Question 1

Select the false statement from the following.
A) Only direct costs are traced to cost objects.
B) The same cost may be assigned to more than one cost object.
C) General, selling, and administrative costs cannot be assigned to a cost object.
D) A given cost can be driven by more than one cost driver.

Accepted Answer

General, selling, and administrative costs can be assigned to a cost object using allocation methods such as activity-based costing.

Question 2

Cost allocation involves:
A) Identifying a cost driver for each cost to be allocated.
B) Calculating an allocation rate for each cost to be allocated.
C) Multiplying the allocation rate by the weight of the cost driver.
D) All of the answers are correct.

Accepted Answer

Cost allocation involves all of the mentioned steps of identifying cost drivers, calculating allocation rates and multiplying them by the weight of cost drivers. Therefore, option D is the correct answer.

Question 3

Which of the following costs is most likely to be directly traceable to a specific department in a retail clothing store?
A) The cost of heating and air-conditioning.
B) The cost of supplies.
C) The cost of the department manager's salary.
D) Rent on the store building.

Accepted Answer

The department manager's salary would be directly attributable to a specific department within the retail clothing store. Heating and air-conditioning costs, supplies, and store rent would likely be allocated to the store as a whole rather than a specific department.

Question 4

Overhead costs include:
A) Direct and indirect costs.
B) Indirect costs only.
C) Direct costs only.
D) Neither direct nor indirect costs.

Accepted Answer

Overhead costs refer to indirect costs, such as rent, utilities, office supplies, and management salaries, that cannot be easily traced to a specific product or service. Direct costs are tied directly to the production of a product or service and are not considered overhead costs.

Question 5

Cost objects may be:
A) Products.
B) Services.
C) Departments.
D) All of the answers are correct.

Accepted Answer

All of the options listed are examples of cost objects. Products and services are both outputs of a company that incur costs, and departments are areas of a company that incur costs as well. Therefore, all of these options can be considered cost objects.

Question 6

Some costs that possibly could be traced directly to cost objects are nonetheless classified as indirect costs because:
A) Such costs cannot be traced to objects in a cost-effective manner.
B) Such practice results in a more accurate accumulated cost for the object.
C) Generally accepted accounting principles require some costs to be treated as indirect.
D) All of the answers are correct.

Accepted Answer

Indirect costs are costs that cannot be traced directly to cost objects in a cost-effective manner. Even though some costs may have a direct relationship with a cost object, they may still be classified as indirect costs if it is inefficient or cost-prohibitive to trace them separately.

Question 7

Cobalt Company management has identified the following cost objects: Cost Object 1: The cost of operating the finishing department
Cost Object 2: The cost of operating the factory
Cost Object 3: The cost of a particular product made in June
With respect to these cost objectives,how would rent paid by the finishing department for storage space be classified?

A) Option A
B) Option B
C) Option C
D) Option D

Accepted Answer

The answer of Cobalt Company management has identified the following...

Question 8

Blankenship Company operates a factory with two departments,X and Y.The utilities to heat and light the manufacturing facility would most likely be allocated to departments X and Y on the basis of:
A) Square footage occupied.
B) Machine hours.
C) Direct labor hours.
D) Units sold.

Accepted Answer

Allocating utilities based on square footage occupied is the most appropriate method as it takes into account the amount of space each department is using and the corresponding amount of energy needed to heat and light that space. Machine hours, direct labor hours, and units sold do not necessarily reflect the amount of energy required to operate and maintain the facility.

Question 9

Managers of a discount store chain are considering whether to add a new auto service department.In reaching this decision,the managers should consider:
A) Direct costs only.
B) Both direct and indirect costs.
C) Neither direct nor indirect costs.
D) Indirect costs but not direct costs.

Accepted Answer

In order to make a well-informed decision, the managers should consider both direct costs (such as wages, supplies, and equipment) and indirect costs (such as utility bills, rent, and advertising). Ignoring either type of cost could result in an incomplete or flawed analysis, which could lead to a poor decision. Therefore, it is best to consider both direct and indirect costs.

Question 10

A chair manufacturer makes custom chairs using hand tools,wood,glue,and varnish.Which of the following statements is true?
A) The costs of wood and glue would be treated as direct costs.
B) Wood, glue, and varnish would all be direct materials.
C) Wood would be accounted for as a direct cost, and glue and varnish as indirect costs.
D) The concepts of direct and indirect costs are not applicable here.

Accepted Answer

The answer of A chair manufacturer makes custom chairs using...

Question 11

Preston Company has three divisions.The company should consider a cost to be a direct cost of a division if:
A) It meets guidelines imposed by generally accepted accounting principles.
B) It can be traced to a division in a cost-effective manner.
C) It is a variable cost.
D) It can be allocated to a division.

Accepted Answer

A cost is considered a direct cost of a division if it can be traced to that division in a cost-effective manner. Direct costs are generally more easily identified and allocated to a specific division, while indirect costs are allocated to divisions through a cost allocation process. While it is important for costs to adhere to generally accepted accounting principles, this alone does not determine whether a cost is a direct cost of a division. Variable costs also do not necessarily indicate whether a cost is a direct cost of a division.

Question 12

Cost accumulation is used to:
A) Determine the cost of a particular cost object.
B) Identify and estimate opportunity costs.
C) Identify fixed and variable costs.
D) Set the selling price for a service.

Accepted Answer

Cost accumulation is the process of collecting costs to determine the total cost of a particular cost object. The ultimate goal of cost accumulation is to determine the cost of production for a product or service, so option A is the correct choice. Identifying and estimating opportunity costs (option B) involves evaluating the benefits of one option against the costs of another, and is not related to cost accumulation. Similarly, identifying fixed and variable costs (option C) is not the same as cost accumulation, though it is related to the analysis of costs. Setting the selling price for a service (option D) also involves a more complex analysis of market factors, not simply cost accumulation.

Question 13

Craig Manufacturing Company operates its three production departments within a single facility.Each department produces its own products and maintains its own production equipment.Although they share a common facility,each department is overseen by a separate supervisor.Which one of the following costs is a direct cost of each department?
A) Lease payment on facility
B) Depreciation on the facility
C) Production supervisor salary
D) Plant manager salary

Accepted Answer

Production supervisor salary is a direct cost of each department since each department has its own supervisor who oversees the production operations within that specific department. The lease payment and depreciation on the facility are indirect costs since they are shared by all three departments, and plant manager salary is also an indirect cost since the manager oversees the entire facility, not just one specific department.

Question 14

Which of the following is not an example of a cost object and its related cost driver? 
A) Option A
B) Option B
C) Option C
D) Option D

Accepted Answer

The answer of Which of the following is not an...

Question 15

Which of the following costs generally can be traced directly to units of product?
A) Indirect materials
B) Overhead costs
C) Assembly labor
D) Indirect materials and assembly labor

Accepted Answer

Assembly labor is a direct cost that can be traced to units of product because it involves the direct manufacturing of the product. Indirect materials and overhead costs are indirect costs that cannot be directly traced to specific units of product.

Question 16

Which of the following statements is true regarding the salary of the manager of a fast-food hamburger restaurant?
A) The salary is a fixed cost that is directly traceable to the cost of making hamburgers.
B) The salary is a variable cost that is directly traceable to the cost of operating a specific restaurant.
C) The salary is a variable cost that cannot be traced to the cost of operating a specific restaurant.
D) None of the answers are correct.

Accepted Answer

The salary of a manager of a fast-food hamburger restaurant is typically considered a fixed cost because it does not change with the volume of hamburgers produced. However, it is not directly traceable to the cost of making hamburgers, making options A, B, and C incorrect. The salary is more accurately associated with the overall operation of the restaurant rather than the direct cost of producing specific items.

Question 17

Which of the following statements is true?
A) Indirect costs can easily be traced to a cost object; direct costs cannot be easily traced to a cost object.
B) Both direct and indirect costs can easily be traced to a cost object.
C) Neither direct nor indirect costs are easily traced to a cost object.
D) Direct costs can be traced easily to a cost object, but indirect costs cannot be easily traced to a cost object.

Accepted Answer

Direct costs can be easily traced to a cost object because they are clearly identifiable and quantifiable. Indirect costs, on the other hand, do not have a clear link to a specific cost object, and therefore, they require allocation or estimation methods to determine their cost.

Question 18

Southeast Manufacturing Company has identified the following cost objects: Cost Object 1: The cost of operating the finishing department
Cost Object 2: The cost of a particular product made in June
Cost Object 3: The cost of operating the factory
With respect to these cost objects,the cost of the salary of the supervisor of the finishing department is directly traceable to cost objects:
A) 1 and 2.
B) 2 and 3.
C) 1 and 3.
D) 1, 2, and 3.

Accepted Answer

The salary of the supervisor of the finishing department is directly traceable to the cost of operating the finishing department (Cost Object 1) and the cost of operating the factory (Cost Object 3). It is not directly traceable to the cost of a particular product made in June (Cost Object 2). Therefore, the best choice is C.

Question 19

Overhead costs:
A) Cannot be traced to cost objects in a cost-effective manner, but are instead allocated to cost objects.
B) Cannot be allocated to cost objects.
C) Are always variable costs.
D) Are only incurred by manufacturing companies.

Accepted Answer

Overhead costs cannot be easily and directly traced to specific cost objects (such as a particular product or customer) but must be allocated based on some predetermined method (such as machine hours or labor hours). This allocation process can be costly, but is necessary to ensure that indirect costs are appropriately assigned to cost objects.

Question 20

Select the incorrect statement from the following.
A) The difference between a direct cost and an indirect cost is that a direct cost relates to a given cost object while an indirect cost does not.
B) Actual costs are useful for evaluating managerial performance.
C) Actual costs are not relevant in many decisions because actual costs cannot be determined until after the decision has been made.
D) When accumulating the cost of a specific cost object, the indirect costs are allocated to the cost object.

Accepted Answer

The answer of Select the incorrect statement from the following.
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Quiz 4: Cost Accumulation,tracing,and Allocation

Select the false statement from the following.

Cost allocation involves:

Which of the following costs is most likely to be directly traceable to a specific department in a retail clothing store?

Overhead costs include:

Cost objects may be:

Some costs that possibly could be traced directly to cost objects are nonetheless classified as indirect costs because:

Blankenship Company operates a factory with two departments,X and Y.The utilities to heat and light the manufacturing facility would most likely be allocated to departments X and Y on the basis of:

Managers of a discount store chain are considering whether to add a new auto service department.In reaching this decision,the managers should consider:

A chair manufacturer makes custom chairs using hand tools,wood,glue,and varnish.Which of the following statements is true?

Preston Company has three divisions.The company should consider a cost to be a direct cost of a division if:

Cost accumulation is used to:

Which of the following is not an example of a cost object and its related cost driver?

Which of the following costs generally can be traced directly to units of product?

Which of the following statements is true regarding the salary of the manager of a fast-food hamburger restaurant?

Which of the following statements is true?

Overhead costs:

Select the incorrect statement from the following.