Question 1

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) In selecting machine usage as the primary cost driver 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.
B) Management must analyze the expected overhead costs and separate them into a cost pool for each department.
C) The allocation process changes because there are now multiple cost pools and multiple allocation bases.
D) The use of multiple predetermined overhead allocation rates is more complex, but it may be more accurate.

Accepted Answer

C

Question 2

Brisbane,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.
 $$\begin{array} { | l | l | l | } 
\hline & \text { Production } & \text { Packing } \
\hline & \text { Machine hours } & \text { Labor hours } \
\hline \text { Part 1 } & 10,000 & 30,000 \
\hline \text { Part 2 } & 25,000 & 10,000 \
\hline & \underline { 35,000 } & 40,000 \
\hline
\end{array}$$

Accepted Answer

Calculation of departmental predetermined overhead allocation rates:
 $$\begin{array} { l l c } 
& \text { Productian } & \text { Packing } \
\text { Estimated overhead cost } & \$ 14,000,000 & \$ 20,000,000 \
\text { Estimated machine hours } & 35,000 & \
\text { Estimated labor hours } & & 40,000 \
\text { Predetermined overhead allocation rate } & \$ 400 & \$ 500
\end{array}$$ Part 1
 $\begin{array}{ll}
\text { Manufacturing overhead }- \text { Production: } 10,000 \text { machine hours } \times \$ 400 & \$ 4,000,000 \
\text { Manufacturing overhead }- \text { Packing: } 30,000 \text { labor hours } \times \$ 500 & \underline{15,000,000} \
\text { Total manufacturing overhead allocated: } & \underline{19,000,000}
\end{array}$

Question 3

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

When using multiple predetermined overhead allocation rates, overhead costs are allocated more accurately to different products or product lines based on the specific activities and resources required for each. This can result in more accurate product unit costs.

Question 4

Fill in the blanks:
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 Fill in the blanks:
Direct materials cost and...

Question 5

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

Accepted Answer

Companies calculate the predetermined overhead rate BEFORE the beginning of an accounting period using estimated values of overhead costs. This rate is then used to apply overhead to production activities during the period.

Question 6

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. $$\begin{array} { | l | r | r | } 
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 35 & \$ 45 \
\hline \text { Direct labor cost per unit } & \$ 51 & \$ 64 \
\hline \text { Number of units } & 530 & 350 \
\hline
\end{array}$$ 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) $500
B) $330
C) $11,556
D) $13,945

Accepted Answer

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

Question 7

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 individually 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 need product cost information quickly in order to make informed decisions about pricing, production processes, and profitability. It is not feasible for them to wait until the end of the accounting period to allocate costs, as this may lead to incorrect decisions being made. Indirect costs are usually allocated using a predetermined overhead rate based on a measure such as direct labor hours or machine hours. Manufacturing overhead costs are not individually assigned to products, but rather allocated using a predetermined overhead rate.

Question 8

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

Accepted Answer

Manufacturing overhead costs include expenses such as rent, utilities, and insurance that cannot be easily traced directly to a specific product or unit of production. Rather, these costs are allocated or apportioned to products using a predetermined overhead rate or other cost allocation method.

Question 9

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 are easily traced to specific products as they are directly related to the production of those products. It is the indirect costs such as overhead costs that are allocated to products through the use of cost allocation methods.

Question 10

In selecting machine usage as the primary cost driver 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

The statement indicates that there is a direct relationship between the number of machine hours used and the amount of overhead costs incurred, which suggests that machine usage is a suitable cost driver for the Production Department. Therefore, the answer is true.

Question 11

Modiste,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 $26,000.Additional estimated information is given below. $$\begin{array} { | l | r | r | } 
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 32 & \$ 45 \
\hline \text { Direct labor cost per unit } & \$ 55 & \$ 63 \
\hline \text { Number of units } & 510 & 390 \
\hline
\end{array}$$ Calculate the predetermined overhead allocation rate.(Round your answer to two decimal places.)
A) 92.69%
B) 49.41%
C) 94.50%
D) 1.58%

Accepted Answer

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

Question 12

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 13

Powers,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. $$\begin{array} { | l | r | r | } 
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 32 & \$ 44 \
\hline \text { Direct labor cost per unit } & \$ 55 & \$ 62 \
\hline \text { Number of units } & 540 & 350 \
\hline
\end{array}$$ 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) $464
B) $14,734
C) $10,765
D) $21,700

Accepted Answer

To allocate the overhead cost to the satchels, we first need to calculate the predetermined overhead rate using the given information:

Predetermined overhead rate = Estimated total overhead costs / Estimated total amount of direct labor cost
= $25,500 / $170,000
= 0.15 or 15% per direct labor cost dollar

Next, we use this rate to allocate the overhead cost to the satchels:

Overhead allocated to satchels = Predetermined overhead rate x Actual amount of direct labor costs for satchels x Actual units produced of satchels
= 0.15 x $34,000 x 1,600
= $10,765

Therefore, the correct answer is C) $10,765.

Question 14

Moonrays,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 $106,000.Additional estimated information is given below. $$\begin{array} { | l | r | r | } 
\hline & \text { Normal } & \text { Premium } \
\hline \text { Machine hours (MHr) } & 21,000 & 38,000 \
\hline \text { Direct materials } & \$ 60,000 & \$ 500,000 \
\hline
\end{array}$$ Calculate the predetermined overhead allocation rate.(Round your answer to the nearest cent.)
A) $5.05 per direct labor hour
B) $1.80 per machine hour
C) $2.79 per machine hour
D) $0.19 per direct labor hour

Accepted Answer

The answer of Moonrays,Inc.manufactures both normal and premium tube lights.The...

Question 15

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. The method of using multiple predetermined overhead allocation rates with different bases is known as activity-based costing (ABC). ABC takes into account the different activities that occur in a company and allocates overhead costs accordingly. This allows for a more accurate and precise allocation of costs to products or services.

Question 16

A furniture corporation manufactures two models of furniture-Standard and Deluxe.The total estimated manufacturing overhead costs are $64,350.The following estimates are available: $$\begin{array} { | l | r | r | } 
\hline & \text { Standard } & \text { Deluxe } \
\hline \text { Direct materials cost per unit } & \$ 240 & \$ 290 \
\hline \text { Direct labor cost per unit } & \$ 120 & \$ 140 \
\hline \text { Number of units } & 240 & 500 \
\hline
\end{array}$$ 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) 31.76%
B) 33.94%
C) 191.52%
D) 65.13%

Accepted Answer

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

Question 17

Oscar,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 $7,000,000.Estimated machine hours are 25,000.During the year,the actual machine hours used were 43,000.Calculate the predetermined overhead allocation rate.(Round your answer to the nearest dollar.)
A) $163
B) $109
C) $280
D) $82

Accepted Answer

C) Calculation of single plantwide allocation rate:
 11ea8870_3635_a02b_bb89_03eef1653b38_TB5025_00

Question 18

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 $170,000 and $350,000,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 34,000,and direct labor hours were 20,000 for the year.Calculate the departmental predetermined overhead allocation rates.(Round your answer to the nearest cent.)
A) Division A-$5.00, Division B-$17.50
B) Division A-$17.50, Division B-$5.00
C) Division A-$8.50, Division B-$10.29
D) Division A-$10.29, Division B-$8.50

Accepted Answer

A) Calculation of department predetermined overhead allocation rates: 11ea8870_3636_3c6e_bb89_f97cfcb393ff_TB5025_00

Question 19

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 20

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

This is correct. The predetermined overhead allocation rate is calculated by estimating the total overhead cost for the accounting period and dividing it by the estimated amount of allocation base units for the period. It is usually determined before production begins and is used to allocate overhead costs to products or services based on their use of the allocation base.

Quiz 24: Cost Allocation and Responsibility Accounting

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?

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.

Fill in the blanks: Direct materials cost and direct labor cost can be to products.Manufacturing overhead costs are in cost pools and then to products.

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

Which of the following statements is true?

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

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

In selecting machine usage as the primary cost driver 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.

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.

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.

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

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.

Quiz 24: Cost Allocation and Responsibility Accounting

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?

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.

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

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

Which of the following statements is true?

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

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

In selecting machine usage as the primary cost driver 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.

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.

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.

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

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.

Fill in the blanks: Direct materials cost and direct labor cost can be to products.Manufacturing overhead costs are in cost pools and then to products.