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Exam 4: Cost Accumulation, Tracing, and Allocation

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Question 71

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Alleghany Community College operates four departments. The square footage used by each department is shown below.Alleghany's annual building rental cost is $320,000 What amount of rent expense that should be allocated to the Sciences Department? $\begin{array} { | l | r | } \hline { \text { De partment } } & \text { Square Footage } \\\hline \text { Accounting } & 3,000 \\\hline \text { Marketing } & 4,000 \\\hline \text { Technology } & 6,000 \\\hline \text { Sciences } & 3,000 \\\hline \text { Total } & \mathbf { 1 6 , 0 0 0 } \\\hline\end{array}$

A) $60,000
B) $80,000
C) $120,000
D) $106,667

E) B) and C)
F) A) and C)

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Question 72

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Indirect costs are often pooled, and not allocated individually because:

A) individual allocation would be more timely.
B) individual allocation would be more accurate.
C) individual allocation would be tedious.
D) the benefits of individual allocation of indirect costs are greater than the costs.

E) A) and B)
F) C) and D)

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Question 73

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Joint costs total $24,000 for a production process that yields two main products, A and A. B. If joint costs are allocated to the products on the basis of their respective $20,000 and $30,000 sales values, 2/3 of the joint costs (or $16,000) would be allocated to Product

Which of the following is not a joint product with the other products listed?

How can the use of a predetermined overhead rate prevent timing problems in determining the costs of products?

Which of the following is not an example of a cost object and its related cost driver? $\begin{array}{|l|l|r|}\hline&{\text { Cost Object }} &{\text { Cost Driver }} \\\hline \text { A. } & \text { Rent } & \text { Square feet } \\\hline \text { B. } & \text { Transportation } & \text { Miles driven } \\\hline \text { C. } & \text { Direct labor hours } & \text { Indirect labor } \\\hline \text { D. } & \text { Utilities } & \text { Machine hours } \\\hline\end{array}$

The terms "cost tracing" and "cost allocation" may be used interchangeably because they mean the same thing.

The goal in allocating a cost to cost objects is to achieve a rational allocation.

The Flintstone Construction Company delivers dirt and stone from local quarries to its construction sites. A new truck that was purchased for a cost of $120,000 at the beginning of the year was expected to deliver 200,000 tons over its useful life. The following is a breakdown of the tons delivered during the year to each construction site: How much truck depreciation should be allocated to Site A? (Do not round your intermediate calculations.) $\begin{array} { | l | l | l | l | l | } \hline \text { Construction Sites: } & \text { A } & \text { B } & \text { C } & \text { D } \\\hline \text { Tons Delivered: } & 2,000 & 3,500 & 4,000 & 1,500 \\\hline\end{array}$

Sometimes, volume-based cost drivers are used to allocate fixed indirect costs.

Vance Electronics expects to make 100,000 Bluetooth speakers during 2014. Direct materials cost per unit are estimated at $12, and direct labor cost is expected to be $4 per unit. The total manufacturing overhead for the year is budgeted at $850,000.Required: 1) Calculate the amount of overhead that should be allocated to each speaker during the year.2) Assume that, during the month of October, Vance made and sold 8,000 speakers. What would the cost of goods sold be for the month? 3) Assume that the company sells the speakers at cost plus 40% of cost. What would be the selling price for each speaker?

Old Virginia Meat Processing Plant processes hogs to produce three joint products: bacon, sausage, and pork chops. The company incurs common processing costs of $100,000 per batch. Each batch yields 15,000 pounds of bacon, 18,000 pounds of sausage, and 7,000 pounds of pork chops. Pork chops can be sold for $3.00 per pound. The bacon and sausage products are sold at the split-off point for $3.25 per pound and $3.50 per pound, respectively.Required: 1) Allocate Old Virginia's joint costs using pounds produced as the allocation base. (Do not round your intermediate calculations.)2) Allocate Old Virginia's joint costs using the relative sales value at split-off method. (Do not round your intermediate calculations.)3) Assume that the pork chops are processed further after the split-off point at an additional cost of $4,000 and that joint costs are allocated based on pounds produced. What would be the total cost assigned to pork chops?

Which of the following is an appropriate cost driver for allocating indirect costs to a human resources department in a service company?

A company's total profit can be affected by the method used to allocate joint costs.

Haskins Company employs material handling employees who move materials between production divisions at a labor cost of $360,000 a year. It is estimated that these employees move 600,000 pounds of material per year. If 60,000 pounds are moved in March, how much of the material handling cost should be assigned to products made in March? (Do not round your intermediate calculations.)

Each indirect cost should be allocated to products individually to provide the most useful cost information.

Burke Company has 160 employees, 88 of whom are in Department 1 and 72 in Department 2. The company expects to incur $166,000 of office supplies costs during the current year. How much of this cost should be allocated to Department 1?

A predetermined overhead rate is calculated using estimated or predicted cost and volume data.

The most useful cost driver for allocating a particular cost is the one with the strongest cause-and-effect relationship.

Bank's Department Store has three departments: Men's, Women's and Children's. The store incurred $50,000 of store rental costs during the current year. The departments identified the following cost drivers: Using the most appropriate cost driver, how much rental cost (rounded to the nearest dollar) should be allocated to the Women's Department? (Do not round your intermediate calculations.) $\begin{array} { | l | r | r | r | } \hline & \text { Men's } & \text { Women's } & \text { Children's } \\\hline \text { Labor dollars } & \$ 530,000 & \$ 775,000 & \$ 240,000 \\\hline \text { Number of employees } & 10 & 20 & 4 \\\hline \text { Square footage } & 3,000 & 8,000 & 1,000 \\\hline \text { Number of sales transactions } & 300,000 & 900,000 & 90,000 \\\hline\end{array}$