Question 1

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 actual costs of products or services are not accurately reflected in the cost accounting system, which results in overcosting of some products and undercosting of other products. Therefore, option D is the correct answer.

Question 2

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 involves allocating overhead costs to each department based on a separate cost allocation base specific to that department. This allows for more accurate cost allocation and can help managers identify areas where overhead costs can be reduced. The other options are not the result of using departmental overhead rates.

Question 3

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

Accepted Answer

Since the Machining Department uses machine robotics extensively, direct labor hours would not be the most appropriate cost allocation base. A more suitable allocation base could be machine hours or machine setups.

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 consider the specific overhead costs of each production department and allocate them to the products that use those departments' resources. This results in a more accurate allocation of overhead costs compared to plantwide overhead rates, which apply a single overhead rate based on the entire plant's overhead costs to all products, regardless of the departments involved in their production.

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.
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 6

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 7

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

C)
Labor ($30 × 8 hrs)+ ($30 × 5 hrs)= $390.00
Materials = $1,400.00
Overhead
Assembly Dept.$35 × 10 hrs = $350.00
Sanding Dept.$20 × 5 hrs = $100.00
Total = $2,240.00

Question 8

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

A)
Casting Dept.$52 × 4 machine hrs = $208.00
Finishing Dept.$28 × 12 direct hrs = $336.00
Total $544.00

Question 9

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 approach allows for more accurate allocation of overhead costs to products, as different departments may incur different types and amounts of overhead costs. Plantwide overhead rates, on the other hand, apply the same overhead rate to all products regardless of the department in which they are produced, which can lead to cost distortion.

Question 10

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 for calculating a departmental overhead rate should be the total estimated departmental overhead cost pool, as this represents the total cost allocated to the department for a given period. The allocation base is used in the denominator to allocate the overhead cost to the jobs or products produced by the department.

Question 11

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)
 11ea7fd5_66ae_93fe_99dd_2d4f6716d0d0_TB1766_00

Question 12

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 calculating the total amount of manufacturing overhead to allocate to a particular job, the company would multiply each departmental overhead rate by the actual amount of the departmental allocation based used by the job and then add together the allocated amounts from each department. This is different from the plantwide overhead rate, which would allocate overhead based on a single rate for the entire plant rather than by department.

Question 13

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 and different jobs or products use the departments to a different extent, then using departmental overhead rates will provide a more accurate allocation of overhead costs to products or jobs, as compared to a plantwide overhead rate.

Question 14

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 15

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

Accepted Answer

The allocation base selected for each department should be the cost driver of the costs in the departmental overhead pool to ensure accurate allocation of costs to products, services, or departments.

Question 16

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

C) 11ea7fd5_66ad_d0ad_99dd_253f6ec5604e_TB1766_00

Question 17

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 18

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

A)Assembly Dept.$35 × 10 machining hrs = $350.00
Sanding Dept.$20 × 5 direct hrs = $100.00
Total $450.00

Question 19

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...

Question 20

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 the amount of manufacturing overhead allocated to the job is equal to the departmental overhead allocation rate multiplied by the actual use of the cost allocation base within that department.

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

Which of the following is a result of cost distortion?

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

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

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.

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

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

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.

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

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

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.