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| 1.
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| Service Dept. | Costs | | Production Dept. | Overhead Cost | | Janitorial | $40,000 | | Shaping Department | $60,000 | | Maintenance | $50,000 | | Assembly Department | $80,000 |
The overhead costs shown are overhead costs prior to allocation. The service department costs are allocated to production departments at a ratio of 7:3. The Shaping Department overhead costs are allocated on a basis of 10,000 machine hours, of which 3,000 were used on Job 599. What amount of overhead was assigned to Job 599 in the Shaping Department? |
| | A) | $18,000 |
| | B) | $36,900 |
| | C) | $42,000 |
| | D) | $24,000 |
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| 2.
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Which of the following is least likely to express an appropriate cost driver for the activities listed? |
| | A) | Cost/Activity: Personnel processing
Cost Driver: Number of employees hired or terminated |
| | B) | Cost/Activity: Quality inspection
Cost Driver: Number of units inspected |
| | C) | Cost/Activity: Materials handling
Cost Driver: Number of purchase orders |
| | D) | Cost/Activity: Equipment amortization
Cost Driver: Number of products produced or hours of use |
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| 3.
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A cost that is incurred for the joint benefit of more than one department is called a(n): |
| | A) | controllable cost |
| | B) | direct expense |
| | C) | escapable expense |
| | D) | indirect expense |
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| 4.
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A cost that is easily traced and assigned to a specific department because it is incurred for the sole benefit of that department is called a: |
| | A) | controllable cost |
| | B) | direct expense |
| | C) | escapable expense |
| | D) | indirect expense |
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| 5.
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Four departments (Paint, Lumber, Hardware, Roofing) in a builder's supply outlet occupy floor space of 10,000, 50,000, 20,000, and 15,000 square metres, respectively. How much of the rent of $104,500 on the building would allocated to the Hardware Department? |
| | A) | $20,000 |
| | B) | $ 5,500 |
| | C) | $52,500 |
| | D) | $22,000 |
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| 6.
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A sales department of a department store generated a contribution overhead percentage of 30.2%, and its departmental contribution to overhead was $45,300. The net sales for the department were: |
| | A) | $150,000 |
| | B) | $ 30,200 |
| | C) | $ 45,300 |
| | D) | $ 66,666 |
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| 7.
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Which line of the following schedule is incorrect? |
| | A) | Term: Indirect cost
Definition: Benefits more than one segment of the business. |
| | B) | Term: Cost centre
Definition: Incurs costs but does not generate revenues. |
| | C) | Term: Direct expense
Definition: Directly traceable to a cost objective. |
| | D) | Term: Uncontrollable cost
Definition: Is eliminated with a segment discontinuance. |
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| 8.
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The PeeDee Gravel Company produces 4 grades of gravel: Decorative, Basic, Foundation, and Pea. From 10 tons of raw materials, the company produces 5 tons of Decorative, 3 tons of Basic, 1 ton of Foundation, and 1 ton of Pea gravel grades. The cost of raw material is $12.00 per ton. On a physical basis, how much of the cost of 90 tons of raw materials should be allocated to the Pea gravel grade? |
| | A) | $ 90 |
| | B) | $ 108 |
| | C) | $ 297 |
| | D) | $ 495 |
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| 9.
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The selling price of a joint product is $12,000. The total selling price of all of the joint products is $60,000. Total cost for all the joint products is $36,000. The gross profit rate on the joint product, based on an allocation of joint costs on a value basis, is: |
| | A) | 33.3% |
| | B) | 40.0% |
| | C) | 25.0% |
| | D) | 60.0% |
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| 10.
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Which of the following statements is INCORRECT? |
| | A) | The concept of controllable costs provides the basis for the responsibility accounting system. |
| | B) | Controllable costs are the same as direct costs. |
| | C) | Controllable and uncontrollable costs are identified with a particular manager and a definite time period. |
| | D) | Uncontrollable costs are not within the manager’s control or influence. |
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| 11.
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Which of the following statements is INCORRECT in preparing departmental contribution reports? |
| | A) | The departmental contribution report is similar to the departmental income statement in its preparation of gross profit. |
| | B) | The direct operating expenses for each department are deducted from gross profit to determine the contribution generated by each department. |
| | C) | The indirect operating expenses are allocated to individual departments. |
| | D) | The indirect operating expenses are deducted in total from the total contribution generated by the company. |
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| 12.
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Which of the following statements is INCORRECT regarding activity-based costing (ABC)? |
| | A) | It is a technique for allocating direct costs among departments or products. |
| | B) | It is commonly used for overhead allocation. |
| | C) | The goal of ABC is to provide more precise information about costs and their sources. |
| | D) | One advantage of ABC is that it forces managers to closely examine the behavior of cost drivers and cost level. |
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