Cost Accounting A Managerial Emphasis 7th Canadian By Charles – Test Bank
To Purchase
this Complete Test Bank with Answers Click the link Below
If face any problem or
Further information contact us At tbzuiqe@gmail.com
Sample Questions
Cost Accounting, Cdn. Ed., 7e (Horngren)
Chapter 4 Job Costing
4.1 Describe the building-block concepts of costing
systems.
1) Cost assignment includes cost allocation for indirect costs
and direct costs.
Answer: TRUE
Explanation: Cost
assignment is a general term for assigning costs, whether
direct or indirect, to a cost
object .
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-1
2) Cost pools are defined as groupings of individual cost items
which can range from broad, company-wide categories to very narrow categories.
Answer: TRUE
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-1
3) A cost allocation base is only financial in nature, and is
usually the cost driver of the particular costs being measured.
Answer: FALSE
Explanation: A cost-allocation base (e.g., number of
machine-hours, or number of labour-hours) is a systematic way to link an
indirect cost or group of indirect costs to cost objects.
Diff: 2 Type: TF
Skill: Remember
Objective: LO 4-1
4) Direct costs are allocated to the cost object using a
cost-allocation method.
Answer: FALSE
Explanation: Indirect costs are allocated to the cost
object using a cost-allocation method.
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-1
5) The objective of allocating indirect costs is to measure the
underlying usage of indirect resources by jobs.
Answer: FALSE
Diff: 2 Type: TF
Skill: Remember
Objective: LO 4-1
6) For each cost pool, the indirect cost rate equals the
indirect cost pool divided by the cost allocation base.
Answer: TRUE
Diff: 2 Type: TF
Skill: Remember
Objective: LO 4-1
7) Raw materials that can be traced to a cost object are an
example of an indirect cost.
Answer: FALSE
Explanation: Raw materials are an example of a direct
cost.
Diff: 1 Type: TF
Skill: Understand
Objective: LO 4-1
8) Fixed and variable costs may be allocated to a cost object.
Answer: TRUE
Diff: 1 Type: TF
Skill: Understand
Objective: LO 4-1
9) The cost driver of an indirect cost is often used as the cost
allocation base.
Answer: TRUE
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-1
10) Cost
tracing is a specific term for assigning indirect costs.
Answer: FALSE
Explanation: Cost
tracing is a specific term for assigning direct costs
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-1
11) Transferring costs from indirect cost pools to cost objects
is called
1. A)
cost allocation.
2. B)
cost control.
3. C)
cost pool.
4. D)
cost factoring.
5. E)
cost processing.
Answer: A
Diff: 1 Type: MC
Skill: Remember
Objective: LO 4-1
12) A factor used to systematically link an indirect cost to a
cost object is called
1. A) a
cost allocation base.
2. B) a
cost pool.
3. C)
cost assignment.
4. D) a
traceable cost.
5. E) a
non-traceable cost.
Answer: A
Diff: 1 Type: MC
Skill: Remember
Objective: LO 4-1
13) Which of the following includes both traced direct costs and
allocated indirect costs?
1. A)
cost tracing
2. B)
cost pools
3. C)
assigned costs
4. D)
cost allocation
5. E)
cost recording
Answer: C
Diff: 2 Type: MC
Skill: Remember
Objective: LO 4-1
14) In general terms the process of assigning costs to a
particular product or service is called
1. A) a
cost allocation system.
2. B) a
cost assignment system.
3. C) a
job costing system.
4. D) a
process costing system.
5. E) a
cost recording system.
Answer: B
Diff: 2 Type: MC
Skill: Remember
Objective: LO 4-1
15) Which of the following would most likely be a direct cost in
a manufacturing company?
1. A)
supervision and engineering
2. B)
utilities
3. C)
repairs
4. D)
utilities and repairs
5. E)
raw materials
Answer: E
Diff: 2 Type: MC
Skill: Understand
Objective: LO 4-1
16) A grouping of individual cost items is called a
1. A)
cost objective.
2. B)
costing group.
3. C)
cost department.
4. D)
cost pool.
5. E)
cost base.
Answer: D
Diff: 1 Type: MC
Skill: Remember
Objective: LO 4-1
17) Assigning direct costs to a cost object is called
1. A) cost
allocation.
2. B)
job costing.
3. C)
cost pooling.
4. D)
process costing.
5. E)
cost tracing.
Answer: E
Diff: 1 Type: MC
Skill: Remember
Objective: LO 4-1
18) In a costing system
1. A)
cost tracing allocates indirect costs.
2. B)
cost allocation assigns direct costs.
3. C)
there may never be more than one indirect cost pool.
4. D) a
cost object should be a product and not a department or a geographic territory.
5. E) a
cost allocation base can be either financial or nonfinancial.
Answer: E
Diff: 2 Type: MC
Skill: Understand
Objective: LO 4-1
19) Which of the following is NOT possible to use as a cost
allocation base for manufacturing overhead?
1. A)
direct labour dollars
2. B)
direct labour hours
3. C)
direct material dollars
4. D)
direct labour hours or dollars
5. E)
indirect labour hours
Answer: E
Diff: 2 Type: MC
Skill: Understand
Objective: LO 4-1
20) Cost pools are often organized in conjunction with
1. A)
direct labour pools.
2. B)
the general ledger control accounts.
3. C)
variable and fixed costs.
4. D)
direct cost tracing techniques.
5. E)
cost-allocation bases.
Answer: E
Diff: 2 Type: MC
Skill: Remember
Objective: LO 4-1
21) Larry’s Appliance Shop operates retail stores that sell
appliances. The cost objects are the individual sales of a given type of appliance
and sales support. For refrigerators in July, the following costs were
recorded:
Professional sales staff commissions
$84,000
Amortization on office
space
4,000
Selling supplies
6,400
Office staff expenses
24,800
Customer relations
8,600
Training expenses
6,000
Utilities
1,400
Required:
1. Which
of the costs will be subject to direct cost tracing?
2. What
is the total cost for refrigerators?
3. What
is the total cost of the Sales Support for refrigerators?
Answer:
1. Professional
sales staff commissions are traced to each refrigerator sold.
1. Total
costs of refrigerators:
Professional sales staff commissions
$84,000
Amortization on office space
4,000
Selling supplies
6,400
Office staff expenses
24,800
Customer
relations
8,600
Training expenses
6,000
Utilities 1,400
Total
$135,200
1. Total
costs of sales support:
Amortization on office space
$4,000
Selling supplies
6,400
Office staff expenses
24,800
Customer relations
8,600
Training
expenses
6,000
Utilities
1,400
Total
$51,200
Diff: 2 Type: ES
Skill: Apply
Objective: LO 4-1
22) The new manager of the insurance division does not
understand how the company can have so many overhead rates for assigning costs
to the activities of the company’s life insurance underwriters. There is one
rate schedule for average assignable costs when agents write standard policies.
There is another rate schedule which the agents must complete when they write
special policies, and these policies are costed out differently from those that
are categorized as standard policies.
Required:
Why might the company have different costing systems with
different overhead rates for the standard and specialized policies?
Answer: Because the standard policies are written the same
way each time, the company knows how long it takes to complete such a policy
and the average effort expended by the agents in doing standard policy work.
Special policies, on the other hand, are different and the amount of effort and
time to complete such a policy is difficult to standardize. The agents are thus
required to keep track of their time and expenses in completing such policies.
A company needs to be able to accurately price its products, particularly in a
competitive industry. While there is no mention of allocation of indirect
costs, it appears that the company is using a modified job-costing system to
price its various products.
Diff: 2 Type: ES
Skill: Understand
Objective: LO 4-1
4.2 Distinguish job costing from process costing.
1) A job costing system assigns costs to a distinct unit or set
of units of a product or service.
Answer: TRUE
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-2
2) A process costing system assigns costs to groups of similar
units during a specified time period and then computes the average unit cost.
Answer: TRUE
Diff: 2 Type: TF
Skill: Remember
Objective: LO 4-2
3) Process costing is a useful system for tracking the costs of
building a house.
Answer: FALSE
Diff: 2 Type: TF
Skill: Understand
Objective: LO 4-2
4) In each period, job costing divides the total cost of
producing an identical or similar product by the total number of units produced
to obtain a per-unit cost.
Answer: FALSE
Explanation: This describes process-costing.
Diff: 2 Type: TF
Skill: Understand
Objective: LO 4-2
5) In a job cost system, the cost object is a unit or multiple
units of a distinct product or service called a job.
Answer: TRUE
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-2
6) Which of the following would be appropriately costed using a
process costing system?
1. A)
oil refining
2. B) a
law firm managing individual legal cases
3. C)
assembly of individual aircraft by Bombardier
4. D)
movies produced by Lions Gate Entertainment
5. E)
audit engagements performed by KPMG
Answer: A
Diff: 2 Type: MC
Skill: Understand
Objective: LO 4-2
7) Which of the following would be appropriately costed using a
job costing system?
1. A)
oil refining
2. B)
bank clearing at TD Canada Trust
3. C)
beverage production
4. D)
replacing a homeowner’s furnace
5. E)
lumber dealing by Weyerhaeuser
Answer: D
Diff: 2 Type: MC
Skill: Understand
Objective: LO 4-2
8) Provide examples of three companies that would likely use job
costing, and three companies that would likely use process costing.
Answer: Students will offer varied examples. From exercise
4-17:
Job costing:
1. A CA
firm
2. A custom
furniture manufacturer
3. A
textbook publisher
4. An
advertising agency
5. An
apparel manufacturing factory
6. A
medical care facility
7. A
landscaping company
8. A
movie studio
9. A law
firm
10. A
commercial aircraft manufacturer
11. A
management consulting firm
12. A
catering service
13. An
auto repair garage
Process costing:
1. An
oil refinery
2. A
tire manufacturer
3. A
pharmaceutical company
4. A
flour mill
5. A
paint manufacturer
6. A
cola-drink-concentrate producer
7. A law
firm
8. A
breakfast cereal company
9. A
paper mill
Diff: 2 Type: ES
Skill: Understand
Objective: LO 4-2
9) Describe job-costing and process-costing systems. Explain
when it would be appropriate to use each.
Answer: Job costing accumulates costs for different jobs
required by specific customers. Process costing computes and allocates an equal
amount of cost to each product. Job costing is the logical choice when the
production process has many distinct products or many heterogeneous jobs, while
process costing is typically used when it is not necessary to keep separate cost
records for individual jobs and the products are relatively homogeneous.
Diff: 2 Type: ES
Skill: Understand
Objective: LO 4-2
4.3 Describe the approaches to evaluating and
implementing job costing systems.
1) Actual costing systems are commonly found in practice because
the indirect cost information is readily available.
Answer: FALSE
Explanation: Actual costing systems are not commonly found
in practice because actual costs cannot be computed in a timely manner.
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-3
2) Actual costing allocates indirect costs based on the
predetermined indirect-cost rates multiplied by the actual quantities of the
cost-allocation bases.
Answer: FALSE
Explanation: Actual costing allocates indirect costs based
on the actual indirect-cost rates multiplied by the actual quantities of the
cost-allocation bases.
Diff: 2 Type: TF
Skill: Remember
Objective: LO 4-3
3) In the five-step decision-making process which of the
following is an element of the last step in the process?
1. A)
evaluate performance
2. B)
choose among alternatives
3. C)
identify uncertainties
4. D)
identify the problems
5. E)
make predictions about the future
Answer: A
Diff: 2 Type: MC
Skill: Remember
Objective: LO 4-3
4.4 Distinguish between actual and normal costing.
1) The difference between the actual costing and normal costing
methods is that actual costing uses a budgeted indirect cost rate while normal
costing uses an actual indirect cost rate.
Answer: FALSE
Explanation: The reverse is true.
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-4
2) Actual costing can also be a method of job costing.
Answer: TRUE
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-4
3) Actual costing traces direct costs to a cost object by
multiplying the budgeted direct cost rate and the actual quantity.
Answer: FALSE
Explanation: Actual costing traces direct costs to a cost
object by multiplying the actual direct cost rate and the actual quantity.
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-4
4) At the end of the year, the direct costs traced to jobs using
the budgeted rates will equal actual direct costs.
Answer: FALSE
Explanation: The actual rate and budgeted rate are
different because they are developed at different times.
Diff: 2 Type: TF
Skill: Remember
Objective: LO 4-4
5) For normal costing, even though the budgeted indirect-cost
rate is based on estimates, indirect costs are allocated to products based on
actual levels of the cost-allocation base.
Answer: TRUE
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-4
6) Direct costs are traced the same way for actual costing and
normal costing.
Answer: TRUE
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-4
7) Managers and accountants gather the information that goes
into their cost systems through source documents, which are the original
records that support journal entries in an accounting system.
Answer: TRUE
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-4
8) To smooth seasonal fluctuating levels of output, separate
indirect-cost rates should be calculated for each month.
Answer: FALSE
Explanation: To smooth seasonal costs and fluctuating
levels of output, indirect-cost rates should be calculated on an annual basis.
Diff: 2 Type: TF
Skill: Understand
Objective: LO 4-4
9) A job cost record (or job cost sheet) is a document where the
costs are recorded and accumulated.
Answer: TRUE
Diff: 1 Type: TF
Skill: Remember
Objective: LO 4-4
10) Place the following steps in the order suggested by the
seven steps used to assign costs to individual jobs:
1. Select
the cost-allocation bases to use for allocating indirect costs to the job
2. Compute
the rate per unit of each cost-allocation base used to allocate indirect costs
to the job
3. Compute
the total cost of the job by adding all direct and indirect costs assigned to
the job
4. Identify
the direct costs of the job
5. Compute
the indirect costs allocated to the job
6. Identify
the indirect costs associated with each cost-allocation base
7. Identify
the job that is the chosen cost object
8. A) G,
F, A, B, E, D, C
9. B) G,
D, A, B, F, E, C
10. C) G,
A, F, B, E, D, C
11. D) G,
A, D, F, B, E, C
12. E) G,
D, A, F, B, E, C
Answer: E
Diff: 2 Type: MC
Skill: Remember
Objective: LO 4-4
11) The first step in job costing is to
1. A)
identify the cost object.
2. B)
identify the direct costs.
3. C)
select the cost allocation base.
4. D)
identify the indirect costs.
5. E)
compute the rate per unit.
Answer: A
Diff: 1 Type: MC
Skill: Remember
Objective: LO 4-4
12) Which of the following is one of the steps used in assigning
manufacturing overhead costs to individual jobs?
1. A)
combine different cost objects into pools
2. B)
assign direct costs to the cost object
3. C)
identify the direct cost pools associated with the job
4. D)
calculate the direct cost allocation rate for each direct cost pool
5. E)
select the cost-allocation base to use in allocating indirect costs to the cost
object
Answer: E
Diff: 1 Type: MC
Skill: Remember
Objective: LO 4-4
13) Managers and accountants collect most of the cost
information that goes into their information systems through
1. A) an
information databank.
2. B)
computer programs.
3. C)
source documents.
4. D)
time surveys.
5. E)
interviewing workers.
Answer: C
Diff: 1 Type: MC
Skill: Remember
Objective: LO 4-4
14) A materials requisition record and a labour time record are
examples of which of the following?
1. A)
normal cost schedule
2. B)
job cost sheets
3. C)
job cost records
4. D)
cost object statements
5. E)
source documents
Answer: E
Diff: 1 Type: MC
Skill: Remember
Objective: LO 4-4
15) Normal costing refers to
1. A)
the average cost.
2. B)
costs within the relevant range.
3. C)
costs that behave like other similar costs.
4. D)
costs included in normal pools.
5. E) allocating
indirect costs at budgeted rates.
Answer: E
Diff: 1 Type: MC
Skill: Remember
Objective: LO 4-4
16) Using normal costing the amount of supervisory salaries to
allocate is determined by calculating
1. A)
actual direct-cost rates times actual quantities of direct-cost inputs.
2. B)
actual indirect-cost rates times actual quantities of cost-allocation bases.
3. C)
actual direct-cost rates times budgeted quantities of input.
4. D)
budgeted indirect-cost rates times actual quantities of cost-allocation bases.
5. E)
budgeted indirect-cost rates times budgeted quantities of cost-allocation
bases.
Answer: D
Diff: 2 Type: MC
Skill: Remember
Objective: LO 4-4
17) The difference between actual costing and normal costing is
1. A)
normal costing uses actual direct cost rates.
2. B)
actual costing uses actual quantities of direct cost inputs.
3. C)
normal costing uses budgeted quantities of actual direct cost inputs and
budgeted indirect cost rates.
4. D)
actual costing uses actual quantities of cost allocation bases.
5. E)
normal costing uses budgeted indirect cost rates.
Answer: E
Diff: 1 Type: MC
Skill: Understand
Objective: LO 4-4
18) The main advantage of using budgeted cost rates rather than
actual cost rates is
1. A)
budgeted costs allow managers to have cost information on a timely basis.
2. B)
budgeted costs may be subject to short-run fluctuations.
3. C)
budgeted indirect-cost rates are known prior to the inception of a new job.
4. D)
actual indirect-cost rates are affected by work done on other jobs.
5. E)
budgeted rates are just as accurate and require less effort.
Answer: A
Diff: 2 Type: MC
Skill: Understand
Objective: LO 4-4
19) Which of the following statements about normal costing is
TRUE?
1. A)
Direct costs and indirect costs are allocated using an actual rate.
2. B)
Direct costs and indirect costs are traced using budgeted rates.
3. C)
Direct costs are traced using a budgeted rate, and indirect costs are allocated
using an actual rate.
4. D)
Direct costs are traced using an actual rate, and indirect costs are allocated
using a budgeted rate.
5. E)
Direct costs are traced by using the actual direct-cost rate times the budgeted
quantity of the direct costs input.
Answer: D
Diff: 2 Type: MC
Skill: Remember
Objective: LO 4-4
20) Which of the following is part of the approach to computing
the budgeted indirect cost allocation rate?
1. A)
identify the costs which are part of the indirect cost pool
2. B)
identify costs associated with the direct cost pool
3. C)
estimate the cost items for direct cost pool
4. D)
adjust the cost allocation base for variances
5. E)
divide the total quantity of the cost allocation base into the total costs in
the direct cost pool
Answer: A
Diff: 1 Type: MC
Skill: Remember
Objective: LO 4-4
21) A machine shop has direct materials cost of $1,800,000
direct labour of $4,200,000 (direct labour rate is $50 per hour) and budgeted
indirect manufacturing costs of $850,000. Management believes that indirect
manufacturing costs increase with direct labour hours. What is the budgeted
indirect manufacturing cost rate?
2. A)
$2.12
3. B)
$2.33
4. C)
$4.94
5. D)
$10.12
6. E)
$17.00
Answer: D
Explanation: D) $850/(4,200/50) = $10.12
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
22) A local financial consulting firm employs 30 full-time
employees. The budgeted compensation per employee is $50,000. The annual
maximum chargeable time to each client is 1,000 hours. Clients always receive
their full amount of time. All labour costs are included in a single
direct-cost category and are traced to jobs on a per-hour basis.
Any other costs are included in a single indirect-cost pool,
allocated according to professional labour-hours. Budgeted indirect costs for
the year are $1,050,000, and the firm expects to have 60 clients during the
coming year.
What is the budgeted indirect-cost rate per hour?
50. A)
$1,050.00 per hour
51. B)
$50.00 per hour
52. C)
$35.00 per hour
53. D)
$17.50 per hour
54. E)
$10.00 per hour
Answer: D
Explanation: D) Indirect cost rate per hour =
$1,050,000/60,000 = $17.50 per hour
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
23) A local financial consulting firm employs 30 full-time
staff. The budgeted compensation per employee is $50,000, for 2,000 hours. All
direct labour costs are charged to clients.
Any other costs are included in a single indirect-cost pool,
allocated according to labour-hours. Actual indirect costs were $750,000.
Budgeted indirect costs for the year are $525,000 and the firm expects to have
60 clients during the coming year.
What is the total cost of a job which took 27 hours, using
normal costing?
911.
A) $911.25
912.
B) $1,012.50
913.
C) $27,337.50
914.
D) $30,375.00
915.
E) $50,000.00
Answer: A
Explanation: A) $50,000/2,000 hours
= $25.00 per hour DL
$525,000/(30 × 2,000) = $8.75
indirect
total cost per hour
= $33.75
total hours =
27
total cost
= $911.25
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
24) A company employs 25 full-time staff. The company spent
$75,000 in advertising in the year (this amount is a period cost with a constant
amount spent each year). Budgeted indirect manufacturing costs total $250,000
and the direct labour rate is $15 per hour. Budgeted labour hours were 500,000,
and actual labour hours were 524,000. Actual indirect overhead was $274,600.
What are the actual and normal indirect-cost rates respectively?
1. A)
$0.52 and $0.50
2. B)
$0.50 and $0.52
3. C)
$0.55 and $0.48
4. D)
$0.67 and $0.65
5. E)
$0.65 and $0.67
Answer: A
Explanation: A) actual = 274,600/524,000 = 0.52
normal = 250,000/500,000 = 0.50
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
25) Budgeted fixed indirect costs remain constant at $150,000
per month. During high-output months variable indirect costs are budgeted at
$120,000, and during low-output months budgeted variable costs are $60,000.
What are the respective high and low indirect cost rates if budgeted
professional labour-hours are 6,000 for high-output months and 2,000 for
low-output months?
31. A)
$31.25 per hour, $87.50 per hour
32. B)
$45.00 per hour, $95.00 per hour
33. C)
$45.00 per hour, $105.00 per hour
34. D)
$56.20 per hour, $105.00 per hour
35. E)
$59.00 per hour, $105.00 per hour
Answer: C
Explanation: C) $120,000/6,000 =
$20.00 $60,000/2,000 = $30.00
$150,000/6,000 =
25.00
$150,000/2,000
= 75.00
High Month = $45.00
Low Month = $105.00
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
26) Fixed costs remain constant at $200,000 per month. During
high-output months variable costs are $160,000, and during low-output months
variable costs are $40,000. What are the respective high and low indirect cost
allocation rates if professional labour-hours are 8,000 for high-output months
and 2,000 for low-output months?
45. A)
$45.00 per hour; $120.00 per hour
46. B)
$45.00 per hour; $45.00 per hour
47. C)
$25.00 per hour; $20.00 per hour
48. D)
$56.20 per hour; $120.00 per hour
49. E)
$25.00 per hour; $100.00 per hour
Answer: A
Explanation: A)
$200,000/8,000 = 25.00 $200,000/2,000 = $100.00
$160,000/8,000 = 20.00 $40,000/2,000
= 20.00
High Month = $45.00 Low Month
= $120.00
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
27) A law office employs full-time attorneys and five
paraprofessionals. For the current year indirect costs were budgeted at
$225,000, but actually amounted to $350,000.
Direct and indirect costs are applied on a professional
labour-hour basis which includes both attorney and paraprofessional hours.
Total budgeted labour-hours were 25,000; however, actual labour-hours were
30,000.
What is the actual indirect-cost rate, if a client used 5,000
professional labour-hours?
5. A)
$5.00
6. B)
$9.00
7. C)
$7.50
8. D)
$14.00
9. E)
$11.67
Answer: E
Explanation: E) 350,000 × 30,000 = $11.67
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
Use the information below to answer the following question(s).
A dental office is in the process of changing their costing
system. Their system currently uses a single direct cost pool (professional
labour) and a single indirect cost pool (staff support). The direct categories
in the new, refined costing system include:
1. Professional
partner labour. Average total annual compensation of the two partners is
$100,000; and, each partner has 2,000 hours of budgeted billable time.
2. Dental
assistant labour. Average total annual compensation of the four assistants is
$22,500 each, and each assistant has 2,000 hours of budgeted billable time.
3. Office
staff. Average total annual compensation of the two staff members is $15,000
each, and each has 2,000 hours of budgeted billable time.
The indirect category in the new refined costing system includes
professional liability insurance. The budgeted indirect amount is $200,000, and
the allocation base is budgeted professional labour hours. The dentist and
dental assistants are considered professional labour hours.
28) What is the budgeted indirect cost allocation rate per unit
of the allocation base for the professional liability insurance?
16. A)
$16.67
17. B)
$25.00
18. C)
$1.67
19. D)
$26.67
20. E)
$12.50
Answer: A
Explanation: A) $200,000/[2,000 × 2) + (2,000 × 4)] =
$16.67 per hour
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
29) What is the budgeted direct cost rate per hour for
professional partner labour?
25. A)
$25.00 per hour
26. B)
$50.00 per hour
27. C)
$44.50 per hour
28. D)
$38.00 per hour
29. E)
$46.00 per hour
Answer: B
Explanation: B) ($100,000 × 2)/(2,000 × 2) = $50.00 per
hour
Diff: 1 Type: MC
Skill: Apply
Objective: LO 4-4
30) What is the budgeted direct cost rate for dental assistant
labour?
17. A)
$17.875 per hour
18. B)
$16.125 per hour
19. C)
$13.750 per hour
20. D)
$11.250 per hour
21. E)
$9.125 per hour
Answer: D
Explanation: D) ($22,500 × 4)/(2,000 × 4) = $11.25 per
hour
Diff: 1 Type: MC
Skill: Apply
Objective: LO 4-4
31) What is the budgeted direct cost rate per hour for office
staff?
11. A)
$11.250 per hour
12. B)
$9.625 per hour
13. C)
$7.500 per hour
14. D)
$6.875 per hour
15. E)
$6.125 per hour
Answer: C
Explanation: C) ($15,000 × 2)/(2,000 × 2) = $7.50 per hour
Diff: 1 Type: MC
Skill: Apply
Objective: LO 4-4
32) What would be the percentage change in the budgeted direct
cost rate if they consider hiring one more employee, as part of the office
staff?
3. A)
3.0%
4. B)
2.0%
5. C)
1.0%
6. D)
0.5%
7. E) 0%
Answer: E
Explanation: E) ($15,000 × 3)/(2,000 × 3) = $7.50; ($7.50
– $7.50)/$7.50 = 0 percent
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
33) What would be the new budgeted direct cost rate if they
decided to give all of the dental assistants a 10% raise?
13. A)
$13.000 per hour
14. B)
$12.375 per hour
15. C)
$11.250 per hour
16. D)
$9.875 per hour
17. E)
$9.125 per hour
Answer: B
Explanation: B) [($22,500 × 110%) × 4]/(2,000 × 4) =
$12.375
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
Use the information below to answer the following question(s).
A Hospital uses a job cost system for all surgery patients. In
February, the pre-operating room (PRE-OP) and operating room (OR) had budgeted
allocation bases of 1,000 nursing hours and 500 nursing hours, respectively,
and budgeted nursing overhead charges were $28,000 and $22,000, respectively.
The hospital ward rooms for surgery patients had budgeted overhead costs of
$200,000 and 2,500 nursing hours for the month. PRE-OP, OR and the hospital
ward have separate indirect cost pools. The hospital uses a budgeted overhead
rate for applying overhead to patient stays.
For patient Jones, actual hours incurred were six and eight
hours, respectively, in the PRE-OP and OR rooms. He was in the hospital for 5
days (120 hours). Other costs related to Jones were:
|
PRE-OP Costs |
OR Costs |
Ward In-room Costs |
|
|
Patient medicine |
$200 |
$500 |
$2,400 |
|
Direct nursing time |
1,200 |
1,750 |
2,700 |
34) What is the budgeted overhead rate for the hospital floor
for surgery?
28. A)
$28.00
29. B)
$44.00
30. C)
$45.75
31. D)
$47.75
32. E)
$80.00
Answer: E
Explanation: E) $200,000/2,500 = $80
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
35) What was the total OR cost for patient Jones?
1. A)
$2,418
2. B)
$2,514
3. C)
$2,250
4. D)
$2,602
5. E)
$2,474
Answer: D
Explanation: D) $500 + $1,750 + [8 hours × ($22,000/500
hours)] = $2,602
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
36) What was the total PRE-OP cost for patient Jones?
1. A)
$1,400
2. B)
$1,568
3. C)
$1,624
4. D)
$1,664
5. E)
$1,752
Answer: B
Explanation: B) $200 + $1,200 + [6 × ($28,000/1,000
hours)] = $1,568
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
Use the information below to answer the following question(s).
Jim’s Computer Products manufactures keyboards for computers. In
June, the two production departments had budgeted allocation bases of 10,000
machine hours in Department 1 and 5,000 direct manufacturing labour hours in
Department 2. The budgeted manufacturing overheads for the month were $34,500
and $37,500, respectively. For Job 501, the actual costs incurred in the two
departments were as follows:
|
Department 1 |
Department 2 |
|
|
Direct materials purchased
on account |
$66,000 |
$106,500 |
|
Direct materials used |
19,500 |
8,100 |
|
Direct manufacturing labour |
31,500 |
32,100 |
|
Indirect manufacturing
labour |
6,600 |
5,400 |
|
Indirect materials used |
4,500 |
2,850 |
|
Lease on equipment |
9,750 |
2,250 |
|
Utilities |
600 |
750 |
Job 501 incurred 1,000 machine hours in Department 1 and 300
manufacturing labour hours in Department 2. The company uses a budgeted
departmental overhead rate for applying overhead to production.
37) What is the budgeted indirect cost allocation rate for
Department 1?
3. A)
$3.45 per hour
4. B)
$3.75 per hour
5. C)
$6.90 per hour
6. D)
$7.50 per hour
7. E)
$8.00 per hour
Answer: A
Explanation: A) $34,500/10,000 = $3.45
Diff: 1 Type: MC
Skill: Apply
Objective: LO 4-4
38) What is the budgeted indirect cost allocation rate for
Department 2?
3. A)
$3.45
4. B)
$3.75
5. C)
$4.60
6. D)
$7.50
7. E)
$8.00
Answer: D
Explanation: D) $37,500/5,000 = $7.50
Diff: 1 Type: MC
Skill: Apply
Objective: LO 4-4
39) What is the total cost assigned to Job 501 based on normal
costing?
1. A)
$27,600
2. B)
$91,200
3. C)
$96,900
4. D)
$123,900
5. E)
$126,500
Answer: C
Explanation: C) $19,500 + $31,500 + 1,000 ($3.45) + $8,100
+ $32,100 + 300 ($7.50) = $96,900
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
Use the information below to answer the following question(s).
Capable Carts manufactures custom carts for a variety of uses.
The following data have been recorded for Job 892, which was recently
completed. Direct materials used cost $6,300, the budgeted direct materials
were $5,900. There were 180 direct labour hours worked on this job at a direct
labour wage rate of $20 per hour; the budgeted direct labour wage rate was $21
per hour. There were 75 machine hours used on this job. The budgeted and actual
indirect cost allocation rates are $32 and $29 per machine hour used,
respectively.
40) What is the total manufacturing cost of Job 892 using normal
costing?
1. A)
$9,900
2. B)
$12,300
3. C) $12,080
4. D)
$12,255
5. E)
$12,075
Answer: B
Explanation: B) $6,300 + (180 × $20) + (75 × $32) =
$12,300
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
41) What is the total manufacturing cost of Job 892 using actual
costing?
1. A)
$9,900
2. B)
$12,300
3. C) $12,080
4. D)
$12,255
5. E)
$12,075
Answer: E
Explanation: E) $6,300 + (180 × $20) + (75 × $29) =
$12,075
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
Use the information below to answer the following question(s).
World Engines Ltd. manufactures custom engines for use in the
lawn and garden equipment industry. The company allocates manufacturing
overhead based on machine hours. Selected data for costs incurred for Job 787
are as follows:
|
Direct materials used |
$3,500 |
|
Direct labour hours worked |
300 |
|
Machine hours used |
400 |
|
Direct labour rate per hour |
$16 |
|
Predetermined overhead rate
based on machine hours |
$18 |
|
Budgeted direct labour rate
per hour |
$20 |
|
Budgeted direct labour
hours |
310 |
|
Budgeted machine hours |
370 |
|
Overhead rate based on
actual indirect costs and actual machine hours |
$15 |
|
Direct materials budgeted |
$3,900 |
42) What is the total manufacturing cost of Job 787 using normal
costing?
1. A)
$17,100
2. B)
$14,960
3. C)
$12,800
4. D)
$15,500
5. E)
$14,300
Answer: D
Explanation: A)
1. D)
$3,500 + (300 hrs. × $16) + (400 hrs. × $18) = $15,500
2. E)
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
43) What is the total manufacturing cost of Job 787 using actual
costing?
1. A)
$17,100
2. B)
$14,960
3. C)
$12,800
4. D) $15,500
5. E)
$14,300
Answer: E
Explanation: A)
1. D)
2. E)
$3,500 + (300 hrs. × $16) + (400 hrs. × $15) = $14,300
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
Use the information below to answer the following question(s).
The following data were taken from the records of Big Sky Ltd.,
a manufacturing company. The company has been calculating the actual indirect
cost allocation rate using direct labour hours as the allocation base.
|
Actual total indirect costs |
$1,152,000 |
|
Budgeted total indirect
costs |
$1,216,000 |
|
Actual direct labour costs |
$3,200,000 |
|
Actual direct labour rate |
$50 per hour |
|
Actual machine hours |
30,000 hours |
|
# of employees |
32 |
44) What is the actual indirect cost rate at Big Sky Ltd. using
direct labour hours as the allocation base?
384.
A) $384.00
385.
B) $7.68
386.
C) $18.00
387.
D) $19.00
388.
E) $138.89
Answer: C
Explanation: C) $1,152,000/64,000 = $18.00
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
45) What is the actual indirect cost rate at Big Sky Ltd. using
machine hours as the allocation base?
60. A)
$60.67
61. B)
$10.67
62. C)
$7.89
63. D)
$4.05
64. E)
$3.84
Answer: E
Explanation: E) 1,152,000/300,000 = $3.84
Diff: 1 Type: MC
Skill: Apply
Objective: LO 4-4
46) Normandeau Company’s actual indirect cost pool amounted to
$1,400,000 and the direct labour pool was $5,400,000. Overhead is allocated on
the basis of direct labour hours. Actual and budgeted direct labour hours were
25,000 and 30,000 for the period. What is the manufacturing overhead cost
allocation rate using actual direct labour hours as the cost allocation base?
46. A)
$46.67
47. B)
$272.00
48. C)
$75.00
49. D)
$226.67
50. E)
$56.00
Answer: E
Explanation: E) 1,400,000/25,000 = 56.00
Diff: 1 Type: MC
Skill: Apply
Objective: LO 4-4
47) A company currently has 30 full-time employees. Actual time
for each employee was as follows:
|
billable time for clients |
2,000 hours |
|
vacation time |
200 hours |
|
professional development |
175 hours |
|
nonbillable time |
0 hours |
|
sick leave |
125 hours |
Consumer demand for the company’s services is at 100 percent of
time available. Each employee receives a salary of $75,000 per year.
What is the total actual indirect cost allocation rate if
management believes that clients should be charged for the employees’ benefits?
10. A)
$10.00
11. B)
$6.67
12. C)
$30.00
13. D)
$6.00
14. E)
$37.50
Answer: D
Explanation: D) (200 + 175 + 125)/(2,000 + 200 + 175 +
125) × 75,000 = $15,000
$15,000/2,500 = $6.00 per hour
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
48) John wants to identify the total cost for computing the
corporate tax return he prepared for his client. Labour is the only direct cost
at $50 per hour. Indirect costs are $60 per labour hour. What is the total
direct cost, indirect cost, and job cost, respectively, if 15 hours are spent
preparing the tax return?
1. A)
$700, $850, $1,550
2. B)
$750, $800, $1,550
3. C)
$750, $900, $1,650
4. D)
$800, $640, $1,440
5. E)
$800, $900, $1,440
Answer: C
Explanation: C) Direct
cost 15 hours × $50.00
= $750
Indirect cost
15 hours × $60.00 =
900
$1,650
Diff: 1 Type: MC
Skill: Apply
Objective: LO 4-4
49) Last week Job # WPP 298 was charged: DM of $4,606; DL of
$1,579; and, MOH of $3,960 based on machine hours. The materials requisition
record for this week showed an additional purchase of 10 brackets at a unit
cost of $16; the direct labour costs were the same as the first week; and, the
total machine hours for both weeks are now 140 hours at $45 per machine hour.
Calculate the revised total job cost. (direct materials + direct labour +
manufacturing overhead).
1. A)
$10,145
2. B)
$11,884
3. C)
$12,645
4. D)
$18,184
5. E)
$14,224
Answer: E
Explanation: E) Direct materials = $4,606 + (10 × $16) =
$4,766
Direct labour = 1,579 × 2 =
3,158
Manufacturing OVH = 140 × $45 =
6,300
$14,224
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
50) Camden Company gathered the following information for the
year ended December 31:
|
Direct labour cost incurred
for the year |
$240,000 |
|
Manufacturing overhead
costs |
$180,000 |
|
Beginning finished goods
inventory |
$200,000 |
|
Work-in-process inventory,
Dec. 31 |
$55,000 |
|
Finished goods inventory,
Dec. 31 |
$67,500 |
|
Cost of goods sold |
$141,000 |
|
Estimated direct labour
hours |
300,000 |
Clyde Company uses a job costing system. What is the indirect
cost allocation rate for the year be using direct labour hours as the
allocation base?
1. A)
$1.11 per direct labour hour
2. B)
$0.90 per direct labour hour
3. C)
$1.20 per direct labour hour
4. D)
$0.60 per direct labour hour
5. E)
$0.47 per direct labour hour
Answer: D
Explanation: D) $180,000/300,000 = $.60
Diff: 1 Type: MC
Skill: Apply
Objective: LO 4-4
51) ZamTech Moldings allocates manufacturing overhead to jobs
based on machine hours. The company has the following estimated costs for the
upcoming year:
|
Direct materials used |
$25,000 |
|
Direct labour costs |
$62,000 |
|
Salary of factory
supervisor |
$41,000 |
|
Advertising expense |
$33,000 |
|
Heating and lighting costs
for factory |
$21,000 |
|
Depreciation on factory
equipment |
$9,000 |
|
Sales commissions |
$8,000 |
The company estimates that 1,800 direct labour hours will be
worked in the upcoming year, while 2,000 machine hours will be used during the
year. The predetermined indirect allocation rate per machine hour is closest to
1. A)
$56
2. B)
$36
3. C)
$100
4. D)
$15
5. E)
$40
Answer: B
Explanation: B) $41,000 + 21,000 + 9,000 = $71,000/2000 =
$36
Diff: 1 Type: MC
Skill: Analyze
Objective: LO 4-4
52) Copley Enterprises manufactures digital video equipment. For
each unit $1,475 of direct material is used and there is $1,500 of direct
manufacturing labour at $30 per hour. Manufacturing overhead is applied at $35
per direct manufacturing labour hour. Calculate the cost of each unit.
1. A)
$2,975
2. B)
$4,025
3. C)
$1,750
4. D)
$3,150
5. E)
$4,725
Answer: E
Explanation: E) $1,475 + $1500 + (($1,500/30 hours) ∗ 35 hours) = $4,725
Diff: 2 Type: MC
Skill: Apply
Objective: LO 4-4
53) Beacon Company does residential real estate appraisals.
There are 40 professionals on its staff. Each professional is allotted the
following number of hours per year:
Budgeted billable time for clients
1,800 hours
Budgeted vacation time
180 hours
Budgeted professional development
100 hours
Budgeted nonbillable time due to lack of demand
0 hours
Budgeted sick leave
120 hours
The company receives more jobs than it can handle and therefore
rejects most out of town work. The budgeted salary for each professional is
$44,000 per year with fringe benefits of $11,000.
During the previous year, the actual salaries were $46,500, plus
fringe benefits of $11,500.
Required:
1. What
was the total budgeted direct cost rate if the company believes that clients
should be charged directly for its employees’ salaries and benefits?
2. What
was the budgeted direct cost rate if the company wants to charge clients for
employee vacation, sick leave, and professional development as an indirect
cost?
Answer:
30. Total
budgeted direct cost rate = ($44,000 + $11,000)/1,800 = $30.56 per hour
31. Total
budgeted direct cost rate = $44,000/1,800 = $24.45 per hour
Diff: 2 Type: ES
Skill: Apply
Objective: LO 4-4
Comments
Post a Comment