 per hr

Question 4

Departmental overhead rates typically do a better job of matching each department's overhead costs to the products that use the department's resources than do plantwide overhead rates.

Accepted Answer

Departmental overhead rates allocate overhead costs based on departments, which typically have different overhead cost drivers. As a result, this method provides a more accurate reflection of the costs associated with each department and the products that use those resources. Plantwide overhead rates, on the other hand, allocate overhead costs based on a single, company-wide rate, which may not accurately reflect the costs associated with different departments or products.

Question 5

Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1,000 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plantwide overhead rate to allocate its $8,088,000 of annual manufacturing overhead. Of this amount, $2,210,000 is associated with the Large Bag line, $3,418,800 is associated with the Medium Bag line, and $2,459,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 40,000 machine hours: 13,000 in the Large Bag line, 15,400 in the Medium Bag line, and 11,600 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs. Which product line(s)have been overcosted or undercosted by using the plantwide manufacturing overhead rate?
A)Large Bags has been undercosted; Medium and Small have been overcosted.
B)Large, Medium, and Small Bags have all been overcosted.
C)Large, Medium, and Small Bags have all been undercosted.
D)Large Bags has been overcosted; Medium and Small have been undercosted.

Accepted Answer

D)
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Question 6

If a company uses departmental overhead allocation rates, then the amount of manufacturing overhead allocated to the job is equal to the plantwide overhead rate multiplied by the actual use of the cost allocation base.

Accepted Answer

If a company uses departmental overhead allocation rates, then different overhead allocation rates are calculated for each department based on the specific costs incurred by that department. The amount of manufacturing overhead allocated to the job is then calculated by multiplying the departmental overhead allocation rate by the actual use of the cost allocation base in that department. This method is more accurate than using a plantwide overhead rate, which allocates overhead based on total costs throughout the entire plant.

Question 7

When calculating a departmental overhead rate, what should the numerator be?
A)Total estimated amount of the departmental allocation base
B)Total estimated departmental overhead cost pool
C)Total estimated amount of manufacturing overhead for the factory
D)Actual quantity of the departmental allocation base used by the job

Accepted Answer

The numerator of a departmental overhead rate should be the total estimated departmental overhead cost pool. This represents the total amount of overhead costs that are allocated to the department, which is then divided by the departmental allocation base to determine the overhead rate.

Question 8

Which of the following condition(s)favors using departmental overhead rates in place of a plantwide overhead rate?
A)Different departments incur different amounts and types of manufacturing overhead.
B)Different jobs or products use the departments to a different extent.
C)Both of the above.
D)Neither of the above.

Accepted Answer

If different departments incur different amounts and types of manufacturing overhead, using departmental overhead rates can provide a more accurate allocation of overhead costs to products or jobs that use those departments. Similarly, if different jobs or products use the departments to a different extent, using departmental overhead rates can ensure that overhead costs are allocated more accurately to those products or jobs. Therefore, both of the above conditions favor using departmental overhead rates instead of a plantwide overhead rate.

Question 9

The Braveheart Corporation uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: cutting and painting. The Cutting Department uses a departmental overhead rate of $12 per machine hour, while the Painting Department uses a departmental overhead rate of $17 per direct labor hour. Job 422 used the following direct labor hours and machine hours in the two departments:
  The cost for direct labor is $20 per direct labor hour and the cost of the direct materials used by Job 422 is $800.
Required: What was the total cost of Job 422 if the Braveheart Corporation used the departmental overhead rates to allocate manufacturing overhead?

Accepted Answer

The answer of The Braveheart Corporation uses departmental overhead rates...

Question 10

Which of the following is a result of cost distortion?
A)Overcosting of all products
B)Undercosting of all products
C)Accurate costing of all products
D)Overcosting of some products and undercosting of other products

Accepted Answer

Cost distortion occurs when the costs of some products are overestimated and the costs of other products are underestimated. Therefore, the best choice is D, which indicates overcosting of some products and undercosting of other products.

Question 11

The allocation base selected for each department should be the cost driver of the costs in the departmental overhead pool.

Accepted Answer

An allocation base should be selected as the cost driver for the costs in the departmental overhead pool in order to allocate the costs accurately to the products or services using the department's resources. The allocation base should have a cause-and-effect relationship with the departmental costs.

Question 12

James Industries uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: Assembly and Sanding. The Assembly Department uses a departmental overhead rate of $35 per machine hour, while the Sanding Department uses a departmental overhead rate of $20 per direct labor hour. Job 603 used the following direct labor hours and machine hours in the two departments:  The cost for direct labor is $30 per direct labor hour and the cost of the direct materials used by Job 542 is $1,400.
What was the total cost of Job 542 if James Industries used the departmental overhead rates to allocate manufacturing overhead?
A)$1,850
B)$2,170
C)$2,240
D)$1,790

Accepted Answer

The answer of James Industries uses departmental overhead rates to...

Question 13

Bobke Technologies manufactures three types of computers for a well known national brand. The three types are: laptops, desktops, and tablets. Currently, Bobke uses a single plant-wide overhead rate to allocate its $1,667,250 of annual manufacturing overhead. Of this amount, $562,000 is associated with laptops, $492,000 is associated with desktops, and $612,750 is associated with tablets. Bobke is currently using a total of 22,150 machine hours: 7,500 for laptops, 8,200 for desktops, and 6,450 for tablets. Bobke uses machine hours to allocate overhead costs.
Required:
a. Calculate the plant-wide manufacturing overhead rate.
b. Calculate the departmental overhead rate for each of the three departments listed.
c. Which product line(s)have been overcosted by using the plant-wide manufacturing overhead rate? By how much per machine hour? Which product line(s)have been undercosted by using the plant-wide manufacturing overhead rate? By how much per machine hour?

Accepted Answer

The answer of Bobke Technologies manufactures three types of computers...

Question 14

Ryan Fabrication allocates manufacturing overhead to each job using departmental overhead rates. Ryan's operations are divided into a metal casting department and a metal finishing department. The casting department uses a departmental overhead rate of $52 per machine hour, while the finishing department uses a departmental overhead rate of $28 per direct labor hour. Job A216 used the following direct labor hours and machine hours in the two departments:  The cost for direct labor is $32 per direct labor hour and the cost of the direct materials used by Job A216 is $1,800.
How much manufacturing overhead would be allocated to Job A216 using the departmental overhead rates?
A)$544
B)$596
C)$1,360
D)$454

Accepted Answer

The answer of Ryan Fabrication allocates manufacturing overhead to each...

Question 15

When calculating the total amount of manufacturing overhead to allocate to a particular job, the company would multiply each departmental overhead rate by ________ and then ________ together the allocated amounts from each department.
A)the actual amount of the departmental allocation based used by the job; multiply
B)the actual amount of the plantwide allocation based used by the job; add
C)the actual amount of the departmental allocation based used by the job; add
D)the actual amount of the plantwide allocation based used by the job; multiply

Accepted Answer

When using departmental overhead rates, the company would multiply each departmental overhead rate by the actual amount of the departmental allocation base used by the job, and then add together the allocated amounts from each department. This is because the departmental overhead rates are based on the actual amount of overhead incurred by each department, and thus by using the actual allocation base used by the job, we can allocate the overhead more accurately.

Question 16

James Industries uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: Assembly and Sanding. The Assembly Department uses a departmental overhead rate of $35 per machine hour, while the Sanding Department uses a departmental overhead rate of $20 per direct labor hour. Job 603 used the following direct labor hours and machine hours in the two departments:  The cost for direct labor is $30 per direct labor hour and the cost of the direct materials used by Job 603 is $1,400.
How much manufacturing overhead would be allocated to Job 603 using the departmental overhead rates?
A)$450
B)$380
C)$715
D)$390

Accepted Answer

The answer of James Industries uses departmental overhead rates to...

Question 17

What will the use of departmental overhead rates generally result in?
A)The use of a separate cost allocation base for each department in the factory
B)The use of a single cost allocation base
C)The use of a single overhead cost pool for the factory
D)The use of separate cost allocation base for each activity in the factory

Accepted Answer

The use of departmental overhead rates generally results in the use of a separate cost allocation base for each department in the factory. This allows for more accurate allocation of overhead costs to products or services based on the specific resources used in each department.

Question 18

Ryan Fabrication allocates manufacturing overhead to each job using departmental overhead rates. Ryan's operations are divided into a metal casting department and a metal finishing department. The casting department uses a departmental overhead rate of $52 per machine hour, while the finishing department uses a departmental overhead rate of $28 per direct labor hour. Job A216 used the following direct labor hours and machine hours in the two departments:  The cost for direct labor is $32 per direct labor hour and the cost of the direct materials used by Job A216 is $1,800.
What was the total cost of Job A216 if Ryan Fabrication used the departmental overhead rates to allocate manufacturing overhead?
A)$2,434
B)$2,344
C)$2,888
D)$2,940

Accepted Answer

Firstly, we need to allocate manufacturing overhead to Job A216 using departmental overhead rates.

For the metal casting department:
Manufacturing overhead cost for Job A216 = Departmental overhead rate x Machine hours used
Manufacturing overhead cost for Job A216 = $52 x 4 = $208

For the metal finishing department:
Manufacturing overhead cost for Job A216 = Departmental overhead rate x Direct labor hours used
Manufacturing overhead cost for Job A216 = $28 x 8 = $224

Total manufacturing overhead cost for Job A216 = $208 + $224 = $432

Next, we need to calculate the total cost of Job A216, which includes direct materials, direct labor, and manufacturing overhead.

Direct materials cost = $1,800
Direct labor cost = Direct labor rate x Direct labor hours
Direct labor cost = $32 x 8 = $256

Total cost of Job A216 = Direct materials cost + Direct labor cost + Manufacturing overhead cost
Total cost of Job A216 = $1,800 + $256 + $432 = $2,488

Therefore, the answer is:
Answer: C

Question 19

Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1,000 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plant-wide overhead rate to allocate its $8,088,000 of annual manufacturing overhead. Of this amount, $2,210,000 is associated with the Large Bag line, $3,418,800 is associated with the Medium Bag line, and $2,459,200 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 40,000 machine hours: 13,000 in the Large Bag line, 15,400 in the Medium Bag line, and 11,600 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs. The plant-wide manufacturing overhead rate would be closest to
A)$ 55.25 per machine hour.
B)$170.00 per machine hour.
C)$222.00 per machine hour.
D)$202.20 per machine hour.

Accepted Answer

D)$8,088,000 / 40,000 hours = $202.20 per hour

Question 20

High Rise Display Company manufactures display cases to be sold to retail stores. The cases come in three sizes: Large, Medium, and Small. Currently, High Rise Display Company uses a single plant-wide overhead rate to allocate its $3,357,800 of annual manufacturing overhead. Of this amount, $820,000 is associated with the Large Case line, $1,276,800 is associated with the Medium Case line, and $1,261,000 is associated with the Small Case line. Clearview Display Company is currently running a total of 33,000 machine hours: 10,000 in the Large Case line, 13,300 in the Medium Case line, and 9,700 in the Small Case line. High Rise Display Company uses machine hours as the cost driver for manufacturing overhead costs.
Required:
a. Calculate the plant-wide manufacturing overhead rate.
b. Calculate the departmental overhead rate for each of the three departments listed.
c. Which product line(s)have been overcosted by using the plant-wide manufacturing overhead rate? By how much per machine hour? Which product line(s)have been undercosted by using the plant-wide manufacturing overhead rate? By how much per machine hour?

Accepted Answer

The answer of High Rise Display Company manufactures display cases...

Quiz 4: Activity-Based Costing, Lean Operations, and the Costs of Quality

Direct labor hours would be the most appropriate cost allocation base for a Machining Department that uses machine robotics extensively.

When a company has established separate manufacturing overhead rates for each department, it is using:

Departmental overhead rates typically do a better job of matching each department's overhead costs to the products that use the department's resources than do plantwide overhead rates.

If a company uses departmental overhead allocation rates, then the amount of manufacturing overhead allocated to the job is equal to the plantwide overhead rate multiplied by the actual use of the cost allocation base.

When calculating a departmental overhead rate, what should the numerator be?

Which of the following condition(s) favors using departmental overhead rates in place of a plantwide overhead rate?

Which of the following is a result of cost distortion?

The allocation base selected for each department should be the cost driver of the costs in the departmental overhead pool.

When calculating the total amount of manufacturing overhead to allocate to a particular job, the company would multiply each departmental overhead rate by and then together the allocated amounts from each department.

What will the use of departmental overhead rates generally result in?