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Exam 12: Cost Accumulation, Tracing, and Allocation

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Question 1

Multiple Choice

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Custom Quilters makes decorative comforters, quilted garments, and other products in a small sewing factory. During the upcoming year, the company expects to make 2,000 comforters. With respect to the comforters, how would the fabric used to make the comforters be classified?

A) Direct and variable
B) Direct and fixed
C) Indirect and variable
D) Indirect and fixed

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

Correct Answer

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A

Question 2

Multiple Choice

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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?

A) Direct and variable
B) Direct and fixed
C) Indirect and variable
D) Indirect and fixed

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

Correct Answer

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Question 3

Multiple Choice

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Custom Quilters makes decorative comforters, quilted garments, and other products in a small sewing factory. During the upcoming year, the company expects to make 2,000 comforters. With respect to the comforters, how would the fabric used to make the comforters be classified?

Each indirect cost should be allocated to products individually to provide the most useful cost information.

Bank's Department Store has three departments: Men's, Women's and Children's. The store incurred $50,000 of store rental costs during the current year. The departments identified the following cost drivers: $\begin{array}{lrrr}&\text { Men's }&\text { Women's}&\text { Children's }\\\text { Labor dollars } & \text { \$ 530,000 } & \$ 775,000 & \$ 240,000 \\\text { Number of employees } & 10 & 20& 4 \\\text { Square footage } & 3,000 & 8,000 & 1,000\\\text { Number of sales transactions } & 300.000 & 900.000 & 90.000\end{array}$ Using the most appropriate cost driver, how much rental cost should be allocated to the Women's Department? (Do not round intermediate calculations. Round final answer to the nearest dollar.)

Selection of a cost driver depends on:

Great Outdoors Company makes two types of camping tents. Making a standard camping tent requires 4 hours of labor while making a deluxe camping tent requires 10 hours of labor. During the most recent accounting period the company made 2,000 standard camping tents and 500 deluxe camping tents. Indirect manufacturing costs amounted to $52,000 and are allocated based on labor hours. Based on this information:

At the beginning of the year, Barcroft Co. estimated that its total annual fixed overhead costs would amount to $25,000. Further, Barcroft estimated that its volume of production would be 2,000 units of product. Based on these estimates, Barcroft computed a predetermined overhead rate that was used to allocate overhead costs to the products made during the year. As predicted, actual fixed overhead costs did amount to $25,000. However, actual volume of production amounted to 2,200 units of product. Based on this information alone:

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

Cost allocation involves:

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

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

Which of the following best describes the term used to assign indirect costs to a cost object?

Which of the following statements is incorrect?

Indirect costs are often pooled, and not allocated individually because:

It is possible that the same cost might be direct with respect to one cost object but indirect with respect to another cost object.

The selection of the most appropriate cost driver often requires considerable judgment in the absence of a strong cause-and-effect relationship.

Haskins Company employs material handling employees who move materials between production divisions at a labor cost of $190,000 a year. It is estimated that these employees move 700,000 pounds of material per year. If 70,000 pounds are moved in March, how much of the material handling cost should be assigned to products made in March? (Do not round intermediate calculations.)

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

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: