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1. Essay: Gibson Company uses a Points: 10
Blackboard Scholar® predetermined o...
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Question Gibson Company uses a predetermined overhead rate of $5 per machine
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hour to apply overhead. During the year, 32,500 machine hours were
CourseSites Live worked. Actual manufacturing overhead cost for the year was $187,500.
Discussion Board Company records showed the following account balances at the end of the
Glossary year:
Journals
Messages Materials $ 22,500
Respondus LockDown Work in process 37,500
Browser
Finished goods 50,000
Rubrics
SafeAssign Cost of goods sold 112,500
Self and Peer Assessment
Send Email Required:
SoftChalk - Synchronize
Copied Content a. Determine the amount of underapplied or overapplied overhead.
SoftChalk Publish with
ScoreCenter b. Assuming the amount of underapplied or overapplied overhead is
material, determine underapplied or overapplied overhead that would
Tasks
be allocated to the following accounts if the allocation is made using
Tests, Surveys, and Pools
ending account balances:
Text Notifications
Wikis
Work in Process
Evaluation
Finished Goods
Grade Center
Cost of Goods Sold
Users and Groups
Customization
c. Assuming the amount of underapplied or overapplied overhead is
Packages and Utilities material, calculate the new balance of the following accounts after
http://www.worldwideplastic.net/juju/c4-5.htm[10/11/2011 11:53:00 PM]

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Help underapplied or overapplied overhead has been allocated:
Work in Process
Finished Goods
Cost of Goods Sold
d. Determine the balance of Cost of Goods Sold if underapplied or

overapplied overhead is immaterial.
Answer
a. $25,000 underapplied $187,500 - ($5 ´ 32,500)
b. Work in Process, $4,687.50 $25,000 ´ ($37,500/$200,000)

Finished Goods, $6,250.00 $25,000 ´ ($50,000/$200,000)
Cost of Goods Sold, $14,062.50 $25,000 ´ ($112,500/$200,000)
c. Work in Process, $42,187.50 = $37,500 + $4687.50

Finished Goods, $56,250 = $50,000 + $6,250
Cost of Goods Sold, $126,562.50 = $112,500 + $14,062.50
d. $137,500 = $112,500 + $25,000
✔
2. Essay: Kramer Company has decided to Points: 10
use a p...
Question Kramer Company has decided to use a predetermined rate to assign factory
overhead to production. The following predictions have been made for 2011:
Total factory overhead costs $150,000

Direct labor hours 40,000
hours
Direct labor costs $200,000
Machine hours 60,000
hours
Required:
a. Compute the predetermined factory overhead rate under three different

bases: (1) direct labor hours, (2) direct labor costs, and (3) machine
hours.
b. Assume that actual factory overhead was $152,500 and that Kramer
elected to apply factory overhead to Work in Process based on direct
labor hours. If actual direct labor was 42,000 hours for 2011, was
factory overhead overapplied or underapplied? By how much?
c. Kramer Company follows the policy of writing off any under- or

overapplied factory overhead balance to Cost of Goods Sold at the
end of the year. Make the entry necessary at the end of 2011 to
dispose of the factory overhead balance determined in Part (b).
Answer
a. (1) Direct labor hours: ($150,000/40,000 hours) = $3.75
per DLH
(2) Direct labor costs: ($150,000/$200,000) = 75% of

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DLC
(3) Machine hours: ($150,000/60,000 hours) = $2.50 per
MH
b. Overhead applied (42,000 ´ $3.75) $157,500

Actual overhead 152,500
Overapplied overhead by $ 5,000
c. Factory Overhead 5,000

Cost of Goods Sold 5,000
✔
3. Essay: The Jewnoe plant has two Points: 10
production d...
Question The Jewnoe plant has two production departments: molding and assembly.
The plant produces two products: A and B. Cost information for the
production departments is given below:
Molding $360,000
Assembly 750,000
The following table presents activity information about the departments and
products:
Molding Assembly Total
Direct labor
hours:
A 10,000 20,000 30,000

B 10,000 30,000 40,000
Total 20,000 50,000 70,000
Machine hours:
A 5,000 1,000 6,000
B 15,000 2,000 17,000

Total 20,000 3,000 23,000
Required:
a. Compute the predetermined overhead rate for each department if

Molding uses machine hours and Assembly uses labor hours.
b. Calculate the per unit overhead rate for each product if 80,000 units of
A were produced and 90,000 units of B were produced.
Answer a. Moldings $ 360,000

Overhead rate $18
Assembly 750,000
Labor hours 50,000
Overhead rate $15

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b.
A B
units produced 80,000 90,000
overhead applied to
production
Molding:
$18 x 5000 $ 90,000
$18 x 15,000 $270,000
Assembly
$15 x 20,000 $300,000
$15 x 30,000 $450,000
Total $390,000 $720,000
Overhead per Unit $4.875 $8
✔ 4. Essay: The Juneau plant produces two Points: 10

calcula...
Question The Juneau plant produces two calculators and has two production
departments: assembly and packaging. Information for the products is given
below:
Deluxe Regular Total

Units produced 20,000 200,000
Prime costs $160,000 $1,500,000 $1,660,000
Direct labor 20,000 160,000 180,000
hours
Number of 60 40 100
setups
Machine hours 10,000 80,000 90,000
Inspection hours 2,000 16,000 18,000
Number of 180 120 300
moves
The following table presents activity information about the departments and
products:
Assembly Packaging Total

Direct labor
hours:
Deluxe 10,000 10,000 20,000
Regular 150,000 10,000 160,000
Total 160,000 20,000 180,000
Machine hours:
Deluxe 2,000 8,000 10,000
Regular 8,000 72,000 80,000
Total 10,000 80,000 90,000
Overhead Costs:
Setting $120,000 $ 120,000 $240,000
equipment
Moving material 60,000 60,000 120,000
Machining 20,000 180,000 200,000
Inspection 16,000 144,000 160,000
Total $216,000 $504,000 $720,000

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Required:
a. Compute the predetermined overhead rate for each department if

Assembly uses labor hours and Packaging uses machine hours.
b. Calculate the per unit cost for each product if departmental overhead
rates are used. (Round to 2 decimal places)
c. Compute the predetermined plant-wide overhead rate based on direct

labor hours.
d. Calculate the per unit cost of each product if a plantwide overhead rate
is used.(Round to 2 decimal places)
e. Calculate the overhead rates for each overhead activity.
f. Calculate the per unit cost of each product if a activity rates are used to
assign overhead.
(Round to 2 decimal places)
Answer
a. Assembly $ 216,000
Labor hours 160,000
Overhead rate $1.35
Packaging $504,000
Overhead rate $6.30
b.
Deluxe Regular
Units 20,000 200,000
Prime costs $160,000 $1,500,000
Overhead applied to
production
Assembly:
1.35 x 10,000 13,500
1.35 x 150,000 202,500
Packaging
6.30 x 8,000 50,400
6.30 x 72,000 453,600
Total $223,900 $2,156,100
Overhead per Unit $11.20 $10.78
c. $720,000/180,000 = $4 per labor hour
d.
Deluxe Regular
Units 20,000 200,000
Prime costs $160,000 $1,500,000

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Overhead costs
4 x 20,000 80,000
4 x 160,000 640,000
Total costs $240,000 $ 2,140,000
Unit cost $12 $10.70
e.
Activity Cost Driver Activity Rate

Setting up equip $240,000 100 $2,400 per setup
Moving material $120,000 300 $400 per move
Machining $200,000 90,000 $2.22 machine hour
Inspecting $160,000 18,000 $8.89 per inspection
hours
f.
Deluxe Regular
Units 20,000 200,000
Prime costs $160,000 $1,500,000
Overhead costs:
Setting up
$2,400 x 60 144,000
$2400 x 40 96,000
Moving materials
$400 x 180 72,000
$400 x 120 48,000
Machining
$2.22 x 10,000 22,200
$2.22 x 80,000 177,600
Inspecting
$8.89 x 2000 17,780
$8.89 x 16,000 142,240
Total costs $415,980 $ 1,963,840
Unit cost $20.80 $9.82
✔
5. Essay: Ivory Corporation manufactures two Points: 10
pr...
Question Ivory Corporation manufactures two products (A and B). The overhead costs
have been divided into four cost pools that use the following activity drivers:
Number of Number of Machine Packing

Product Setups Orders Hours Orders
A 20 35 1,000 75
B 5 70 1,500 125
Cost per pool $15,000 $8,400 $120,000 $40,000
Required:
a. Compute the allocation rates for each of the activity drivers listed.

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b. Allocate the overhead costs to Products A and B using activity-based

costing.
c. Compute the overhead rate using machine hours under the functional-
based costing system.
d. Allocate the overhead costs to Products A and B using the functional-
based costing system overhead rate calculated in part (c).
Answer
a. Number of Number of Machine Packing
Setups Orders Hours Orders
Cost per $15,000 $8,400 $120,000 $40,000

pool
Total ÷ 25 ÷ 105 ÷ 2,500 ÷ 200
Allocation $ 600 $ 80 $ 48 $ 200

rate
b. Product A Product B
Number of 20 ´ $600 = $12,000 5 ´ $600 = $ 3,000

setups
Number of 35 ´ $80 = 2,800 70 ´ $80 = 5,600

orders
Machine 1,000 ´ $48 = 48,000 1,500 ´ $48 = 72,000

hours
Packing 75 ´ $200 = 15,000 125 ´ $200 = 25,000

orders
$77,800 $105,600
c. ($15,000 + $8,400 + $120,000 + $40,000)/2,500 = $73.36 per MH
d. Product A: 1,000 ´ $73.36 = $73,360

Product B: 1,500 ´ $73.36 = $110,040
✔
6. Essay: Hunter Company manufactures two Points: 10
produ...
Question Hunter Company manufactures two products (XX and YY). The overhead
costs have been divided into four cost pools that use the following activity
drivers:
Number of Number of Number of Labor

Labor
Product Orders Setups Transactions Hours
XX 60 20 50 2,000
YY 20 80 70 500
Cost per pool $16,000 $13,000 $2,400 $20,000
Required:
a. Compute the allocation rates for each of the activity drivers listed.
b. Allocate the overhead costs to Products XX and YY using activity-
based costing.
c. Compute the overhead rate using labor hours under the functional-

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based costing system.

d. Allocate the overhead costs to Products XX and YY using the
functional-based costing system overhead rate calculated in part (c).
Answer
a. Number of Number of Number of Labor
Labor
Orders Setups Transactions Hours
Cost per $16,000 $13,000 $ 2,400 $20,000

pool
Total ÷ 80 ÷ 100 ÷ 120 ÷ 2,500
Allocation $ 200 $ 130 $ 20 $ 8

rate
b. Product XX Product B
Number of 60 ´ $200 = $12,000 20 ´ $200 = $ 4,000

orders
Number of 20 ´ $130 = 2,600 80 ´ $130 = 10,400

setups
No. of labor 50 ´ $20 = 1,000 70 ´ $20 = 1,400

trans.
Labor hours 2,000 ´ $8 = 16,000 500 ´ $8 = 4,000
$31,600 $19,800
c. ($16,000 + $13,000 + $2,400 + $20,000)/2,500 = $20.56 per DLH
d. Product XX: 2,000 ´ $20.56 = $41,120

Product YY: 500 ´ $20.56 = $10,280
✔
7. Essay: Lyons, Inc., has identified the Points: 10
follo...
Question Lyons, Inc., has identified the following overhead costs and activity drivers
for next year:
Overhead Item Expected Cost Activity Driver Expected Qty.

Setup costs $150,000 Number of setups 1,200
Ordering costs 40,000 Number of orders 10,000
Maintenance 200,000 Machine hours 16,000
Power 20,000 Kilowatt hours 100,000
The following are the two product models completed during the year:
Model XX Model YY
Direct materials $2,250 $2,500
Direct labor 3,000 1,875
Units completed 375 300
Direct labor hours 90 110
Number of setups 6 8
Number of orders 8 15
Machine hours 180 150
Kilowatt hours 90 120

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The company's normal activity is 20,000 direct labor hours.
Required:
a. Determine the unit cost for each job using direct labor hours to apply
overhead.
b. Determine the unit cost for each job using the four activity drivers.
(Round amounts to 2 decimal places.)
c. Which method produces the more accurate cost assignment? Why?
Answer
a. Unit cost for Model XX: $18.92
Unit cost for Model YY: $22.10
Model XX
Direct materials $2,250
Direct labor 3,000
Overhead assigned: ($20.50* ´ 90) 1,845
Total cost $7,095
Unit cost ($7,095/375) $18.92
*($150,000 + $40,000 + $200,000 + $20,000)/20,000 = $20.50/DLH
Model YY
Direct labor 1,875
Overhead assigned: ($20.50 ´ 110) 2,255
Total cost $6,630
Unit cost ($6,630/300) $22.10
b. Unit cost for Model XX: $22.13

Unit cost for Model YY: $24.45
Setup: $150,000/1,200 = $125/setup

Ordering: $40,000/10,000 = $4/order
Maintenance: $200,000/16,000 = $12.50/hour
Power: $20,000/100,000 = $0.20/kilowatt hour
Model XX
Direct labor 3,000
Overhead assigned:
$125 ´ 6 750
$4 ´ 8 32
$12.50 ´ 180 2,250
$0.20 ´ 90 18
Total cost $8,300

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Unit cost ($8,300/375) $22.13
Model YY
Direct material $2,500
Direct labor 1,875
Overhead assigned:
$125 ´ 8 1,000
$4 ´ 15 60
$12.50 ´ 150 1,875
$0.20 ´ 120 24
Total cost $7,334
Unit cost ($7,334/300) $24.45
c. Activity-based costing produces more accurate cost information

because overhead incurrence is often related to many different
activities rather than a single volume-based activity driver.
✔ 8. Essay: King Manufacturing has four Points: 10

categorie...
Question King Manufacturing has four categories of overhead. The four categories
and expected overhead costs for each category for next year are as follows:
Maintenance $70,000
Materials handling 30,000
Setups 25,000
Inspection 50,000
Currently, overhead is applied using a predetermined overhead rate based

upon budgeted direct labor hours. 50,000 direct labor hours are budgeted
for next year.
The company has been asked to submit a bid for a proposed job. The plant
manager feels that obtaining this job would result in new business in future
years. Usually, bids are based upon full manufacturing cost plus 30 percent.
Estimates for the proposed job are as follows:

Direct labor (750 hours) $3,750
Number of machine hours 300
Number of material moves 8
Number of setups 3
Number of inspections 5
In the past, full manufacturing cost has been calculated by allocating

overhead using a volume-based activity driver, direct labor hours. The plant
manager has heard of a new way of applying overhead that uses cost pools
and activity drivers.
Expected activity for the four activity drivers that would be used are:

Material moves 4,000

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Setups 2,000
Quality inspections 8,000
Required:
a. Determine the amount of overhead that would be allocated to the

proposed job if direct labor hours are used as the volume-based activity
driver.
Determine the total cost of the proposed job.
Determine the company's bid if the bid is based upon full manufacturing
cost plus 30 percent.
b. Determine the amount of overhead that would be applied to the

proposed project if activity-based costing is used.
Determine the total cost of the proposed job if activity-based costing is

used.
Determine the company's bid if activity-based costing is used and the

bid is based upon full manufacturing cost plus 30 percent.
c. Which product costing method produces the more competitive bid?
Answer
a. $2,625
($70,000 + $30,000 + $25,000 + $50,000)/50,000 =
$3.50/DLH
$3.50 ´ 750 DLH = $2,625
$8,875 ($2,500 + $3,750 + $2,625)

$11,537.50 ($8,875 ´ 130%)
b. $1,442.75
Maintenance: $70,000/16,000 = $4.375

Material handling: $30,000/4,000 = $7.50
Setups: $25,000/2,000 = $12.50
Inspection: $50,000/8,000 = $6.25
Overhead assigned:
$4.375 ´ 300 $1,312.50
$7.50 ´ 8 60.00
$12.50 ´ 3 37.50
$6.25 ´ 5 31.25
$1,441.25
$7,691.25 ($2,500 + $3,750 + $1,441.25)

$9,998.63 ($7,691.25 ´ 130%)

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c. Activity-based costing produces more accurate cost information and a

more competitive bid.
✔
9. Essay: The Data Maintenance Corporation Points: 10
prov...
Question The Data Maintenance Corporation provided the following data about its
resources and activities.
Resources Activities clerical

hours
Supervision $ processing accounts 10,000

140,000
phone and issuing statements 2,000

supplies 80,000
salaries processing data 10,000
250,000
computer answering customer 3,000

20,000 inquiries
total $ total 25,000

490,000
In addition, computers are used for issuing statements (30 percent) and
processing data (70 percent). Phones, supplies, and answering customer
inquiries are 60 percent, with the other 40 percent divided equally among
the remaining activities, including supervision. The supervisor spends 100
percent of his/her time on supervision. In addition to the 25,000 clerical
hours, there are 2,000 hours of supervision used (the hours used by the
supervising clerks activity which is not listed above)
Required:
Prepare a work distribution matrix for the primary activities.

Answer
Activity supervisor staff
processing accounts 40% 10/25
issuing statements 8% 2/25

processing data 40% 10/25
answering customer 12% 3/25

inquiries
supervision 100% 2,000/2,000
✔ 10. Essay: Hilton Manufacturing uses an Points: 10

activity...
Question Hilton Manufacturing uses an activity-based costing system. The company

produces Model A and Model B. Information concerning the two products is
as follows:
Model A Model B
Direct labor hours 24,000 26,000
Engineering labor (hours) 4,000 6,000
Setups 20 30
Kilowatt hours 5,000 7,000

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The following overhead activities and costs are

reported:
Power $12,000
Labor-related overhead 70,000
Setups 60,000
Required:
a. Classify the following overhead activities as unit-level activities, batch-

level activities, or product-level activities:
Power
Engineering
Setups
b. Calculate the following:
Activity rate for power

Activity rate for setups
Activity rate for engineering
c. Calculate the following:
Power costs assigned to Model B

Setups costs assigned to Model A
Engineering costs assigned to Model A
d. Calculate the total overhead cost per unit for Model A using ABC.
e. Calculate the total overhead cost assigned to Model A using the

approximately relevant ABC system based on only the two most
expensive activities. Round to 2 decimal places)
f. State the set of equations using the equally accurate reduced ABC
system based on the consumption ratios for labor related costs and
setups.(Round to 2 decimal places)
Answer
a. Power: Unit-level activity
Engineering: Product-level activity
Setups: Batch-level activity
b. $1.00/kwh [$12,000/(5,000 + 7,000)] = $1.00

$1,200/setup [$60,000/(20 + 30)] = $1,200
$7/hour [$70,000/(4,000 + 6,000)] = $7
c. $7,000 ($1.00 ´ 7,000)

$24,000 ($1,200 ´ 20)
$28,000 ($7 ´ 4,000)

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d. ABC
Model A Model B
Overhead
Power
$1 x 5,000 $ 5000
$1 x 7,000 $ 7000
Setups
$1,200 x 20 24,000
$1,200 x 30 36,000
Engineering
$7 x 4,000 28,000
$7 x 6,000 42,000
Total overhead $57,000 $85,000
Units 30,000 50,000
Overhead per unit $1.90 $1.70
e. approximately relevant ABC system

most expensive activities:
labor related $70,000 +[$70,000/$130,000 x $12,000] = $76,461.54
/50,000 = $1.53
setups $60,000 +[$60,000/$130,000 x $12,000] = $65,538.46 /50
= $1,310.77
Model A Model B
labor related $1.53 x 24,000 = $36,720 $1.53 x 26,000
= 39,780
setups $1,310.77 x 20 = 26,215.40 $1,310.77 x 30 =
39,323.10
total $62,935.40 79,103.10
f.
global consumption ratios

Model A $57,000/$142,000 = .40
Model B $85,000/$142,000 = .60
set of equations where x = labor hrs. and y = setups

.4 = .48x +.4y
.6 = .52x + .6y
✔ 11. Essay: Funk Manufacturing Company Points: 10

produces s...
Question Funk Manufacturing Company produces specially machined parts. The parts
are produced in batches in one continuous manufacturing process. Each
part is custom produced and requires special engineering design activity
(based on customer specifications). Once the design is completed, the
equipment can be set up for batch production. Once the batch is completed,
a sample is taken and inspected to see if the parts are within the tolerances
allowed. Thus, the manufacturing process has four activities: engineering,
setups, machining, and inspecting. In addition, there is a sustaining process
with two activities: providing utilities (plantwide) and providing space. Costs
have been assigned to each activity using direct tracing and resource
drivers:
Engineering $125,000
Setups 112,500
Machining 250,000

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Inspection 100,000
Providing space 31,250
Providing utilities 22,500
Activity drivers for each activity have been identified and their practical
capacities listed:

Setups 400
Engineering hours 10,000
Inspection hours 5,000
The costs of batch-level activities are assigned using number of setups.

The costs of facility-level activities are assigned using machine hours.
Required:
a. Identify the activities within each process as unit-level, batch-level,

product-level, or facility-level.
b. Build an activity relational table.
c. Compute the pool rates.
Answer
a. Manufacturing process:
Unit-level: Machining
Batch-level: Engineering, setups, and
inspecting
Product-level: None
Sustaining process:
Facility-level: Providing utilities, providing
space
b. Activity Activity
Activity Name Process Level Driver Capacity Cost
1 Machining Manufact. Unit Mach. 50,000 $250,000
hrs.
2 Engineering Manufact. Batch # of 400 125,000
setups
3 Setup Manufact. Batch # of 400 112,500
setups
4 Inspecting Manufact. Batch # of 400 100,000
setups
5 Prov. space Sustaining Facility Mach. 50,000 31,250
hrs.
6 Prov. util. Sustaining Facility Mach. 50,000 22,500
hrs.
c. Pool rates:
Pool 1: $250,000/50,000 = $5.00 per machine hour

Pool 2: $337,500/400 = $843.75 per setup
Pool 3: $53,750/50,000 = $1.08 per machine hour

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✔ 12. Essay: Godwin Corporation produces Points: 10

specially...
Question Godwin Corporation produces specially machined parts. The parts are
produced in batches in one continuous manufacturing process. Each part is
custom produced and requires special engineering design activity (based on
customer specifications). Once the design is completed, the equipment can
be set up for batch production. Once the batch is completed, a sample is
taken and inspected to see if the parts are within the tolerances allowed.
Thus, the manufacturing process has four activities: engineering, setups,
machining, and inspecting. In addition, there is a sustaining process with
two activities: providing utilities (plantwide) and providing space. Costs have
been assigned to each activity using direct tracing and resource drivers:
Engineering $250,000
Setups 225,000
Machining 500,000
Inspection 200,000
capacities listed:

Setups 200
The costs of batch-level activities are assigned using number of setups.

Required:
a. Identify the activities within each process as unit-level, batch-level,

product-level, or facility-level.
b. Build an activity relational table.
c. Compute the rates for each activity.
Answer
a. Manufacturing process:
Unit-level: Machining
Batch-level: Engineering, setups, and inspecting
Product-level: None
Sustaining process:
Facility-level: Providing utilities, providing space
b. Activity Activity
Activity Name Process Level Driver Capacity Cost
1 Machining Manufact. Unit Mach. 25,000 $500,000
hrs.
2 Engineering Manufact. Batch # of 200 250,000
setups

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3 Setup Manufact. Batch # of 200 225,000

setups
4 Inspecting Manufact. Batch # of 200 200,000
setups
5 Prov. space Sustaining Facility Mach. 25,000 62,500
hrs.
6 Prov. util. Sustaining Facility Mach. 25,000 45,000
hrs.
c. Activity rates:
machining $500,000/25,000 = $20 per machine hour

engineering: $250,000/200 = $1250.00 per setup
setup $225,000/200 = $1,125 per setup
inspecting $200,000/200 = $1000 per setup
providing space $62,500/25,000 = $2.50 per machine hour
providing utilities: $45,000/25,000 = $1.80 per machine hour
✔
13. Essay: Doyle Manufacturing Company has Points: 10
the f...
Question Doyle Manufacturing Company has the following activities: creating bills of
materials (BOM), studying manufacturing capabilities, improving
manufacturing processes, training employees, and designing tooling. The
general ledger accounts reveal the following expenditures for manufacturing
engineering:
Salaries $500,000
Equipment 100,000
Supplies 30,000
Total $630,000
The equipment is used for two activities: improving processes and designing
tooling. Forty percent of the equipment's time is used for improving
processes and 60 percent is used for designing tools. The salaries are for
five engineers, one who earns $160,000 and four who earn $85,000 each.
The $160,000 engineer spends 30 percent of his time training employees in
new processes and 70 percent of his time on improving processes. One
engineer spends 100 percent of her time on designing tooling and another
engineer spends 100 percent of his time on improving processes. The
remaining two engineers spend equal time on all activities. Supplies are
consumed in the following proportions:
Creating BOMs 15%

Studying capabilities 5%
Improving processes 30%
Training employees 30%
Designing tooling 20%
Required:
Using the resource drivers and direct tracing, calculate the cost of each
manufacturing engineering activity. What are the resource drivers?
Answer
Activity Cost
Creating BOMS $ 38,500 *

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Studying capabilities 35,500 **

Improving processes 280,000 ***
Training employees 91,000 ****
Designing tooling 185,000 *****
$630,000
* (0.20 ´ $170,000 + 0.15 ´ $30,000)

** (0.20 ´ $170,000 + 0.05 ´ $30,000)
*** (0.40 ´ $100,000 + 0.70 ´ $160,000 + $85,000 + 0.20 ´ $170,000
+ 0.30 ´ $30,000)
**** (0.30 ´ $160,000 + 0.20 ´ $170,000 + 0.30 ´ $30,000)
***** (0.60 ´ $100,000 + $85,000 + 0.20 ´ $170,000 + 0.20 ´ $30,000)
Resource drivers: Percent of machine usage, percent of effort, and percent

of supply usage.
✔
14. Essay: Elbert Manufacturing has recently Points: 10
ins...
Question Elbert Manufacturing has recently installed an activity-based relational data

base. Using the information contained in the activity relational table, the
following pool rates were computed:
$400 per purchase order

$24 per machine hour, Process R
$30 per machine hour, Process S
$80 per engineering hour
$4 per packing order
$200 per square foot
Two products are produced by Elbert: Regular and Super. Each product has
an area in the plant that is dedicated to its production. The plant has two
manufacturing processes, the regular process (Process R) and the super
process (Process S). Other processes include engineering, product
handling, and procurement. The product relational table for Elbert is as
follows:
Regular Product:
Activity Driver # and Name Activity
Usage
1 Units 800,000
2 Purchase orders 1,000
3 Machine hours 320,000
4 Engineering hours 5,000
5 Packing orders 400,000
6 Square footage 6,000
Super Product:
Usage
1 Units 100,000
2 Purchase orders 500

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5 Packing orders 100,000
6 Square footage 4,000
Required:
a. Identify two different concatenated keys. What is the purpose of

concatenated keys?
b. Using the pool rates and the information from the product relational
table, calculate the unit overhead cost for each product.
c. Does the product relational table indicate how many activities are in
each pool? Is this necessary for product costing? Explain.
Answer
a. First key: Product Name and Driver Name; Second key: Product
Name and Driver Number. Concatenated keys uniquely identify each
record. This is essential for accessing data and using it for product
costing.
b. Calculation of unit overhead costs:
Driver Assignment Super

Regular
Purchase order:
$400 ´ 1,000 $ 400,000
$400 ´ 500 $ 200,000
Machine hours:
$24 ´ 320,000 7,680,000
$30 ´ 40,000 1,200,000
Engineering hours:
$80 ´ 5,000 400,000
$80 ´ 6,000 480,000
Packing orders:
$4 ´ 400,000 1,600,000
$4 ´ 100,000 400,000
Square footage:
$200 ´ 6,000 1,200,000
$200 ´ 4,000 800,000
Total $11,280,000 $3,080,000
Units ÷ 800,000 ÷_ 100,000
Unit overhead cost $ 14.10 $ 30.80
c. The product relational table does not reveal the activities in each pool.
This information would come from the activity relational table. For
product costing, individual activity information is not needed. Once
pool rates are computed, all that is needed is the activity usage by
each product.
✔ 15. Essay: Manchester Manufacturing Points: 10

Company has ...
Question Manchester Manufacturing Company has an accounts receivable

department that performs three activities within the department: processing
customer credit applications, invoicing customers, and performing collection

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activities. During interviews, the employee survey reports that they spend 15
percent of their time processing credit applications, 55 percent of their time
invoicing customers, and 30 percent of their time on collection activities. The
accounts receivable department employs 10 associates for a total cost of
$200,000. Assume each associate works 8 hours per day, 20 days per
month, but an estimate of practical capacity is 80 percent. After close
observation of the employee’s daily work, managers conclude the following:
Processing a credit 35 minutes

application:
Invoicing a Customer: 10 minutes
Collection activities: 20 minutes
The estimated monthly quantities of work in the three activities are 500
credit applications, 18,000 invoices, and 900 collection calls.
Required:
1. Under a traditional ABC system, what is the cost of one unit of
activity?
2. Assuming the practical capacity information, what is the cost per
minute of supplying capacity?
3. Under time-driven ABC, what are the cost driver rates for each
activity?
Answer 1.
Activity % Time Assigned Activity Cost-Driver
Spent Cost Quantity Rate
Processing 15% $ 30,000 500 $60 per

Credit credit
Application application
Processing 55% $110,000 18,000 $6.11 per

Invoices invoice
Collection 30% $ 60,000 900 $66.66 per

Activities call
Totals 100% $200,000
2. 1 associate * 8 hours per day * 20 days * 60 minutes = 9,600

minutes per associate, per month
At 80 percent capacity, that would be 9,600 * 80% = 7,680 * 10
associates = 76,800 minutes in total. Therefore, the cost per minute
of supplying capacity is $2.60 ($200,000 / 76,800, rounded to the
nearest cent)
3. Cost rates per activity:
Processing Credit Applications: $2.60 per minute * 35 minutes =
$91 per credit application
Processing $2.60 per minute * 10 minutes = $26 per
Invoices: invoice
Collection Activities: $2.60 per minute * 20 minutes = $52 per
collection call
✔ 16. Essay: Compare and contrast Points: 10

perishability an...
Question Compare and contrast perishability and intangibility in an automobile oil

lubrication shop and architectural design firms.
Answer Intangibility refers to the nonphysical nature of services. There can be no
inventory of services. Both lube jobs and architectural designs must be
performed upon the demand of the customer to meet the specifications-of
the car, land, etc. Perishability also means that services cannot be

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inventoried because they are consumed when they are performed. The
consumption of service means that customers may need repeated
treatments. Oil lubes are much more perishable than architectural designs.
There is a more frequent need for lube jobs than design jobs.
✔ 17. Essay: What is the most important factor Points: 10

tha...
Question What is the most important factor that causes service firms to generally rank
lower in customer satisfaction than manufacturing firms?
Answer Employees are key to customer services. Service firms have a greater
heterogeneity of labor due to different skills and abilities for interacting with
customers and each other. Employees may not even behave the same
from one day to another, creating inconsistency in the level of service. In
manufacturing, employees are interacting with machinery in more routine
tasks. Performance is more consistent.
✔ 18. Essay: Explain why actual costing Points: 10

systems ar...
Question Explain why actual costing systems are rarely used in practice.
Answer Actual costing systems are rarely used in practice because they do not
provide accurate unit cost information on a timely basis. Actual per-unit
overhead costs can vary dramatically from period to period because (1)
actual costs vary from period to period and/or (2) the number of units
produced may vary from period to period. Thus, when actual costing is
used, a unit produced during a low-volume month may be assigned a
higher cost than a unit produced during a high-volume month, even though
the units are identical.
To avoid fluctuations in per-unit costs using actual overhead costs, it is

necessary to wait until the end of the period and use total actual overhead
costs for the year to calculate per-unit amounts. However, that information
is received too late to be used throughout the year for planning, control,
and decision making. Using a normal costing system and a predetermined
overhead rate avoids the problems associated with an actual cost system.
✔
19. Essay: Why are firms reluctant to use Points: 10
actual...
Question Why are firms reluctant to use actual costing? How does normal costing
solve the problems?
Answer Actual costing systems do not provide accurate unit cost information on a
timely basis because manufacturing overhead costs are indirect costs that
may fluctuate dramatically from month to month and may be incurred
independent of nonuniform production levels. Normal costing averages
overhead over the entire year and applies it as production takes place.
✔ 20. Essay: Why are unit costs important? Points: 10

Why do ...
Question Why are unit costs important? Why do full-cost unit costs change from
accounting period to accounting period.
Answer Unit costs are important for valuing inventory, calculating the CGS and net
income, and for making decisions. Full-cost unit costs consist of direct
materials, direct labor and manufacturing overhead. If there are changes in
production volume, the fixed manufacturing overhead will be spread over
different numbers of units causing unit costs to change.
✔
21. Essay: What are the source documents Points: 10
used in...

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Question What are the source documents used in a job-order costing system? How
do the source documents relate to the job cost sheet? How do these
documents inform work in process?
Answer The materials requisition form and job time tickets are the source
documents for materials and labor. The materials requisition form is used to
bring materials needed for production to the production floor for different
jobs. The job time ticket is kept for each laborer. It reports the time spent
working on different jobs. These source documents are used to assign
materials and labor costs to job cost sheets. The job cost sheet collects all
the materials, labor, and overhead applied to each job. The job cards are
read and summarized to create the WIP account.
✔
22. Essay: Jocarro Company has a job Points: 10
costing sys...
Question Jocarro Company has a job costing system. The following items appeared in
the Work-in-Process account during February 2011:
February 1, 2011, balance $20,000
Materials placed into ?

production
Direct labor (4,000 $120,000

hours)
Factory overhead applied $96,000

Cost of goods $400,000
manufactured
February 28, 2011, $16,000

balance
Jocarro applies overhead to production on the basis of direct labor hours.

Job XX, the only job in process on February 28, has been charged $10,600
materials cost and has 100 labor hours of direct labor time assigned to it.
Required:
a. Determine the predetermined factory overhead rate for Jocarro

Company.
b. Determine the amounts of materials, direct labor, and factory overhead

included in the
February 28, 2011, work in process.
c. Determine the amount of materials placed into production during

February 2011.
Answer a. Factory overhead rate = $96,000/4,000 = $24 per direct labor hour
b. Costs assigned to Job XX:

materials $10,600
direct labor (100 x $30*) 3,000
factory overhead applied (100 x $24) 2,400
work in process, February 28,2006 $16,000
* $120,000/4000 = $30 per hour
c. $X + $120,000 +$96,000 + $20,000 - $16,000 = $400,000

X = $180,000
✔
23. Essay: Reed Incorporated uses a job- Points: 10
order co...

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Question Reed Incorporated uses a job-order costing system and a predetermined

overhead rate based on machine hours.
At the beginning of the year, the company estimated manufacturing

overhead for the year would be $240,000 and machine hours would be
8,000.
The following information pertains to December of the current year:
Job 10 Job 11 Job 12 Total

Work-in-process, Dec. 1 $16,000 $26,000 $38,000
$80,000
December production activity:

Materials requisitioned $4,000 $4,800 $7,200
$16,000
Direct labor cost $2,400 $3,600 $4,000 $10,000
Machine hours 400 700 900 2,000
Labor hours 120 180 200 500
Actual manufacturing overhead cost incurred in December was $61,000.
Required:
a. Compute the predetermined overhead application rate.
b. Determine the total cost associated with each job.
c. If jobs 10 and 12 were completed, prepared the journal entry to move

the cost.
d. If job 10 was delivered to customers that paid $50,000 cash, prepare

the journal
entries.
What is the gross profit for job 10?
e. Assuming no beginning work in process, what is the cost assigned to

ending work in
process?
f. Assuming no beginning finished goods what is the cost assigned to

ending finished goods?
g. How much was overhead over/underapplied?

Answer a. $240,000/8,000 = $30
b. Job 10 Job 11 Job 12 Total

Work in process, Dec. 1 $16,000 $26,000 $38,000
$80,000
Materials requisitioned $ 4,000 $ 4,800 $ 7,200
$16,000
Direct labor cost $ 2,400 $ 3,600 $ 4,000
$10,000
Overhead applied:
Machine hours
400 x $30 $12,000
700 x $30 $21,000
900 x $30 $27,000
total 34,400 55,400 76,200
c. Finished goods $110,600

Work in process $110,600
job 10 + job 12 = 34,400 + 76,200 = $110,600 (the cost of goods

manufactured)

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d. record a sale
Cash $50,000
Sales $50,000
Cost of goods sold $34,400

Finished goods $34,400
Sales $50,000
CGS 34,400
Gross Profit $15,600
e. Job 11 is still in production = $55,400
f. Finished goods has 1 job - job 12 = $76,200
g. Actual overhead $ 61,000

Applied overhead (12,000 + 21,000 + 27,000)=$ 60,000
Underapplied overhead $ 1,000
✔
24. Essay: Wolf Company had the following Points: 10
select...
Question Wolf Company had the following selected account balances at the end of
2011:
Work in Process $120,000

Finished Goods 150,000
Factory Overhead (overapplied) 63,000
Required:
a. Prepare the journal entry to dispose of the factory overhead balance

assuming it is written off to Cost of Goods Sold.
b. Prepare the journal entry to dispose of the factory overhead balance
assuming it is allocated among Work in Process, Finished Goods, and
Cost of Goods Sold based on ending balances.
c. Which method of disposing of under- or overapplied factory overhead
cost is more accurate? Explain.
Answer
a. Factory Overhead 63,000
b. Factory Overhead 63,000

Work in Process (120/450) 16,800
Finished Goods (150/450) 21,000
Cost of Goods Sold (180/450) 25,200
c. When the amount of overapplied or underapplied overhead is

immaterial, writing it off to Cost of Goods Sold is sufficient. If the
amount is material, allocating the amount to the two inventories (WIP
and FG) and Cost of Goods Sold is preferable.
✔ 25. Essay: Selected account balances of Points: 10

Howard C...

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Question Selected account balances of Howard Company for 2011 are as follows:
Work in Process $35,000 Debit

Finished Goods $65,000 Debit
Cost of Goods Sold $100,000 Debit
Factory Overhead $22,000 Debit
Required:
a. Were factory overhead costs underapplied or overapplied in 2011?

Explain.
b. Prepare the journal entry to dispose of the factory overhead balance
assuming the amount is immaterial.
c. Prepare the journal entry to dispose of the factory overhead balance
using the allocation method.
Answer
a. Underapplied by $22,000
The actual costs were $22,000 greater than
those applied to work-in-process.
b. Cost of Goods Sold 22,000

Factory Overhead 22,000
c. Work in Process (35,000/200,000) 3,850

Finished Goods (65,000/200,000) 7,150
Cost of Goods Sold (100,000/200,000) 11,000
✔ 26. Essay: The following information was Points: 10

taken f...
Question The following information was taken from the job cost sheet for Job 101 for
Scott Manufacturing Company:
Date started: July 5, 2011

Date completed: August 21, 2011
Direct Direct Factory Job
Date Materials Labor Overhead Total
7-05-09 $3,000
7-15-09 $ 900 $450
7-17-09 1,500
7-22-09 1,350 675
8-01-09 1,500
8-21-09 600 300
Job 101 was sold on account on August 25, 2011, for 160 percent of its
cost.
Required:

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a. Prepare the journal entries to record the costs incurred for Job 101 in
2011 for direct materials, direct labor, and factory overhead.
b. Prepare the journal entry to record the completion of Job 101.
c. What is the predetermined factory overhead rate for Scott?
d. Prepare the journal entries to record the sale of Job 101.
Answer
a. Work-in-Process 6,000
Materials 6,000
Work-in-Process 2,850
Wages Payable 2,850
b. Finished Goods 10,275

c. $1,425/$2,850 = 50% of direct labor costs
d. Accounts Receivable 16,440

Sales 16,440

Finished Goods 10,275
✔ 27. Essay: Moore Company completed the Points: 10

following...
Question Moore Company completed the following transactions with respect to its
manufacturing operations during December 2011:
a. Materials costing $140,000 and indirect materials costing $16,800 were

purchased on account. Assume indirect materials was debited to
materials.
b. A total of $70,000 of materials was requisitioned to the factory for
manufacturing operations conducted during December.
c. Manufacturing payroll for the month consisted of 2,000 hours of direct
labor and 500 hours of indirect labor, both at $14 per hour.
d. Indirect materials costing $7,000 were requisitioned.
e. Depreciation on the factory building and equipment was $14,000.
f. Miscellaneous factory overhead expenses totaled $5,600 for
December.
g. Factory overhead cost was applied to work in process at the rate of
125 percent of direct labor costs.
h. Units of product with a total manufacturing cost of $84,000 were
completed and transferred to the finished goods warehouse.
i. Finished goods costing $49,000 were sold during December for
$77,000.
Required:

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Prepare journal entries for each of the transactions that occurred during
December 2011.
Answer
a. Materials 156,800
Accounts Payable 156,800
b. Work-in-Process 70,000
Materials 70,000
c. Work-in-Process 28,000
Wages Payable 35,000
d. Factory Overhead 7,000

Materials 7,000
e. Factory Overhead 14,000

Accumulated Depreciation 14,000
f. Factory Overhead 5,600

Various Accounts 5,600
g. Work-in-Process 35,000
h. Finished Goods 84,000

i. Cash 77,000
Sales 77,000

Finished Goods Inventory 49,000
✔
28. Essay: Dobro Company has two Points: 10
production depa...
Question Dobro Company has two production departments: A and B. Dobro has
following budgeted overhead costs and activity:
Overhead costs Direct labor hours

Machine hours
Department A $ 50,000 10,000 5,000
Department B 175,000 5,000 25,000
Total $250,000 15,000 30,000
Production data for job 20 and 21 are given below:
Job 20 Job 21
Dept A Dept B Dept A
Dept B
Prime costs $7,000 $12,000 $22,000 $30,000
Direct labor hours 50 5 60 5
Machine hours 10 40 10 50

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Job 20 Job 21
Units produced 100 100
Required:
a. Compare the costs per unit of Job 20 if Dobro uses

1. a plantwide rate based on direct labor hours;
2. a plantwide rate based on machine hours;
3. departmental rates with Department A based on direct
labor hours and Department B using machine hours.
(round to 2 decimal places)
b. Why is there such a variation in the cost per unit? Which method
provides the best
cost assignment?
Answer a. Overhead rates if Dobro uses
1. a plantwide rate based on direct labor hours;
$250,000/15,000 = $16.67 DLH
2. a plantwide rate based on machine hours;
$250,000/30,000 = $8.33 MH
3. departmental rates with department A based on direct
labor hours and department B using machine hours.
A $50,000/10,000 = $5 DLH
B $175,000/5,000 = $35 MH
✔
29. Essay: Highland Corporation is a job Points: 10
order c...
Question Highland Corporation is a job order costing company that uses activity-
based costing to apply overhead to jobs. The following overhead activities
were budgeted for the year.
Activity Cost Driver Amount of

driver
setups $ 120,000 number of 6,000

setups
purchasing 80,000 number of parts 20,000
other overhead 150,000 direct labor 75,000

hours
The following information about the jobs was given for October.
Job Job Job Job

1001 1002 1003 1004
Balance 10/1 $44,900 $60,700 $30,500 0

direct 54,000 37,000 25,000 41,000
materials
direct labor 80,000 38,500 43,000 71,000
number of 40 10 30 200
setups
number of 300 180 400 500

parts
direct labor 5,000 2,400 5,200 1,200
hours
By October 31, Jobs 1001 and 1003 were completed and sold. The
remaining jobs were still in process.

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Required:
1. Calculate the activity rates for each overhead activity.
2. Calculate the cost of each job for October 31.
3. What is the beginning work in process on October 1 and November 1?
4. What is the cost of goods manufactured?
5. What is the cost of goods sold?
6. Draw the T account for work in process. (include all debits and credits)
Prepare the Statement of the Cost of Goods Manufactured.
WIP
___________________________________________
BI |
DM |
DL |
MOH |
_________________ |__________________________
EI
Answer 1.
Activity Cost amount of activity rate
Driver
setups $ 120,000 6,000 $ 20

purchasing 80,000 20,000 $ 4
other overhead 150,000 75,000 $ 2
2.
Job 1001 Job 1002 Job 1003 Job 1004 Total
Balance $44,900 $60,700 $30,500 0 136,100

10/1
dm 54,000 37,000 25,000 41,000 157,000
dl 80,000 38,500 43,000 71,000 232,000
# setups ( 40) (10) 200 (30) 600 (200) 5,600

$20 800 4,000
# parts $4 (300) (180) (400) (500) 5,520

1,200 720 1,600 2,000
dlhours (5,000) (2,400) (5,200) (1,200) 27,600
$2 10,000 4,800 10,400 2,400
TOTAL $190,900 $141,920 $111,100 $120,400 $564,320
3. BWIP = $136,100
EWIP 10/31 = BWIP 11/1 = jobs 1002 + 1004 = $141,920 + $120,400 =
$262,320
4. CGM = jobs 1001 + 1003 = $190,900 + $111,100 = $302,000
5. CGS = jobs 1001 + 1003 = $190,900 + $111,100 = $302,000
6. WIP
___________________________________________
BI 136,100 | 302,000
DM 157,000 |
DL 232,500 |
MOH 38,720 |
_________________ |__________________________
EI 262,320
STATEMENT OF COST OF GOODS MANUFACTURED

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Highland Corporation
Month of October
Direct materials used in production $157,000

Direct labor 232,500
Manufacturing overhead applied 38,720
Total manufacturing costs added 428,220
Add: beginning work in process 136,100
Less: ending work in process 262,320
Cost of Goods manufactured 302,000
✔ 30. Multiple Choice: Which is NOT a Points: 10

characteristic of a un...
Question Which is NOT a characteristic of a unit-based costing system?

Answer It uses traditional product costing definitions.
It uses unit-based activity drivers to assign overhead to products.
It is cheaper than an activity-based costing system.
It offers greater product costing accuracy than an activity-based
costing system.
✔
31. Multiple Choice: Unit-level product Points: 10
costing assigns
Question Unit-level product costing assigns

Answer direct materials and direct labor directly to products and assigns
overhead to departmental pools which are assigned to products using
predetermined overhead rates based on unit-level drivers.
direct materials, direct labor and overhead to departmental cost pools
which as assigned to products using predetermined overhead rates based
on unit-level drivers.
direct materials and direct labor directly to products and assigns
overhead to departmental pools which are assigned to products using
predetermined overhead rates based on non-unit level drivers.
direct materials, direct labor and overhead to departmental cost pools
which are assigned to products using predetermined overhead rates based
on non-unit level drivers.
✔
32. Multiple Choice: Unit-based product Points: 10
costing uses which...
Question Unit-based product costing uses which of the following procedures?

Answer Overhead costs are traced to departments, then costs are traced to
products.
Overhead costs are traced to activities, then costs are traced to
products.
Overhead costs are traced directly to products.
All overhead costs are expensed as incurred.
✔
33. Multiple Choice: A(n) _______________ Points: 10
method first tra...
Question A(n) _______________ method first traces costs to a department and then
to products.
Answer direct costing
absorption costing
unit-based costing
indirect costing

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✔ 34. Multiple Choice: A predetermine overhead Points: 10

rate is calcu...
Question A predetermine overhead rate is calculated using which of the following

formulas?
Answer Actual annual overhead / budgeted annual driver level
Budgeted annual overhead / budgeted annual driver level
Budgeted annual overhead / actual annual driver level
Actual annual overhead / actual annual driver level
✔
35. Multiple Choice: The overhead rates of Points: 10
the traditional...
Question The overhead rates of the traditional functional-based product costing use
Answer non-unit-based activity drivers.
unit-based activity drivers.
process costing.
job order costing.
✔
36. Multiple Choice: A costing system that Points: 10
uses actual cos...
Question A costing system that uses actual costs for direct materials and labor and
predetermined overhead rates to apply overhead is called a(n)
Answer actual costing system.
normal costing system.
standard costing system.
activity-based costing system.
✔ 37. Multiple Choice: Common measures of Points: 10

production activit...
Question Common measures of production activity include

Answer units produced.
direct labor hours.
machine hours.
all of these.
✔ 38. Multiple Choice: If unit-based product Points: 10

costing is used...
Question If unit-based product costing is used, which of the following would be traced
directly to the product?
Answer setup costs
direct labor
maintenance of machinery
inspection costs
✔
39. Multiple Choice: Product costs can be Points: 10
distorted if a u...
Question Product costs can be distorted if a unit-based activity driver is used and
Answer non-unit-based overhead costs are a significant proportion of total
overhead.

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the consumption ratios differ between unit-based and non-unit-based

input categories.
both a and b.
neither a nor b.
✔
40. Multiple Choice: All of the following are Points: 10
non-unit-bas...
Question All of the following are non-unit-based activity drivers EXCEPT

Answer number of setups.
number of direct labor hours.
number of inspections.
number of material moves.
✔
41. Multiple Choice: All of the following are Points: 10
unit-based a...
Question All of the following are unit-based activity drivers EXCEPT

Answer machine hours.
number of setups.
number of units.
direct labor hours.
✔
42. Multiple Choice: For a labor-intensive Points: 10
manufacturing o...
Question For a labor-intensive manufacturing operation, which of the following would

be the most appropriate activity driver?
Answer machine hours
direct labor hours
number of employees
units of output
✔ 43. Multiple Choice: In a department that is Points: 10

drilling hole...
Question In a department that is drilling holes in materials, which activity base is likely
to be most appropriate for assigning overhead costs?
Answer units produced
direct labor hours
machine hours
number of batches
✔
44. Multiple Choice: A department that is Points: 10
capital-intensiv...
Question A department that is capital-intensive most likely would use a predetermined

departmental overhead rate based on which of the following activity bases?
Answer units of direct material used
direct labor hours
direct labor cost
machine hours
✔
45. Multiple Choice: Figure 4-1Adams Points: 10

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Company predicted fac...
Question Figure 4-1
Adams Company predicted factory overhead for 2010 and 2011

would be $120,000 for each year. The predicted activity for 2010
and 2011 were 30,000 and 20,000 direct labor hours, respectively.
Additional data are as follows:
2009 2010
Sales in units 25,000 25,000
Selling price per unit $20 $20
Direct materials and direct labor per unit $10 $10
The company assumes that the long-run normal production level is

20,000 direct labor hours per year. The actual factory overhead
cost for the end of 2009 and 2010 was $120,000. Assume that it
takes one direct labor hour to make one finished unit.
Refer to Figure 4-1. When the annual estimated factory overhead

rate is used, the gross profits for 2010 and 2011, respectively, are
Answer $150,000 and $150,000.
$250,000 and $250,000.
$150,000 and $100,000.
$150,000 and $100,000.
Correct Feedback SUPPORTING CALCULATIONS:
2006: 25,000 ´ [$20 - $10 - $150,000

($120,000/30,000)]=
2007: 5,000 ´ [$20 - $10 - $ 30,000

($120,000/30,000)]=
20,000 ´ [$20 - $10 - 80,000
($120,000/20,000)]=
= $110,000
Incorrect Feedback SUPPORTING CALCULATIONS:
2006: 25,000 ´ [$20 - $10 - $150,000

($120,000/30,000)]=
2007: 5,000 ´ [$20 - $10 - $ 30,000

($120,000/30,000)]=
20,000 ´ [$20 - $10 - 80,000
($120,000/20,000)]=
= $110,000
✔ 46. Multiple Choice: Figure 4-1Adams Points: 10

Company predicted fac...
Question Figure 4-1
Adams Company predicted factory overhead for 2010 and 2011

would be $120,000 for each year. The predicted activity for 2010
and 2011 were 30,000 and 20,000 direct labor hours, respectively.
Additional data are as follows:
2009 2010

Blackboard Learn
Sales in units 25,000 25,000

Selling price per unit $20 $20
Direct materials and direct labor per unit $10 $10
The company assumes that the long-run normal production level is

20,000 direct labor hours per year. The actual factory overhead
cost for the end of 2009 and 2010 was $120,000. Assume that it
takes one direct labor hour to make one finished unit.
Refer to Figure 4-1. When the normal factory overhead rate is

used, the gross profits for 2010 and 2011, respectively, are
Answer $80,000 and $80,000.
$200,000 and $200,000.
$120,000 and $140,000.
$100,000 and $100,000.
Rate =
$120,000/20,000 = $6
2006: ($20 - $10 - $6) ´ 25,000 =

$100,000
2007: ($20 - $10 - $6) ´ 25,000 =

$100,000
Rate =
$120,000/20,000 = $6
2006: ($20 - $10 - $6) ´ 25,000 =

$100,000
2007: ($20 - $10 - $6) ´ 25,000 =

$100,000
✔ 47. Multiple Choice: Figure 4-2The following Points: 10

information i...
Question Figure 4-2
The following information is provided for the year:
Actual direct labor hours worked 36,000

Budgeted overhead $300,000
Budgeted direct labor hours 30,000
Actual overhead costs incurred $360,000
Refer to Figure 4-2. If normal costing is used, the amount of

overhead applied for the year is
Answer $299,880.
$300,000.
$380,000.
$360,000.

Blackboard Learn

Budgeted overhead/Budgeted direct labor hours =
$300,000/30,000 = $10/DLH
$10 ´ 36,000 = $360,000

Budgeted overhead/Budgeted direct labor hours =
$300,000/30,000 = $10/DLH
$10 ´ 36,000 = $360,000

information i...
Question Figure 4-2
The following information is provided for the year:

Refer to Figure 4-2. The actual overhead rate for applying

manufacturing overhead is
Answer $ 7.14.
$ 7.50.
$10.00.
$10.50.
Actual overhead rate = $200,000/20,000 = $10
Actual overhead rate = $200,000/20,000 = $10
✔ 49. Multiple Choice: Figure 4 - 3The following Points: 10

information...
Question Figure 4 - 3
The following information is provided:
Estimated manufacturing overhead $690,000

Estimated machine hours 46,000
Actual machine hours worked 50,000
Actual costs incurred:

Indirect materials $170,000
Indirect labor 230,000
Utilities 120,000
Insurance 100,000
Rent 80,000
Refer to Figure 4-3. The amount of overapplied or underapplied

overhead is
Answer $65,200 underapplied.

Blackboard Learn
$60,000 overapplied.
$50,000 overapplied.
$10,000 underapplied.
Applied overhead [($690,000/46,000) x $750,000

50,000]
Actual overhead:
Utilities 120,000
Insurance 100,000
Rent 80,000 700,000
Overapplied overhead $ 50,000
Applied overhead [($690,000/46,000) x $750,000

50,000]
Actual overhead:
Utilities 120,000
Insurance 100,000
Rent 80,000 700,000
✔ 50. Multiple Choice: Figure 4 - 3The following Points: 10

information...
The following information is provided:
Estimated manufacturing overhead $690,000

Estimated machine hours 46,000
Actual costs incurred:

Utilities 120,000
Insurance 100,000
Rent 80,000
Refer to Figure 4-3. The company uses a predetermined overhead

rate to apply overhead. Manufacturing overhead applied is
Answer $750,000.
$700,000.
$690,000.

Blackboard Learn
$648,000.

Predetermined rate = $690,000/46,000 = $15
Applied overhead = $15 ´ 50,000 = $750,000
Predetermined rate = $690,000/46,000 = $15
Applied overhead = $15 ´ 50,000 = $750,000
✔
51. Multiple Choice: The following Points: 10
information pertains to...
Question The following information pertains to Black Corporation for 2011:
Estimated total overhead costs for 2011 $37,500

Estimated direct labor costs for 2011 25,000
Actual direct labor costs 22,500
Actual overhead costs 36,000
Activity base Direct labor costs
What is the predetermined overhead rate for Black Corporation for

2011?
Answer 150%
66.7%
160%
62.5%
$37,500/$25,000 = 150% of direct labor costs
$37,500/$25,000 = 150% of direct labor costs
✔
52. Multiple Choice: Carlson Company uses a Points: 10
predetermined ...
Question Carlson Company uses a predetermined rate to apply overhead. At

the beginning of the year, Carlson estimated its overhead costs at
$240,000, direct labor hours at 40,000, and machine hours at
10,000. Actual overhead costs incurred were $249,280, actual
direct labor hours were 41,000, and actual machine hours were
11,000.
What is the predetermined overhead rate per machine hour for

Carlson?
Answer $ 6.08
$ 5.85
$24.00
$22.66
$240,000/10,000 = $24.00 per MH
$240,000/10,000 = $24.00 per MH
✔
53. Multiple Choice: Figure 4-4Erickson Points: 10
Company made the f...
Question Figure 4-4
Erickson Company made the following predictions for 2011:

Blackboard Learn
Factory overhead costs $300,000

hours
hours
Job A2 (which was started and completed in May) used 3,000

direct labor hours, 2,000 machine hours, and $57,000 of prime
costs.
Refer to Figure 4-4. If factory overhead is applied based on direct

labor hours, the cost of Job A2 for the Erickson Company is
Answer $60,000.
$75,000.
$63,000.
$66,000.
$57,000 + [3,000 ´ ($300,000/50,000)] = $75,000
$57,000 + [3,000 ´ ($300,000/50,000)] = $75,000
✔
54. Multiple Choice: Figure 4-4Erickson Points: 10
Company made the f...
Question Figure 4-4
Erickson Company made the following predictions for 2011:
Factory overhead costs $300,000

hours
hours
Job A2 (which was started and completed in May) used 3,000

direct labor hours, 2,000 machine hours, and $57,000 of prime
costs.
Refer to Figure 4-4. If factory overhead is applied based on

machine hours, the cost of Job A2 for the Erickson Company is
Answer $69,000.
$75,000.
$63,000.
$66,000.
$57,000 + [2,000 ´ (300,000/100,000)] = $63,000
$57,000 + [2,000 ´ (300,000/100,000)] = $63,000
✔
55. Multiple Choice: The Holland Company Points: 10
uses a predetermi...
Question The Holland Company uses a predetermined overhead rate of $12

per direct labor hour to apply overhead. During the year, 30,000
direct labor hours were worked. Actual overhead costs for the year
were $320,000. The overhead variance is
Answer $36,000 overapplied.

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none of the above.
Applied overhead ($12 ´ 30,000) $360,000

Applied overhead ($12 ´ 30,000) $360,000

✔ 56. Multiple Choice: The following Points: 10

information is provided...
Question The following information is provided for the year:
Actual overhead $450,000

Budgeted machine hours 27,500
Applied overhead $487,500
If normal costing is used, budgeted overhead used to calculate the

predetermined rate would be
Answer $443,250.
$450,000.
$487,500.
$536,250.
Applied overhead = Predetermined rate ´ Actual activity
$487,500 = Predetermined rate ´ 25,000
Predetermined rate = $19.50 per hour
Predetermined rate = Budgeted overhead/Budgeted activity
$19.50 = Budgeted overhead/27,500
Budgeted overhead = $19.50 ´ 27,500 = $536,250
Applied overhead = Predetermined rate ´ Actual activity
$487,500 = Predetermined rate ´ 25,000
Predetermined rate = $19.50 per hour
Predetermined rate = Budgeted overhead/Budgeted activity
$19.50 = Budgeted overhead/27,500
Budgeted overhead = $19.50 ´ 27,500 = $536,250
✔ 57. Multiple Choice: Assume the following: Points: 10

Actual overhead...
Question Assume the following: Actual overhead costs equaled estimated overhead.
Actual direct labor hours exceeded estimated direct labor hours used to
calculate the predetermined overhead rate. If overhead is applied using the
predetermined overhead rate, then overhead is
Answer overapplied.
underapplied.
$-0-.
indeterminable from the information given.

Blackboard Learn
✔
58. Multiple Choice: The following Points: 10
information is provided...
Question The following information is provided for the year:

If normal costing is used, the amount of overhead applied for the

year is
Answer $568,750.00.
$441,031.25.
$481,250.00.
$525,000.00.
Predetermined overhead rate = $525,000/30,000 = $17.50/DLH
Applied overhead = $17.50 ´ 27,500 = $481,250

Predetermined overhead rate = $525,000/30,000 = $17.50/DLH
Applied overhead = $17.50 ´ 27,500 = $481,250
✔
59. Multiple Choice: Long Industries uses a Points: 10
job-order cost...
Question Long Industries uses a job-order costing system. The Molding

Department applies overhead based on machine hours, while the
Assembly Department applies overhead based on direct labor
hours. The company made the following estimates at the beginning
of the current year:
Molding Assembly
Manufacturing overhead cost $600,000 $400,000
Machine hours 10,000 4,000
The following information was available for Job No. 7-29, which
was started and completed during July:
Job No. 7-29

Molding Assembly
Direct materials $3,500 $ 7,500
Direct labor $9,000 $12,500
Direct labor hours 900 1,250
Machine hours 500 400
The predetermined overhead rate for the molding department is

Answer $50.
$60.
$83.
$100.

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Predetermined overhead rate = $600,000/10,000 = $60
Predetermined overhead rate = $600,000/10,000 = $60
✔
60. Multiple Choice: Walter Company uses a Points: 10
job-order costi...
Question Walter Company uses a job-order costing system to account for

product costs. The following information pertains to 2011:
Materials placed into production $140,000

Direct labor (10,000 hours) 160,000
Depreciation of factory building 60,000
Other factory overhead 100,000
Increase in work-in-process inventory 30,000
Factory overhead rate is $18 per direct labor hour.
What is the amount of under- or overapplied overhead for Walter

Company in 2011?
Answer $40,000 underapplied
$20,000 underapplied
$40,000 overapplied
$20,000 overapplied
Actual overhead ($40,000 + $60,000 + $100,000) $200,000

Applied overhead 180,000
Actual overhead ($40,000 + $60,000 + $100,000) $200,000

Applied overhead 180,000
✔
61. Multiple Choice: Material amounts of Points: 10
underapplied or o...
Question Material amounts of underapplied or overapplied overhead should be

Answer treated as an adjustment to cost of goods sold.
treated as an adjustment to work in process.
allocated to direct materials, work in process, and finished goods.
allocated to work in process, finished goods, and cost of goods sold.
✔
62. Multiple Choice: Account balances are as Points: 10
follows:Manuf...
Question Account balances are as follows:
Manufacturing overhead $240,000

underapplied
Work in process 100,000

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Finished goods 300,000

Cost of goods sold 800,000
If underapplied or overapplied overhead is material and is allocated

to Work in Process, Finished Goods, and Cost of Goods Sold
(based on ending account balances), Cost of Goods Sold after
adjustment would have a balance of
Answer $1,440,000.
$ 640,000.
$1,040,000.
$ 960,000.
Adjustment to cost of goods sold

$800,000/($100,000 + $300,000 + $800,000) ´
$240,000 =
$800,000/$1,200,000 ´ $240,000 = $160,000

Add: Adjustment for underapplied overhead 160,000
Adjusted cost of goods sold $960,000
Adjustment to cost of goods sold

$800,000/($100,000 + $300,000 + $800,000) ´
$240,000 =
$800,000/$1,200,000 ´ $240,000 = $160,000

Add: Adjustment for underapplied overhead 160,000
Adjusted cost of goods sold $960,000
✔ 63. Multiple Choice: Figure 4-5The Hampshire Points: 10

Company produ...
Question Figure 4-5
The Hampshire Company produces 9 volt batteries and AAA

batteries. The Hampshire Company uses a plantwide rate to apply
overhead based on direct labor hours. The following data is given:
Estimated Overhead $350,000
Estimated activity:
9 volt battery 100,000 direct
labor hours
AAA battery 400,000 direct

labor hours
Actual activity:
labor hours

labor hours
Units produced:

Blackboard Learn
9 volt battery 500,000
AAA battery 250,000
Refer to Figure 4-5. What is the predetermined overhead rate?

(round to 2 decimal places)
Answer $0.65
$0.70
$0.67
$0.62
Correct Feedback $350,000 / (400,000 + 100,000) = .7
Incorrect Feedback $350,000 / (400,000 + 100,000) = .7
✔ 64. Multiple Choice: Figure 4-5The Hampshire Points: 10

Company produ...
Question Figure 4-5


Estimated activity:

labor hours

labor hours
Actual activity:

labor hours
labor hours
Units produced:
AAA battery 250,000
Refer to Figure 4-5. How much overhead is applied to each 9 volt

batteries and AAA batteries respectively? (round to 2 decimal
places)
Answer $87,500; $280,000
$70,000; $280,00
$81,250; $260,000
none of these
Correct Feedback 9 volt 125,000 x .7 = $87,500
AAA 400,000 x .7 = $280,000
Incorrect Feedback 9 volt 125,000 x .7 = $87,500
AAA 400,000 x .7 = $280,000
✔
65. Multiple Choice: Figure 4-5The Hampshire Points: 10
Company produ...
Question Figure 4-5

Blackboard Learn


Estimated activity:

labor hours

labor hours
Actual activity:

labor hours

labor hours
Units produced:
AAA battery 250,000
Refer to Figure 4-5. How much was overhead over/underapplied?

Answer $25,000
$17,500
$42,500
none of these
Correct Feedback 125,000 x .7 = 87,500
400,000 x .7 = 280,000
367,500 applied
actual MOH 325,000
overapplied MOH 42,500
Incorrect Feedback 125,000 x .7 = 87,500
400,000 x .7 = 280,000
367,500 applied
actual MOH 325,000
overapplied MOH 42,500
✔
66. Multiple Choice: Figure 4-5The Hampshire Points: 10
Company produ...
Question Figure 4-5

Estimated activity:

labor hours

labor hours
Actual activity:

labor hours

Blackboard Learn

labor hours
Units produced:
AAA battery 250,000
Refer to Figure 4-5. If the accounts had the following balances,

how much will cost of goods sold be adjusted?
raw materials $200,000
inventory
work in process $100,000

inventory
finished goods $200,000

inventory
cost of goods sold $500,000
Answer debit $12,500

debit $21,250
credit $26,562.50
none of these
Correct Feedback overapplied $42,500
WIP 100,000
FG 200,000
CGS 500,000 5/8 x 42,500 = $26,562.50
total 800,000
Incorrect Feedback overapplied $42,500
WIP 100,000
FG 200,000
CGS 500,000 5/8 x 42,500 = $26,562.50
total 800,000
✔ 67. Multiple Choice: Figure 4-6Cabrini Points: 10

Company produces tw...
Question Figure 4-6
Cabrini Company produces two products: toy trucks and toy cars.
They use departmental overhead rates for the two production
departments: molding and finishing. Molding uses machine hours
to assign overhead and Finishing uses direct labor hours. 50,000
trucks and 250,000 cars are produced. Please find the following
data:
Molding Finishing Total
Estimated $250,000 $100,000 $350,000

Overhead
Actual Overhead $240,000 $120,000 $360,000
Expected direct
labor hours
trucks 5,000 5,000 10,000

cars 5,000 35,000 40,000
Expected
machine hours
trucks 17,000 3,000 20,000

Blackboard Learn
cars 3,000 7,000 10,000
Actual direct
labor hours
trucks 4,500 5,300 10,000
cars 5,500 34,500 40,000
Actual machine
hours
trucks 16,500 3,500 20,000
cars 3,200 6,800 10,000
Refer to Figure 4-6. What are the departmental overhead rates for
the molding and finishing department respectively?
Answer $25; $2.50
$8.33; $2
$25; $10
$12.50; $2.50
Correct Feedback molding 250,000/ 20,000 = $12.50
finishing 100,000/ 40,000 = $2.50
Incorrect Feedback molding 250,000/ 20,000 = $12.50
finishing 100,000/ 40,000 = $2.50
✔
68. Multiple Choice: Figure 4-6Cabrini Points: 10
Question Figure 4-6
data:
Estimated $250,000 $100,000 $350,000

Overhead
Actual Overhead $240,000 $120,000 $360,000
Expected direct
labor hours
trucks 5,000 5,000 10,000
cars 5,000 35,000 40,000
Expected
machine hours
trucks 17,000 3,000 20,000
cars 3,000 7,000 10,000

Actual direct
labor hours
trucks 4,500 5,300 10,000
cars 5,500 34,500 40,000

Actual machine
hours

Blackboard Learn
trucks 16,500 3,500 20,000
cars 3,200 6,800 10,000
Refer to Figure 4-6. How much overhead is applied to the trucks?

Answer $ 60,000
$250,000
$219,500
$225,000
Correct Feedback molding 12.50 x 16,500 = 206,250

finishing 2.50 x 5,300 = 13,250
total OH applied = 219,500
Incorrect Feedback molding 12.50 x 16,500 = 206,250
finishing 2.50 x 5,300 = 13,250
total OH applied = 219,500

Question Figure 4-6
data:
Estimated $250,000 $100,000 $350,000

Overhead
Actual Overhead $240,000 $120,000 $360,000
Expected direct
labor hours
trucks 5,000 5,000 10,000

cars 5,000 35,000 40,000
Expected
machine hours
trucks 17,000 3,000 20,000

cars 3,000 7,000 10,000
Actual direct
labor hours
trucks 4,500 5,300 10,000

cars 5,500 34,500 40,000
Actual machine
hours
trucks 16,500 3,500 20,000
cars 3,200 6,800 10,000
Refer to Figure 4-6. What is the overhead per unit for cars? (round
to 3 decimal places)
Answer $0.50

Blackboard Learn
$0.505
$0.32
$1.40
Correct Feedback molding 12.50 x 3,200 = $40,000

assembly 2.50 x 34,500 = $86,250
total MOH $126,250
250,000 cars $0.505
Incorrect Feedback molding 12.50 x 3,200 = $40,000
assembly 2.50 x 34,500 = $86,250
total MOH $126,250
250,000 cars $0.505

Question Figure 4-6
data:

Estimated $250,000 $100,000 $350,000
Overhead
Actual Overhead $240,000 $120,000 $360,000
Expected direct
labor hours
trucks 5,000 5,000 10,000
cars 5,000 35,000 40,000
Expected
machine hours
trucks 17,000 3,000 20,000
cars 3,000 7,000 10,000
Actual direct
labor hours
trucks 4,500 5,300 10,000
cars 5,500 34,500 40,000
Actual machine
hours
trucks 16,500 3,500 20,000
cars 3,200 6,800 10,000
Refer to Figure 4-6. How much was overhead over or

underapplied?
Answer $14,250
$10,000
$ 4,250
none of these
Correct Feedback MOH applied to trucks 219,500
MOH applied to cars 126,250

Blackboard Learn
total MOH applied 345,750

actual MOH 360,000
underapplied 14,250
Incorrect Feedback MOH applied to trucks 219,500
MOH applied to cars 126,250
total MOH applied 345,750
actual MOH 360,000
underapplied 14,250
✔
71. Multiple Choice: Kryzski Company has a Points: 10
predetermined o...
Question Kryzski Company has a predetermined overhead rate of $6 per

direct labor hour. Last year the company incurred $156,600 of
actual manufacturing overhead cost and the account was $12,600
underapplied. How many direct labor hours were worked during the
year?
Answer 24,000 direct labor hours
25,000 direct labor hours
Correct Feedback actual MOH - Underapplied MOH = applied MOH
156,600 - 12,600 = 144,000
applied MOH/ MOH rate = actual direct labor hours
144,000/6 = 24,000
Incorrect Feedback actual MOH - Underapplied MOH = applied MOH
156,600 - 12,600 = 144,000
applied MOH/ MOH rate = actual direct labor hours
144,000/6 = 24,000
✔
72. Multiple Choice: Igor Inc. had a Points: 10
predetermined overhea...
Question Igor Inc. had a predetermined overhead rate of $2 per direct labor
hour. The direct labor hours were estimated to be 25,000. The
actual manufacturing overhead incurred was $47,000 and 24,000
actual direct labor hours were worked. How much was overhead
over/under applied last year?
Answer $1,000 underapplied
$2,000 underapplied
$1,000 overapplied
$3,000 overapplied
Correct Feedback actual MOH - applied MOH = under/over applied MOH
$47,000 - ($2 x 24,000) = $1,000 overapplied
Incorrect Feedback actual MOH - applied MOH = under/over applied MOH
$47,000 - ($2 x 24,000) = $1,000 overapplied
✔
73. Multiple Choice: Providence Company Points: 10
uses departmental ...
Question Providence Company uses departmental manufacturing overhead rates to

apply overhead. Direct labor cost is used to apply manufacturing overhead
in Department A and machine hours are used for Department B.
Dept. A Dept. B
direct labor cost $56,000 $33,000
factory overhead $67,200 $45,000
direct labor hours 8,000 9,000
machine hours 4,000 15,000

Blackboard Learn
What predetermined overhead rate would be used for departments A and B

respectively?
Answer 83%; $5
83%; $3
120%; $3
$8.40; $5
✔ 74. Multiple Choice: Bangor Company applies Points: 10

manufacturing ...
Question Bangor Company applies manufacturing overhead. At the end of

the year the following data were available:
actual manufacturing $115,000
overhead
estimated manufacturing $120,000

overhead
applied manufacturing $118,000

overhead
What is the journal entry if the amount is considered small?

Answer Manufacturing Overhead $3,000
Cost of Goods Sold $3,000
Manufacturing Overhead $5,000
Correct Feedback actual MOH - appliled MOH = under/over applied MOH
115,000 - 118,000 = 3000 overapplied
MOH 3000
CGS 3000
Incorrect Feedback actual MOH - appliled MOH = under/over applied MOH
115,000 - 118,000 = 3000 overapplied
MOH 3000
CGS 3000
✔
75. Multiple Choice: Portland Company Points: 10
applies manufacturin...
Question Portland Company applies manufacturing overhead. At the end of

the year the following data were available:
actual manufacturing $115,000
overhead
estimated manufacturing $110,000

overhead
applied manufacturing $100,000

overhead
The following accounts had the unadjusted balances:

raw materials inventory $100,000

Blackboard Learn
work-in-process $100,000
inventory
finished goods $100,000

inventory
cost of goods sold $300,000
What is the journal entry if the amount is considered material?

Answer Work in Process $ 1,000
Finished Goods $ 1,000
Cost of goods sold $ 3,000
Work in Process $ 1,000

none of these
Correct Feedback applied MOH - actual MOH = under/over applied MOH
108,000 - 115,000 = 7,000 underapplied overhead
WIP 100,000 1/5 x 15,000 = 3000

FG 100,000 1/5 x 15,000 = 3000
CGS 300,000 3/5 x 15,000 = 9000
total 500,000
WIP 3000
FG 3000
CGS 9000
MOH 15,000
Incorrect Feedback applied MOH - actual MOH = under/over applied MOH
108,000 - 115,000 = 7,000 underapplied overhead
WIP 100,000 1/5 x 15,000 = 3000

FG 100,000 1/5 x 15,000 = 3000
CGS 300,000 3/5 x 15,000 = 9000
total 500,000
WIP 3000
FG 3000
CGS 9000
MOH 15,000
✔ 76. Multiple Choice: Figure 4-7The Ogunquit Points: 10

Company uses a...
Question Figure 4-7
The Ogunquit Company uses a predetermined overhead rate. The

following accounts have these unadjusted balances:
Raw Materials $20,000
Finished Goods $10,000

Blackboard Learn
Refer to Figure 4-7. If overhead is underapplied by $12,000 and

considered immaterial, the journal entry would be
Answer Cost of Goods Sold $12,000
Correct Feedback under applied MOH 12000
CGS 12000
MOH 12000
Incorrect Feedback under applied MOH 12000
CGS 12000
MOH 12000
✔
77. Multiple Choice: Figure 4-7The Ogunquit Points: 10
Company uses a...
Question Figure 4-7

Refer to Figure 4-7. If Manufacturing overhead was $12,000

overapplied and considered immaterial, what is the journal entry?


Blackboard Learn
Correct Feedback manufacturing ovehead $12,000 overapplied
MOH 12,000
CGS 12,000
Incorrect Feedback manufacturing ovehead $12,000 overapplied
MOH 12,000
CGS 12,000
✔
78. Multiple Choice: Figure 4-7The Ogunquit Points: 10
Company uses a...
Question Figure 4-7


overapplied and considered material, what is the journal entry?

Correct Feedback manufacturing ovehead $12,000 overapplied
MOH 12,000
WIP 4,800
FG 1,200
CGS 6,000
Incorrect Feedback manufacturing ovehead $12,000 overapplied
MOH 12,000
WIP 4,800
FG 1,200
CGS 6,000
✔ 79. Multiple Choice: Figure 4-7The Ogunquit Points: 10

Company uses a...
Question Figure 4-7


Blackboard Learn


underapplied and considered material, what is the journal entry?


Correct Feedback manufacturing ovehead $12,000 underapplied
WIP 4,800
FG 1,200
CGS 6,000
MOH 12,000
Incorrect Feedback manufacturing ovehead $12,000 underapplied
WIP 4,800
FG 1,200
CGS 6,000
MOH 12,000
✔ 80. Multiple Choice: Products might consume Points: 10

overhead in di...
Question Products might consume overhead in different proportions due to

differences in
Answer product size.
setup times.
product complexity.
all of these.
✔
81. Multiple Choice: The proportion of an Points: 10
overhead activit...
Question The proportion of an overhead activity consumed by a product is the

Answer overhead ratio.
consumption ratio.
quick ratio.
fixed ratio.

Blackboard Learn
82. Multiple Choice: More accurate product Points: 10

costing informa...
Question More accurate product costing information is produced by assigning costs

using
Answer a volume-based, plantwide rate.
volume-based, departmental rates.
activity-based pool rates.
all of these.
✔ 83. Multiple Choice: Figure 4-8Zipp Company Points: 10

manufactures t...
Question Figure 4-8
Zipp Company manufactures two products (X and Y). The

overhead costs ($84,000) have been divided into three cost pools
that use the following activity drivers:
Product Number of Machine Packing

Setups Hours Orders
X 10 500 75
Y 10 2,000 175
Cost per pool $9,000 $60,000 $15,000
Refer to Figure 4-8. Using functional-based costing, what is the

amount of overhead cost to be assigned to Product X using
machine hours as the allocation base?
Answer $12,000
$60,000
$48,000
$16,800
($9,000 + $60,000 + $15,000)/2,500 = $33.60
$33.60 ´ 500 = $16,800

($9,000 + $60,000 + $15,000)/2,500 = $33.60
$33.60 ´ 500 = $16,800
✔ 84. Multiple Choice: Figure 4-8Zipp Company Points: 10

manufactures t...
Question Figure 4-8


Setups Hours Orders
X 10 500 75
Y 10 2,000 175

Blackboard Learn
Cost per pool $9,000 $60,000 $15,000
Refer to Figure 4-8. What is the allocation rate per setup using
activity-based costing?
Answer $ 900
$ 450
$9,000
$2,100

$9,000/20 = $450
$9,000/20 = $450
✔
85. Multiple Choice: Figure 4-8Zipp Company Points: 10
manufactures t...
Question Figure 4-8


Setups Hours Orders
X 10 500 75
Y 10 2,000 175
Cost per pool $9,000 $60,000 $15,000
Refer for Figure 4-8. What is the allocation rate per packing order
using activity-based costing?
Answer $15,000
$ 60
$ 7,500
$ 200

$15,000/250 = $60
$15,000/250 = $60
✔
86. Multiple Choice: Figure 4-8Zipp Company Points: 10
manufactures t...
Question Figure 4-8


Setups Hours Orders
X 10 500 75
Y 10 2,000 175
Cost per pool $9,000 $60,000 $15,000

Blackboard Learn
Refer to Figure 4-8. If the number of machine hours is used to

assign machine hour cost, determine the amount of machine hour
cost to be assigned to Product X.
Answer $12,000
$60,000
$48,000
$16,800
$60,000/2,500 = $24
$24 ´ 500 = $12,000

$60,000/2,500 = $24
$24 ´ 500 = $12,000
✔ 87. Multiple Choice: Figure 4-9Winter Points: 10

Manufacturing has fo...
Question Figure 4-9
Winter Manufacturing has four categories of overhead. The four

categories and expected overhead costs for each category for next
year are listed as follows:
Maintenance $255,000
Setups 30,000
Inspection 105,000
Currently, overhead is applied using a predetermined overhead

rate based upon budgeted direct labor hours. 100,000 direct labor
hours are budgeted for next year.
The company has been asked to submit a bid for a proposed job.
The plant manager feels that obtaining this job would result in new
business in future years. Usually bids are based upon full
manufacturing cost plus 10 percent.

Direct labor (8,000 hours) $12,000
Number of setups 24
Number of machine hours 4,000
The plant manager has heard of a new way of applying overhead

that uses cost pools and activity drivers. Expected activity for the
four activity drivers that would be used are:

Setups 3,000

Blackboard Learn
Refer to Figure 4-9. What is the amount of overhead allocated to

the proposed job if Winter Manufacturing uses direct labor hours as
its only activity driver?
Answer $41,200
$30,400
$30,000
$20,800
Overhead rate = ($255,000 + $125,000 + $30,000 +
$105,000)/100,000 = $5.15/DLH
Overhead allocated to proposed job = $5.15 ´ 8,000 = $41,200

Overhead rate = ($255,000 + $125,000 + $30,000 +
$105,000)/100,000 = $5.15/DLH
Overhead allocated to proposed job = $5.15 ´ 8,000 = $41,200
✔ 88. Multiple Choice: Figure 4-9Winter Points: 10

Question Figure 4-9
Winter Manufacturing has four categories of overhead. The four

year are listed as follows:
Setups 30,000
Inspection 105,000

manufacturing cost plus 10 percent.

Direct labor (8,000 hours) $12,000
Number of setups 24
Number of machine hours 4,000
The plant manager has heard of a new way of applying overhead

that uses cost pools and activity drivers. Expected activity for the
four activity drivers that would be used are:

Setups 3,000

Blackboard Learn
Refer to Figure 4-9. What is the total cost of the proposed job if
Winter Manufacturing uses direct labor hours as its only activity
driver?
Answer $72,000
$68,200
$56,200
$53,200

Direct labor 12,000
Overhead ($5.15 ´ 8,000) 41,200
Total $68,200

Direct labor 12,000
Overhead ($5.15 ´ 8,000) 41,200
Total $68,200
✔ 89. Multiple Choice: Unit-level cost drivers Points: 10

create distor...
Question Unit-level cost drivers create distortions when

Answer products use resources similarly.
products are produced using resources homogeneously.
different products consume resources differently.
all of these.
✔ 90. Multiple Choice: The use of unit-based Points: 10

activity driver...
Question The use of unit-based activity drivers to assign costs tends to

Answer overcost low-volume products.
overcost high-volume products.
undercost all products.
overcost all products.
✔ 91. Multiple Choice: Which of the following is Points: 10

NOT a limit...
Question Which of the following is NOT a limitation of a plantwide overhead rate?

Answer Predetermined rates using budgeted overhead are usually the best
estimate of the amount of overhead.
Overhead usage is not strictly linked to the units produced because some
products are more complex and diverse than others.
Product diversity may consume overhead activities under differing
consumption ratios.
Overhead costs tend to be underallocated to highly complex products.
✔
92. Multiple Choice: A possible solution to Points: 10

Blackboard Learn
overcome disto...
Question A possible solution to overcome distortions caused by unit level rates is

Answer assign costs by multiplying activity rates times the amount of activity
consumed.
calculate individual rates for each activity with activity drivers.
increase the number of rates used that reflect the diverse activity and
nonunit overhead drivers.
all of these.
✔
93. Multiple Choice: Figure 4-10The Points: 10
Emmanuele Company has ...
Question Figure 4-10
The Emmanuele Company has collected the following data for use
in calculating product costs:
Activity Data: (expected and actual)

mops brooms total
units produced 50,000 250,000 300,000
prime costs $200,000 $750,000 $950,000
direct labor 10,000 40,000 50,000

hours
machine hours 20,000 10,000 30,000
number of 25 75 100
setups
inspection 1,200 2,800 4,000

hours
number of 140 210 350

moves
Departmental Data: (expected and actual)

molding assembly total
direct labor
hours
mops 5,000 5,000 10,000
brooms 5,000 35,000 40,000

total 10,000 40,000 50,000
machine
hours
mops 17,000 3,000 20,000

brooms 3,000 7,000 10,000
total 20,000 10,000 30,000

overhead
costs
machining $120,000 $ 30,000 $150,000
moving 40,000 30,000 70,000

materials
setting up 70,000 10,000 80,000
inspecting 20,000 30,000 50,000

products
total 250,000 $100,000 $350,000

Blackboard Learn
Refer to Figure 4-10. What is the unit product cost for mops if a
plantwide rate is used?
Answer $11.00
$ 4.00
$ 5.40
$ 4.12
Correct Feedback $350,000 / 50,000 = $7

$7 x 10,000 = $ 70,000 + $200,000 = $270,000/50,000 = $5.40
Incorrect Feedback $350,000 / 50,000 = $7
$7 x 10,000 = $ 70,000 + $200,000 = $270,000/50,000 = $5.40
✔

mops brooms total
units produced 50,000 250,000 300,000
prime costs $200,000 $750,000 $950,000
direct labor 10,000 40,000 50,000

hours
machine hours 20,000 10,000 30,000
number of 25 75 100
setups
inspection 1,200 2,800 4,000

hours
number of 140 210 350

moves

direct labor
hours
mops 5,000 5,000 10,000
brooms 5,000 35,000 40,000

total 10,000 40,000 50,000
machine
hours
mops 17,000 3,000 20,000

brooms 3,000 7,000 10,000
total 20,000 10,000 30,000

overhead
costs
machining $120,000 $ 30,000 $150,000
moving 40,000 30,000 70,000

materials
setting up 70,000 10,000 80,000

Blackboard Learn
inspecting 20,000 30,000 50,000

products
total 250,000 $100,000 $350,000
Refer to Figure 4-10. Emmanuele Company uses departmental

overhead rates: Molding uses machine hours and Assembly uses
labor hours. What is the unit product cost for brooms if
departmental overhead rates are used?
Answer $3.50
$8.50
$3.00
$1.40
Correct Feedback molding $250,000/20,000 = 12.50
assembly $100,000/40,000 = 2.50
brooms
molding 3,000 x 12.50 = $ 37,500
assembly 35,000 x 2.50 = $ 87,500
total MOH $125,000
prime $750,000
total cost $875,000/ 250,000 = $3.50 per unit
Incorrect Feedback molding $250,000/20,000 = 12.50
assembly $100,000/40,000 = 2.50
brooms
molding 3,000 x 12.50 = $ 37,500
assembly 35,000 x 2.50 = $ 87,500
total MOH $125,000
prime $750,000
total cost $875,000/ 250,000 = $3.50 per unit
✔ 95. Multiple Choice: Figure 4-10The Points: 10


mops brooms total
units produced 50,000 250,000 300,000

prime costs $200,000 $750,000 $950,000
direct labor 10,000 40,000 50,000

hours
machine hours 20,000 10,000 30,000
number of 25 75 100
setups
inspection 1,200 2,800 4,000

hours
number of 140 210 350

moves

direct labor
hours
mops 5,000 5,000 10,000

Blackboard Learn
brooms 5,000 35,000 40,000
total 10,000 40,000 50,000
machine
hours
mops 17,000 3,000 20,000
brooms 3,000 7,000 10,000
total 20,000 10,000 30,000
overhead
costs
machining $120,000 $ 30,000 $150,000
moving 40,000 30,000 70,000

materials
setting up 70,000 10,000 80,000

inspecting 20,000 30,000 50,000
products
total 250,000 $100,000 $350,000
Refer to Figure 4-10. What are the consumption ratios for mops
and brooms respectively for the inspection of products activity?
Answer .3; .7
.2; .8
.4; .6
.67; .33
Correct Feedback inspecting products mops 1,200 brooms 2,800
4,000 4,000
.3 .7
Incorrect Feedback inspecting products mops 1,200 brooms 2,800
4,000 4,000
.3 .7


mops brooms total
units produced 50,000 250,000 300,000

prime costs $200,000 $750,000 $950,000
direct labor 10,000 40,000 50,000

hours
machine hours 20,000 10,000 30,000
number of 25 75 100
setups
inspection 1,200 2,800 4,000

hours
number of 140 210 350

moves

Blackboard Learn

direct labor
hours
mops 5,000 5,000 10,000
brooms 5,000 35,000 40,000
total 10,000 40,000 50,000
machine
hours
mops 17,000 3,000 20,000
brooms 3,000 7,000 10,000
total 20,000 10,000 30,000
overhead
costs
machining $120,000 $ 30,000 $150,000
moving 40,000 30,000 70,000

materials
setting up 70,000 10,000 80,000

inspecting 20,000 30,000 50,000
products
total 250,000 $100,000 $350,000
Refer to Figure 4-10. What is the consumption ratio for the

plantwide activity rate?
Answer .25; .75
.71; .29
.2; .8
.8; .2
Correct Feedback direct labor hours
mops 10,000/50,000 = .2
brooms 40,000/50,000 = .8
Incorrect Feedback direct labor hours
mops 10,000/50,000 = .2
brooms 40,000/50,000 = .8


mops brooms total
units produced 50,000 250,000 300,000
prime costs $200,000 $750,000 $950,000

direct labor 10,000 40,000 50,000
hours
machine hours 20,000 10,000 30,000
number of 25 75 100
setups

Blackboard Learn
inspection 1,200 2,800 4,000

hours
number of 140 210 350
moves

direct labor
hours
mops 5,000 5,000 10,000
brooms 5,000 35,000 40,000
total 10,000 40,000 50,000
machine
hours
mops 17,000 3,000 20,000
brooms 3,000 7,000 10,000
total 20,000 10,000 30,000
overhead
costs
machining $120,000 $ 30,000 $150,000
moving 40,000 30,000 70,000

materials
setting up 70,000 10,000 80,000
inspecting 20,000 30,000 50,000

products
total 250,000 $100,000 $350,000
Refer to Figure 4-10. What are the consumption ratios for mops
for the departments on the basis of the departmental drivers
(molding;assembly)?
Answer .33; .87
.85; .125
.33; .25
.85; .5
Correct Feedback mops
molding mhrs 17,000/20,000 = .85
assembly dlh 5,000/40,000 = .125
Incorrect Feedback mops
molding mhrs 17,000/20,000 = .85
assembly dlh 5,000/40,000 = .125


mops brooms total
units produced 50,000 250,000 300,000
prime costs $200,000 $750,000 $950,000

Blackboard Learn
direct labor 10,000 40,000 50,000

hours
machine hours 20,000 10,000 30,000
number of 25 75 100
setups
inspection 1,200 2,800 4,000

hours
number of 140 210 350

moves

direct labor
hours
mops 5,000 5,000 10,000
brooms 5,000 35,000 40,000
total 10,000 40,000 50,000

machine
hours
mops 17,000 3,000 20,000
brooms 3,000 7,000 10,000

total 20,000 10,000 30,000
overhead
costs
machining $120,000 $ 30,000 $150,000
moving 40,000 30,000 70,000

materials
setting up 70,000 10,000 80,000
inspecting 20,000 30,000 50,000

products
total 250,000 $100,000 $350,000
Refer to Figure 4-10. What is the activity rate for moving materials?
Answer .2
$1000
$800
$200
Correct Feedback $70,000/ 350 = $200
Incorrect Feedback $70,000/ 350 = $200
✔

mops brooms total
units produced 50,000 250,000 300,000

Blackboard Learn
prime costs $200,000 $750,000 $950,000
direct labor 10,000 40,000 50,000

hours
machine hours 20,000 10,000 30,000

number of 25 75 100
setups
inspection 1,200 2,800 4,000
hours
number of 140 210 350

moves

direct labor
hours
mops 5,000 5,000 10,000

brooms 5,000 35,000 40,000
total 10,000 40,000 50,000

machine
hours
mops 17,000 3,000 20,000
brooms 3,000 7,000 10,000

total 20,000 10,000 30,000
overhead
costs
machining $120,000 $ 30,000 $150,000
moving 40,000 30,000 70,000

materials
setting up 70,000 10,000 80,000
inspecting 20,000 30,000 50,000

products
total 250,000 $100,000 $350,000
Refer to Figure 4-10. What is the unit product cost for mops?
Answer $11.00
$ 7.26
$ 4.00
$ 3.75
Correct Feedback machining $150,000/ 30,000 = $5
setting up $80,000/100 = $800
number of moves $70,000/350 = $200
inspection $$50,000/4,000 = $12.50
mops
machining $5 x 20,000 = $100,000
setting up $800 x 25 = $20,000
moving $200 x 140 = $28,000
inspection $12.50 x 1,200 = $15,000
total moh $163,000
prime costs 200,000
total costs 363,000/ 50,000 units = $7.26
Incorrect Feedback machining $150,000/ 30,000 = $5
setting up $80,000/100 = $800

Blackboard Learn
number of moves $70,000/350 = $200

inspection $$50,000/4,000 = $12.50
mops
machining $5 x 20,000 = $100,000
setting up $800 x 25 = $20,000
moving $200 x 140 = $28,000
inspection $12.50 x 1,200 = $15,000
total moh $163,000
prime costs 200,000
total costs 363,000/ 50,000 units = $7.26
✔
100. Multiple Choice: A(n) _______________ Points: 10
system first tra...
Question A(n) _______________ system first traces costs to activities and then to
products.
Answer direct costing
absorption costing
functional-based costing
activity-based costing
✔ 101. Multiple Choice: An activity-based Points: 10

costing system uses...
Question An activity-based costing system uses which of the following procedures?

Answer Overhead costs are traced to departments, then costs are traced to
products.
Overhead costs are traced to activities, then costs are traced to
products.
Overhead costs are traced directly to products.
All overhead costs are expensed as incurred.
✔ 102. Multiple Choice: Activity-based costing Points: 10

assigns cost t...
Question Activity-based costing assigns cost to cost objects by first tracing costs to
Answer products and then tracing costs to cost objects.
departments and then tracing costs to products.
activities and then tracing costs to cost objects.
customers and then tracing costs to products.
✔ 103. Multiple Choice: If a firm has Points: 10

implemented activity-ba...
Question If a firm has implemented activity-based procedures for home office

expenses, it will
Answer allocate all home office expenses on the basis of sales revenues.
allocate all home office expenses to homogeneous cost pools.
allocate the costs in a pool using a predetermined rate per unit of
activity.
both a and b.
✔ 104. Multiple Choice: _____________ are Points: 10

nonfinancial and fi...
Question _____________ are nonfinancial and financial data that describe individual

Blackboard Learn
activities.
Answer Activity dictionaries
Activity attributes
Concatenated keys
ABC inventories
✔
105. Multiple Choice: _____________ is a simple Points: 10
list of act...
Question _____________ is a simple list of activities identified in an ABC system.

Answer Activity inventory
Activity dictionary
Activity attributes
Activity driver
✔
106. Multiple Choice: _____________ aids Points: 10
management in achi...
Question _____________ aids management in achieving objectives such as product

or customer costing, continuous improvement and environmental
management.
Answer Activity driver
Concatenated key
Primary key
Activity classification
✔
107. Multiple Choice: A secondary activity is Points: 10
Question A secondary activity is

Answer the second activity on the activity list.
an activity driver.
one that is consumed by the final cost object.
one that is consumed by intermediate cost objects.
✔ 108. Multiple Choice: Which of the following Points: 10

quantities is ...
Question Which of the following quantities is an example of an activity driver in

Answer number of setups
number of orders placed
number of machine hours
all of these
✔
109. Multiple Choice: Figure 4-11Yang Points: 10
Manufacturing Company...
Yang Manufacturing Company manufactures two products (A and

B). The overhead costs ($58,000) have been divided into three
cost pools that use the following activity drivers:
Number of
Labor

Blackboard Learn
Product Number of Orders Transactions Labor Hours

A 15 50 500
B 10 150 2,000
Cost per $10,000 $8,000 $40,000

pool
Refer to Figure 4-11. What is the allocation rate per order using
ABC?
Answer $10,000
$2,320
$400
$58,000
$10,000/25 = $400
$10,000/25 = $400
✔ 110. Multiple Choice: Figure 4-11Yang Points: 10


Number of
Labor
A 15 50 500
B 10 150 2,000
Cost per $10,000 $8,000 $40,000

pool
Refer to Figure 4-11. What is the allocation rate per labor

transaction using ABC?
Answer $ 8,000
$ 16
$29,000
$ 40
$8,000/200 = $40
$8,000/200 = $40
✔
111. Multiple Choice: Figure 4-11Yang Points: 10


Blackboard Learn
Number of
Labor
A 15 50 500
B 10 150 2,000
Cost per $10,000 $8,000 $40,000

pool
Refer to Figure 4-11. If the number of labor hours is used to assign

labor costs from the cost pool, determine the amount of overhead
cost to be assigned to Product A.
Answer $58,000
$ 8,000
$ 9,600
$32,000

$40,000/2,500 = $16
$16 ´ 500 = $8,000

$40,000/2,500 = $16
$16 ´ 500 = $8,000
✔ 112. Multiple Choice: Figure 4-11Yang Points: 10


Number of
Labor
A 15 50 500
B 10 150 2,000
Cost per $10,000 $8,000 $40,000

pool
Refer to Figure 4-11. Using functional-based costing, what is the

amount of overhead cost to be assigned to Product B using labor
hours as the allocation base?
Answer $58,000
$43,500
$11,600
$46,400
($10,000 + $8,000 + $40,000)/2,500 = $23.20
$23.20 ´ 2,000 = $46,400

Blackboard Learn

($10,000 + $8,000 + $40,000)/2,500 = $23.20
$23.20 ´ 2,000 = $46,400
✔
113. Multiple Choice: Figure 4-12Vaughn, Points: 10
Inc., has identifi...
Vaughn, Inc., has identified the following overhead costs and

activity drivers for next year:
Expected Expected
Overhead Item Cost Activity Driver Quantity
Setup costs $200,000 Number of 250
setups
Ordering costs 80,000 Number of 1,600
orders
The following are two of the jobs completed during the year:
Job 10A Job 20B

Machine hours 20 25
Refer to Figure 4-12. If the number of setups is used to assign

setup costs, the amount of setup costs assigned to Job 10A would
be
Answer $1,600.
$1,000.
$800.
$1,680.
$200,000/250 = $800 per setup
$800 ´ 1 = $800
$200,000/250 = $800 per setup
$800 ´ 1 = $800
✔ 114. Multiple Choice: Figure 4-12Vaughn, Points: 10


Blackboard Learn

Expected Expected
setups
orders
Job 10A Job 20B

Machine hours 20 25
Refer to Figure 4-12. If the four activity drivers are used to allocate
overhead costs, total overhead allocated to Job 10A would be
Answer $5,533.
$4,830.
$5,030.
$5,630.
Setups ($200,000/250) $800 per setup

Ordering costs ($80,000/1,600) $50 per order
Maintenance ($400,000/2,000) $200 per
machine hour
Power ($40,000/40,000) $1.00 per
kilowatt hour
Setups ($800 ´ 1) $ 800

Ordering costs ($50 ´ 4) 200
Maintenance ($200 ´ 20) 4,000
Power ($1.00 ´ 30) 30
Total overhead $5,030
Setups ($200,000/250) $800 per setup

Ordering costs ($80,000/1,600) $50 per order
Maintenance ($400,000/2,000) $200 per
machine hour
Power ($40,000/40,000) $1.00 per
kilowatt hour

Blackboard Learn
Setups ($800 ´ 1) $ 800

Ordering costs ($50 ´ 4) 200
Maintenance ($200 ´ 20) 4,000
Power ($1.00 ´ 30) 30
Total overhead $5,030
✔
115. Multiple Choice: Figure 4-12Vaughn, Points: 10

Expected Expected
setups
orders
Job 10A Job 20B

Machine hours 20 25
Refer to Figure 4-12. If kilowatt hours are used to assign power

costs, the amount of power costs assigned to Job 10A would be
Answer $33.20.
$30.00.
$102.00.
$53.32.
$40,000/40,000 = $1.00 per kilowatt hour
$1.00 ´ 30 = $30.00
$40,000/40,000 = $1.00 per kilowatt hour
$1.00 ´ 30 = $30.00
✔
116. Multiple Choice: Figure 4-13The Xiang Points: 10

Blackboard Learn
plant has two ca...
The Xiang plant has two categories of overhead: maintenance and

inspection.
Costs expected for these categories for the coming year are as
follows:
Maintenance $50,000
Inspection 75,000
The plant currently applies overhead using direct labor hours and
expected capacity of 50,000 direct labor hours. The following data
have been assembled for use in developing a bid for a proposed
job:
Direct materials $500

Direct labor $2,000
Machine hours 500
Direct labor hours 800
Total expected machine hours for all jobs during the year is
25,000, and the total expected number of inspections is 1,500.
Refer to Figure 4-13. Using activity-based costing and the

appropriate activity drivers, the total cost of the potential job would
be
Answer $1,200.
$1,800.
$3,700.
$3,875.
Direct materials $ 500

Direct labor 2,000
Overhead:
($50,000/25,000) ´ 500 1,000
($75,000/1,500) ´ 4 200
Total $3,700

Direct labor 2,000
Overhead:
($50,000/25,000) ´ 500 1,000
($75,000/1,500) ´ 4 200
Total $3,700
✔
117. Multiple Choice: Figure 4-13The Xiang Points: 10
plant has two ca...

Blackboard Learn
The Xiang plant has two categories of overhead: maintenance and

inspection.
Costs expected for these categories for the coming year are as
follows:
Maintenance $50,000
Inspection 75,000
The plant currently applies overhead using direct labor hours and
expected capacity of 50,000 direct labor hours. The following data
have been assembled for use in developing a bid for a proposed
job:
Direct materials $500

Direct labor $2,000
Machine hours 500
Direct labor hours 800
Total expected machine hours for all jobs during the year is
25,000, and the total expected number of inspections is 1,500.
Refer to Figure 4-13. Using direct labor hours to assign overhead,

the total cost of the potential job would be
Answer $2,500.
$5,500.
$4,000.
$4,500.

Direct labor 2,000
Overhead:
($125,000/50,000) ´ 800 2,000
Total $4,500

Direct labor 2,000
Overhead:
($125,000/50,000) ´ 800 2,000
Total $4,500
✔ 118. Multiple Choice: Figure 4-14Spear Points: 10

Spear Manufacturing has four categories of overhead. The four

year are as follows:
Setups 24,000

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Inspection 90,000

manufacturing cost plus 15 percent. Estimates for the proposed
job are as follows:

Number of setups 8
In the past, full manufacturing cost has been calculated by

allocating overhead using a volume-based activity driver, direct
labor hours. The plant manager has heard of a new way of
applying overhead that uses cost pools and activity drivers.
Expected activity for the four activity drivers that would be used
are:
Machine hours 5,000

Material moves 600
Setups 200
Refer to Figure 4-14. If material moves are used to assign material

handling costs, the amount of material handling costs allocated to
the proposed job would be
Answer $180.
$170.
$147.
$ 60.
$27,000/600 = $45 per material move
$45 ´ 4 = $180
$27,000/600 = $45 per material move
$45 ´ 4 = $180
✔ 119. Multiple Choice: Figure 4-14Spear Points: 10

Spear Manufacturing has four categories of overhead. The four

year are as follows:

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Setups 24,000
Inspection 90,000

manufacturing cost plus 15 percent. Estimates for the proposed
job are as follows:

Number of setups 8
In the past, full manufacturing cost has been calculated by

allocating overhead using a volume-based activity driver, direct
labor hours. The plant manager has heard of a new way of
applying overhead that uses cost pools and activity drivers.
Expected activity for the four activity drivers that would be used
are:
Machine hours 5,000

Material moves 600
Setups 200
Refer to Figure 4-14. If the number of inspections is used to assign

inspection costs, the amount of inspection costs allocated to the
proposed job would be
Answer $2,700.
$ 990.
$ 900.
$ 540.
$90,000/1,000 = $90
$90 ´ 6 = $540
$90,000/1,000 = $90
$90 ´ 6 = $540
✔ 120. Multiple Choice: Riley, Inc., has Points: 10

identified the follo...
Question Riley, Inc., has identified the following overhead costs and activity
drivers for next year:
Expected Expected
Setup costs $100,000 Number of setups 500

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Ordering costs 40,000 Number of orders 3,200

Job AA Job BB
Direct materials $375 $1,000
Direct labor $350 $1,200
Machine hours 20 25
If the activity drivers are used to allocate overhead costs, the unit
cost (rounded to two decimal places) for Job BB would be
Answer $21.40.
$26.56.
$26.95.
$27.03.
Direct materials $1,000.00

Direct labor 1,200.00
Setup [($100,000/500) ´ 4] 800.00
Ordering [(40,000/3,200) ´ 5] 62.50
Maintenance [($200,000/4,000) ´ 25] 1,250.00
Power [($20,000/80,000) ´ 50] 12.50
Total $4,325.00
$4,325/160 = $27.03
Direct materials $1,000.00

Direct labor 1,200.00
Setup [($100,000/500) ´ 4] 800.00
Ordering [(40,000/3,200) ´ 5] 62.50
Maintenance [($200,000/4,000) ´ 25] 1,250.00
Power [($20,000/80,000) ´ 50] 12.50
Total $4,325.00
$4,325/160 = $27.03
✔
121. Multiple Choice: Figure 4-15Quint Points: 10
Manufacturing uses a...
Quint Manufacturing uses an activity-based costing system. The

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company produces Model 1 and Model 2. Information relating to

the two products is as follows:
Model 1 Model 2
Material handling (number of moves) 4,000 6,000
Setups 5,000 7,000
The following costs are reported:
Material handling $ 40,000

Setups 60,000
Refer to Figure 4-15. Setup costs assigned to Model 2 are

Answer $36,000.
$35,000.
$28,000.
$25,000.
$60,000/12,000 = $5
$5 ´ 7,000 = $35,000
$60,000/12,000 = $5
$5 ´ 7,000 = $35,000
✔ 122. Multiple Choice: Figure 4-15Quint Points: 10

Quint Manufacturing uses an activity-based costing system. The

company produces Model 1 and Model 2. Information relating to
the two products is as follows:
Model 1 Model 2
Material handling (number of moves) 4,000 6,000
Setups 5,000 7,000
Material handling $ 40,000

Setups 60,000
Refer to Figure 4-15. Labor-related overhead costs assigned to

Model 1 are

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Answer $60,000.
$58,000.
$54,400.
$48,000.
$120,000/20,000 = $6
$6 ´ 8,000 = $48,000
$120,000/20,000 = $6
$6 ´ 8,000 = $48,000
✔ 123. Multiple Choice: Figure 4-16Newman Points: 10

Company recently in...
Newman Company recently installed an activity-based relational

database. Using the information contained in the activity relational
table, the following pool rates were computed:

$24 per machine hour, Process 1
Two products are produced by Special Products: X and Y. The

plant has two manufacturing processes, Process 1 and Process 2.
Other processes include engineering, product handling, and
procurement. Product X goes through Process 1 while Product Y
goes through Process 2. The product relational table for Special
Products is as follows:
Product X:
Usage
1 Units 200,000
Product Y:
Usage
1 Units 25,000
Refer to Figure 4-16. What is the unit cost of Product Y?

Answer $ 18.80
$504.00
$ 10.60
$ 12.00

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Purchase orders (125 ´ $400) $ 50,000

Machine hours (10,000 ´ $30) 300,000
Engineering hours (1,500 ´ $80) 120,000
Total costs $470,000
Units ÷_25,000
Unit cost $ 18.80
Purchase orders (125 ´ $400) $ 50,000

Machine hours (10,000 ´ $30) 300,000
Total costs $470,000
Units ÷_25,000
Unit cost $ 18.80




Product X:
Usage
1 Units 200,000
Product Y:
Usage
1 Units 25,000
Refer to Figure 4-16. How much purchasing overhead cost will be

assigned to Product X using the number of purchase orders?

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Answer $ 100,000
$ 50,000
$80,000,000
$ 133,500

250 ´ $400 = $100,000
250 ´ $400 = $100,000




Product X:
Usage
1 Units 200,000
Product Y:
Usage
1 Units 25,000
Refer to Figure 4-16. How much engineering overhead cost will be

assigned to Product Y using engineering hours?
Answer $100,000
$120,000
$2,000,000
$801,000
1,500 ´ $80 = $120,000
1,500 ´ $80 = $120,000

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Product X:
Usage
1 Units 200,000
Product Y:
Usage
1 Units 25,000
Refer to Figure 4-16. How much machine overhead cost will be

assigned to Product X using Process 1?
Answer $2,400,000
$4,800,000
$1,920,000
$240,000
80,000 ´ $24 = $1,920,000
80,000 ´ $24 = $1,920,000
✔
127. Multiple Choice: Figure 4-16Newman Points: 10


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Product X:
Usage
1 Units 200,000
Product Y:
Usage
1 Units 25,000
Refer to Figure 4-16. How much machine overhead cost will be

assigned to Product Y using Process 2?
Answer $2,400,000
$1,920,000
$240,000
$300,000
10,000 ´ $30 = $300,000
10,000 ´ $30 = $300,000





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Product X:
Usage
1 Units 200,000
Product Y:
Usage
1 Units 25,000
Refer to Figure 4-16. What is the unit cost of Product X?

Answer $9.42
$504.00
$10.60
$7.52
Purchase orders (250 ´ $400) $ 100,000

Machine hours (80,000 ´ $24) 1,920,000
Total costs $2,120,000
Units ÷__200,000
Unit costs $ 10.60
Purchase orders (250 ´ $400) $ 100,000

Machine hours (80,000 ´ $24) 1,920,000
Total costs $2,120,000
Units ÷__200,000
Unit costs $ 10.60
✔
129. Multiple Choice: Figure 4-17Moss Points: 10
Corporation has the f...
Moss Corporation has the following activities: creating bills of

manufacturing processes, training employees, and designing
tooling. The general ledger accounts reveal the following
expenditures for manufacturing engineering:

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Salaries $ 75,000
Equipment 40,000
Supplies 10,000
Total $125,000
The equipment is used for two activities: improving processes and

designing tooling. Thirty-five percent of the equipment's time is
used for improving processes and 65 percent is used for designing
tools. The salaries are for two engineers. One is paid $50,000,
while the other earns $25,000. The $50,000 engineer spends 40
percent of his time training employees in new processes and 60
percent of his time on improving processes. The remaining
engineer spends equal time on all activities. Supplies are
Creating BOMs 25%

Refer to Figure 4-17. What is the cost assigned to the creating

BOMs activity?
Answer $31,250
$7,500
$43,750
$125,000
(0.20 ´ $25,000 + 0.25 ´ $10,000) = $7,500
(0.20 ´ $25,000 + 0.25 ´ $10,000) = $7,500
✔ 130. Multiple Choice: Figure 4-17Moss Points: 10


Salaries $ 75,000
Equipment 40,000
Supplies 10,000
Total $125,000


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Creating BOMs 25%

Refer to Figure 4-17. What is the cost assigned to the improving

processes activity?
Answer $250,000
$25,000
$43,750
$51,000
(0.35 ´ ´ $40,000 + 0.20 ´ $25,000 + 0.60 ´ $50,000 + 0.20 ´
$10,000) = $51,000
(0.35 ´ ´ $40,000 + 0.20 ´ $25,000 + 0.60 ´ $50,000 + 0.20 ´
$10,000) = $51,000


Salaries $ 75,000
Equipment 40,000
Supplies 10,000
Total $125,000

Creating BOMs 25%

Refer to 4-17. What is the cost assigned to the training employees

activity?
Answer $27,500
$125,000

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$31,250
$81,250

(0.40 ´ $50,000 + 0.20 ´ $25,000 + 0.25 ´ $10,000) = $27,500
(0.40 ´ $50,000 + 0.20 ´ $25,000 + 0.25 ´ $10,000) = $27,500


Salaries $ 75,000
Equipment 40,000
Supplies 10,000
Total $125,000

Creating BOMs 25%

Refer to 4-17. What is the cost assigned to the designing tooling

activity?
Answer $81,250
$33,000
$25,000
$125,000
(0.65 ´ $40,000 + 0.20 ´ $25,000 + 0.20 ´ $10,000) = $33,000
(0.65 ´ $40,000 + 0.20 ´ $25,000 + 0.20 ´ $10,000) = $33,000
✔ 133. Multiple Choice: If activity-based Points: 10

costing is used, ma...
Question If activity-based costing is used, materials handling would be classified as a

Answer unit-level activity.
batch-level activity.

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product-level activity.
facility-level activity.
✔
134. Multiple Choice: If activity-based Points: 10
costing is used, mo...
Question If activity-based costing is used, modifications made by engineering to the

product design of several products would be classified as a

quantities is ...
Question Which of the following quantities is an example of an activity driver in

Answer number of direct labor hours
number of labor transactions
number of machine hours
all of these
✔
costing is used, se...
Question If activity-based costing is used, security is an example of a

✔
costing is used, in...
Question If activity-based costing is used, insurance on the plant would be classified

as a
✔
costing is used, pr...
Question If activity-based costing is used, product inspections would be classified as a

✔
costing is used, se...

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Question If activity-based costing is used, setups would be classified as a

✔
140. Multiple Choice: Maintenance of the Points: 10
production equipme...
Question Maintenance of the production equipment would be classified as a

cell-level activity.
✔
141. Multiple Choice: Figure 4-18Ubben Points: 10
Ubben Manufacturing uses an activity-based costing system. The company

produces Model X and Model Y. Information relating to the two products is
as follows:
Model X Model Y
Setups 40 60
Engineering $ 48,000
Setups 100,000
Machine-related overhead 144,000
Refer to Figure 4-18. Setups would be classified as a

✔ 142. Multiple Choice: Figure 4-18Ubben Points: 10

Ubben Manufacturing uses an activity-based costing system. The company

produces Model X and Model Y. Information relating to the two products is
as follows:
Model X Model Y

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Setups 40 60
Engineering $ 48,000
Setups 100,000
Machine-related overhead 144,000
Refer to Figure 4-18. Machine-related overhead would be classified as a

✔ 143. Multiple Choice: Figure 4-19Owens Points: 10

Corporation produces...
Owens Corporation produces specially machined parts. The parts are

Engineering $1,000,000
Setups 900,000
Machining 2,000,000
Inspection 800,000
capacities listed:

Setups 200
Refer to Figure 4-19. What is (are) the unit-level activity(ies)?

Answer engineering
setups
inspecting
machining

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Setups 900,000
Machining 2,000,000
Inspection 800,000
capacities listed:

Setups 200
Refer to Figure 4-19. What is (are) the batch-level activity(ies)?

Answer engineering
setups
inspecting
all of these
✔
145. Multiple Choice: Figure 4-19Owens Points: 10

Setups 900,000
Machining 2,000,000

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Inspection 800,000
capacities listed:

Setups 200
Refer to 4-19. What is (are) the facility-level activity(ies)?

Answer providing utilities
providing space
inspecting
both a and b
✔ 146. Multiple Choice: If activity-based Points: 10

costing is used, el...
Question If activity-based costing is used, electricity usage would be an example of a

✔
147. Multiple Choice: Batch-level costs are Points: 10
assigned using
Question Batch-level costs are assigned using

Answer unit-based activity drivers.
non-unit-based activity drivers.
cost pools.
departmental rates.
✔

produced in batches in one continuous manufacturing process. Each
part is custom produced and requires special engineering design
activity (based on customer specifications). Once the design is
completed, the equipment can be set up for batch production. Once
the batch is completed, a sample is taken and inspected to see if the
parts are within the tolerances allowed. Thus, the manufacturing
process has four activities: engineering, setups, machining, and
inspecting. Costs have been assigned to each activity using direct
tracing and resource drivers:
Activity Expected Activity Activity Capacity

Cost Driver

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Engineering $1,000,000 engineering 5,000 hours

hours
Setups $ 900,000 setups 200 setups
Machining $2,000,000 machine hours 25,000 machine
hours
Inspection $ 800,000 inspection 2,500 inspection
hours hours
Owens produces two models: Model X and Model Y. The following

table shows how the two products consume activity.
Model X Model Y
Units completed 300,000 200,000
Engineering hours 1,000 4,000
Setups 80 120
Inspection hours 1,500 1,000
Refer to Figure 4-20. How much overhead is assigned to Model X

using the 4 activity drivers?
Answer $560,000
$2,060,000
$2,640,000
$2,820,000
Activity rates:
Engineering $1,000,000/5000 = $200 eng. hr.
Setups $900,000/200 = $4500 per setup
Machining $2,000,000/25,000 =$80 mach. hr.
Inspection $800,000/2500 = $320 insp hr.
Assign activity costs to products:

Pool Activity Cost for X Activity Cost for
rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
Overhead $8.80 $10.3
per unit

Activity rates:
Setups $900,000/200 = $4500 per setup

rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00

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Inspection $320 1,500 $480,000 1,000 $800,00

Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit
✔


Cost Driver
hours
hours
hours hours

Model X Model Y
Setups 80 120
Refer to 4-20. How much overhead is assigned to Model Y using the

activity drivers?
Answer $560,000
$2,060,000
$2,640,000
$2,820,000
Activity rates:
Setups $900,000/200 = $4500 per setup

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rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit

Activity rates:
Setups $900,000/200 = $4500 per setup

rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit


part is custom produced and requires special engineering design acti
(based on customer specifications). Once the design is completed, th
equipment can be set up for batch production. Once the batch is
completed, a sample is taken and inspected to see if the parts are wit
the tolerances allowed. Thus, the manufacturing process has four
activities: engineering, setups, machining, and inspecting. Costs hav
been assigned to each activity using direct tracing and resource drive

Cost Driver
hours
hours
hours hours

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Owens produces two models: Model X and Model Y. The following ta

shows how the two products consume activity.
Model X Model Y
Setups 80 120
Refer to Figure 4-20. Determine the engineering costs assigned to

model X using the two most expensive activities for cost pools. The
costs of the two relatively inexpensive activities are allocated to the tw
most expensive activities in proportion to their costs. (Round to two
decimal places.)The engineering cost assigned to model X would be
Answer $313,330
$566,666.67
$1,566,666.67
$2,819,930

Activity rates:
Setups $900,000/200 = $4500 per setup

rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit
Inexpensive activities are setups and inspection = $900,000 + $800,0

= $1,700,000
Cost pools for the two most expensive activities:

engineering 1,000,000 + [(1,000,000/3,000,000) x 1,700,000] =
1,566,666.67
machining 2,000,000 + [(2,000,000/3,000,000) x 1,700,000] =
3,133,333.33
Cost pool rates for the two most expensive activities:

engineering 1,566,666.67/5,000 eng. hrs. = 313.33 per eng. hr
machining 3,133,333.33/25,000 mach. hrs. = 125.33 per mach
hr.

rate for X for Y
Engineering $313.33 1,000 $313,330 4,000 $1,253,3
Machining $125.33 20,000 $2,506,600 5,000 $626,6

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Total cost $2,819,930 $1,879,9

assigned

Activity rates:
Setups $900,000/200 = $4500 per setup

rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit

= $1,700,000

engineering 1,000,000 + [(1,000,000/3,000,000) x 1,700,000] =
1,566,666.67
machining 2,000,000 + [(2,000,000/3,000,000) x 1,700,000] =
3,133,333.33

hr.

rate for X for Y
Engineering $313.33 1,000 $313,330 4,000 $1,253,3
Machining $125.33 20,000 $2,506,600 5,000 $626,6
Total cost $2,819,930 $1,879,9
assigned



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Cost Driver
hours
hours
hours hours

Model X Model Y
Setups 80 120
Refer to Figure 4-20. Determine the overhead costs assigned to mod

Y using the two most expensive activities for cost pools. The costs of
the two relatively inexpensive activities are allocated to the two most
expensive activities in proportion to their costs. (Round to two decima
places.)The engineering cost assigned to model Y would be
Answer $626,650.
$1,253,320.
$1,879,970.
$3,133,333.33.
Activity rates:
Setups $900,000/200 = $4500 per setup

rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit

= $1,700,000

engineering 1,000,000 + [(1,000,000/3,000,000) x 1,700,000] =
1,566,666.67
machining 2,000,000 + [(2,000,000/3,000,000) x 1,700,000] =
3,133,333.33

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hr.

rate for X for Y
Engineering $313.33 1,000 $313,330 4,000 $1,253,3
Machining $125.33 20,000 $2,506,600 5,000 $626,6
Total cost $2,819,930 $1,879,9
assigned

Activity rates:
Setups $900,000/200 = $4500 per setup

rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit

= $1,700,000

engineering 1,000,000 + [(1,000,000/3,000,000) x 1,700,000] =
1,566,666.67
machining 2,000,000 + [(2,000,000/3,000,000) x 1,700,000] =
3,133,333.33

hr.

rate for X for Y
Engineering $313.33 1,000 $313,330 4,000 $1,253,3
Machining $125.33 20,000 $2,506,600 5,000 $626,6
Total cost $2,819,930 $1,879,9
assigned
✔

Blackboard Learn


Cost Driver
hours
hours
hours hours

Model X Model Y
Setups 80 120
Refer to Figure 4-20. First, determine the overhead costs assigned to

model Y using the two most expensive activities for cost pools. The
costs of the two relatively inexpensive activities are allocated to the tw
most expensive activities in proportion to their costs. (Round to two
decimal places.)What is the error in the overhead cost assigned to
model Y using ABC (4 driver model) as the benchmark?
Answer $180,030
$240,700
$313,330
$626,650

Activity rates:
Setups $900,000/200 = $4500 per setup

rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00

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per unit

= $1,700,000

engineering 1,000,000 + [(1,000,000/3,000,000) x 1,700,000] =
1,566,666.67
machining 2,000,000 + [(2,000,000/3,000,000) x 1,700,000] =
3,133,333.33

hr.

rate for X for Y
Engineering $313.33 1,000 $313,330 4,000 $1,253,3
Machining $125.33 20,000 $2,506,600 5,000 $626,6
Total cost $2,819,930 $1,879,9
assigned
Model Y -- ABC behchmark $2,060,000

$1,879,970
Error $ 180,030
Activity rates:
Setups $900,000/200 = $4500 per setup

rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit

= $1,700,000

engineering 1,000,000 + [(1,000,000/3,000,000) x 1,700,000] =
1,566,666.67
machining 2,000,000 + [(2,000,000/3,000,000) x 1,700,000] =
3,133,333.33

hr.

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rate for X for Y

Engineering $313.33 1,000 $313,330 4,000 $1,253,3
Machining $125.33 20,000 $2,506,600 5,000 $626,6
Total cost $2,819,930 $1,879,9
assigned
Model Y -- ABC behchmark $2,060,000

$1,879,970
Error $ 180,030
✔


Cost Driver
hours
hours
hours hours

Model X Model Y
Setups 80 120
Refer to Figure 4-20. What are the global consumption ratios of X an

Y respectively? (round to two decimal places)
Answer 0.20; 0.80
0.42; 0.58
0.56; 0.44
0.84; 0.16
Activity rates:
Setups $900,000/200 = $4500 per setup

Blackboard Learn


rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit
Global consumption ratios: X Y Total

$2,640,000 $2,060,000 $4,700,000
0.56 0.44 1.00
Activity rates:
Setups $900,000/200 = $4500 per setup

rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit

$2,640,000 $2,060,000 $4,700,000
0.56 0.44 1.00



Blackboard Learn

Cost Driver
hours
hours
hours hours

Model X Model Y
Setups 80 120
Refer to Figure 4-20. Using the activity ratios for engineering and
machining, what is the overhead rate for machining? (round to two
decimal places)
Answer $376
$541.50
$872.60
$112.80
Activity rates:
Setups $900,000/200 = $4500 per setup

rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit

$2,640,000 $2,060,000 $4,700,000
0.56 0.44 1.00
Equations
1/5W1 + 4/5W2 = 0.56
4/5W1 1/5W2 = 0.44
W1 = 0.4; W2 = 0.6
Machining 4,700,000 x .6 = 2,820,000/25,000 mach. hrs. = 112.8

Blackboard Learn
mach. hrs.
Activity rates:
Setups $900,000/200 = $4500 per setup

rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit

$2,640,000 $2,060,000 $4,700,000
0.56 0.44 1.00
Equations
1/5W1 + 4/5W2 = 0.56
4/5W1 1/5W2 = 0.44
W1 = 0.4; W2 = 0.6
mach. hrs.
✔


Cost Driver
hours
hours
hours hours

Blackboard Learn
Model X Model Y
Setups 80 120
Refer to Figure 4-20. Using the activity ratios for engineering and
machining, what is the overhead cost assigned to the engineering
pool? (round to two decimal places)
Answer $1,880,000
$2,620,000
$2,740,000
$2,870,000
Activity rates:
Setups $900,000/200 = $4,500 per setup

rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00
Setups $4,500 80 $360,000 120 $900,00
Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit

$2,640,000 $2,060,000 $4,700,000
0.56 0.44 1.00
Equations
1/5W1 + 4/5W2 = 0.56
4/5W1 1/5W2 = 0.44
W1 = 0.4; W2 = 0.6
mach. hrs.
Engineering 4,700,000 x .4 = $1,880,000
Activity rates:
Setups $900,000/200 = $4,500 per setup

rate for X for Y
Engineering $200 1,000 $200,000 4,000 $1,000,00

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Setups $4,500 80 $360,000 120 $900,00

Machining $80 20,000 $1,600,000 5,000 $2,000,00
Inspection $320 1,500 $480,000 1,000 $800,00
Total cost $2,640,000 $2,060,00
assigned
Units 300,000 200,00
per unit

$2,640,000 $2,060,000 $4,700,000
0.56 0.44 1.00
Equations
1/5W1 + 4/5W2 = 0.56
4/5W1 1/5W2 = 0.44
W1 = 0.4; W2 = 0.6
mach. hrs.
Engineering 4,700,000 x .4 = $1,880,000
✔ 156. Multiple Choice: Figure 4-21Jones Points: 10

Jones Manufacturing uses an activity-based costing system. The com

Model Y. Information relating to the two products is as follows:
Units produced
Machine hours
Direct labor hours
Material handling (number of moves)
Setups
Purchase orders
Inspections
Product line variations
The following overhead costs are reported for the following activities
Material handling
Labor-related overhead
Setups
Product design
Batch inspections
Central purchasing
Jones manufacturing has used activity based costing to assign costs

table below:
Activity Cost Driver Pool Model Model

Pool Rate X X Cost
Activity
Material $40,000 10,000 $4 4,000 $16,000

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handling
Labor $120,000 20,000 $6 8,000 $48,000
related
overhead
Setups $60,000 12,000 $5 5,000 $25,000
Product $100,000 20 $5,000 8 $40,000
design
Batch $120,000 24,000 $5 10,000 $50,000
inspections
Central $70,000 70 $1,000 30 $30,000
purchasing
total $209,000
Jones Manufacturing wants to implement an approximately relevant A

expensive activities for cost assignment.
Refer to Figure 4-21. Under this new approach, which activities would
Answer materials handling and labor related
labor related and batch inspections
product design and batch inspections
materials handling and central purchasing

The two activities that have the highest cost are labor related at $120
$120,000
$120,000
✔
157. Multiple Choice: Figure 4-21Jones Points: 10

Units produced
Machine hours
Direct labor hours
Setups
Purchase orders
Inspections
Material handling
Setups
Product design
Batch inspections
Central purchasing

Blackboard Learn

table below:

Pool Rate X X Cost
Activity
Material $40,000 10,000 $4 4,000 $16,000
handling
Labor $120,000 20,000 $6 8,000 $48,000
related
overhead
Setups $60,000 12,000 $5 5,000 $25,000
Product $100,000 20 $5,000 8 $40,000
design
Batch $120,000 24,000 $5 10,000 $50,000
inspections
Central $70,000 70 $1,000 30 $30,000
purchasing
total $209,000

Refer to Figure 4-21. Under this new approach, what cost would be a
Answer 0
$40,000
$140,000
$290,000

$120,000. No costs would be assigned to materials handling.
$120,000. No costs would be assigned to materials handling.
✔

Units produced
Machine hours
Direct labor hours
Setups
Purchase orders
Inspections

Blackboard Learn
Material handling
Setups
Product design
Batch inspections
Central purchasing

table below:

Pool Rate X X Cost
Activity
Material $40,000 10,000 $4 4,000 $16,000
handling
Labor $120,000 20,000 $6 8,000 $48,000
related
overhead
Setups $60,000 12,000 $5 5,000 $25,000
Product $100,000 20 $5,000 8 $40,000
design
Batch $120,000 24,000 $5 10,000 $50,000
inspections
Central $70,000 70 $1,000 30 $30,000
purchasing
total $209,000

Refer to Figure 4-21. Under this new approach, what cost would be a
pool?
Answer 0
$120,000
$255,000
$315,000

$120,000. The remaining costs in the other pools amount to $270,000
labor related = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 120,000 + [120,000/240,000 x 270,000] = 255,000
labor related = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 120,000 + [120,000/240,000 x 270,000] = 255,000
✔

Blackboard Learn
Units produced
Machine hours
Direct labor hours
Setups
Purchase orders
Inspections
Material handling
Setups
Product design
Batch inspections
Central purchasing

table below:

Pool Rate X X Cost
Activity
Material $40,000 10,000 $4 4,000 $16,000
handling
Labor $120,000 20,000 $6 8,000 $48,000
related
overhead
Setups $60,000 12,000 $5 5,000 $25,000
Product $100,000 20 $5,000 8 $40,000
design
Batch $120,000 24,000 $5 10,000 $50,000
inspections
Central $70,000 70 $1,000 30 $30,000
purchasing
total $209,000

Refer to Figure 4-21. Under this new approach using the new rates, w
Model X in this approximately relevant ABC system?
Answer $60,000
$102,000
$153,000
$225,000

labor related = 120,000 + [120,000/240,000 x 270,000] = 255,000

Blackboard Learn
batch = 120,000 + [120,000/240,000 x 270,000] = 255,000
labor related = 255,000/ 20,000 lab hr = $12.75 per lab hr

batch = 255,000/ 24,000 = $10.625 batch
Pool Rate Model X Model X

activity cost
labor related $12.75 8000 102,000
costs
batch $10.675 10,000
inspections
total

labor related = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 255,000/ 24,000 = $10.625 batch

activity cost
labor related $12.75 8000 102,000
costs
batch $10.675 10,000
inspections
total
✔

Units produced
Machine hours
Direct labor hours
Setups
Purchase orders
Inspections
Material handling
Setups
Product design
Batch inspections

Blackboard Learn
Central purchasing

table below:

Pool Rate X X Cost
Activity
Material $40,000 10,000 $4 4,000 $16,000
handling
Labor $120,000 20,000 $6 8,000 $48,000
related
overhead
Setups $60,000 12,000 $5 5,000 $25,000
Product $100,000 20 $5,000 8 $40,000
design
Batch $120,000 24,000 $5 10,000 $50,000
inspections
Central $70,000 70 $1,000 30 $30,000
purchasing
total $209,000

Refer to Figure 4-21. Under this new approach, what is the new pool
Answer 0
$6
$8.225
$12.75

labor related = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 255,000/ 24,000 = $10.625 batch
labor related = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 255,000/ 24,000 = $10.625 batch
✔


Blackboard Learn
Units produced
Machine hours
Direct labor hours
Setups
Purchase orders
Inspections
Material handling
Setups
Product design
Batch inspections
Central purchasing

table below:

Pool Rate X X Cost
Activity
Material $40,000 10,000 $4 4,000 $16,000
handling
Labor $120,000 20,000 $6 8,000 $48,000
related
overhead
Setups $60,000 12,000 $5 5,000 $25,000
Product $100,000 20 $5,000 8 $40,000
design
Batch $120,000 24,000 $5 10,000 $50,000
inspections
Central $70,000 70 $1,000 30 $30,000
purchasing
total $209,000

Refer to Figure 4-21. Under this new approach, what is the new pool
Answer 0
$5
$10.625
$15.525

labor related = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 255,000/ 24,000 = $10.625 batch

Blackboard Learn

labor related = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 255,000/ 24,000 = $10.625 batch
✔

Units produced
Machine hours
Direct labor hours
Setups
Purchase orders
Inspections
Material handling
Setups
Product design
Batch inspections
Central purchasing

table below:

Pool Rate X X Cost
Activity
Material $40,000 10,000 $4 4,000 $16,000
handling
Labor $120,000 20,000 $6 8,000 $48,000
related
overhead
Setups $60,000 12,000 $5 5,000 $25,000
Product $100,000 20 $5,000 8 $40,000
design
Batch $120,000 24,000 $5 10,000 $50,000
inspections
Central $70,000 70 $1,000 30 $30,000
purchasing

Blackboard Learn
total $209,000

Refer to Figure 4-21. Under this new approach using the new rates, w
assigned to Model Y in this approximately relevant ABC system?
Answer $120,000
$208,250
$255,000
$301,750
labor related = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 255,000/ 24,000 = $10.625 batch

activity cost
labor related $12.75 8000 102,000
batch $10.675 10,000 106,250
inspection
total 208,250

labor related = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 255,000/ 24,000 = $10.625 batch

activity cost
labor related $12.75 8000 102,000
batch $10.675 10,000 106,250
inspection
total 208,250
✔

Units produced
Machine hours
Direct labor hours

Blackboard Learn
Setups
Purchase orders
Inspections
Material handling
Setups
Product design
Batch inspections
Central purchasing

table below:

Pool Rate X X Cost
Activity
Material $40,000 10,000 $4 4,000 $16,000
handling
Labor $120,000 20,000 $6 8,000 $48,000
related
overhead
Setups $60,000 12,000 $5 5,000 $25,000
Product $100,000 20 $5,000 8 $40,000
design
Batch $120,000 24,000 $5 10,000 $50,000
inspections
Central $70,000 70 $1,000 30 $30,000
purchasing
total $209,000

Refer to Figure 4-21. Using ABC as the benchmark, What is the perc
to Model Y using the approximately relevant ABC approach? (round t
Answer 0.25%
0.12%
1.2%
2.5%

labor related = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 255,000/ 24,000 = $10.625 batch

activity cost
labor related $12.75 8000 102,000

Blackboard Learn
batch $10.675 10,000 106,250

inspections
total 208,250
Model Y 301,000 - 301, 750 = 750/301,000 = .0025

labor related = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 120,000 + [120,000/240,000 x 270,000] = 255,000

batch = 255,000/ 24,000 = $10.625 batch

activity cost
labor related $12.75 8000 102,000
batch $10.675 10,000 106,250
inspections
total 208,250
Model Y 301,000 - 301, 750 = 750/301,000 = .0025


Units produced
Machine hours
Direct labor hours
Setups
Purchase orders
Inspections
Material handling
Setups
Product design
Batch inspections
Central purchasing

table below:

Blackboard Learn
Pool Rate X X Cost

Activity
Material $40,000 10,000 $4 4,000 $16,000
handling
Labor $120,000 20,000 $6 8,000 $48,000
related
overhead
Setups $60,000 12,000 $5 5,000 $25,000
Product $100,000 20 $5,000 8 $40,000
design
Batch $120,000 24,000 $5 10,000 $50,000
inspections
Central $70,000 70 $1,000 30 $30,000
purchasing
total $209,000

Refer to Figure 4-21. Under this new approach, what are the global c
and Model Y respectively? (round to 2 decimal places)
Answer .41: .59
.44; .56
.40; .60
.50; .50

Model X Model Y
209,000 301,000
510,000 510,000
0.41 0.59
Model X Model Y
209,000 301,000
510,000 510,000
0.41 0.59


Units produced
Machine hours
Direct labor hours
Setups
Purchase orders
Inspections

Blackboard Learn
Material handling
Setups
Product design
Batch inspections
Central purchasing

table below:

Pool Rate X X Cost
Activity
Material $40,000 10,000 $4 4,000 $16,000
handling
Labor $120,000 20,000 $6 8,000 $48,000
related
overhead
Setups $60,000 12,000 $5 5,000 $25,000
Product $100,000 20 $5,000 8 $40,000
design
Batch $120,000 24,000 $5 10,000 $50,000
inspections
Central $70,000 70 $1,000 30 $30,000
purchasing
total $209,000

Refer to Figure 4-21. Under this new approach using consumption ra

hours, what set of equations would be used to create equally accura
(where a = labor hours and b = machine hours)? (round to 5 decimal
Answer .40 = .8a + .75b
.60 = .12a + .85b
.41 = .4a + .46875b
.59 = .6a + .53125b
.50 = .4a + .6b
.50 = .6a + .4b
.44 = .8a + .75b
.56 = .12a + .85b

Model X Model Y
209,000 301,000
510,000 510,000
0.41 0.59
Model X Model Y
global consumption ratios .41 .59
a = labor hours 8,000/20,000 12,000/20,000
.4 .6
b= machine hours 7,500/16,000 8,500/16,000
.46875 .53125
set of equations
Model X .41 = .4a + .46875b
Model Y .59 = .6a + .53125b

Blackboard Learn
Model X Model Y
209,000 301,000
510,000 510,000
0.41 0.59
Model X Model Y
a = labor hours 8,000/20,000 12,000/20,000
.4 .6
b= machine hours 7,500/16,000 8,500/16,000
.46875 .53125
set of equations
Model X .41 = .4a + .46875b
Model Y .59 = .6a + .53125b


Units produced
Machine hours
Direct labor hours
Setups
Purchase orders
Inspections
Material handling
Setups
Product design
Batch inspections
Central purchasing

table below:

Pool Rate X X Cost
Activity
Material $40,000 10,000 $4 4,000 $16,000
handling
Labor $120,000 20,000 $6 8,000 $48,000
related
overhead
Setups $60,000 12,000 $5 5,000 $25,000
Product $100,000 20 $5,000 8 $40,000
design

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Batch $120,000 24,000 $5 10,000 $50,000

inspections
Central $70,000 70 $1,000 30 $30,000
purchasing
total $209,000


hours, what allocation rate would be used to assign labor related cost
Answer 0.85455
0.60
0.46875
0.53125

Model X Model Y
209,000 301,000
510,000 510,000
0.41 0.59
Model X Model Y
a = labor hours 8,000/20,000 12,000/20,000
.4 .6
b= machine hours 7,500/16,000 8,500/16,000
.46875 .53125
Set of equations:
Model X .41 = .4a + .46875b
Model Y .59 = .6a + .53125b
a= .85455 ; b= .14545
Model X Model Y
209,000 301,000
510,000 510,000
0.41 0.59
Model X Model Y
a = labor hours 8,000/20,000 12,000/20,000
.4 .6
b= machine hours 7,500/16,000 8,500/16,000
.46875 .53125
Set of equations:
Model X .41 = .4a + .46875b
Model Y .59 = .6a + .53125b
a= .85455 ; b= .14545



Blackboard Learn
Units produced
Machine hours
Direct labor hours
Setups
Purchase orders
Inspections
Material handling
Setups
Product design
Batch inspections
Central purchasing

table below:

Pool Rate X X Cost
Activity
Material $40,000 10,000 $4 4,000 $16,000
handling
Labor $120,000 20,000 $6 8,000 $48,000
related
overhead
Setups $60,000 12,000 $5 5,000 $25,000
Product $100,000 20 $5,000 8 $40,000
design
Batch $120,000 24,000 $5 10,000 $50,000
inspections
Central $70,000 70 $1,000 30 $30,000
purchasing
total $209,000


hours, the overhead assigned to labor related activities would be? (ro
Answer $102,546.50
$120,000
$255,000
$435,820.50

Model X Model Y
209,000 301,000
510,000 510,000
0.41 0.59
Model X Model Y
a = labor hours 8,000/20,000 12,000/20,000

Blackboard Learn
.4 .6
b= machine hours 7,500/16,000 8,500/16,000
.46875 .53125
Set of equations
Model X .41 = .4a + .46875b
Model Y .59 = .6a + .53125b
a= .85455 ; b= .14545
labor related = .85455 x 510,000 = 435,820.50

Model X Model Y
209,000 301,000
510,000 510,000
0.41 0.59
Model X Model Y
a = labor hours 8,000/20,000 12,000/20,000
.4 .6
b= machine hours 7,500/16,000 8,500/16,000
.46875 .53125
Set of equations
Model X .41 = .4a + .46875b
Model Y .59 = .6a + .53125b
a= .85455 ; b= .14545
labor related = .85455 x 510,000 = 435,820.50
✔

Units produced
Machine hours
Direct labor hours
Setups
Purchase orders
Inspections
Material handling
Setups
Product design
Batch inspections
Central purchasing

Blackboard Learn

table below:

Pool Rate X X Cost
Activity
Material $40,000 10,000 $4 4,000 $16,000
handling
Labor $120,000 20,000 $6 8,000 $48,000
related
overhead
Setups $60,000 12,000 $5 5,000 $25,000
Product $100,000 20 $5,000 8 $40,000
design
Batch $120,000 24,000 $5 10,000 $50,000
inspections
Central $70,000 70 $1,000 30 $30,000
purchasing
total $209,000


hours, the overhead cost assigned to Model X would be? (round to 5
Answer $74,179.50
$209,099.89
$255,000
$435,870.50

Model X Model Y
209,000 301,000
510,000 510,000
0.41 0.59
Model X Model Y
a = labor hours 8,000/20,000 12,000/20,000
.4 .6
b= machine hours 7,500/16,000 8,500/16,000
.46875 .53125
Set of equations
Model X .41 = .4a + .46875b
Model Y .59 = .6a + .53125b
a= .85455 ; b= .14545
labor related = .85455 x 510,000 = 435,820.50/20,000 = $21.79103 p

machine = .14545 x 510,000 = 74,179.50 /16,000 = 4.63622 per ma
rate Model X activity Model X

cost
labor 21.79103 8000 175,328.24
mach 4.63622 7500 34,771.65
209,099.89

Model X Model Y
209,000 301,000

Blackboard Learn
510,000 510,000
0.41 0.59
Model X Model Y
a = labor hours 8,000/20,000 12,000/20,000
.4 .6
b= machine hours 7,500/16,000 8,500/16,000
.46875 .53125
Set of equations
Model X .41 = .4a + .46875b
Model Y .59 = .6a + .53125b
a= .85455 ; b= .14545
labor related = .85455 x 510,000 = 435,820.50/20,000 = $21.79103 p

machine = .14545 x 510,000 = 74,179.50 /16,000 = 4.63622 per ma
rate Model X activity Model X

cost
labor 21.79103 8000 175,328.24
mach 4.63622 7500 34,771.65
209,099.89
✔ 169. Multiple Choice: _______________ is (are) Points: 10

the collecte...
Question _______________ is (are) the collected data sets that are organized and
interrelated for use by an organization's ABC information system.
Answer Activity driver
Cost objective
Activity-based costing database
Both a and c
✔
170. Multiple Choice: Figure 4-22Isidora’s Points: 10
Clinic is ...
Isidora’s Clinic is considering a time-driven activity based costing

system. Given the following data:
Resources Activities time/activity
supervision $ 60,000 treating 1.40 hr.

patients
supplies and $ 80,000 providing 1.00 hr
uniforms hygienic care
salaries $350,000 responding 0.60 hr

to requests
computer $ 10,000 monitoring 1.00 hr

patients
monitor $ 25,000
Total $525,000
Total nursing 15,000

hours
(practical

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capacity)
Refer to Figure 4-22. What is the capacity cost rate?

Answer $35
$25
$4
$105
Correct Feedback $525,000/ 15,000 = $35

Incorrect Feedback $525,000/ 15,000 = $35
✔
Clinic is ...


patients

to requests

patients
monitor $ 25,000
Total $525,000

hours
(practical
capacity)
Refer to Figure 4-22. What is the activity rate for treating patients?
Answer $35
$49
$21
$140
Correct Feedback 525,000/15,000 = 35
35 x 1.40 = $49 per patient
Incorrect Feedback 525,000/15,000 = 35
35 x 1.40 = $49 per patient
✔
Clinic is ...


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patients


to requests

patients
monitor $ 25,000
Total $525,000

hours
(practical
capacity)
Refer to Figure 4-22. What is the activity rate for responding to

requests?
Answer $50
$35
$25
$21
Correct Feedback $525,000/15,000 = 35
35 x .6 =
Incorrect Feedback $525,000/15,000 = 35
35 x .6 =
✔ 173. Multiple Choice: A(n)_______________ is a Points: 10

grouping of ...
Question A(n)_______________ is a grouping of logically related information.

Answer data set
activity driver
cost objective
both a and c

statements is ...
Question Which of the following statements is TRUE?

Answer A vital attribute of an ABC database is the cost of individual
departments.
The ultimate objective of activity classification is to build homogeneous
cost pools.
When unbundling general ledger costs to an ABC database, we are
more concerned about "How are the dollars spent?" than "What is spent?"
Both b and c are true.
✔
175. Multiple Choice: In an approximately Points: 10
relevant ABC system
Question In an approximately relevant ABC system

Answer all activities still are separated into pools; they are allocated on
estimated activity levels.
only the most expensive activities are allocated using appropriate
cause-and-effect drivers.

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cost pools are limited to only two cost pools.

none of these.
✔
176. Multiple Choice: If operations run on Points: 10
less than full c...
Question If operations run on less than full capacity, what is the result on cost driver
rates?
Answer They are not affected.
They are too low.
They can be either too high or too low.
They are too high.
✔ 177. Multiple Choice: In the time-driven ABC Points: 10

systems, managers
Question In the time-driven ABC systems, managers

Answer assign resources to departments, then activities.
assign resource costs first to activities, then to products.
directly estimate the resource demands imposed by each product.
none of these.

is NOT an appr...
Question Which of the following is NOT an approach to estimate practical capacity in

a time-driven ABC system?
Answer Review past activity levels and identify the month with the most days.
Assume practical capacity at some set percentage of theoretical
capacity.
Review past activity levels and identify the month with the most overtime.
Review project activity levels based on time estimates from interviews
of employees.
✔
179. Multiple Choice: In a time-driven ABC Points: 10
system, once the...
Question In a time-driven ABC system, once the managers determine the cost of per
time unit of supplying resources to activities, the next step would be
Answer for managers to determine how long an employee takes to do an activity.
assign costs of a department’s resources to the customer who uses the
services.
for managers to determine the time it takes to carry out one unit of
each kind of activity.
attempt to estimate practical capacity.

is NOT an adva...
Question Which of the following is NOT an advantage of a time-driven ABC system?

Answer There are more activity pools used to allocate costs
Managers can review the costs of unused capacity
Managers can determine how to reduce the cost of supplying unused
resources in subsequent periods
Managers can monitor efforts to reduce costs with unused capacity

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is a pure serv...
Question Which of the following is a pure service?

Answer bungee jumping
beauty salon
restaurant
software
✔ 182. Multiple Choice: A pure service Points: 10

organization has
Question A pure service organization has

Answer no raw materials, no inventories, and a definite separation between the
plant and the customer.
raw materials, tangible items, and no separation between the plant and
the customer.
no raw materials, no tangible items, and no separation between the
plant and the customer.
none of these.
✔
183. Multiple Choice: Which of the following Points: 10
is a manufactu...
Question Which of the following is a manufactured product?

Answer bungee jumping
beauty salon
restaurant
automobile
✔
184. Multiple Choice: Inseparability refers to Points: 10
the
Question Inseparability refers to the

Answer nonphysical nature of services as opposed to products.
fact that production and consumption are inseparable for services.
greater chances for variation in the performance of services than in the
production of products.
fact that services cannot be inventoried but must be consumed when
performed.
✔
185. Multiple Choice: Heterogeneity refers to Points: 10
the
Question Heterogeneity refers to the

greater chances for variation in the performance of services than in
the production of products.
performed.
✔
186. Multiple Choice: Intangibility refers to Points: 10
the

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Question Intangibility refers to the

performed.
✔
187. Multiple Choice: Perishability refers to Points: 10
the
Question Perishability refers to the

performed.
✔
firms would ma...
Question Which of the following firms would make extensive use of service costing?
Answer auto manufacturer
furniture manufacturer
auto dealer
CPA firm
✔
189. Multiple Choice: Manufacturers Points: 10
producing unique or cus...
Question Manufacturers producing unique or customized products would employ a(n)

Answer process costing system.
job-costing system.
homogeneous costing system.
all of these.
✔
products would...
Question Which of the following products would NOT use job-order costing?
Answer houses
chemicals
ships
custom-built furniture
✔
firms would ma...
Question Which of the following firms would make extensive use of a job-order
costing?
Answer dental and medical services
canned foods
discount brokers

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petroleum
✔ 192. Multiple Choice: Process costing would Points: 10

be most applica...
Question Process costing would be most applicable for

Answer an electronics producer.
custom machining.
high rise building construction.
CPA audits.

would NOT use ...
Question Which of the following would NOT use a process costing system?
Answer electrical wire
cotton yarn
newsprint
satellites
✔ 194. Multiple Choice: Which cost accounting Points: 10

process would b...
Question Which cost accounting process would be most appropriate for accumulating
costs of identical, standardized units?
Answer job-order costing
process costing
normal costing
standard costing
✔
195. Multiple Choice: Homogeneous products Points: 10
refer to
Question Homogeneous products refer to

Answer products similar in nature.
the nonphysical nature of services and opposed to products.
great variation in the nature products.
products that can be inventoried.
✔
196. Multiple Choice: In ____________ a single Points: 10
product is p...
Question In ____________ a single product is produced on a continuous basis.

Answer process production
job production
job-order production
both a and c
✔
197. Multiple Choice: A source document Points: 10
Question A source document

Answer is only an external document.
provides transaction data that can be recorded in a database.
is only used to record a transaction between an organization and an

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outside vendor.
is only an internal document.
✔
costs is usual...
Question Which of the following costs is usually NOT easily traceable to finished units
of product?
Answer direct labor
manufacturing overhead
direct materials
all of these
✔ 199. Multiple Choice: Manufacturing Points: 10

overhead consists of all
Question Manufacturing overhead consists of all

Answer costs other than direct materials.
manufacturing costs other than direct materials.
costs other than direct materials and direct labor.
manufacturing costs other than direct materials and direct labor.
✔ 200. Multiple Choice: _______________ is the Points: 10

recognition an...
Question _______________ is the recognition and recording of costs.

Answer Cost accumulation
Cost measurement
Cost assignment
Job order costing
✔ 201. Multiple Choice: _______________ involves Points: 10

determining ...
Question _______________ involves determining the dollar amounts of direct

materials, direct labor, and overhead used in production.
Cost measurement
Cost assignment
Job order costing
✔
202. Multiple Choice: An actual overhead rate Points: 10
can be calcul...
Question An actual overhead rate can be calculated

Answer at the beginning of the year.
at the end of each month.
at the beginning of each month.
either at the beginning of the year or at the beginning of the month.
✔
203. Multiple Choice: Disadvantages of actual Points: 10
costing include
Question Disadvantages of actual costing include

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Answer actual cost systems cannot provide accurate unit cost information on a
timely basis.
actual cost systems produce unit costs that fluctuate from period to
period.
estimates must be used when calculating the actual overhead rate.
both a and b.
✔
204. Multiple Choice: The effect of uniform Points: 10
production leve...
Question The effect of uniform production levels on unit production costs can be
achieved
Answer by using a factory overhead rate based on different production levels for
each year.
by using a factory overhead rate based on selling price.
by closing the factory overhead at the end of the accounting period.
by using a factory overhead rate based on long-run normal production
activity level.
✔ 205. Multiple Choice: The predetermined Points: 10

overhead rate is us...
Question The predetermined overhead rate is usually calculated at the

Answer end of each month.
beginning of each month.
beginning of the year.
end of the year.
✔ 206. Multiple Choice: Normal costing uses Points: 10

which cost in wor...
Question Normal costing uses which cost in work in process?

Answer applied direct materials
actual overhead
applied overhead
budgeted overhead
✔ 207. Multiple Choice: A normal costing Points: 10

system records which...
Question A normal costing system records which costs in work in process?

Answer actual direct materials, actual direct labor, actual manufacturing
overhead
applied direct materials, applied direct labor, applied manufacturing
overhead
applied materials and labor and actual manufacturing overhead
actual materials and labor and applied overhead
✔ 208. Multiple Choice: The principal difficulty Points: 10

with normal ...
Question The principal difficulty with normal costing is that

Answer the unit cost information is not received on a timely basis.
it can result in fluctuating per-unit overhead costs.
estimated overhead and estimated activity are likely to differ from
actual overhead and actual costs, resulting in underapplied or overapplied

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overhead.
there is no difficulty associated with using normal costing.

costing system...
Question Which of the following costing systems assigns actual costs of materials to
inventory?
Answer actual costing system
normal costing system
standard costing system
both a and b
✔
210. Multiple Choice: _______________ is the Points: 10
association of...
Question _______________ is the association of production costs with the units

produced.
Cost measurement
Cost assignment
Job-order costing
✔ 211. Multiple Choice: Unit cost information is Points: 10

needed for
Question Unit cost information is needed for

Answer costing inventory.
financial reporting requirements.
decision making.
all of these.
✔ 212. Multiple Choice: Unit costs are critical Points: 10

for
Question Unit costs are critical for

Answer valuing inventory.
determining net income.
decisions to enter a new product line.
all of these.
✔ 213. Multiple Choice: Unit cost is important Points: 10

information fo...
Question Unit cost is important information for which of the following?

Answer valuing inventory
determining income
decision making
all of these
✔ 214. Multiple Choice: In developing unit Points: 10

costs, overhead co...
Question In developing unit costs, overhead costs should be assigned using activity

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drivers. Which would be the likely activity driver for a production process
using a lathe?
Answer units produced
direct labor hours
machine hours
direct materials cost

production lev...
Question _______________ is the production level the firm expects to attain for the
coming year.
Answer Expected activity level
Normal activity level
Theoretical activity level
Practical activity level
✔
average activi...
Question _______________ is the average activity that a firm experiences in the long
term (more than one year).

absolute maxim...
Question _______________ is the absolute maximum production activity of a

manufacturing firm.
✔
maximum output...
Question _______________ is the maximum output that can be realized if everything

operates efficiently.
✔ 219. Multiple Choice: _______________ assign(s) Points: 10

costs by th...
Question _______________ assign(s) costs by the job.

Answer The process costing system
The job-order costing system
The project costing system
Both a and c

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✔ 220. Multiple Choice: A job-order costing Points: 10

process would be ...
Question A job-order costing process would be most applicable for

Answer a food processing plant.
a natural gas processing.
an airplane manufacturing.
fertilizer production.
✔ 221. Multiple Choice: The collection of all job Points: 10

cost sheets...
Question The collection of all job cost sheets defines a

Answer materials file.
finished goods file.
cost of goods file.
work-in-process file.

items is a bas...
Question Which of the following items is a basic costing system record in a job-order
costing system?
Answer materials requisition form
job-order cost sheet
job time ticket
all of these
✔
223. Multiple Choice: The _______________ Points: 10
serves as the doc...
Question The _______________ serves as the document that identifies each job and
accumulates its manufacturing costs.
Answer job-order cost sheet
control account
production order
bill of materials
✔ 224. Multiple Choice: The cost of direct Points: 10

materials is assig...
Question The cost of direct materials is assigned to a job by the use of a source
document known as a
Answer job cost sheet.
control account.
production order.
materials requisition form.
✔
225. Multiple Choice: A _______________ Points: 10
indicates the type ...
Question A _______________ indicates the type and quantity of each material issued
to the factory.
Answer control account

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materials requisition form

production list
work ticket
✔ 226. Multiple Choice: A work-in-process Points: 10

inventory file is
Question A work-in-process inventory file is

Answer a file of electronic job-order cost sheets.
a file cabinet where work tickets are stored.
a file of electronic materials requisitions.
none of these.
✔ 227. Multiple Choice: Direct labor costs are Points: 10

assigned to in...
Question Direct labor costs are assigned to individual jobs using a source document
known as a
Answer job-order cost sheet.
payroll check.
time sheet.
requisition form.
✔
228. Multiple Choice: Figure 5 - 1The King Points: 10
Corporation manu...
The King Corporation manufactures custom-made furniture. The

following data pertains to Job X4A:
Direct materials placed into $9,000

production
Direct labor hours worked 300 hours
Direct labor rate per hour $15
Machine hours worked 100 hours
Factory overhead rate is $22.50 per machine hour. Job X4A

consists of 500 units.
Refer to Figure 5-1. One-half of Job X4A was sold for $10,000.
What is the total amount of costs assigned to Job X4A?
Answer $9,000
$20,250
$13,500
$15,750

$9,000 + $15(300) + $22.50(100) = $15,750
$9,000 + $15(300) + $22.50(100) = $15,750
✔
229. Multiple Choice: Figure 5 - 1The King Points: 10
Corporation manu...

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The King Corporation manufactures custom-made furniture. The

following data pertains to Job X4A:

production
Direct labor rate per hour $15
Factory overhead rate is $22.50 per machine hour. Job X4A

consists of 500 units.
Refer to Figure 5-1. One-half of Job X4A was sold for $10,000.
What is the cost per unit for Job X4A?
Answer $18
$31.50
$27
$40.50

$9,000 + $15(300) + $22.50(100) = $15,750/500 = $31.50
$9,000 + $15(300) + $22.50(100) = $15,750/500 = $31.50
✔ 230. Multiple Choice: Figure 5 - 2The Kraig Points: 10

Corporation man...
The Kraig Corporation manufactures custom-made purses. The

following data pertains to Job XY5:

production
Direct labor rate per hour $ 15
Factory overhead is applied using a plant-wide rate based on direct

labor hours. Factory overhead was budgeted at $60,000 for the
year and the direct labor hours were estimated to be 15,000. Job
XY5 consists of 50 units.
Refer to Figure 5-2. What is overhead cost assigned to Job XY5?

Answer $200
$400
$750
$1,500

$60,000/15,000 = $4; $4 x 50 = $200
$60,000/15,000 = $4; $4 x 50 = $200
✔
231. Multiple Choice: Figure 5 - 2The Kraig Points: 10
Corporation man...

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production

Refer to Figure 5-2. What is the materials cost per unit for Job
XY5?
Answer $4
$40
$80
$267
$4,000/ 50 = $80
$4,000/ 50 = $80
✔
Corporation man...


production

Refer to Figure 5-2. What is the labor cost per unit for Job XY5?
Answer $4
$15
$0.80
$40

$15 x 50 = $750/50= $15
$15 x 50 = $750/50= $15
✔
Corporation man...

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production

Refer to Figure 5-2. What the total cost assigned to Job XY5?
Answer $5,1500
$4,400
$4,200
$4,950
$60,000/15,000 = $4; $4 x 50 = $200; $4,000 + ($15x50) +$200 =
$4,950
$60,000/15,000 = $4; $4 x 50 = $200; $4,000 + ($15x50) +$200 =
$4,950
✔
costs is NOT i...
Question Which of the following costs is NOT included on a job-order cost sheet?
Answer direct material costs
applied factory overhead costs
direct labor costs
actual factory overhead costs
✔ 235. Multiple Choice: A debit to Materials Points: 10

Inventory indica...
Question A debit to Materials Inventory indicates materials were

Answer purchased.
requisitioned.
put into production.
ordered.
✔ 236. Multiple Choice: Figure 5 - 3Olson Points: 10

Corporation constru...
Olson Corporation constructs new homes. Assume that Olson uses a job
costing system. During May 2011, the following transactions occurred:
Olson purchased $4,500 of lumber on account.
Olson used $3,750 of lumber in production and incurred 50 hours of direct

labor hours at $15 per hour.
Depreciation of $1,500 on equipment used to build new houses was

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recorded.
A house that was completed last period at a cost of $150,000 was sold for
$180,000 in cash.
Refer to Figure 5-3. The journal entry to record the requisition of lumber for
Olson would include a
Answer debit to Work-in-Process of $4,500.
debit to Materials Inventory of $3,750.
credit to Finished Goods of $3,750.
debit to Work-in-Process of $3,750.
✔
237. Multiple Choice: Figure 5 - 3Olson Points: 10
Corporation constru...
Olson Corporation constructs new homes. Assume that Olson uses

a job costing system. During May 2011, the following transactions
occurred:
Olson purchased $4,500 of lumber on account.
Olson used $3,750 of lumber in production and incurred 50 hours

of direct labor hours at $15 per hour.
Depreciation of $1,500 on equipment used to build new houses

was recorded.
A house that was completed last period at a cost of $150,000 was

sold for $180,000 in cash.
Refer to Figure 5-3. The journal entry to record labor for Olson
would include a
Answer debit to Finished Goods of $750.
debit to Wages Payable of $750.
credit to Finished Goods of $750.
debit to Work-in-Process of $750.
Correct Feedback Labor is recorded as a debit to Work-in-Process $15 x 50 = $750
Incorrect Feedback Labor is recorded as a debit to Work-in-Process $15 x 50 = $750
✔
238. Multiple Choice: Figure 5 - 4Walter Points: 10
Company uses a job...
Walter Company uses a job-order costing system to account for


Increase in work-in-process 30,000
inventory
Refer to Figure 5-4. What is the total amount credited to Materials

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Inventory for Walter in 2011?

Answer $480,000
$170,000
$140,000
$110,000

Materials used in production = $140,000
Materials used in production = $140,000
✔ 239. Multiple Choice: Figure 5 - 4Walter Points: 10

Company uses a job...
Walter Company uses a job-order costing system to account for


Increase in work-in-process 30,000
inventory
Refer to Figure 5-4. What is the total amount debited to Finished

Goods Inventory in 2011?
Answer $490,000
$510,000
$450,000
$550,000
$140,000 + $160,000 + ($18 ´ 10,000) - $30,000 = $450,000
$140,000 + $160,000 + ($18 ´ 10,000) - $30,000 = $450,000
✔
240. Multiple Choice: A journal entry debiting Points: 10
Work-in-Proc...
Question A journal entry debiting Work-in-Process would normally NOT be

accompanied by a credit to
Answer Materials Inventory.
Finished Goods.
Overhead Control.
Wages Payable.
✔ 241. Multiple Choice: If there is a debit Points: 10

balance in overhe...
Question If there is a debit balance in overhead control, that implies

Answer actual overhead costs exceed overhead applied.
applied overhead exceeds actual overhead.
actual overhead has not been closed to cost of goods sold.

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none of these.
✔
242. Multiple Choice: For a manufacturer, the Points: 10
three invento...
Question For a manufacturer, the three inventory accounts on the balance sheet are
Answer Materials, Finished Goods, and Cost of Goods Sold.
Materials, Overhead, and Cost of Goods Sold.
Materials, Direct Labor, and Overhead.
Materials, Work-in-Process, and Finished Goods.
✔
243. Multiple Choice: In a traditional Points: 10
enterprise, the flow...
Question In a traditional enterprise, the flow of costs through the system is

Answer materials inventory, work-in-process inventory, finished goods
inventory, cost of goods sold.
materials inventory, work-in-process inventory, cost of goods sold,
finished goods inventory.
work-in-process inventory, materials inventory, finished goods inventory,
cost of goods sold.
work-in-process inventory, materials inventory, finished goods.
✔ 244. Multiple Choice: When normal costing is Points: 10

used, actual o...
Question When normal costing is used, actual overhead costs are

Answer recorded in the work-in-process account.
recorded in the overhead control account.
recorded in the finished goods account.
not recorded.
✔ 245. Multiple Choice: Carlson Company uses Points: 10

a predetermined ...
Question Carlson Company uses a predetermined rate to apply overhead. At

the beginning of the year, Carlson estimated its overhead costs at
$240,000, direct labor hours at 40,000, and machine hours at
10,000. Actual overhead costs incurred were $249,280, actual
direct labor hours were 41,000, and actual machine hours were
11,000.
If the predetermined overhead rate is based on machine hours,

what is the total amount credited to the factory overhead account
for the year for Carlson?
Answer $249,280
$246,000
$240,000
$264,000
$24 ´ 11,000 = $264,000
$24 ´ 11,000 = $264,000
✔ 246. Multiple Choice: On April 9, 2011, Job Points: 10

XX4 was complet...

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Question On April 9, 2011, Job XX4 was completed. The job cost sheet
showed a total of $4,000 in direct materials and $6,000 in direct
labor at a rate of $20 per direct labor hour. Factory overhead is
applied at $30 per direct labor hour. The debit to Finished Goods
Inventory to record the completion of Job XX4 is
Answer $13,000.
$9,000.
$4,000.
$19,000.
$4,000 + $6,000 + $30($6,000/$20) = $19,000
$4,000 + $6,000 + $30($6,000/$20) = $19,000
✔
247. Multiple Choice: Figure 5-5Wright Points: 10
Corporation had the ...
Question Figure 5-5
Wright Corporation had the following information available for

December 2011:
Work in Process, December 1 $20,000

Materials placed into production, 27,500
December
Direct labor, December 37,500
Factory overhead rate is 150 percent of direct labor costs.
Job cost sheets had the following balances:
Job Z1 $32,500
Job Z2 55,000
Job Z3 35,000
Job Z4 18,750
Jobs Z3 and Z4 were not completed at the end of December.
Refer to Figure 5-5. What is the balance in Work-in-Process for

Wright at the end of December?
Answer $85,000
$87,500
$56,250
$53,750

$35,000 + $18,750 = $53,750
$35,000 + $18,750 = $53,750
✔ 248. Multiple Choice: Figure 5-5Wright Points: 10

Corporation had the ...
Question Figure 5-5
Wright Corporation had the following information available for

December 2011:

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Work in Process, December 1 $20,000

Materials placed into production, 27,500
December
Direct labor, December 37,500
Job cost sheets had the following balances:
Job Z1 $32,500
Job Z2 55,000
Job Z3 35,000
Job Z4 18,750
Jobs Z3 and Z4 were not completed at the end of December.
Refer to Figure 5-5. What is the cost of goods finished during

December for Wright Corporation?
Answer $85,000
$87,500
$56,250
$53,750

$32,500 + $55,000 = $87,500
$32,500 + $55,000 = $87,500
✔ 249. Multiple Choice: Figure 5 - 6In the Mains Points: 10

Company, the...
In the Mains Company, the following Job cards were totaled at the
end of the month:
Job 243 $5,750
Job 244 $4,980
Job 245 $3,675
Job 246 $4,250
Job 247 $5,100
Job 248 $3,800
Jobs 243 and 244 were in Finished Goods Inventory at the

beginning of the month. Jobs 245 and 246 were in Work-in-
process at the beginning of the month. Jobs 247 and 248 were
started during the month. At the end of the month, Jobs 243 and
247 were sent to customers; jobs 245, 247, and 248 were
completed and sent to finished goods.
Refer to Figure 5-6. What is the cost of goods sold for the month?
Answer $10,730
$10,850
$12,575
none of these
Jobs 243 and 247 were sent to customers and sold. $5,750 +
$5,100 = $10,850
Jobs 243 and 247 were sent to customers and sold. $5,750 +
$5,100 = $10,850

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✔ 250. Multiple Choice: Figure 5 - 6In the Mains Points: 10

Company, the...
end of the month:
Job 243 $5,750
Job 244 $4,980
Job 245 $3,675
Job 246 $4,250
Job 247 $5,100
Job 248 $3,800

Refer to Figure 5-6. What is the ending work-in-process inventory

for the month?
Answer $10,730
$4,250
$12,575
none of these
Jobs 245, 247, and 248 were finished so Job 246 is still in
process. = $4,250
Jobs 245, 247, and 248 were finished so Job 246 is still in
process. = $4,250
✔
251. Multiple Choice: Figure 5 - 6In the Mains Points: 10
Company, the...
end of the month:
Job 243 $5,750
Job 244 $4,980
Job 245 $3,675
Job 246 $4,250
Job 247 $5,100
Job 248 $3,800

Refer to Figure 5-6. What is the cost of goods manufactured for

the month?
Answer $10,730
$10,850
$12,575
none of these

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Jobs 245, 247, and 248 were completed. $3,675 + $5,100 +
$3,800 = $12,575
Jobs 245, 247, and 248 were completed. $3,675 + $5,100 +
$3,800 = $12,575
✔
252. Multiple Choice: Russell Company has Points: 10
the following dat...
Question Russell Company has the following data pertaining to 2011:
Beginning materials inventory $ 50,000

Beginning work-in-process -0-
inventory
Beginning finished goods -0-
inventory
Materials placed into production 125,000
Materials purchased on account 137,500
Direct labor incurred (10,000 62,500
hours)
Cost of goods completed (Job 25,000
BB8)
What is the ending materials inventory balance for Russell in

2011?
Answer $50,000
$62,500
$12,500
$37,500
$50,000 + $137,500 - $125,000 = $62,500
$50,000 + $137,500 - $125,000 = $62,500
✔
253. Multiple Choice: Smith Company has the Points: 10
following selec...
Question Smith Company has the following selected debit balance accounts
at the end of the current year: Work-in-Process, $25,000; Finished
Goods, $12,500; Cost of Goods Sold, $37,500; and Factory
Overhead, $6,000. The pro-rated amount charged to Cost of
Goods Sold for factory overhead will be
Answer $25,000.
$3,000.
$37,500.
$6,000.
$37,500/($25,000 + $12,500 + $37,500) ´ $6,000 = $3,000
$37,500/($25,000 + $12,500 + $37,500) ´ $6,000 = $3,000
✔ 254. Multiple Choice: Under normal costing, Points: 10

which of the fo...

Blackboard Learn
Question Under normal costing, which of the following statements is true regarding
factory overhead?
Answer The balance in factory overhead at the end of the accounting period is
closed.
Different overhead rates are used for different quantities of predicted
activity.
The balance in factory overhead at the end of the accounting period is
kept open.
The immaterial balance in factory overhead at the end of the accounting
period is allocated to the cost of goods sold and inventory accounts.
✔ 255. Multiple Choice: Total manufacturing- Points: 10

related costs inc...
Question Total manufacturing-related costs incurred for Miller Company in

October for all jobs is as follows:

Insurance-factory building 150
Direct labor 1,200
Property taxes-factory building 400
Other factory overhead costs 1,450
Factory overhead applied 1,650
Assuming Miller uses a normal costing system and applies

overhead based on a predetermined rate, what is the credit to
Overhead Control to close the account at the end of the year?
Answer $900
$350
$1,450
$1,650
Actual overhead = $150 + $400 + $1,450 = $2,000
Applied overhead = $1,650
Underapplied = $350
Actual overhead = $150 + $400 + $1,450 = $2,000
Applied overhead = $1,650
Underapplied = $350
✔
transactions i...
Question Which of the following transactions in a job-order costing system requires

the procedure of merely moving a job-order cost sheet from one file to
another?
Answer applying factory overhead to jobs
closing overapplied factory overhead
delivering a completed job to a customer
moving the job from one production department to another
✔
257. Multiple Choice: Figure 5-7The following Points: 10
information i...
Question Figure 5-7
The following information is available pertaining to the Production

Blackboard Learn
Division:
Mixing Dept. Finishing Total

Dept.
Overhead costs $7,500 $22,500 $30,000
Direct labor hours 7,500 2,500 10,000
Machine hours 2,500 7,500 10,000
Production information pertaining to Job 4X5:

Dept.
Prime costs $1,250 $-0- $1,250
Direct labor hours 250 -0- 250
Machine hours 1 -0- 1
Units produced 500 -0- 500
Refer to Figure 5-7. What is the plantwide overhead rate based on

direct labor hours?
Answer $3.00
$1.50
$9.00
$1.00
$30,000/10,000 = $3 per DLH
$30,000/10,000 = $3 per DLH

information i...
Question Figure 5-7

Division:

Dept.
Overhead costs $7,500 $22,500 $30,000
Machine hours 2,500 7,500 10,000

Dept.
Prime costs $1,250 $-0- $1,250
Refer to Figure 5-7. Using the plantwide overhead rate based on

direct labor hours what is the cost of Job 4X5?

Blackboard Learn
Answer $1,250
$2,000
$8,750
$31,250

$30,000/10,000 = $3 per DLH
prime cost $1,250

moh (250 x $3) 750
total $2,000
$30,000/10,000 = $3 per DLH
prime cost $1,250

moh (250 x $3) 750
total $2,000

information i...
Question Figure 5-7

Division:

Dept.
Overhead costs $7,500 $22,500 $30,000
Machine hours 2,500 7,500 10,000

Dept.
Prime costs $1,250 $-0- $1,250
Refer to Figure 5-7. What is the overhead rate for the Finishing
Department based on machine hours?
Answer $9.00
$3.00
$2.25
$1.00
$22,500/7,500 = $3 per MH
$22,500/7,500 = $3 per MH

information i...
Question Figure 5-7

Blackboard Learn

Division:

Dept.
Overhead costs $7,500 $22,500 $30,000
Machine hours 2,500 7,500 10,000

Dept.
Prime costs $1,250 $-0- $1,250
Refer to Figure 5-7. Based on departmental overhead rates, what

is the cost of Job 4X5? Departmental overhead notes for the
Mixing Department are based on direct labor hours, while
departmental overhead rates for the Finishing Department are
based on machine hours.
Answer $31,250
$8,750
$2,000
$1,250
$22,500/7,500 = $3 per MH
prime cost $1,250

dhl (250 x 3) 750
total $2,000
$22,500/7,500 = $3 per MH
prime cost $1,250

dhl (250 x 3) 750
total $2,000

information i...
Question Figure 5-7

Division:

Dept.
Overhead costs $7,500 $22,500 $30,000
Machine hours 2,500 7,500 10,000

Blackboard Learn

Dept.
Prime costs $1,250 $-0- $1,250
Refer to Figure 5-7. What are the total overhead costs assigned to
Job 4X5, assuming the Mixing and Finishing Departments use
direct labor hours and machine hours for their bases, respectively?
Answer $62.50
$1,500.00
$750.00
$250.00
($7,500/7,500) ´ 250 = $250
($7,500/7,500) ´ 250 = $250
✔ 262. Multiple Choice: The cost of spoilage is Points: 10

added to a jo...
Question The cost of spoilage is added to a job when it is considered to be

Answer a result of the process, no matter what job is being worked on.
a normal consequence of working on that job.
abnormal.
all of these.
✔ 263. Multiple Choice: In a job-order costing Points: 10

system, if cos...
Question In a job-order costing system, if costs are incurred to rework a job due to
inadequate training of personnel, these costs would be
Answer debited to manufacturing overhead control.
debited to the job.
credited to manufacturing overhead control.
credited to the cost of goods sold.
✔
264. Multiple Choice: Figure 5 - 8Griswold Points: 10
Corporation is a...
Griswold Corporation is a job order costing company that uses

activity-based costing to apply overhead to jobs. The following
overhead activities were budgeted for the year.

driver

setups
purchasing 160,000 number of 20,000

parts
other 300,000 direct labor 80,000

overhead hours

Blackboard Learn
The following information about the jobs was given for September.
Job 101 Job 102 Job 103 Job

104
Balance $64,900 $40,770 $30,500 0

9/1
direct 54,000 37,900 25,000 11,000

materials
direct 80,000 38,500 43,000 21,000

labor
number 40 10 30 200
of
setups
number 300 80 400 500
of parts
direct 5,000 2,400 5,200 1,200
labor
hours
By September 30, Jobs 102 and 103 were completed and sold.
The remaining jobs were still in process.
Refer to Figure 5-8. What is the activity rate for purchasing?

Answer $ 1.25
$ 3.75
$8
$ 40
Correct Feedback $160,000/20,000 = $8
Incorrect Feedback $160,000/20,000 = $8
✔
Corporation is a...


driver

setups

parts

overhead hours

104
Balance $64,900 $40,770 $30,500 0

9/1
direct 54,000 37,900 25,000 11,000

Blackboard Learn
materials
direct 80,000 38,500 43,000 21,000
labor
number 40 10 30 200
of
setups
number 300 80 400 500
of parts
direct 5,000 2,400 5,200 1,200

labor
hours
Refer to Figure 5-8. What is the cost of job 102?

Answer $ 86,440
$ 127,210
$ 117,170
none of these
Correct Feedback Job 102 = BI $40,770
DM 37,900
DL 38,500
MOH
setups 10 x $40 400
purch 80 x $8 640
other 2,400 x $3.75 9,000
total cost 127,210
Incorrect Feedback Job 102 = BI $40,770
DM 37,900
DL 38,500
MOH
setups 10 x $40 400
purch 80 x $8 640
other 2,400 x $3.75 9,000
total cost 127,210
✔
Corporation is a...


driver

setups
parts

overhead hours

104

Blackboard Learn
Balance $64,900 $40,770 $30,500 0

9/1
direct 54,000 37,900 25,000 11,000

materials
direct 80,000 38,500 43,000 21,000
labor
number 40 10 30 200
of
setups
number 300 80 400 500
of parts
direct 5,000 2,400 5,200 1,200
labor
hours
Refer to Figure 5-8. What is the cost of goods manufactured?

Answer $ 144,400
$ 215,670
$ 178,340
$ 249,610
Correct Feedback CGM = Job 102 + Job 103
Job 102 = BI $40,770 Job 103 $ 30,500

DM 37,900 25,000
DL 38,500 43,000
MOH
setups 10 x $40 400 30 x $40 1,200
purch 80 x $8 640 400 x $8 3,200
other 2,400 x $3.75 9,000 5,200 x $3.75 19,500
total cost $127,210 + $122,400 =
$249,610
Incorrect Feedback CGM = Job 102 + Job 103
Job 102 = BI $40,770 Job 103 $ 30,500

DM 37,900 25,000
DL 38,500 43,000
MOH
setups 10 x $40 400 30 x $40 1,200
purch 80 x $8 640 400 x $8 3,200
other 2,400 x $3.75 9,000 5,200 x $3.75 19,500
total cost $127,210 + $122,400 =
$249,610
✔ 267. Multiple Choice: Figure 5 - 8Griswold Points: 10

Corporation is a...


driver
setups

Blackboard Learn
parts

overhead hours

104
Balance $64,900 $40,770 $30,500 0
9/1
direct 54,000 37,900 25,000 11,000

materials
direct 80,000 38,500 43,000 21,000

labor
number 40 10 30 200
of
setups
number 300 80 400 500

of parts
direct 5,000 2,400 5,200 1,200

labor
hours
Refer to Figure 5-8. The ending work in process would consist of

the costs of what jobs?
Answer Job 102 + Job 103
Job 101 + Job 104
Job 101 + Job 102 + Job 103 + Job 104
Job 101 + Job 102 + Job 103
Correct Feedback Jobs 101 + Job 104
Incorrect Feedback Jobs 101 + Job 104
✔
Corporation is a...


driver
setups

parts

overhead hours

Blackboard Learn
104
Balance $64,900 $40,770 $30,500 0

9/1
direct 54,000 37,900 25,000 11,000
materials
direct 80,000 38,500 43,000 21,000

labor
number 40 10 30 200
of
setups
number 300 80 400 500

of parts
direct 5,000 2,400 5,200 1,200

labor
hours
Refer to Figure 5-8. The cost of goods sold would consist of the
costs of what jobs?
Answer Job 102 + Job 103
Job 101 + Job 104
Job 101 + Job 102 + Job 103 + Job 104
Job 101 + Job 102 + Job 103
Correct Feedback Jobs 102 + Job 103
Incorrect Feedback Jobs 102 + Job 103
✔
269. Multiple Choice: Figure 5-9Alpha Points: 10
Company manufactures ...
Question Figure 5-9
Alpha Company manufactures customized motors on a job-order

basis. Job 492 is an order for 100 units. It requires the following:
direct materials $3,000
direct labor ($10/hr) 1,000
overhead (150% DL$) 1,500
After inspection, 2 units required rework which required 8
additional direct labor hours and $60 of materials.
Refer to Figure 5-9. If the spoilage was considered normal, what is

the cost of job 492?
Answer $5,640
$5,760
$5,500
$3,000
Correct Feedback DM $3,000
DL 1,000
MOH 1,500
total cost 5,500
rework is charged to MOH

Incorrect Feedback DM $3,000
DL 1,000
MOH 1,500
total cost 5,500
rework is charged to MOH

Blackboard Learn
✔ 270. Multiple Choice: Figure 5-9Alpha Points: 10

Question Figure 5-9

Refer to Figure 5-9. If the rework is considered normal spoilage,

what is the journal entry for overhead control?
Answer overhead control $ 140
materials $60
payroll $80
materials $ 60
payroll $80
overhead control $140
no journal entry is needed
none of these
Correct Feedback overhead control $ 140
materials $60
payroll $80
Incorrect Feedback overhead control $ 140
materials $60
payroll $80
✔
Question Figure 5-9

Refer to Figure 5-9. If the rework is considered abnormal spoilage,

what is the journal entry for overhead control?
Answer overhead control $ 140
materials $60
payroll $80
materials $ 60
payroll $80
overhead control $140
no journal entry is needed
none of these
Correct Feedback overhead control $ 140
materials $60
payroll $80
Incorrect Feedback overhead control $ 140
materials $60
payroll $80

Blackboard Learn
✔
Question Figure 5-9

Refer to Figure 5-9. If the rework is considered abnormal spoilage,

what is the cost of job 492?
Answer $5,500
$6,740
$3,140
$5,640
Correct Feedback DM $3,000 + $60 = $3,060
DL $1,000 + $80 = 1,080
MOH $1,500 + $120 = $1,620
Total $5,760
Incorrect Feedback DM $3,000 + $60 = $3,060
DL $1,000 + $80 = 1,080
MOH $1,500 + $120 = $1,620
Total $5,760
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CourseSites: Dirk Stromberg CREATE COURSE HELP LOGOUT SHARE |

My CourseSites FMGT123 sas457 Resources

Success: 272 questions added as a copy.

http://www.worldwideplastic.net/juju/c4-5.htm[10/11/2011 11:53:00 PM]

Help underapplied or overapplied overhead has been allocated:

d. Determine the balance of Cost of Goods Sold if underapplied or

b. Work in Process, $4,687.50 $25,000 ´ ($37,500/$200,000)

c. Work in Process, $42,187.50 = $37,500 + $4687.50

d. $137,500 = $112,500 + $25,000

Total factory overhead costs $150,000

a. Compute the predetermined factory overhead rate under three different

c. Kramer Company follows the policy of writing off any under- or

http://www.worldwideplastic.net/juju/c4-5.htm[10/11/2011 11:53:00 PM]

b. Overhead applied (42,000 ´ $3.75) $157,500

c. Factory Overhead 5,000

Molding Assembly Total

A 10,000 20,000 30,000

Total 20,000 50,000 70,000

A 5,000 1,000 6,000

B 15,000 2,000 17,000

a. Compute the predetermined overhead rate for each department if

Answer a. Moldings $ 360,000

http://www.worldwideplastic.net/juju/c4-5.htm[10/11/2011 11:53:00 PM]

✔ 4. Essay: The Juneau plant produces two Points: 10

Deluxe Regular Total

Assembly Packaging Total

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a. Compute the predetermined overhead rate for each department if

c. Compute the predetermined plant-wide overhead rate based on direct

e. Calculate the overhead rates for each overhead activity.

c. $720,000/180,000 = $4 per labor hour

http://www.worldwideplastic.net/juju/c4-5.htm[10/11/2011 11:53:00 PM]

Activity Cost Driver Activity Rate

Number of Number of Machine Packing

Cost per pool $15,000 $8,400 $120,000 $40,000

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b. Allocate the overhead costs to Products A and B using activity-based

Setups Orders Hours Orders

Cost per $15,000 $8,400 $120,000 $40,000

Allocation $ 600 $ 80 $ 48 $ 200

Number of 20 ´ $600 = $12,000 5 ´ $600 = $ 3,000

Number of 35 ´ $80 = 2,800 70 ´ $80 = 5,600

Machine 1,000 ´ $48 = 48,000 1,500 ´ $48 = 72,000

Packing 75 ´ $200 = 15,000 125 ´ $200 = 25,000

c. ($15,000 + $8,400 + $120,000 + $40,000)/2,500 = $73.36 per MH

d. Product A: 1,000 ´ $73.36 = $73,360

Number of Number of Number of Labor

Cost per pool $16,000 $13,000 $2,400 $20,000

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based costing system.

Orders Setups Transactions Hours

Cost per $16,000 $13,000 $ 2,400 $20,000

Total ÷ 80 ÷ 100 ÷ 120 ÷ 2,500

Allocation $ 200 $ 130 $ 20 $ 8

Number of 60 ´ $200 = $12,000 20 ´ $200 = $ 4,000

Number of 20 ´ $130 = 2,600 80 ´ $130 = 10,400

No. of labor 50 ´ $20 = 1,000 70 ´ $20 = 1,400

Labor hours 2,000 ´ $8 = 16,000 500 ´ $8 = 4,000

c. ($16,000 + $13,000 + $2,400 + $20,000)/2,500 = $20.56 per DLH

d. Product XX: 2,000 ´ $20.56 = $41,120

Overhead Item Expected Cost Activity Driver Expected Qty.

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