Question 1

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 the departmental overhead rate should be the total estimated departmental overhead cost pool. This represents the total amount of overhead costs that will be allocated to the department based on the chosen allocation base.

Question 2

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 1500 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 $7,705,000 of annual manufacturing overhead. Of this amount, $2,260,000 is associated with the Large Bag line, $3,418,000 is associated with the Medium Bag line, and $2,027,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 44,000 machine hours: 14,000 in the Large Bag line, 15,900 in the Medium Bag line, and 14,100 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)$51.36 per machine hour.
B)$161.43 per machine hour.
C)$214.97 per machine hour.
D)$175.11 per machine hour.

Accepted Answer

The answer of Cooper's Bags Company manufactures cloth grocery bags...

Question 3

Lucas 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 $60 per machine hour, while the Sanding Department uses a departmental overhead rate of $30 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 $35 per direct labor hour and the cost of the direct materials used by Job 542 is $1500.
What was the total cost of Job 542 if Lucas Industries used the departmental overhead rates to allocate manufacturing overhead?
A)$2060
B)$2820
C)$2745
D)$2025

Accepted Answer

To calculate the total cost of Job 542, we need to first calculate the manufacturing overhead cost allocated to the job in each department:

Assembly Department: 25 machine hours x $60 per machine hour = $1500
Sanding Department: 30 direct labor hours x $30 per direct labor hour = $900

The total manufacturing overhead cost allocated to Job 542 is $2400 ($1500 + $900).

Next, we need to calculate the total cost of Job 542 by adding the direct materials cost and the total manufacturing overhead cost:

Total cost = Direct materials cost + Total manufacturing overhead cost
Total cost = $1500 + $2400
Total cost = $3900

However, the question asks for the total cost of Job 603, not Job 542. Therefore, all answer choices are incorrect.

Question 4

Big Trail Running Company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. They feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming year:  Manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department.
At the end of the year, the following information was gathered related to the production of the trail running shoes and running apparel:
 How much manufacturing overhead will be allocated to the trail running shoes? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
A)$482,500
B)$484,054
C)$900,000
D)$225,000

Accepted Answer

The answer of Big Trail Running Company has started to...

Question 5

Lucas 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 $50 per machine hour, while the Sanding Department uses a departmental overhead rate of $25 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 $25 per direct labor hour and the cost of the direct materials used by Job 603 is $1600.
How much manufacturing overhead would be allocated to Job 603 using the departmental overhead rates?
A)$675
B)$575
C)$700
D)$300

Accepted Answer

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

Question 6

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 an appropriate cost allocation base as the machines do not require direct labor to operate. A more appropriate cost allocation base would be machine hours, which takes into account the usage of the machinery.

Question 7

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 the specific department that incurs them, providing a more accurate match to the products that use those resources. In contrast, plantwide overhead rates apply a single overhead rate to all departments, which can result in some products being over- or under-costed.

Question 8

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 900 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 $8,597,000 of annual manufacturing overhead. Of this amount, $2,270,000 is associated with the Large Bag line, $3,420,000 is associated with the Medium Bag line, and $2,907,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 35,000 machine hours: 12,100 in the Large Bag line, 14,500 in the Medium Bag line, and 8400 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)$245.63 per machine hour.
B)$346.07 per machine hour.
C)$187.60 per machine hour.
D)$235.86 per machine hour.

Accepted Answer

The departmental manufacturing overhead rate for the Small Bag line is calculated by dividing the overhead costs associated with the Small Bag line ($2,907,000) by the machine hours for the Small Bag line (8,400 hours), resulting in approximately $346.07 per machine hour.

Question 9

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

Departmental overhead rates involve allocating overhead costs to each department based on a specific cost allocation base. This allows for more accurate cost allocation as each department may have different cost drivers. Therefore, A is the correct answer as it involves the use of separate cost allocation base for each department in the factory.

Question 10

When calculating a departmental overhead rate, what should the denominator 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 denominator for calculating a departmental overhead rate should be the total estimated amount of the departmental allocation base. This allocation base is usually a measure of the activity that drives overhead costs in a specific department. Using the total estimated amount of the departmental allocation base as the denominator ensures that the overhead rate is appropriate for the level of activity in the department.

Question 11

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 cost of a product differs from its calculated cost. This can lead to overcosting of some products and undercosting of other products, as some costs are allocated more or less than they should be. Therefore, the best answer is D which states that overcosting of some products and undercosting of other products is a result of cost distortion.

Question 12

Big Trail Running Company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. They feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming year:  Manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department. Based on this information, what is the departmental manufacturing overhead rate for the machining and finishing department, respectively? (Round any intermediary calculations and your final answer to the nearest cent.)
A)$5.50 per machine hour and $13.75 per direct labor hour
B)$7.69 per machine hour and $1.41 per direct labor hour
C)$5.00 per machine hour and $1.25 per direct labor hour
D)$14.29 per machine hour and $11.11 per direct labor hour

Accepted Answer

To calculate the departmental overhead rate for each department, we need to divide the total manufacturing overhead costs for each department by the total machine hours for the machining department and total direct labor hours for the finishing department, respectively.

From the information given, we know that Big Trail Running Company is predominantly driven by machine hours for the machining department and direct labor hours for the finishing department. Therefore, we use machine hours and direct labor hours as the allocation base for these two departments.

Total manufacturing overhead costs = $187,200 
Total machine hours for machining department = 37,440 
Total direct labor hours for finishing department = 149,760

Departmental manufacturing overhead rate for machining department = Total manufacturing overhead costs / Total machine hours for machining department 
= $187,200 / 37,440 
= $5.00 per machine hour

Departmental manufacturing overhead rate for finishing department = Total manufacturing overhead costs / Total direct labor hours for finishing department 
= $187,200 / 149,760 
= $1.25 per direct labor hour

Therefore, the departmental manufacturing overhead rates for the machining and finishing departments are $5.00 per machine hour and $1.25 per direct labor hour, respectively. The correct answer is C.

Question 13

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 800 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 $8,373,000 of annual manufacturing overhead. Of this amount, $2,160,000 is associated with the Large Bag line, $3,414,000 is associated with the Medium Bag line, and $2,799,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 41,000 machine hours: 12,700 in the Large Bag line, 16,300 in the Medium Bag line, and 12,000 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

Since the plantwide overhead rate uses a single rate to allocate overhead costs to all product lines, it does not consider the differences in the amount of manufacturing overhead costs and the machine hours used by each product line. As a result, product lines with lower manufacturing overhead costs and machine hours, such as Large Bags, are undercosted while product lines with higher manufacturing overhead costs and machine hours, such as Medium and Small Bags, are overcosted. Therefore, choice D is the best answer.

Question 14

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 for a more accurate allocation of overhead costs to each department based on their specific use and consumption of resources. The use of a plantwide overhead rate, on the other hand, would result in cost distortion as it assumes all departments have the same overhead costs and usage.

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 allocating manufacturing overhead, each departmental overhead rate is multiplied by the actual amount of the departmental allocation based used by the job. The allocated amounts from each department are then added together to determine the total amount of manufacturing overhead to allocate to the job.

Question 16

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 should be the cost driver of the costs in the departmental overhead pool to ensure accuracy in allocating costs to products or services.

Question 17

Big Trail Running Company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. They feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming year:  Manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department.
At the end of the year, the following information was gathered related to the production of the trail running shoes and running apparel:
 How much manufacturing overhead will be allocated to running apparel? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
A)$249,000
B)$247,025
C)$1,000,500
D)$250,000

Accepted Answer

The answer of Big Trail Running Company has started to...

Question 18

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

Departmental overhead rates are preferred when different departments incur different amounts and types of manufacturing overhead and when different jobs or products use the departments to a different extent. This allows for a more accurate allocation of overhead costs to products or jobs that use specific departments more heavily.

Question 19

Crane Fabrication allocates manufacturing overhead to each job using departmental overhead rates. Crane's operations are divided into a metal casting department and a metal finishing department. The casting department uses a departmental overhead rate of $51 per machine hour, while the finishing department uses a departmental overhead rate of $26 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 $34 per direct labor hour and the cost of the direct matrials used by Job A216 is $1700.
How much manufacturing overhead would be allocated to Job A216 using the departmental overhead rates?
A)$362
B)$425
C)$1072
D)$283

Accepted Answer

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

Question 20

Crane Fabrication allocates manufacturing overhead to each job using departmental overhead rates. Crane's operations are divided into a metal casting department and a metal finishing department. The casting department uses a departmental overhead rate of $51 per machine hour, while the finishing department uses a departmental overhead rate of $25 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 $42 per direct labor hour and the cost of the direct materials used by Job A216 is $2000.
What was the total cost of Job A216 if Crane Fabrication used the departmental overhead rates to allocate manufacturing overhead?
A)$2378
B)$2924
C)$3427
D)$3682

Accepted Answer

The total manufacturing overhead cost allocated to Job A216 in the casting department is:

$51 per machine hour x 3 machine hours = $153

The total manufacturing overhead cost allocated to Job A216 in the finishing department is:

$25 per direct labor hour x 6 direct labor hours = $150

Therefore, the total manufacturing overhead cost allocated to Job A216 is $153 + $150 = $303.

The total cost of Job A216 is:

Direct materials cost + Direct labor cost + Manufacturing overhead cost
= $2000 + ($42 per direct labor hour x 6 direct labor hours) + $303
= $2000 + $252 + $303
= $2555

Therefore, the best choice is C) $3427, which is not provided in the answer choices. This suggests that there may be an error in the question or answer choices.

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

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

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.

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

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

Which of the following is a result of cost distortion?

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

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.

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

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