Managerial accounting, 5th by jiambalvo test bank ch06

VelCraft allocates costs from its payroll department and the maintenance department to its production departments using the direct method of allocation.. Payroll department costs are all

Cost Allocation and Activity-Based Costing Summary of Questions by Objectives and Bloom’s Taxonomy

1 Indirect costs occur because resources are shared by more than one cost objective

2 Cost allocation is the process of assigning direct and indirect costs to products

3 Cost allocation methods that provide the most accurate full cost information for financial

reporting, also provide the most accurate information for cost-plus contracts

4 One of the reasons that companies allocate costs is to allow for the frivolous use of common

resources

5 One of the reasons that companies allocate costs is to encourage managers to use externally

provided services, rather than those that are internally provided

6 From a decision-making standpoint, the allocated cost should measure the opportunity cost of

using a company resource

7 Once the opportunity cost associated with a shared resource is determined, it is unlikely to

change

8 In order to provide full cost information for external reporting purposes, indirect production costs

must be allocated to goods produced

9 Cost-plus contracts guarantee that the supplier will pay for production costs and the customer will

pay a fixed amount or percentage of the cost

10 The more costs that are allocated to a cost-plus contract, the smaller the profit will be for the

supplier of the contract

11 A cost objective is the product, service, or department that will receive the allocated cost

12 Large cost pools that contain many different kinds of costs are most useful to managers in making

decisions

13 The allocation base selected should ideally have a relative benefits relationship with the costs to

be allocated

14 In the direct method of allocating costs, service department costs are allocated only to production

departments, not to other service departments

15 When service department costs are allocated using actual costs and actual usage, the amount

allocated to one department will depend on the usage of other departments

16 Allocating actual service department costs allows the service departments to pass on the costs of

inefficiencies to the production departments

17 Managers should not be held responsible for noncontrollable costs.

18 Allocating unitized fixed and variable costs leads to better decision making than allocating total

costs

19 Allocating fixed costs on a per unit basis will often cause the managers receiving the allocations

to perceive the costs as variable

20 ABC is more likely than traditional costing systems to undercost complex, low-volume products

21 ABC allocates cost pools to cost objectives using cost drivers as the allocation base

22 Under the ABC approach, costs are assigned to cost drivers based on a chosen cost objective

23 An example of a unit-level activity is the design of a particular product

24 Activity-based management aims at improving the efficiency and effectiveness of business

processes

25 Activity-based costing uses benchmarking to compare the cost of an activity in one organization

to the cost for a similar activity in another organization

*26 Before resources used by the major activities of a business can be identified, managers using

activity-based management must identify ways to improve the effectiveness of the activities

*27 The process of determining major activities occurs before the resources used by each activity are

identified in performing an activity-based management study

28 A batch-level activity is an activity that supports all other activities

MULTIPLE CHOICE

29 Indirect costs occur when

A resources are shared by more than one product or service

B costs are directly traced to products or services

C controllable costs are incurred by cost objectives

D All of these answer choices are correct

30 The process of assigning indirect costs is called

A benchmarking

B tracing

C cost allocation

D cost unitizing

31 Which of the following is not a reason that companies allocate costs?

A To calculate the full cost of products for financial reporting purposes

B To discourage managers from using external suppliers

C To reduce the frivolous use of company resources

D To provide information needed by managers to make appropriate decisions

32 Costs may not be allocated to

A cost drivers

B services

C departments

D cost objectives

33 From a decision-making standpoint, the allocated cost should measure the

A sunk cost of the resource involved

B variable costs of the materials purchased

C opportunity cost of using a company resource

D product cost of the goods produced

34 If managers are not charged for centrally administered services, what may managers likely do?

A Seek outside suppliers

B Limit their frivolous use of these services

C Consider the services as free

D Evaluate and consider lower-cost alternatives for the services

35 Full cost information

A is required by GAAP for internal reporting purposes

B requires the allocation of indirect costs

C provides managers with cost information on uncontrollable costs

D treats all costs as fixed costs

36 A contract that specifies that the supplier will be paid for the cost of production as well as some

fixed amount or percentage of cost is called a(n)

A relative-benefits contract

B cost-plus contract

C allocation cost pool

D indirect cost budget

37 In which of the following industries are cost-plus contracts common?

A Hybrid car manufacturers

B Soft drink bottlers

C Governmental defense suppliers

D Newspaper publishers

38 A major problem with cost-plus contracts is that they

A include costs that do not follow GAAP

B cause the supplier to take significant financial risks

C require the supplier to use variable costing

D create an incentive to allocate as much cost as possible to the goods produced under the

contract

39 Which of the following is not a step in the cost allocation process?

A Calculate the cost involved in each step of the production process

B Select an allocation base to relate the cost pools to the cost objectives

C Form cost pools

D Identify the cost objectives

40 A cost objective is the

A reason for allocating the cost

B basis on which costs are allocated

C product, service, or department that is to receive the allocation

D relative benefit received from using a resource

41 What is the product, service, or department that is to receive the cost allocation called?

A Cost-plus recipient

B Cost objective

C Cost driver

D Cost pool

42 Which of the following is least likely to be a cost objective?

A Salaries such as those in the accounting and personnel departments

B Individual products such as spades and mowers

C Product lines such as loans and estate plans

D Departments such as assembly and finishing

43 Which of the following is a grouping of individual costs whose total is allocated using one

A not necessary in cost-plus contracts

B useful when separating mixed costs into their fixed and variable components

C allocated using a single allocation base

D a method of allocating costs among service departments

45 Which of the following is a measure of activity used to distribute indirect costs?

A Cost objective

B Cost pool

C Cost driver

D Cost unitization

46 Which of the following is the overriding concern in forming a cost pool?

A To ensure that there are no variable costs in the cost pool

B To ensure that the total amount in the cost pool is less than the direct costs for the product

C To ensure that only costs which have been budgeted are included in the cost pool

D To ensure the costs in the pool are homogeneous or similar

47 Which of the following statements about cost pools is true?

A The costs in each of the cost pools should be homogeneous or similar

B The number of cost pools must be the same as the number of products produced by a

company

C Only four different kinds of costs may be included in a single cost pool

D Each cost pool should include the costs of one expense account

48 An allocation base

A is the minimum amount to be allocated to a cost objective

B is also called a cost pool

C represents the items to which a cost will be allocated

D relates the cost pool to the cost objectives

49 An allocation base

A is also called a cost objective

B is a characteristic that is the same for all cost drivers

C ideally uses a cause-and-effect relationship to the cost pool

D All of these answer choices are correct

50 Which of the following is not a criterion typically used to allocate indirect fixed costs?

A Ability to bear costs

52 Which of the following is a method of allocation used to assign service department costs to

production departments, but not to other service departments?

A Equity method

B Direct method

C Lump-sum method

D Traditional method

53 Service department costs are allocated to producing departments

A so that the costs can be allocated to the products in the producing departments

B so that less cost is allocated to service departments

C so that the service will not be purchased externally

D All of these answer choices are correct

54 Which of the following allocations would not occur when the direct method is used in a

manufacturing company?

A Personnel department costs are allocated to the maintenance department

B Maintenance department costs are allocated to the mixing department

C Security department costs are allocated to the packaging department

D Payroll department costs are allocated to the assembly department

55 The advantage of allocating budgeted rather than actual service department costs is that

A managers are not motivated to evaluate the charges

B only one cost pool is necessary

C service departments cannot pass on the costs of inefficiencies and waste

D this practice is acceptable under GAAP

56 What costs are affected by the manager’s decisions for which the manager should be held

58 When fixed costs are unitized, they

A are stated on a per unit basis

B may appear to remain the same in total at all levels of activity

C may cause managers to use volume-related allocation

D All of these answer choices are correct

59 An allocation of a predetermined amount that is not affected by changes in the activity level of

the organizational unit receiving the allocation is called a(n)

A generally changes year after year

B do not change when the activity levels of any of the user departments change

C are impacted by the usage of the allocated resource by other departments

D make fixed costs appear variable

61 Which of the following statements is true concerning lump-sum allocations of service department

costs?

A They make fixed costs appear to be variable to the manager receiving the allocation

B They are not affected by the activity level in the department receiving the allocation

C They make fixed costs appear to be variable to the manager receiving the allocation and

are not affected by the activity level in the department receiving the allocation

D They do not make fixed costs appear to be variable to the manager receiving the

allocation and are affected by the activity level in the department receiving the allocation

62 Which of the following is not a problem caused by assigning actual service department costs to

operating departments based on actual usage of service department activities by the operating departments?

A The cost assigned to one manager will be affected by the service usage of another

manager

B Inefficiencies in the service department will be passed along to the operating

departments

C Operating managers having high peak capacity requirements will not have to bear the full

cost of meeting this peak capacity

D All of these answer choices are problems caused by assigning actual service costs to

operating departments

63 The Copy Department of Hernandez Hardware is budgeted to incur $30,000 per month in fixed

costs plus a cost of $0.02 per copy The company allocates copy costs to user departments as follows:

• Fixed costs are allocated as a lump sum based on budgeted fixed costs and estimated peak demand for each department

• Variable costs are allocated based on the budgeted rate per copy times the department's actual usage

Which of the following is an advantage of this allocation scheme over allocating all actual servicecosts based on actual usage?

A Departments that use copy services are charged for cost overruns in the copy department

B The amount charged to a particular user department is affected by the number of copies

used by another department

C Managers in departments that use services pay for the fixed costs that fluctuate based on

their changing needs

D Managers are charged for the activities they use

64 From the perspective of a manager of a producing department, which of the following is a desired

feature of a cost allocation received from a service department?

A The amount of the allocation should be based solely on the usage of the service by the

producing department and not a function of the usage of the service by other departments

B The budgeted cost should be allocated rather than actual service department costs

C The allocation should force the production manager to pay for fluctuating demands that

the production manager is creating

D All of these answer choices are correct

65 Companies that use only one or two cost pools rather than several cost pools

A incurs more cost of record keeping

B will experience more profit than if more pools are used

C may price products incorrectly due to inaccurate cost allocation

D are likely to be using ABC

66 When activity-based costing is implemented, the initial outcome is that

A the unit cost of all products will be higher

B the unit cost of all products will be lower

C the unit cost of low-volume products will be higher and the unit cost of high-volume

products will be lower

D the unit cost of low-volume products will be lower and the unit cost of high-volume

products will be higher

67 Which of the following is likely to occur when fewer overhead cost pools are used?

A Product costs will be less accurate

B Recordkeeping will be more expensive

C Decisions such as product pricing will be improved

D All products will be undercosted

68 The traditional approach to cost allocation

A tends to over-cost high volume core products

B usually requires more cost pools than ABC

C attempts to identify the activities that cause costs

D produces more accurate costs than other allocation methods

69 Which of the following steps is not involved in the ABC approach?

A Identify activities that cause costs to be incurred

B Allocate costs to products based on activity usage

C Group costs of activities into cost pools

D Improve processes based on benchmarking

70 How many distinct activities are used by most companies that design ABC systems?

A Fewer than 3

B 3 to 10

C 11 to 24

D 25 to 100

71 Happy Foods uses ABC costing Which of the following is most likely to be a cost driver for the

cost of cashiering at a convenience store?

A Cost of items purchased

B Direct labor cost

C Number of customers processed

D Number of employees handling the job

72 Which of the following is generally true when a company compares activity-based costing (ABC)

and traditional volume-based costing?

A ABC uses fewer cost drivers in an effort to reduce total costs

B ABC allocates costs based primarily on production volume

C ABC is less expensive

D ABC is less likely to undercost complex, low-volume products

73 Which of the following is not an advantage of activity-based costing over traditional

volume-based costing systems?

A ABC may lead to cost control improvement as managers are charged for using activities

B ABC is less likely than a traditional system to undercost complex, low-volume products

C ABC is less costly to implement than traditional systems

D ABC allows managers to get an understanding of the cost of their respective department’s

activities

74 What is the major difference between ABC and ABM?

A ABC is used in managerial accounting, while ABM is used in financial accounting

B ABC focuses on measurement, while ABM focuses on control

C The goal of ABC is to accurately control costs, while the goal of ABM is to allocate costs

most effectively to cost objectives

D There is no difference; ABC and ABM are two names for the same thing

75 Activity-based management

A is the management of activities that cause costs

B requires cost pools to be formed consisting of costs that are homogenous in nature

C allocates costs in a cause and effect manner to cost objectives

D is a method of allocating direct costs to cost objectives

*76 Which one of the following lists the major steps in activity-based management in the correct

order?

A Determine major activities, form cost pools, evaluate the performance of the activities,

and identify ways to improve the activities

B Determine major activities, identify resources used by each activity, evaluate the

performance of the activities, and identify ways to improve the activities

C Determine major activities, identify ways to improve the activities, evaluate the

performance of the activities, and identify resources used by each activity

D Determine major activities, evaluate the performance of activities, form cost pools, and

identify ways to improve the activities

77 Teal Sports offers 2 different types of water sport activities—sailfish rental and banana boat rides

The company has two different activities—lifeguarding and maintenance—that provide input intoits cost objectives Data on estimated overhead for the year follows:

Activity Driver Overhead CostEstimated Sailfish RentalEstimate Boat RidesEstimate

Lifeguarding # of Labor hours $63,940 3,280 hours 2,280 hoursMaintenance Hours of riding time $88,000 1,500 hours 2,500 hoursWhat overhead rates will be used in each department to assign costs to the banana boat rides?

78 Terrel Gifts produces logo platters and cups bearing the name of the city in which the items will

be sold to tourists Indirect logo printing costs are allocated to platters and cups based on the amount of time spent on the logo machine The company has budgeted logo costs of $4,224 per month and expects to spend 4,800 hours on the printing logos each month Each platter uses 24 minutes and each cup spends 6 minutes on the logo machine How much of the logo printing costs will be allocated to each platter?

A $0.35

B $0.88

C $21.12

D $8.12

79 Teal Sports offers 2 different types of water sport activities—sailfish rental and banana boat rides

The company has two different activities—lifeguarding and maintenance—that provide input intoits cost objectives Data on estimated overhead for the year follows:

Activity Driver

Estimated Overhead Cost

Sailfish RentalEstimate

Boat RidesEstimateLifeguarding # of Labor hours $63,940 3,280 hours 2,280 hoursMaintenance Hours of riding time $88,000 1,500 hours 2,500 hoursThe company provides 2,400 banana boat rides and 1,200 sailfish rentals each year How much overhead will be assigned to each banana boat ride?

A $42.20

B $73.24

C $22.56

D $33.84

80 The law firm of Barnes & Cohen purchased a new $17,600 copier Copying costs will be shared

by the purchasing, accounting, and information technology departments since those are the only departments that will have access to the machine The company has decided to allocate the copying cost based on the number of copies made by each department The sales person who soldthe copier to the attorneys expects it will generate 1,000,000 copies The manager of each

department has estimated the number of copies that his or her department will make over the life

81 Marley Music produces toy instruments—trumpet and flute— for children Molding costs are

allocated to products based on a percentage of material costs Molding costs of $15,000 per month are budgeted and the store anticipates spending $30,000 in materials By the end of the month, it was determined that actual molding costs were $14,500 If the company spends $6.50 per trumpet for materials, and $3.50 per flute for materials, how much of the molding costs will

be allocated to each trumpet?

A $0.50

B $0.48

C $3.14

D $3.25

82 The law firm of Barnes & Cohen purchased a new $17,600 copier Copying costs will be shared

by the purchasing, accounting, and information technology departments since those are the only departments that will have access to the machine The company has decided to allocate the copying cost based on the number of copies made by each department The sales person who soldthe copier to the attorneys expects it will generate 1,000,000 copies The manager of each

department has estimated the number of copies that his or her department will make over the life

D None of these answer choices are correct

83 Ransom Widgets allocates the estimated cost of its accounting department, $200,000, to its

production and sales departments since the accounting department supports these departments with regard to payroll and accounts payable functions The accounting department costs will be allocated based on the number of employees using the direct method Information regarding employees follows:

84 Intermodal Moving uses the direct method and allocates its maintenance costs on the basis of

repair hours and its payroll department costs on the basis of employees Estimated costs and information on the services and production departments follows:

Packing 30 employees, 280 repair hoursDriving 10 employees, 1,960 repair hoursHow much of the payroll and maintenance costs will be allocated to the packing department?

85 Freely Service provides residential and commercial monthly swimming pool cleaning services

Information on this service is as follows:

Service revenue $140,000Direct materials 18,000Direct labor 44,000Estimated travel costs for the month total $2,340 and are allocated to each client based on miles driven to each pool cleaning The company estimates it will clean 50 residential pools and 80 commercial pools per month with 1,200 total miles used for commercial pools and 2,400 total miles used for residential pools Because commercial pools are much larger, they take 3 hours to clean, while residential pools take a half hour each During the month, the actual mileage totaled 2,600 miles How much is the rate at which travel costs will be allocated to residential pools?

A $0.65

B $0.975

C $18.00

D $8.83

86 The building maintenance department for Advantage Toys budgets annual costs of $4,200,000

based on the expected operating level for the coming year The costs are allocated to two

production departments The following data relate to the potential allocation bases:

Production Dept A Production Dept B

If Advantage assigns costs to departments based on square footage, how much maintenance cost will be allocated to Production Department A?

A $1,400,000

B $1,050,000

C $1,575,000

D $2,100,000

87 The building maintenance department for Advantage Toys budgets annual costs of $4,200,000

based on the expected operating level for the coming year The costs are allocated to two

production departments The following data relate to the potential allocation bases:

Production Dept A Production Dept B

If Advantage assigns costs to departments based on direct labor hours, how much maintenance cost will be allocated to Production Department B?

A $1,400,000

B $1,050,000

C $2,800,000

D $2,100,000

88 Sweet Cocoa produces chocolate syrup used by candy companies Recently, the company has had

excess capacity due to a foreign supplier entering its market Sweet Cocoa is currently bidding on

a potential order from Kilwin’s Candy for 5,000 cases of syrup The estimated cost of each case is

$27.50, as follows: direct material, $10; direct labor, $5; and manufacturing overhead, $12.50 The overhead rate of $2.50 per direct labor dollar is based on estimated annual overhead of

$1,500,000 and estimated direct labor cost of $600,000, composed 40% of variable costs and 60%

of fixed costs The largest fixed cost relates to depreciation of plant and equipment How much is the variable cost of producing a case of chocolate syrup?

A $16.00

B $27.50

C $11.00

D $20.00

89 Sweet Cocoa produces chocolate syrup used by candy companies Recently, the company has had

excess capacity due to a foreign supplier entering its market Sweet Cocoa is currently bidding on

a potential order from Kilwin’s Candy for 5,000 cases of syrup The estimated cost of each case is

$27.50, as follows: direct material, $10; direct labor, $5; and manufacturing overhead, $12.50 The overhead rate of $2.50 per direct labor dollar is based on estimated annual overhead of

$1,500,000 and estimated direct labor cost of $600,000, composed 40% of variable costs and 60%

of fixed costs The largest fixed cost relates to depreciation of plant and equipment Should SweetCocoa bid on the Kilwin’s Candy business at $21 per case?

A No, because the incremental loss will be $6.50 per case

B Yes, because the incremental profit will be $1.00 per case

C No, because there are too many qualitative considerations

D Yes, because the incremental profit will be $10 per case

90 Maintenance costs at Sturgeon Company are allocated to the production departments based on

area occupied Maintenance costs of $300,000 are budgeted to maintain a 60,000 square foot production area If the finishing department occupies 25,000 square feet, how much of the

maintenance department costs will be allocated to the finishing department?

A $125,000

B $175,000

C $100,000

D $5,000

91 Dewey, Cheatham, and How, Attorneys-at-Law, specialize in three areas: criminal, civil, and

family law When specifications for a new IT system were established, the partners agreed to allocate fixed costs based on gigabytes needed by each department The criminal law division needed 40% of the capacity, civil law needed 35%, and family law needed 25% Variable costs forthe IT department are allocated on the amount of bandwidth used by each division used The IT department’s budgeted monthly fixed costs are $640,000, and the budgeted monthly variable costs are $160,000 The firm estimates that 8,000,000 gigabytes of computer time will be used in June The criminal law division actually used 3,040,000 gigabytes of bandwidth during June How much fixed IT costs will be allocated to the criminal law division during June?

A $256,000

B $240,000

C $512,000

D None of these answer choices are correct

92 Dewey, Cheatham, and How, Attorneys-at-Law, specialize in three areas: criminal, civil, and

family law When specifications for a new IT system were established, the partners agreed to allocate fixed costs based on gigabytes needed by each department The criminal law division needed 40% of the capacity, civil law needed 35%, and family law needed 25% Variable costs forthe IT department are allocated on the amount of bandwidth used by each division used The IT department’s budgeted monthly fixed costs are $640,000, and the budgeted monthly variable costs are $160,000 The firm estimates that 8,000,000 gigabytes of computer time will be used in June During June, the family law division used 1,900,000 gigabytes of bandwidth How much are total variable IT costs to be allocated to the family law division during June? Compute cost allocation rates to 3 significant digits

A $160,000

B $60,000

C $40,000

D $38,000

93 Dewey, Cheatham, and How, Attorneys-at-Law, specialize in three areas: criminal, civil, and

family law When specifications for a new IT system were established, the partners agreed to allocate fixed costs based on gigabytes needed by each department The criminal law division needed 40% of the capacity, civil law needed 35%, and family law needed 25% Variable costs forthe IT department are allocated on the amount of bandwidth used by each division used The IT department’s budgeted monthly fixed costs are $640,000, and the budgeted monthly variable costs are $160,000 The firm estimates that 8,000,000 gigabytes of computer time will be used in June The criminal law division actually used 3,040,000 gigabytes of bandwidth during June The family law division used 2,100,000 and the civil law division used 3,100,000 gigabytes of bandwidth during June What amount of the IT fixed costs will be allocated to the civil law division during June? (Compute cost allocation rates to 3 significant digits.)

94 Dragon Fire Hot Sauce makes two types of hot sauces—meek and mild Budgeted information

for the two flavors appears below:

Direct materials $100,000 $120,000Direct labor cost $108,000 $180,000Labor hourly cost $12.00 $12.00The company estimates it will incur $345,600 in overhead costs for the period Dragon Fire allocates overhead cost to products based on the labor hours worked on each product What is the overhead application rate to be used when allocating to Meek?

A $14.40

B $1.20

C $3.20

D None of these answer choices are correct

95 Manufacturing overhead is allocated to products based on the number of machine hours required

In a year when 40,000 machine hours and 60,000 direct labor hours were anticipated, indirect costs were budgeted at $252,000 If production of wagons requires 9,000 machine hours and 10,800 direct labor hours, how much manufacturing overhead will be allocated to wagons?

A $45,360

B $56,700

C $2,268

D $28

96 Dragon Fire Hot Sauce makes two types of hot sauces—meek and mild Budgeted information

for the two flavors appears below:

Direct materials $100,000 $120,000Direct labor cost $108,000 $180,000Labor hourly cost $12.00 $12.00The company estimates it will incur $345,600 in overhead costs for the period Dragon Fire allocates overhead cost to products based on the labor hours worked on each product How much

is the total overhead applied to Meek?

A $130,500

B $129,600

C $1,566

D $348,000

97 The production departments at Windsor Parke occupy a total area of 50,000 square feet Heating

costs total $600,000 and are allocated based on the area that each department occupies The finishing department occupies 30,000 square feet and the packaging department occupies 20,000 square feet What amount of heating cost will be allocated to the finishing and packaging

98 Dragon Fire Hot Sauce makes two types of hot sauces—meek and mild Budgeted information

for the two flavors appears below:

Direct materials $100,000 $120,000Direct labor cost $108,000 $180,000Labor hourly cost $12.00 $12.00The company estimates it will incur $345,600 in overhead costs for the period Dragon Fire allocates overhead cost to products based on the labor cost incurred How much overhead is assigned to Mild?

A $216,000

B $28,800

C $56,250

D None of these answer choices are correct

99 Maintenance cost is allocated to Wakshaw’s three producing departments based on the machine

hours used in each department The maintenance cost for June was $200,000 The three

departments had the following usage for June:

Department Machine hours used Direct labor hours used

100 Excellence Pastries produces baked goods Utility costs are allocated to the products based on the

baking time required for the product Utility costs of $291,500 are budgeted in a period when 550,000 total minutes of baking time and 100,000 minutes of cooling time are anticipated If a batch of rolls bakes for 45 minutes, and then cools for 15 minutes, what amount of utility cost will be allocated to each batch of rolls?

A $38.87

B $23.85

C $20.18

D $31.80

101 ZanaTech has an on-site cafeteria in which it provides free meals for employees The company

allocates the cost of the cafeteria to production departments using the direct method based on the number of employees in each department The four production departments in the company have the following number of employees: molding, 15; polishing, 20; engraving, 10; and packaging,

15 There are 20 employees in the cafeteria The cafeteria’s costs are budgeted at $144,000 for theyear When the cafeteria’s costs are allocated, what is the amount per employee that will be allocated to the packaging department each year?

102 ZanaTech has an on-site cafeteria in which it provides free meals for employees The company

allocates the cost of the cafeteria to production departments using the direct method based on the number of employees in each department The four production departments in the company have the following number of employees: molding, 15; polishing, 20; engraving, 10; and packaging,

15 There are 20 employees in the cafeteria The cafeteria’s costs are budgeted at $144,000 for theyear What amount of the cafeteria’s cost will be allocated to the molding department?

A $27,000

B $9,600

C $2,400

D $36,000

103 ZanaTech has an on-site cafeteria in which it provides free meals for employees The company

allocates the cost of the cafeteria to production departments using the direct method based on the number of employees in each department The four production departments in the company have the following number of employees: molding, 15; polishing, 20; engraving, 10; and packaging,

15 There are 20 employees in the cafeteria The cafeteria’s costs are budgeted at $144,000 for theyear What amount of cafeteria cost will be allocated to the engraving department? Use 4

significant digits for calculations

A $2,400

B $24,000

C $18,000

D $14,400

104 ZanaTech has an on-site cafeteria in which it provides free meals for employees The company

allocates the cost of the cafeteria to production departments using the direct method based on the number of employees in each department The four production departments in the company have the following number of employees: molding, 15; polishing, 20; engraving, 10; and packaging,

15 There are 20 employees in the cafeteria The cafeteria’s costs are budgeted at $144,000 for theyear The actual cafeteria costs totaled $147,000 for the year What is the total amount of the cafeteria’s costs that will be allocated to the production departments?

A $108,000

B $144,000

C $147,000

D None of these answer choices are correct

105 Ransall Auto Parts has two service departments—maintenance and personnel, and three

production departments—fabrication, assembly, and packaging Service costs are allocated to producing departments using the direct method Information on overhead in each department and possible allocation bases appear below:

Maintenance Personnel Fabrication Assembly Packaging

106 Ransall Auto Parts has two service departments—maintenance and personnel, and three

production departments—fabrication, assembly, and packaging Service costs are allocated to producing departments using the direct method Information on overhead in each department and possible allocation bases appear below:

Maintenance Personnel Fabrication Assembly Packaging

107 Ransall Auto Parts has two service departments—maintenance and personnel, and three

production departments—fabrication, assembly, and packaging Service costs are allocated to producing departments using the direct method Information on overhead in each department and possible allocation bases appear below:

Maintenance Personnel Fabrication Assembly Packaging

108 Ernst & Gray, CPAs has three divisions: audit, tax, and business consulting When the

specifications for the new computer system were established, the audit division needed 50% of the capacity, the tax division required 30%, and business consulting required 20% The fixed computer department costs are allocated based on computer needs The variable costs of the computer department are allocated based on the minutes of computer time that each department uses The computer division budget for fixed costs is $450,000, and the budget for variable costs

is $145,600 The company anticipates using 520,000 minutes of computer time What amount of variable costs will be allocated when a division uses a minute of computer time?

A $4.50

B $2.80

C $1.15

D $0.28

109 Ernst & Gray, CPAs has three divisions: audit, tax, and business consulting When the

specifications for the new computer system were established, the audit division needed 50% of the capacity, the tax division required 30%, and business consulting required 20% The fixed computer department costs are allocated based on computer needs The variable costs of the computer department are allocated based on the minutes of computer time that each department uses The computer division budget for fixed costs is $450,000, and the budget for variable costs

is $145,600 The company anticipates using 520,000 minutes of computer time If the audit division uses 250,000 minutes of computer time, what amount of variable costs will be allocated

to the audit division (round your intermediate calculation to two decimal places)?

A $70,000

B $302,848

C $286,346

D $48,533

110 Ernst & Gray, CPAs has three divisions: audit, tax, and business consulting When the

specifications for the new computer system were established, the audit division needed 50% of the capacity, the tax division required 30%, and business consulting required 20% The fixed computer department costs are allocated based on computer needs The variable costs of the computer department are allocated based on the minutes of computer time that each department uses The computer division budget for fixed costs is $450,000, and the budget for variable costs

is $145,600 The company anticipates using 520,000 minutes of computer time If the tax divisionuses 104,000 minutes of computer time this year, what is the total amount of computer

department costs that will be allocated to the tax division (round your intermediate calculation to two decimal places)?

A $173,680

B $135,000

C $164,120

D $119,120

111 Ernst & Gray, CPAs has three divisions: audit, tax, and business consulting When the

specifications for the new computer system were established, the audit division needed 50% of the capacity, the tax division required 30%, and business consulting required 20% The fixed computer department costs are allocated based on computer needs The variable costs of the computer department are allocated based on the minutes of computer time that each department uses The computer division budget for fixed costs is $450,000, and the budget for variable costs

is $145,600 The company anticipates using 520,000 minutes of computer time What amount of the computer department’s fixed costs will be allocated to the business consulting division?

A $150,000

B $29,120

C $90,000

D $119,120

112 Ernst & Gray, CPAs has three divisions: audit, tax, and business consulting When the

specifications for the new computer system were established, the audit division needed 50% of the capacity, the tax division required 30%, and business consulting required 20% The fixed computer department costs are allocated based on computer needs The variable costs of the computer department are allocated based on the minutes of computer time that each department uses The computer division budget for fixed costs is $450,000, and the budget for variable costs

is $145,600 The company anticipates using 520,000 minutes of computer time If the business consulting division uses 78,000 minutes of computer time, what is the total amount of computer department costs that will be allocated to the business consulting division (round your

intermediate calculation to two decimal places)?

A $21,840

B $89,340

C $111,840

D $119,120

113 Bayard Backup is a manufacturer of data storage devices Bayard operates two service

departments—maintenance and technology, and two production departments—assembly and testing Maintenance costs are allocated on the basis of square footage occupied, and technology costs are allocated on the basis of the number of workstations The following data relate to allocations of service department costs:

Maintenance Technology Assembly Testing

Service department costs $400,000 $230,000

114 Bayard Backup is a manufacturer of data storage devices Bayard operates two service

departments—maintenance and technology, and two production departments—assembly and testing Maintenance costs are allocated on the basis of square footage occupied, and technology costs are allocated on the basis of the number of workstations The following data relate to allocations of service department costs:

Maintenance Technology Assembly Testing

Service department costs $400,000 $230,000

115 VelCraft allocates costs from its payroll department and the maintenance department to its

production departments using the direct method of allocation Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet that the production department occupies within the factory Information about the departments is presented below:

116 VelCraft allocates costs from its payroll department and the maintenance department to its

production departments using the direct method of allocation Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet that the production department occupies within the factory Information about the departments is presented below:

117 VelCraft allocates costs from its payroll department and the maintenance department to its

production departments using the direct method of allocation Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet that the production department occupies within the factory Information about the departments is presented below:

118 VelCraft allocates costs from its payroll department and the maintenance department to its

production departments using the direct method of allocation Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet that the production department occupies within the factory Information about the departments is presented below:

119 VelCraft allocates costs from its payroll department and the maintenance department to its

production departments using the direct method of allocation Payroll department costs are allocated based on the number of employees in the department and maintenance department costs are allocated based on the number of square feet that the production department occupies within the factory Information about the departments is presented below:

When the maintenance department costs are allocated, what amount will be charged to the

molding department? (Round your intermediate calculation to two decimal places)

A $44,000

B $82,707

C $110,000

D $52,932

120 The manager of the molding department at the Category Products Company is evaluated based on

the profit performance of his department Personnel costs at Category Products are estimated to

be $40,000 These costs are allocated based on the number of employees in each production department The welding department has 40 employees, and the molding department has 60 employees The personnel department actually incurred $52,000 in personnel costs The profit of the molding department is down this year because the molding department’s share of allocated personnel costs is much higher than last year The allocation of personnel costs to the molding department is higher in the current year This is most likely due to

A the increase in the company’s total production costs

B allocating actual personnel costs to the production departments

C more number of efficient employees in the welding department

D more number of employees in the molding department

121 Vystar Credit Union has six service departments (human resources, duplicating, janitorial,

accounting, graphic design, and food services) whose fixed costs are allocated to the company’s two subsidiaries (Vystar Personal Banking and Vystar Business Banking) on the basis of their relative revenue What type of costs will the president of Vystar Business Banking subsidiary perceive the allocated service department costs to be?

A Fixed costs

B Opportunity costs

C Direct costs

D Variable costs

122 Unique Finds sells fine collectible statues and has implemented activity-based costing Costs in

the shipping department have been divided into three cost pools The first cost pool contains coststhat are related to packaging and shipping Unique has determined that the number of boxes

shipped is an appropriate cost driver for these costs The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected The final cost pool is used for general

operations of the department and the cost driver is the number of orders Information about the activities is summarized below:

Cost Pool Estimated

Total Costs

Annual ActivityPackaging and shipping $ 67,200 Number of boxes shipped 16,000 boxesFinal inspection 200,000 Number of individual items inspected 100,000 itemsGeneral operations 85,000 Number of orders 10,000 ordersDuring June, 2,100 boxes were packed and shipped How much is the packaging and shipping cost for each box shipped?

A $0.24

B $7.62

C $4.20

D $32.00

123 Unique Finds sells fine collectible statues and has implemented activity-based costing Costs in

the shipping department have been divided into three cost pools The first cost pool contains coststhat are related to packaging and shipping Unique has determined that the number of boxes

shipped is an appropriate cost driver for these costs The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected The final cost pool is used for general

operations of the department and the cost driver is the number of orders Information about the activities is summarized below:

Cost Pool Estimated

Total Costs

Annual ActivityPackaging and shipping $ 67,200 Number of boxes shipped 16,000 boxesFinal inspection 200,000 Number of individual items inspected 100,000 itemsGeneral operations 85,000 Number of orders 10,000 ordersDuring June, 4,000 items were sold reflecting 800 orders that were packed and shipped in 2,100 boxes What amount is allocated to each order for general operations of the department?

A $4.20

B $29.53

C $8.50

D $10.00

124 Unique Finds sells fine collectible statues and has implemented activity-based costing Costs in

the shipping department have been divided into three cost pools The first cost pool contains coststhat are related to packaging and shipping Unique has determined that the number of boxes

shipped is an appropriate cost driver for these costs The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected The final cost pool is used for general

operations of the department and the cost driver is the number of orders Information about the activities is summarized below:

Cost Pool Estimated

Total Costs

Annual ActivityPackaging and shipping $ 67,200 Number of boxes shipped 16,000 boxesFinal inspection 200,000 Number of individual items inspected 100,000 itemsGeneral operations 85,000 Number of orders 10,000 orders

An order is shipped to a retail customer who has ordered 6 individual items This order will be shipped in 3 separate boxes What is the packing and shipping cost that will be allocated to the order?

A $4.20

B $4.03

C $25.20

D $12.60

125 Unique Finds sells fine collectible statues and has implemented activity-based costing Costs in

the shipping department have been divided into three cost pools The first cost pool contains coststhat are related to packaging and shipping Unique has determined that the number of boxes

shipped is an appropriate cost driver for these costs The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected The final cost pool is used for general

operations of the department and the cost driver is the number of orders Information about the activities is summarized below:

Cost Pool Estimated

Total Costs

Annual ActivityPackaging and shipping $ 67,200 Number of boxes shipped 16,000 boxesFinal inspection 200,000 Number of individual items inspected 100,000 itemsGeneral operations 85,000 Number of orders 10,000 orders

A new customer orders two items that can be shipped in a single box What is the total shipping department cost that will be allocated to this order?