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Exam 12: Cost Accumulation, Tracing, and Allocation

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Question 71

Multiple Choice

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Which of the following is not a step in allocating indirect costs to cost objects?

A) Multiply the allocation rate by the weight of the cost driver.
B) Trace direct costs to individual cost pools.
C) Compute an allocation rate by dividing the total cost to be allocated by the total cost driver volume.
D) All of the answers are steps in allocating indirect costs.

E) B) and D)
F) B) and C)

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Question 72

Multiple Choice

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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.

E) A) and D)
F) C) and D)

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Question 73

True/False

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Costs that can be traced to a cost object in a cost-effective way are called direct costs.

A cost object is anything for which management desires a separate tracking of costs, while a cost driver is the factor that causes the cost object to increase or decrease.

The following are Acme's production costs for the quarter ended September 30^th: $\begin{array}{llr} \text {Direct materials } &\$160,000\\ \text { Direct labor} &\$110,000\\ \text {Factory overhead } &\$44,000\end{array}$ What amount of costs should be traced to specific products in the process?

The following are Acme's production costs for the quarter ended September 30^th: $\begin{array}{llr} \text {Direct materials } &\$100,000\\ \text {Direct labor } &\$190,000\\ \text { Factory overhead} &\$50,000\end{array}$ What amount of costs should be traced to specific products in the process?

Once indirect costs are pooled, they must remain pooled for all allocations.

Which of the following statements is true?

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 $54,000 are allocated based on labor cost. Assume 4,000 units of product A and 5,000 units of Product B are produced. What amount of production costs would be assigned to Product A? (Do not round intermediate calculations.)

Marsden Company has three departments occupying the following amount of floor space: $\begin{array} { l l } \text { Department } 1 & 24,000 \text { sq.ft. } \\ \text { Department } 2 & 10,500 \text { sq. ft. } \\\text { Department } 3 & 34,000 \text { sq. ft. }\end{array}$ How much store rent should be allocated to Department 3 if total rent is equal to $90,000? (Do not round intermediate calculations.)

Which of the following is an appropriate cost driver for allocating indirect costs to a human resources department in a service company?

Custom Quilters makes decorative comforters, quilted garments, and other products in a small sewing factory. The company expects to make 2,000 comforters during the current year. With respect to the comforters, how would the hourly wages of sewing machine operators be classified?

During the current year, Kemp Construction Company built 23 custom homes that ranged in size from 2,500 square feet to 8,000 square feet. One home was completed each month during January, February, and March. Three homes were completed during April and May. Two homes were completed during each of the months from June through December. Based upon this information, the most appropriate allocation base (i.e., cost driver) for the assignment of indirect overhead costs to each house would be the:

Which of the following is not a step in allocating indirect costs to cost objects?

Bank's Department Store has three departments: Men's, Women's and Children's. The store incurred $24,000 of store rental costs during the current year. The departments identified the following cost drivers: $\begin{array}{lrrr}&\text { Men's }&\text {Women's}&\text { Children's }\\\text { Labor dollars } & \$ 524,000 & \$ 769,000 & \$ 234,000 \\\text { Number of employees } & 26 & 36 & 20 \\\text { Square footage } & 2,400 & 7,400 & 1,500 \\\text { Number of sales transactions } & 294,000 & 894,000 & 84,000\end{array}$ Using the most appropriate cost driver, how much rental cost should be allocated to the Women's Department? (Do not round intermediate calculations. Round your answer to the nearest dollar.)

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

Sheddon Industries produces two products. The products' identified costs are as follows: $\begin{array} { l c c } & \text { Product A } & \text { Product B } \\\text { Direct materials } & \$ 24,000 & \$ 19,000 \\\text { Direct labor } & 12,000 & 20,000\end{array}$ The company's overhead costs of $58,000 are allocated based on labor cost. Assume 8,000 units of product A and 9,000 units of Product B are produced. What amount of production costs would be assigned to Product A? (Do not round intermediate calculations.)

Jiminez Company paid its annual property tax of $6,000 on its manufacturing facility in January. The company expects to make 4,000 units of product during the year. During January, 300 units of product were produced. Based on this information:

Which of the following is an appropriate cost driver for allocating indirect costs to a human resources department in a service company?

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