Question

Multiple Choice (4 Points) ment, identify each a 11. Which of the following is not a reason that managers allocate overhead costs to products? a. To provide information for decision making. b. To apply direct labor and direct materials to products. c. To promote efficient use of resources. d. To comply with U.S. Generally Accepted Accounting Principles (GAAP). e. None of the answer choices is correct. comfort. uture production. safety reasons. aterials. cal hardware store. story for manufact 12 Gabriel Company uses the department approach for allocating overhead. The Assembly Derartment uses direct labor hours as its allocation base and the Grinding Department uses machine hours as its allocation base. The data for each is as follows: Estimated Cost Pool $800,000 $300,000 Allocation base 100.000 direct labor hours 5,000 machine hours Assembly Department Grinding Department lated to its quali What is the allocation rate for each Department (round to the nearest cent)? a. Assembly = $11.00 per direct labor hour: Grinding = $220,00 per machine hour. b. Assembly = $0.13 per direct labor hour: Grinding + $0.02 per machine hour. c. Assembly $8.00 per direct labor hour: Grinding $60.00 per machine hour. d. Assembly $10.48 per direct labor hour: Grinding = $10.48 per machine hour. e. None of the answer choices is correct. $ 150, 300, 1,575, 960, 720,0 13. All of the following are methods of allocating overhead costs except: a department allocation. b. activity-based allocation. c. plant wide allocation. d. product allocation. e. None of the answer choices is correct. 75,0 $ 3.780.C internal faf 14. The predetermined overhead rate is calculated as: a. Estimated Overhead Costs x Estimated Cost Driver Activity. b. Estimated Overhead Costs / Estimated Cost Driver Activity. c. Estimated Overhead Costs - Estimated Cost Driver Activity. d. Estimated Overhead Costs + Estimated Cost Driver Activity e. None of the answer choices is correct. 15. A collection of overhead costs, typically organized by department or activity, is called a: a. cost objective. b. cost driver. c. cost pool d. cost hierarchy. e. None of the answer choices is correct.

Answer 1

Solution:

11. The answer is Option e. None of the above. Overhead costs are allocated to products to provide information for decision making, promote efficient use of resources and to comply with U.S. GAAP. U.S. GAAP requires that direct materials, direct labor and overheads assigned to product.

12. The answer is Option c. Allocation rate for Assembly department = $800,000/100,000 direct labor hours = $8.00 per direct labor hour. Allocation rate for Grinding department = $300,000/5,000 machine hours = $60.00 per machine hour.

13. The answer is Option d. Product allocation is not a method of allocating overhead costs. The three methods are plant wide allocation, departmental allocation and activity-based allocation.

14. The answer is Option b. Predetermined overhead rate = Estimated Overhead costs/Estimated Cost Driver Activity.

15. The answer is Option c. Cost pool. Cost pool is a collection of individual costs.