ACC 406 Chapter Notes - Chapter 2: Nabu, Ath, Horse Length
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1.Which of the following is not a benefit ofcost allocation?
a.Instilling responsibility for all costs of the company indivision managers.
b.Constructing performance measures that may be more meaningfulthan contribution margins.
c.Relating indirect costs to contracts, jobs and products.
d.Additional bookkeeping costs incurred to provide costallocation information.
2.Cost pools are used with:
Plantwide Rates | Department Rates | |
A. | Yes | No |
B. | No | Yes |
C. | No | No |
D. | Yes | Yes |
Option A
Option B
Option C
Option D
3.Product costs are computed by:
a.dividing the cost driver rate by the number of units of thecost driver in each product.
b.multiplying the cost driver rate by the number of units of thecost driver in each product.
c.adding the cost driver rates of all products.
d.averaging the plantwide cost driver rate with the cost driverfor each product.
4.When product costs are used for decision-making, whatassumption is most likely to distort the decisions?
a.There is a proportionality of overhead costs and output,regardless of whether a product is dropped or not.
b.Some overhead estimates can decrease when a product isdropped.
c.Some overhead costs could be fixed when a product isdropped.
d.The cost accounting system treats all overhead as if it werevariable with respect to the allocation base.
5. Dreamland University has 20 departments. Two of its bestdepartments are the (1) College of Innovation (COI) and (2) TestingServices. The College of Innovation (COI) attempts to teachstudents the difficult, but useful, skill of innovation. TestingServices grades examinations for professors. How would these twodepartments be classified?
College of Innovation | Testing Services | |
A. | Service | Service |
B. | User | Service |
C. | User | User |
D. | Service | User |
Option A
Option B
Option C
Option D
The following data are for the two products produced by Tadros Company.
Product A | Product B | ||||
Direct materials | $ | 14 per unit | $ | 24 per unit | |
Direct labor hours | 0.6 DLH per unit | 1.5 DLH per unit | |||
Machine hours | 0.5 MH per unit | 1.1 MH per unit | |||
Batches | 125 batches | 250 batches | |||
Volume | 10,000 units | 2,000 units | |||
Engineering modifications | 10 modifications | 50 modifications | |||
Number of customers | 500 customers | 400 customers | |||
Market price | $ | 34 per unit | $ | 95 per unit per unit | |
The company's direct labor rate is $20 per direct labor hour (DLH). Additional information follows.
Costs | Driver | |||
Indirect manufacturing | ||||
Engineering support | $ | 22,500 | Engineering modifications | |
Electricity | 28,800 | Machine hours | ||
Setup costs | 41,000 | Batches | ||
Nonmanufacturing | ||||
Customer service | 74,000 | Number of customers | ||
Required:
(Round your per unit cost answers to 2 decimal places and other answers to nearest whole number. Loss amounts should be indicated with minus sign.)
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5. Which method of product costing gives better information to managers of this company?
Departmental overhead rate method
Activity-based costing method
Plantwide overhead rate method