1		Which of the following best identifies the decision-making relationship between cost drivers, cost objects and accumulated cost?
			A)	Cost objects are used to allocate estimated accumulated costs to cost drivers.
			B)	Cost objects are used to allocate actual accumulated costs to cost drivers.
			C)	Cost drivers are used to allocate estimated accumulated costs to cost objects.
			D)	Cost drivers are used to allocate actual accumulated costs to cost objects.
2		Which of the following statements is false?
			A)	Direct costs can be traced to cost objects in a cost-effective manner.
			B)	Indirect costs cannot be traced to cost objects in a cost-effective manner.
			C)	Direct costs are also called overhead costs.
			D)	A particular cost may be a direct cost for one cost object and an indirect cost for a different cost object.
3		When manufacturing air conditioners which of the following would be considered an indirect cost?
			A)	Cost of the condenser put in an air conditioner.
			B)	Cost of supervising the production of air conditioners.
			C)	Cost of assembling an air conditioner
			D)	Cost of the box and packaging for an air conditioner
4		In a retail store which of the following would be considered an indirect cost to a department?
			A)	Cost of merchandise
			B)	Cost of the department manager's salary
			C)	Cost of the store manager's salary
			D)	Cost of sales commissions
5		The process of dividing a total cost into parts and assigning the parts to particular cost objects is known as
			A)	cost allocation.
			B)	cost assignment.
			C)	allocation basing.
			D)	allocation rating.
6		The Pager Company has three departments. The following is a summary of the direct labor hours and number of units produced in each department:   Direct Labor Hours Units Produced Department 1 400 350 Department 2 300 420 Department 3 800 490 Pager Company has overhead costs totaling $24,825 and allocates them based on the number of direct labor hours worked. The company’s allocation rate is
			A)	$19.70.
			B)	$16.55.
			C)	$8.99.
			D)	$12.40.
7		The Daniels Company has three departments. Each department occupies floor space as follows: Department 1: 1,500 square feet Department 2: 1,140 square feet Department 3: 1,360 square feet How much of Daniels Company’s $42,000 rent should be allocated to Department 1?
			A)	$14,000
			B)	$15,750
			C)	$16,525
			D)	$28,000
8		A company’s administration costs relate to marketing and selling its product. Which of the following is the best cost driver to allocate the administration costs?
			A)	Number of employees
			B)	Number of hours
			C)	Square feet
			D)	Number of units sold

Use the following information to answer questions 9 - 12.

Department	Number of Employees	No. of Hours Worked	Square Feet	Number of Units Sold	Sales Dollars
A	10	20,000	20,000	200	$1,350,000
B	14	18,000	4,000	400	$ 950,000
C	20	22,000	6,000	1,000	$ 750,000
D	30	15,000	10,000	3,000	$ 375,000
	----	-------	-------	------	----------
	74	75,000	40,000	4,600	$3,425,000
	====	=====	=====	=====	========

9		The personnel department costs total $162,800. The personnel department is responsible for recruiting and hiring employees and managing employee benefits. Which of the following cost drivers would be most appropriate for allocating the personnel department costs to each department?
			A)	Number of employees
			B)	Square feet
			C)	Number of departments
			D)	Sales dollars
10		If the personnel department costs total $162,800, what would be the amount of personnel department costs allocated to Department C?
			A)	$ 4,400
			B)	$ 13,200
			C)	$ 44,000
			D)	$162,800
11		The company allocates the cost of supplies based on the number of units sold. Which cost driver would the manager of Department A prefer to use to allocate the cost of supplies used?
			A)	Number of employees
			B)	Number of units sold
			C)	Sales dollars
			D)	Number of departments
12		The company has some costs that have not been allocated. These include the cost of heat, cleaning, and telephones. Of the following allocation methods, which is the best method of allocating these unallocated costs to each of the departments?
			A)	Establish one cost pool and allocate the cost based upon square feet.
			B)	Establish one cost pool and allocate the cost based upon number of employees.
			C)	Establish two cost pools: one pool for telephones with the cost allocation based upon number of employees, and a second pool for heat and cleaning with the cost allocation based upon square feet.
			D)	Establish two cost pools: one pool for telephones with the cost allocation based upon number of employees, and a second pool for heat and cleaning with the cost allocation based upon sales dollars.
13		Polar Company expects to incur $20,000 of indirect overhead costs per month and direct production costs of $10 per unit. Polar allocates the indirect overhead costs based on the number of units produced. The expected production activity for the year is as follows: 1 st Quarter 2 nd Quarter 3 rd Quarter 4 th Quarter 3,450 units 3,750 units 5,250 units 3,550 units What is Polar Company’s predetermined overhead rate?
			A)	$15.00 per unit
			B)	$17.39 per unit
			C)	$25.00 per unit
			D)	$27.39 per unit
14		In producing air conditioners, Apex Company uses 3 hours of direct labor per unit at a rate of $15 per hour. The material cost for each unit is $80. For the upcoming year the company expects to produce 5,000 units and to incur the following overhead costs: Material Handling $ 38,000 Assembly Supervisor 45,000  Purchasing 34,000    $117,000  If Apex allocates overhead based upon direct labor hours, what is the total cost per unit?
			A)	$ 103.80
			B)	$ 118.40
			C)	$ 133.90
			D)	$ 148.40
15		Marty’s Music expects to make 6,000 guitars in the upcoming accounting period. The company made 420 guitars in January. Material and labor costs for January were $21,000 and $63,000, respectively. In January the company paid $25,200 for the upcoming year’s property taxes. Marty’s Music desires to sell its guitars for cost plus 25% of cost. Ignoring other manufacturing overhead costs, what price should be charged for the guitars produced in January?
			A)	$250.00
			B)	$255.25
			C)	$325.00
			D)	$256.25

Use the following information to answer questions 16 and 17.

HCL Chemicals produces two products, HC and CL. The joint raw materials cost is $30,000 and the joint processing cost is $24,000 per batch. A batch consists of 1,500 gallons of HC and 4,500 gallons of CL. HCL allocates joint costs based on the number of gallons produced. The 1,500 gallons of HC sells for $20,000. CL requires additional processing costs of $11,000 to complete at which time it sells for $70,000.

16		What amount of the joint costs will be allocated to product HC?
			A)	$13,500
			B)	$15,750
			C)	$27,000
			D)	$31,500
17		What is the gross margin for CL?
			A)	$18,500
			B)	$29,500
			C)	$32,000
			D)	$43,000

Use the following information to answer Questions 18 and 19.

Landway Company has two service departments, personnel and cleaning, and two operating departments, department A and department B. The personnel department supports the cleaning department and both operating departments, while the cleaning department only supports the two operating departments. Information pertaining to the four departments is as follows:

Department	Employees	Sq. ft.	Department Costs	Hours	Allocation Base
Personnel	3	1,000	$ 180,000	--	Employees
Cleaning	5	--	$ 222,750	--	Square feet
Operating Dept. A	30	3,750	$2,500,000	45,000	Hours
Operating Dept. B	10	3,000	$3,000,000	27,000	Hours

18		Using the direct method to allocate the personnel department and cleaning department costs, what is the predetermined overhead allocation rate for department A?
			A)	$ 62.27
			B)	$ 61.31
			C)	$123.97
			D)	$116.44
19		Using the step method to allocate personnel department and cleaning department costs, what is the predetermined overhead allocation rate for department B?
			A)	$114.44
			B)	$116.59
			C)	$119.34
			D)	$209.18
20		Which method of allocating service department costs takes into consideration two-way interrelationships?
			A)	Direct Method
			B)	Step Method
			C)	Reciprocal Method
			D)	Interrelationship Allocation Method