Question 1

Tungsten,Inc.manufactures both normal and premium tube lights.The company allocates manufacturing overhead using a single plantwide rate with machine hours as the allocation base.Estimated overhead costs for the year are $102,000.Additional estimated information is given below. $$\begin{array} { | l | r | r | } 
\hline & \text { Normal } & \text { Premium } \
\hline \text { Machine hours } ( \mathrm { MHr } ) & 24,000 & 39,000 \
\hline \text { Direct materials } & \$ 51,000 & \$ 480,000 \
\hline
\end{array}$$ Calculate the predetermined overhead allocation rate.(Round your answer to the nearest cent.)
A)$4.25 per direct labor hour
B)$1.62 per machine hour
C)$2.62 per machine hour
D)$0.19 per direct labor hour

Accepted Answer

B

Question 2

When a manufacturer changes from using a single plantwide predetermined overhead rate to multiple predetermined overhead allocation rates,the product unit cost may be more accurate.

Accepted Answer

By using multiple predetermined overhead allocation rates, overhead costs can be more accurately allocated to specific products based on the actual amount of resources used by each product. This can result in more accurate product unit costs.

Question 3

In selecting machine usage as the primary cost driver of overhead costs for the Production Department,management feels that there is a direct relationship between the number of machine hours used and the amount of overhead costs incurred.

Accepted Answer

Management believes that there is a direct relationship between machine usage and overhead costs, indicating that machine usage is a significant driver of overhead costs for the Production Department.

Question 4

Borsetta,Inc.manufactures two kinds of bags-totes and satchels.The company allocates manufacturing overhead using a single plantwide rate with direct labor cost as the allocation base.Estimated overhead costs for the year are $25,000.Additional estimated information is given below. $$\begin{array} { | l | r | r | } 
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 33 & \$ 44 \
\hline \text { Direct labor cost per unit } & \$ 54 & \$ 62 \
\hline \text { Number of units } & 540 & 370 \
\hline
\end{array}$$ Calculate the amount of overhead to be allocated to Satchels,if the actual units produced and direct labor costs equal the estimated amounts.(Round any percentages to two decimal places and your final answer to the nearest dollar.)
A)$463
B)$13,991
C)$11,007
D)$22,940

Accepted Answer

The total direct labor cost is calculated as (540 units * $54) + (370 units * $62) = $29,160 + $22,940 = $52,100. The overhead rate is $25,000 / $52,100 = 0.47985. The overhead allocated to Satchels is 370 units * $62 * 0.47985 = $11,007.

Question 5

A modification of the overhead allocation method which uses a single plantwide rate,is to use multiple predetermined overhead allocation rates that have a single allocation base.

Accepted Answer

Using multiple predetermined overhead rates involves using different rates for different departments or activities, not a single allocation base. This approach is more refined than using a single plantwide rate and allows for more accurate allocation of overhead costs based on the specific activities or departments.

Question 6

Manufacturing overhead costs,which are also known as indirect costs,cannot be cost-effectively traced to products.

Accepted Answer

Manufacturing overhead costs such as rent, utilities, and depreciation are indirect costs that cannot be easily or cost-effectively traced to individual products. Instead, they are allocated to the products based on a predetermined overhead rate.

Question 7

A radial tire manufacturer produces products in two departments-Divisions A and B.The company uses separate predetermined overhead allocation rates for each department to allocate its overhead.Divisions A and B have estimated manufacturing overhead costs of $160,000 and $360,000,respectively.Division A uses machine hours as the allocation base,and Division B uses direct labor hours as the allocation base.The total estimated machine hours were 31,000,and direct labor hours were 22,000 for the year.Calculate the departmental predetermined overhead allocation rates.(Round your answer to the nearest cent.)
A)Division A-$5.16,Division B-$16.36
B)Division A-$16.36,Division B-$5.16
C)Division A-$7.27,Division B-$11.61
D)Division A-$11.61,Division B-$7.27

Accepted Answer

Division A predetermined overhead allocation rate = Estimated manufacturing overhead costs / Estimated machine hours
= $160,000 / 31,000
= $5.16 per machine hour

Division B predetermined overhead allocation rate = Estimated manufacturing overhead costs / Estimated direct labor hours
= $360,000 / 22,000
= $16.36 per direct labor hour

Therefore, the correct answer is A) Division A-$5.16, Division B-$16.36.

Question 8

Why is using multiple predetermined overhead allocation rates more accurate than using a single plantwide allocation rate?

Accepted Answer

The answer of Why is using multiple predetermined overhead allocation...

Question 9

A modification of the overhead allocation method which uses a single plantwide rate,is to use multiple predetermined overhead allocation rates that have different allocation bases.

Accepted Answer

This statement is true. Using multiple predetermined overhead allocation rates with different allocation bases is known as activity-based costing, which can provide more accurate cost allocation for complex manufacturing processes.

Question 10

Companies calculate the predetermined overhead rate at the beginning of an accounting period using the actual overhead costs.

Accepted Answer

Companies calculate the predetermined overhead rate before the accounting period begins using estimated overhead costs.

Question 11

Direct materials cost and direct labor cost can be ________ ________ to products.Manufacturing overhead costs are ________ in cost pools and then ________ to products.

Accepted Answer

The answer of Direct materials cost and direct labor cost...

Question 12

Direct material costs and direct labor costs cannot be easily traced to products.Therefore,they are allocated to products.

Accepted Answer

Direct material costs and direct labor costs can be easily traced to products, making them direct costs that are not allocated but rather directly assigned to specific products.

Question 13

Bella,Inc.manufactures two kinds of bags-totes and satchels.The company allocates manufacturing overhead using a single plantwide rate with direct labor cost as the allocation base.Estimated overhead costs for the year are $25,750.Additional estimated information is given below. $$\begin{array} { | l | r | r | } 
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 33 & \$ 44 \
\hline \text { Direct labor cost per unit } & \$ 52 & \$ 60 \
\hline \text { Number of units } & 520 & 370 \
\hline
\end{array}$$ Calculate the predetermined overhead allocation rate.(Round your answer to two decimal places.)
A)95.23%
B)52.29%
C)86.21%
D)1.49%

Accepted Answer

The answer of Bella,Inc.manufactures two kinds of bags-totes and satchels.The...

Question 14

A furniture corporation manufactures two models of furniture-Standard and Deluxe.The total estimated manufacturing overhead costs are $64,200.The following estimates are available: $$\begin{array} { | l | r | r | } 
\hline & \text { Standard } & \text { Deluxe } \
\hline \text { Direct materials cost per unit } & \$ 250 & \$ 290 \
\hline \text { Direct labor cost per unit } & \$ 125 & \$ 140 \
\hline \text { Number of units } & 240 & 600 \
\hline
\end{array}$$ The company uses direct labor costs as the base to allocate manufacturing overhead.Calculate the predetermined overhead rate.(Round your answer to two decimal places.)
A)27.44%
B)29.23%
C)191.07%
D)56.32%

Accepted Answer

The answer of A furniture corporation manufactures two models of...

Question 15

Which of the following statements is true?
A)Indirect costs must be allocated based on a single plant wide rate.
B)Manufacturing overhead costs are accumulated in cost pools and then assigned to products.
C)Managers cannot wait until the end of the accounting period for product cost information.
D)Managers can choose to wait until the end of the accounting period to allocate manufacturing overhead costs.

Accepted Answer

Managers cannot wait until the end of the accounting period for product cost information because they need this information to make decisions throughout the period, such as pricing decisions and production planning decisions.

Question 16

The predetermined overhead allocation rate is an estimated overhead cost per unit of the allocation base and is calculated at the beginning of the accounting period.

Accepted Answer

The predetermined overhead allocation rate is indeed an estimated overhead cost per unit of the allocation base, but it is calculated before the period begins (usually at the end of the previous period).

Question 17

Treasurers,Inc.,a manufacturer of gift articles,uses a single plantwide rate to allocate indirect costs with machine hours as the allocation base.Estimated overhead costs for the year are $6,000,000.Estimated machine hours are 29,000.During the year,the actual machine hours used were 50,000.Calculate the predetermined overhead allocation rate.(Round your answer to the nearest dollar.)
A)$120
B)$88
C)$207
D)$63

Accepted Answer

Predetermined overhead allocation rate = Estimated overhead costs for the year ÷ Estimated machine hours

Predetermined overhead allocation rate = $6,000,000 ÷ 29,000 hours ≈ $207 per machine hour

Therefore, the best choice is C.

Question 18

Bag Ladies,Inc.manufactures two kinds of bags-totes and satchels.The company allocates manufacturing overhead using a single plantwide rate with direct labor cost as the allocation base.Estimated overhead costs for the year are $25,500.Additional estimated information is given below. $$\begin{array} { | l | r | r | } 
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 33 & \$ 40 \
\hline \text { Direct labor cost per unit } & \$ 53 & \$ 61 \
\hline \text { Number of units } & 530 & 360 \
\hline
\end{array}$$ Calculate the amount of overhead to be allocated to Totes.(Round any percentages to two decimal places and your final answer to the nearest dollar.)
A)$481
B)$327
C)$11,189
D)$14,312

Accepted Answer

The answer of Bag Ladies,Inc.manufactures two kinds of bags-totes and...

Question 19

Drive Safe,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 the amount of manufacturing overhead costs allocated to Part 1.
 $$\begin{array} { | c | c | c | } 
\hline & \textbf { Production } & \textbf { Packing } \
\hline & \text { Machine hours } & \text { Labor hours } \
\hline \textbf { Part1 } & 10,000 & 30,000 \
\hline \textbf { Part 2 } & \underline { 25,000 } & \underline { 10,000 }_{_{}} \
\hline & \underline { 35,000 } & \underline { 40,000 }_{} \
\hline
\end{array}$$

Accepted Answer

The answer of Drive Safe,Inc.a leading manufacturer of car spare...

Question 20

A furniture manufacturer has decided that its use of a single plantwide predetermined overhead allocation rate is no longer accurate.In making the transition to using multiple predetermined overhead allocation rates,which of the following statements is incorrect?
A)With multiple overhead rates,there are multiple cost pools.
B)Management must analyze the expected overhead costs and separate them into a cost pool for each department.
C)With multiple overhead rates,there is one cost pool and multiple allocation bases.
D)The use of multiple predetermined overhead allocation rates is more complex,but it may be more accurate.

Accepted Answer

With multiple overhead rates, there are multiple cost pools, not one cost pool with multiple allocation bases as mentioned in choice C. Choices A, B, and D are all accurate statements about the use of multiple predetermined overhead allocation rates.

Quiz 19: Cost Management Systems: Activity-Based, just-In-Time, and Quality Management Systems