Question 1

The reciprocal approach to allocating support department costs recognises that only large support departments provide services to other support departments.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following would NOT be a volume-based cost driver in a conventional costing system?

Accepted Answer

A)   Quantity of direct material
B)   Factory floor area in square metres
C)   Direct labour hours
D)   Machine hoursE) B) and D)
F) B) and C)

Question 3

Which of the following is a common base to distribute the cost of building depreciation to responsibility centres?

Accepted Answer

A)   Number of employees in responsibility centre
B)   Budgeted sales dollars in responsibility centre
C)   Square metres of space occupied by responsibility centre
D)   Budgeted direct costs of operating the responsibility centreE) A) and B)
F) All of the above

Question 4

The Lots More Store has a Janitorial Department and a Personnel Department that provide services to three Sales Departments.The Janitorial Department cost is allocated based on space and the Personnel Department cost is allocated based on employees.The following information is available.Using the direct method,calculate the amount of Janitorial Department cost allocated to Sales Department #2.

Accepted Answer

A)   $8654
B)   $8571
C)   $9000
D)   $10 350E) None of the above
F) B) and D)

Question 5

A plantwide overhead rate is used to allocate overheads when it is assumed that overheads are all driven by the same cost driver.

Accepted Answer

A) True 
 B)False

Question 6

The production section of a firm is serviced by personnel and computing as follows:
Personnel costs are allocated on the number of employees and computing costs on service hours.Overhead rates are based on labour hours.If the reciprocal services method is used to allocate support department costs,the total support department costs allocated to the Assembly Department (rounded) would be:

Accepted Answer

A)   $55 927
B)   $52 800
C)   $53 800
D)   $56 072E) A) and B)
F) B) and C)

Question 7

The following information relates to the Moonie Park Manufacturing Company for the year 2012.The predetermined overhead rates per machine hour based on practical capacity,normal capacity and budgeted capacity respectively are:

Accepted Answer

A)   $4.50,$5.00 and $6.00
B)   $6.00,$4.50 and $5.00
C)   $6.00,$5.00 and $4.50
D)   $5.00,$4.50 and $6.00E) All of the above
F) B) and C)

Question 8

The process of assigning the costs in a cost pool to the cost objects is called:

Accepted Answer

A)   cost allocation
B)   segmented profit and loss statement
C)   variance
D)   absorption costingE) B) and D)
F) C) and D)

Question 9

Monex reported $65 000 in net profit for the year using absorption costing.The company had no units in beginning inventory,planned and actual production was 20 000 units and sales were 18 000 units during the year.Variable manufacturing costs were $20 per unit and total budgeted fixed manufacturing overhead was $100 000.There was no underapplied or overapplied overhead reported during the year.Determine the net profit under variable costing.

Accepted Answer

A)   $115 000
B)   $75 000
C)   $65 000
D)   $55 000E) A) and B)
F) A) and C)

Question 10

The Browning Company manufactures a single product;the standard costs per unit being variable manufacturing $8,fixed manufacturing $6.Selling and administrative costs are $2 per unit sold.The selling price is $20 per unit.Actual and budgeted fixed overhead is $900,000 for the year.Information about Browning's production activity for the year follows:
What is the profit under variable costing?

Accepted Answer

A)   $1 250 000
B)   $350 000
C)   $500 000
D)   Insufficient information to determineE) All of the above
F) B) and C)

Question 11

An allocation base may also be referred to as a:

Accepted Answer

A)   cost object
B)   common cost
C)   cost driver
D)   joint baseE) None of the above
F) A) and B)

Question 12

The Kelsey Manufacturing Company Ltd has two production departments (Assembly and Finishing) and two support departments (Janitorial and Personnel) .The usage of the two support departments in 2012 is as follows:
The budgeted costs in the support departments of 2012 were as follows:
Using the step-down method,what is the total support department costs allocated to the Finishing Department with the Personnel Department cost allocated first?

Accepted Answer

A)   $81 052
B)   $74 000
C)   $61 158
D)   $78 842E) B) and C)
F) A) and D)

Question 13

The Kelsey Manufacturing Company Ltd has two production departments (Assembly and Finishing) and two support departments (Janitorial and Personnel) .The usage of the two support departments in 2012 is as follows:
The budgeted costs in the support departments of 2012 were as follows:
Using the direct method,what is the Janitorial Department cost allocated to the Assembly Department?

Accepted Answer

A)   $28 948
B)   $21 053
C)   $34 158
D)   $25 000E) A) and D)
F) A) and C)

Question 14

The following information about Monfort Manufacturing is available:
Using the direct method,the cost allocated from both of the support departments to Machining Department is:

Accepted Answer

A)   $170 000
B)   $155 000
C)   $160 000
D)   $180 000E) A) and B)
F) A) and C)

Question 15

Absorption costing profit is always equal to:

Accepted Answer

A)   variable costing profit + fixed overhead in opening inventory - fixed overhead in closing inventory
B)   fixed overhead in opening inventory + fixed overhead in closing inventory
C)   fixed overhead in opening inventory - fixed overhead in closing inventory
D)   variable costing profit + fixed overhead in closing inventory - fixed overhead in opening inventoryE) C) and D)
F) None of the above

Question 16

Consider the following statements about support department costs.i.In order to assign all manufacturing costs to products,support department costs must be allocated to production departments
Ii) Support department costs are period costs rather than product costs because the support departments are not directly involved in production.
Iii) Support departments are not considered crucial to the production process.Which statement/s is/are correct?

Accepted Answer

A)   i,ii and iii
B)   i and iii
C)   iii
D)   iE) A) and B)
F) B) and C)

Question 17

Assume that the predetermined fixed overhead rate per unit remains the same from 2007 to 2008 and inventory decreases in 2008.Which of the following statements is true?

Accepted Answer

A)   The fixed overhead expended in 2008 under variable costing will be greater than that expended under absorption costing.
B)   The fixed overhead expended in 2008 under absorption costing will be greater than that expended under variable costing.
C)   The amount of fixed overhead expended will be the same under both methods.
D)   It is impossible to determine what effect the decrease in inventory will have on net profit under absorption costing.E) A) and D)
F) B) and C)

Question 18

A normal absorption costing system charges work in process with:

Accepted Answer

A)   actual prime costs and actual overhead costs.
B)   applied prime costs and all overhead costs using a budgeted rate.
C)   actual prime costs and all overhead costs using a budgeted rate.
D)   applied direct materials and all conversion costs using a budgeted rate.E) All of the above
F) A) and B)

Question 19

Classix Products reported $28 000 in net profit for the year using variable costing.The company had no units in beginning inventory,planned and actual production was 30 000 units,and sales were 25 000 units during the year.Variable manufacturing costs were $15 per unit and total budgeted fixed manufacturing overhead was $150 000.There was no underapplied or overapplied overhead reported during the year.Determine the net profit under absorption costing.

Accepted Answer

A)   $28 000
B)   $30 000
C)   $53 000
D)   $58 000E) A) and B)
F) A) and C)

Question 20

When allocating support department costs,the costs that should be used are:

Accepted Answer

A)   actual fixed costs and budgeted variable costs
B)   actual fixed costs and actual variable costs
C)   budgeted fixed costs and actual variable costs
D)   budgeted fixed costs and budgeted variable costsE) C) and D)
F) B) and D)

Exam 7: A Closer Look at Overhead Costs

Which of the following is a common base to distribute the cost of building depreciation to responsibility centres?

Correct Answer
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Correct Answer
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Correct Answer
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Absorption costing profit is always equal to:

Correct Answer
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Correct Answer
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The reciprocal approach to allocating support department costs recognises that only large support departments provide services to other support departments.

Correct Answer
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A normal absorption costing system charges work in process with:

Correct Answer
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Correct Answer
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Correct Answer
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The process of assigning the costs in a cost pool to the cost objects is called:

Correct Answer
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The following information about Monfort Manufacturing is available: Using the direct method,the cost allocated from both of the support departments to Machining Department is:

Correct Answer
verified

The following information relates to the Moonie Park Manufacturing Company for the year 2012.The predetermined overhead rates per machine hour based on practical capacity,normal capacity and budgeted capacity respectively are:

Correct Answer
verified

Assume that the predetermined fixed overhead rate per unit remains the same from 2007 to 2008 and inventory decreases in 2008.Which of the following statements is true?

Correct Answer
verified

An allocation base may also be referred to as a:

Correct Answer
verified

A plantwide overhead rate is used to allocate overheads when it is assumed that overheads are all driven by the same cost driver.

Correct Answer
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Correct Answer
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Which of the following would NOT be a volume-based cost driver in a conventional costing system?

Correct Answer
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Correct Answer
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Correct Answer
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When allocating support department costs,the costs that should be used are:

Correct Answer
verified

Exam 7: A Closer Look at Overhead Costs

Which of the following is a common base to distribute the cost of building depreciation to responsibility centres?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Absorption costing profit is always equal to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The reciprocal approach to allocating support department costs recognises that only large support departments provide services to other support departments.

Correct AnswerverifiedShow Answer

A normal absorption costing system charges work in process with:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The process of assigning the costs in a cost pool to the cost objects is called:

Correct AnswerverifiedShow Answer

The following information about Monfort Manufacturing is available: Using the direct method,the cost allocated from both of the support departments to Machining Department is:

Correct AnswerverifiedShow Answer

The following information relates to the Moonie Park Manufacturing Company for the year 2012.The predetermined overhead rates per machine hour based on practical capacity,normal capacity and budgeted capacity respectively are:

Correct AnswerverifiedShow Answer

Assume that the predetermined fixed overhead rate per unit remains the same from 2007 to 2008 and inventory decreases in 2008.Which of the following statements is true?

Correct AnswerverifiedShow Answer

An allocation base may also be referred to as a:

Correct AnswerverifiedShow Answer

A plantwide overhead rate is used to allocate overheads when it is assumed that overheads are all driven by the same cost driver.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following would NOT be a volume-based cost driver in a conventional costing system?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When allocating support department costs,the costs that should be used are:

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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