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| 1 | |
Allocating indirect costs to responsibility centres may encourage responsibility centre managers to: |
| | A) | over-consume resources |
| | B) | under-consume resources |
| | C) | underestimate the costs of their outputs |
| | D) | understand the economic effects of their decisions |
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| 2 | |
Which of the following support department allocation methods fully recognises that support departments serve each other? |
| | A) | Direct method. |
| | B) | Step-down method. |
| | C) | Indirect method. |
| | D) | Reciprocal method. |
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| 3 | |
Rose Manufacturing Company operates two support departments and two production departments. Budgeted costs and normal activity levels are as follows:
| Support Department | Production Department |
| W | X | Y | Z | Overhead costs | $10000 | $25000 | $45000 | $60000 | Square metres | 1000 | 2000 | 3000 | 5000 | Number of employees | 10 | 12 | 30 | 20 | Direct labour hours |
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| 7500 | 3200 | Machine hours |
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| 3000 | 2500 |
Support Department W’s overhead costs are allocated based on square metres and Support Department X’s overhead costs are allocated on the basis of number of employees. Production Department Y uses direct labour hours to assign overhead costs to products and Production Department Z uses machine hours. One of the products the company manufactures, Product A, requires two direct labour hours in Department Y and three machine hours in Department Z. Direct materials for the product cost $45 per unit and direct labour is $20 per unit. If the reciprocal method is used to allocate the support department overhead costs, the equation for the total cost of Department W is: |
| | A) | asfd |
| | B) | asdf |
| | C) | asff dsf |
| | D) | afdsdf |
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| 4 | |
Rose Manufacturing Company operates two support departments and two production departments. Budgeted costs and normal activity levels are as follows:
| Support Department | Production Department |
| W | X | Y | Z | Overhead costs | $10000 | $25000 | $45000 | $60000 | Square metres | 1000 | 2000 | 3000 | 5000 | Number of employees | 10 | 12 | 30 | 20 | Direct labour hours |
|
| 7500 | 3200 | Machine hours |
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| 3000 | 2500 |
Support Department W’s overhead costs are allocated based on square metres and Support Department X’s overhead costs are allocated on the basis of number of employees. Production Department Y uses direct labour hours to assign overhead costs to products and Production Department Z uses machine hours. One of the products the company manufactures, Product A, requires two direct labour hours in Department Y and three machine hours in Department Z. Direct materials for the product cost $45 per unit and direct labour is $20 per unit. If the reciprocal method is used to allocate the support department overhead costs, the equation for the total cost of Department X is: |
| | A) | afdsdf |
| | B) | af |
| | C) | asfd |
| | D) | af |
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| 5 | |
Rose Manufacturing Company operates two support departments and two production departments. Budgeted costs and normal activity levels are as follows:
| Support Department | Production Department |
| W | X | Y | Z | Overhead costs | $10000 | $25000 | $45000 | $60000 | Square metres | 1000 | 2000 | 3000 | 5000 | Number of employees | 10 | 12 | 30 | 20 | Direct labour hours |
|
| 7500 | 3200 | Machine hours |
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| 3000 | 2500 |
Support Department W’s overhead costs are allocated based on square metres and Support Department X’s overhead costs are allocated on the basis of number of employees. Production Department Y uses direct labour hours to assign overhead costs to products and Production Department Z uses machine hours. One of the products the company manufactures, Product A, requires two direct labour hours in Department Y and three machine hours in Department Z. Direct materials for the product cost $45 per unit and direct labour is $20 per unit. If the reciprocal method is used to allocate the support department overhead costs, the total amount of support department costs allocated to Production Department Y (rounded) is: |
| | A) | $19 200 |
| | B) | $18 750 |
| | C) | $16 535 |
| | D) | $18 360 |
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| 6 | |
In February, the month just ended, Paddington Industries produced 400 000 units and sold 370 000 units. There were 20 000 units in the balance of finished goods inventory at the end of January. Manufacturing costs were stable from month to month. The fixed manufacturing overhead rate was $6 per unit. Paddington Industries uses absorption costing. If Paddington Industries had used variable costing, the difference in the net income would have been: |
| | A) | $300 000 higher than using absorption costing |
| | B) | $180 000 lower than using absorption costing |
| | C) | $120 000 lower than using absorption costing |
| | D) | $120 000 higher than using absorption costing |
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| 7 | |
In June, the month just ended, Paddington Industries produced 370 000 units and sold 400 000 units. There were 80 000 units in the balance of finished goods inventory at the end of May. Manufacturing costs were stable from month to month. The fixed manufacturing overhead rate was $6 per unit. Paddington Industries uses absorption costing. If Paddington Industries had used variable costing, the difference in the net income would have been: |
| | A) | $180 000 lower than using absorption costing |
| | B) | $120 000 lower than using absorption costing |
| | C) | $120 000 higher than using absorption costing |
| | D) | $180 000 higher than using absorption costing |
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| 8 | |
If an organisation is using a costing system where the fixed manufacturing overhead is inventoried until the manufactured goods are sold, the organisation is using: |
| | A) | absorption costing |
| | B) | variable costing |
| | C) | job costing |
| | D) | process costing |
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| 9 | |
The profit calculated under absorption costing may differ from profit determined under variable costing. How is this difference reconciled? |
| | A) | Change in inventory (units) x predetermined fixed manufacturing overhead per unit. |
| | B) | Change in inventory (units) x predetermined variable manufacturing overhead per unit. |
| | C) | Change in units produced x predetermined fixed manufacturing overhead per unit. |
| | D) | Change in units sold x predetermined fixed manufacturing overhead per unit. |
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