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1. MCQ-20 1.Cost allocation is:
Question 1Cost allocation is:The process of tracking both direct and indirect costs
associated with a cost objectThe process of determining the actual cost of the cost objectThe
assignment of indirect costs to the chosen cost objectA function of cost tracingQuestion
2Which one of the following items is a direct cost? ??Customer-service costs of a
multiproduct firm; Product A is the cost object. ?Printing costs incurred for payroll check
processing; payroll check processing is the cost object. ?The salary of a maintenance
supervisor in a multiproduct manufacturing plant; Product B is the cost object. ?Utility costs
of the administrative offices; the accounting department is the cost object.?Question
3Variable costs:Are always indirect costsIncrease in total when the actual level of activity
increasesInclude most personnel costs and depreciation on machineryCan always be traced
directly to the cost objectQuestion 4The Singer Company manufactures several different
products. Unit costs associated with Product ICT101 are as follows:?What are the variable
costs per unit associated with Product ICT101?Direct materials $60 $60Direct
manufacturing labor 10 10Variable manufacturing overhead 18 18Fixed manufacturing
overhead 32 32Sales commissions (2% of sales) 4 4Administrative salaries 16 16Total 92
$140? ? ? ? ? ??a. $18 c. $88b. $22 d. $92Question 5Cost-volume-profit analysis is used
primarily by management: ??As a planning tool ?For control purposes ?To prepare external
financial statements ?Tto attain accurate financial resultsQuestion 6Operating income
calculations use: ??Net income ?Income tax expense ?Cost of goods sold and operating costs
?Non-operating revenues and non-operating expenses ?Question 7Contribution margin
equals: ??Revenues minus period costs ?Revenues minus product costs ?Revenues minus
variable costs ?Revenues minus fixed costsQuestion 8Holly’s Ham, Inc. sells hams during the
major holiday seasons. During the current year 11,000 hams were sold resulting in
$220,000 of sales revenue, $55,000 of variable costs, and $24,000 of fixed
costs.?Contribution margin per ham is:??$5.00 ?$15.00?$20.00 ?None of these answers are
correct. ?Question 9The actual indirect-cost rate is calculated by:??Dividing actual total
indirect costs by the actual total quantity of the cost-allocation base.?Multiplying actual total
indirect costs by the actual total quantity of the cost-allocation base.?Dividing the actual
total quantity of the cost allocation base by actual total indirect costs.?Multiplying the actual
total quantity of the cost allocation base by actual total indirect costs.?Question 10O’Reilly
Enterprises manufactures digital video equipment. For each unit $2,950 of direct material is
used and there is $2,000 of direct manufacturing labor at $20 per hour. Manufacturing
overhead is applied at $35 per direct manufacturing labor hour. Calculate the cost of each

2. unit.??A. $4,950, B. $9,950, C. $8,450, D. $11,950Question 11Joni’s Kitty Supplies applies
manufacturing overhead costs to products at a budgeted indirect-cost rate of $60 per direct
manufacturing labor-hour. A retail outlet has requested a bid on a special order of the Toy
Mouse product. Estimates for this order include: Direct materials $40,000; 500 direct
manufacturing labor-hours at $20 per hour; and a 20% markup rate on total manufacturing
costs.?Manufacturing overhead cost estimates for this special order total:??$10,000
?$30,000 ?$36,000 ?None of these answers is correct.Question 13ABC systems create:??One
large cost pool ?Homogenous activity-related cost pools ?Activity-cost pools with a broad
focus ?activity-cost pools containing many direct costs ?Question 16Activity-based costing
systems provide better product costs when they: ??Employ more activity-cost drivers
?Employ fewer activity-cost drivers ?Identify and cost more indirect cost differences among
products ?Always yield more accurate product costs than traditional systemsQuestion
17Quality management provides an important competitive edge because it: ??Reduces costs
?Increases customer satisfaction ?Often results in substantial savings and higher revenues
in the short run ?All of these answers are correct.Question 18An example of a nonfinancial
measure for customer satisfaction is: ??Average manufacturing time for key
products?Contribution margin?Percentage of products that fail soon after delivery ?Number
of employees trained on managing bottleneck operationsQuestion 19A tool which indicates
how frequently each type of defect occurs is a: ??Control chart ?Pareto diagram ?Cause-and-
effect diagram ?Fishbone diagramsQuestion 20An important difference between financial
measures of quality and nonfinancial measures of quality is that:??Financial measures of
quality tend to be useful indicators of future long-term performance, while nonfinancial
measures have more of a short-term focus ?Nonfinancial measures of quality tend to be
useful indicators of future long-term performance, while financial measures of quality have
more of a short-term focus?Nonfinancial measures are generally too subjective to have any
long-term value?None of these answers is correct.?Question 12Bauer Manufacturing uses
departmental cost driver rates to allocate manufacturing overhead costs to products.
Manufacturing overhead costs are allocated on the basis of machine-hours in the Machining
Department and on the basis of direct labor-hours in the Assembly Department. At the
beginning of 20X3, the following estimates were provided for the coming year:Machining
AssemblyDirect labor-hours 30,000 60,000 60,000Machine-hours 80,000 20,000
20,000Direct labor cost $500,000 $900,000 $900,000Manufacturing overhead costs
$420,000 $240,000 $240,000The accounting records of the company show the following
data for Job #316:? ?Machining AssemblyDirect labor-hours 120 70 70Machine-hours 60 5
5Direct material cost $300 $200 $200Direct labor cost $100 $400 $400For Bauer
Manufacturing, what is the annual manufacturing overhead cost-allocation rate for the
Machining Department???$4.00 ?$4.20 ?A. $4.00, B.$4.20C. $4.67D. $5.25 $4.67 ?$5.25
?Question 15Velshi Printers has contracts to complete weekly supplements required by
forty-six customers.For the year 2010, manufacturing overhead cost estimates total
$840,000 for an annual production capacity of 12 million pages.?For 2010 Velshi Printers
has decided to evaluate the use of additional cost pools.After analyzing manufacturing
overhead costs, it was determined that number of design changes, setups, and inspections
are the primary manufacturing overhead cost drivers.?The following information was

3. gathered during theanalysis:Cost Pool Manufacturing Overhead Costs Activity Level Activity
LevelDesign changes $120,000 300 design changes 300 design changesSetups $640,000
5,000 setups 5,000 setupsInspections $80,000 5,000 setups 8,000 inspectionsTotal
manufacturing overhead costs $840,000During 2010, two customers, Money Managers and
Hospital Systems, are expected to use the following printing services:Activity Money
Managers Hospital SystemsPages 60,000 76,000Design changes 10 0Setups 20
10Inspections 30 38What is the cost driver rate if manufacturing overhead costs are
considered one large cost pool and are assigned based on 12 million pages of production
capacity???A. $0.10 per pageB. $0.07 per pageC. $0.70 per pageD. $0.05 per pageClick here
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