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Exam 12: Cost Accumulation, Tracing, and Allocation

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Question 31

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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.

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Question 32

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The first step in cost accumulation is to identify cost objects.

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Question 33

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Which of the following is not an example of a cost object and its related cost driver? $\begin{array}{cc} \text { Cost Object } &&& \text { Cost Driver } \\\end{array}$ A. $\begin{array}{cc} \text { Rent} &&&&&& \text {Square feet } \\\end{array}$ B. $\begin{array}{cc} \text { Transportation } && \text { Miles driven } \\\end{array}$ C. $\begin{array}{cc} \text { Direct labor hours} & \text {Indirect labor } \\\end{array}$ D. $\begin{array}{cc} \text {Utilities } &&&&& \text { Machine hours } \\\end{array}$

The Flintstone Construction Company delivers dirt and stone from local quarries to its construction sites. A new truck that was purchased for a cost of $120,000 at the beginning of the year was expected to deliver 200,000 tons over its useful life. The following is a breakdown of the tons delivered during the year to each construction site: $\begin{array} { l c c c } \text { Construction Sites:}& \text { A } & \text { B } & \text { C } & \text { D } \\ \text { Tons Delivered:}&2,000 & 3,500 & 4,000 & 1,500 \end{array}$ How much truck depreciation should be allocated to Site A? (Do not round intermediate calculations.)

Jessup Company expects to incur overhead costs of $20,000 per month and direct production costs of $125 per unit. The estimated production activity for the upcoming year is 1,000 units. If the company desires to earn a gross profit of $50 per unit, the sales price per unit would be which of the following amounts?

Sheddon Industries produces two products. The products' identified costs are as follows: $\begin{array} { l c c } & \text {Product A } & \text { Product B} \\\text { Direct materials } & \$ 20,000 & \$ 15,000 \\\text { Direct labor } & \$ 12,000 & 24,000\end{array}$ The company's overhead costs of $108,000 are allocated based on direct labor cost. Assume 4,000 units of product A and 5,000 units of Product B are produced. What is the cost per unit for product B? (Do not round intermediate calculations.)

Blanton Company wishes to allocate rent expense of $24,000 to its three operating departments, A, B, and C. Assuming the three departments occupy 10,000, 20,000, and 30,000 square feet, respectively, the cost allocation rate for Department C is $0.80 per square foot.

Sometimes, volume-based cost drivers are used to allocate fixed indirect costs.

Which of the followings statements is correct regarding direct and indirect costs?

Herald Manufacturing Company uses a predetermined overhead rate to allocate fixed manufacturing overhead to production on a monthly basis. At the end of the accounting period it was determined that actual overhead cost was less than the estimated overhead cost and that the actual volume of production was higher than estimated. Based on this information alone:

Michael & Co. expects overhead costs of $60,000 per month and direct production costs of $24 per unit. The estimated production activity for the current accounting period is as follows: $\begin{array} { | l | c | c | c | c | } \hline& 1 ^ { \text {st } } \text { Quarter } & 2 ^ { \text {nd } } \text { Quarter } & \mathbf { 3 } ^ { \text {rd } } \text { Quarter } & 4 ^ { \text {th } } \text { Quarter } \\\hline \text { Units produced } & 11,500 & 5,000 & 8,250 & 11,250 \\\hline\end{array}$ The predetermined overhead rate based on units produced is: (Round the answer to 2 decimal places.)

Which of the following is not a true statement regarding the pooling of indirect costs?

All of the following are examples of indirect costs that can be classified as being variable costs except:

The following are Acme's production costs for the quarter ended September 30^th: $\begin{array}{llr} \text {Direct materials } &\$150,000\\ \text { Direct labor} &\$175,000\\ \text {Factory overhead } &\$225,000\end{array}$ What amount of costs should be traced to specific products in the process?

Cost objects may be:

At the beginning of the year, Rangle Company expected to incur $54,000 of overhead costs in producing 6,000 units of product. The direct material cost is $20 per unit of product. Direct labor cost is $30 per unit. During January, 600 units were produced. The total cost of the units made in January was:

Marsden Company has three departments occupying the following amount of floor space: $\begin{array} { l l } \text { Departiment } 1 & 21,000 \text { sq. ft. } \\\text { Department } 2 & 11,500 \text { sq. ft. } \\\text { Department } 3 & 31,000 \text { sq. ft. }\end{array}$ How much store rent should be allocated to Department 3 if total rent is equal to $106,000? (Do not round intermediate calculations.)

A factor having a "cause-and-effect" relationship with a cost object is called a(n) :

How a particular cost behaves (fixed versus variable) is dependent on whether the cost is classified as direct or indirect.

Marsden Company has three departments occupying the following amount of floor space: $\begin{array} { l l } \text { Departiment } 1 & 15,000 \text { sq. ft. } \\\text { Department } 2 & 10,000 \text { sq. ft. } \\\text { Department } 3 &25,000 \text { sq. ft. }\end{array}$ How much store rent should be allocated to Department 3 if total rent is equal to $200,000? (Do not round intermediate calculations.)