Question 1

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 the number of machine hours used and the amount of overhead costs incurred, which supports selecting machine usage as the primary cost driver for overhead costs in the Production Department.

Question 2

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 $25,500.Additional estimated information is given below. $$\begin{array} { | l | l | l | } 
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 30 & \$ 43 \
\hline \text { Direct labor cost per unit } & \$ 54 & \$ 64 \
\hline \text { Number of units } & 520 & \$ 70 \
\hline
\end{array}$$ 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.)

Accepted Answer

The total direct labor cost is calculated by multiplying the direct labor cost per unit by the number of units for both totes and satchels. The overhead rate is then determined by dividing the total estimated overhead costs by the total direct labor cost. Finally, the overhead allocated to satchels is found by multiplying the overhead rate by the direct labor cost for satchels.

Question 3

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 4

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 $9,000,000.Estimated machine hours are 30,000.During the year,the actual machine hours used were 44,000.Calculate the predetermined overhead allocation rate.

Accepted Answer

Calculation of single plantwide allocation rate:
 11eb0def_7899_c46f_9431_bbf827614183_TB6702_00

Question 5

A furniture corporation manufactures two models of furniture-Standard and Deluxe.The total estimated manufacturing overhead costs are $64,250.The following estimates are available: $$\begin{array} { | l | l | l | } 
\hline & \text { Standard } & \text { Deluxe } \
\hline \text { Direct materials cost per unit } & \$ 250 & \$ 280 \
\hline \text { Direct labor cost per unit } & \$ 115 & \$ 140 \
\hline \text { Number of units } & 250 & 600 \
\hline
\end{array}$$ 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.)

Accepted Answer

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

Question 6

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 $150,000 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 31,000,and direct labor hours were 20,000 for the year.Calculate the departmental predetermined overhead allocation rates.(Round your answer to the nearest cent.)

Accepted Answer

Calculation of department predetermined overhead allocation rates: 11eb0def_789a_1292_9431_0d1ee8c4cf71_TB6702_00

Question 7

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 statement is true. The predetermined overhead allocation rate is calculated at the beginning of the accounting period based on estimated overhead costs and the estimated allocation base (such as direct labor hours, machine hours, or material costs). The allocation rate is then used to allocate overhead costs to products or services throughout the period.

Question 8

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?

Accepted Answer

This statement is incorrect. With multiple overhead rates, there are multiple cost pools and multiple allocation bases, not one cost pool and multiple allocation bases. The use of multiple predetermined overhead allocation rates is more complex, but it may provide a more accurate reflection of the actual overhead costs incurred by each department. Management must analyze the expected overhead costs and separate them into cost pools for each department to apply the appropriate overhead rate to each product or service.

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

Question 10

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.
 $$\begin{array} { | l | l | l | } 
\hline & \text { Production } & \text { Packing } \
\hline & \text { Machine hours } & \text { Labor hours } \
\hline \text { Part1 } & 10,000 & 30,000 \
\hline \text { Part 2 } & 25,000 & 10,000 \
\hline & 35,000 & 40,000 \
\hline
\end{array}$$

Accepted Answer

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

Question 11

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 12

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 13

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 $24,500.Additional estimated information is given below. $$\begin{array} { | l | l | l | } 
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 31 & \$ 41 \
\hline \text { Direct labor cost per unit } & \$ 53 & \$ 63 \
\hline \text { Number of units } & 500 & \$ 60 \
\hline
\end{array}$$ 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.)

Accepted Answer

The total direct labor cost is calculated as (500 units * $53) + (60 units * $63) = $26,790. The overhead rate is $24,500 / $26,790 = 0.9145. The overhead allocated to Totes is 500 units * $53 * 0.9145 = $24,500 * ($26,500 / $26,790) = $13,202.

Question 14

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

Multiple predetermined overhead allocation rates allow for more accurate allocation of overhead costs to specific products or product lines, resulting in more accurate product unit costs.

Question 15

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 equipment maintenance. These costs are not easily traced to specific products or production runs, and are instead allocated based on predetermined cost drivers such as machine hours or labor hours.

Question 16

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 and is a more refined method of allocating overhead costs than the traditional single plantwide rate approach.

Question 17

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 $25,250.Additional estimated information is given below. $\begin{array}{|l|l|l|} 
\hline& \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 33 & \$ 45 \
\hline \text { Direct labor cost per unit } & \$ 50 & \$ 65 \
\hline \text { Number of units } & 500 & \$ 90 \
\hline
\end{array}$ Calculate the predetermined overhead allocation rate.(Round your answer to two decimal places.)

Accepted Answer

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

Question 18

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

Accepted Answer

The predetermined overhead rate is calculated before the accounting period begins based on estimated overhead costs, not actual.

Question 19

Which of the following statements is TRUE?

Accepted Answer

The answer of Which of the following statements is TRUE?
...

Question 20

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 $106,000.Additional estimated information is given below. $$\begin{array} { | l | l | l | } 
\hline & \text { Normal } & \text { Premium } \
\hline \text { Machine hours } ( \mathrm { MHr } ) & 30,000 & 34,000 \
\hline \text { Direct materials } & \$ 52,000 & \$ 400,000 \
\hline
\end{array}$$ Calculate the predetermined overhead allocation rate.(Round your answer to the nearest cent.)

Accepted Answer

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

Quiz 7: Cost Allocation and Responsibility Accounting

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.

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.

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.

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?

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

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.

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

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.

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

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.

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

Which of the following statements is TRUE?

Quiz 7: Cost Allocation and Responsibility Accounting

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.

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.

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.

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?

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

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.

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

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.

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

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.

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

Which of the following statements is TRUE?

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.