Chapter 17

The cost object(s) of the departmental overhead rate method is:

The production departments in the first stage and the unit of product in the second stage.

The use of departmental overhead rates will generally result in:

The use of a separate cost allocation base for each department in the factory.

A company estimates that overhead costs for the next year will be $8,320,000 for indirect labor and $155,500 for factory utilities. The company uses machine hours as its overhead allocation base. If 400,000 machine hours are planned for this next year, what is the company's plantwide overhead rate? (Round your answer to two decimal places.)

$21.19 per machine hour.

Crinkle Cut Clothes Company manufactures two products CC1 and CC2. Current direct material and direct labor costs are detailed below. Next year the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year's overhead is estimated to be $338,250. The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $28 per hour and the company expects to manufacture 22,000 units of CC1 and 91,000 units of CC2 next year. Direct Material per Unit. DirectLabor Dollars per Unit. - CC1. $37.10 $22.40 - CC2. $25.20 $15.40 Compute the plantwide overhead rate for next year.

$5.00 per DLH.

Would the following activities at a manufacturer of shampoo be best classified as unit-level, batch-level, product-level, or facility level activities? - Researching newformulas - Shipping orders tostores

- Product - Batch

Gray Company uses a plantwide overhead rate with machine hours as the allocation base. Use the following information to solve for the amount of machine hours estimated per unit of product Q. Direct material cost per unit of Q $15 Total estimated manufacturing overhead $100,000 Total cost per unit of Q $60 Total estimated machine hours 200,000 MHDirect labor cost per unit of Q$30

30 MH per unit of Q.

Which of the following costing systems is more accurate for overhead cost allocation and most likely to allow managers the ability to make better pricing decisions? - Direct costing. - Plantwide overhead rate. - Departmental overhead allocation rates. - Traditional costing system. - Activity-based costing.

Activity-based costing.

Consider the following activities that take place in a veterinary clinic.(a.) Cleaning cages. (b.) Heating and air conditioning the clinic. (c.) Sending blood work to a lab. (d.) Dispensing medicine. Which of the following statements is true? - Cleaning cages is a facility level activity. - Heating and air conditioning the clinic is a facility level activity. - Service entities cannot use ABC for overhead allocation. - Dispensing medicine is a facility level activity. - Sending blood work to a lab is a facility level activity.

Heating and air conditioning the clinic is a facility level activity.

Which of the following is not true? - The departmental overhead rate method is more refined than the plantwide overhead rate method. - Overhead costing accuracy is improved by the use of multiple departmental rates rather than a single overhead rate. - The departmental overhead method assigns overhead on the basis of volume-related measures. - The departmental overhead rate method does not assign overhead on the basis of volume-related measures. - The departmental overhead rate method is more costly to implement than the plantwide overhead rate method.

The departmental overhead rate method does not assign overhead on the basis of volume-related measures.

Which of the following are advantages of using the plantwide overhead rate method?

The necessary information is readily available.

Which of the following statements is true with regard to activity-based costing rates? - ABC is another way to refer to a multiple departmental rate situation. - There one basic stage to ABC. - ABC is simpler and less expensive to implement than other traditional methods of allocating overhead costs. - The premise of ABC is that activities are what cause costs to be incurred. - All cost drivers used to determine the rates will be unit-level drivers.

The premise of ABC is that activities are what cause costs to be incurred.

The cost object(s) of the activity-based costing method is(are): - The production activities of the company. - The time period. - The production activities in the first stage and the unit of product in the second stage. - The unit of product in the first stage and the production activities in the second stage. - The production departments of the company.

The production activities in the first stage and the unit of product in the second stage.

ABC systems ________. - will limit cost drivers to units of output - will allocate costs based on volume - comply with GAAP - highlight the different levels of activitiesCorrect - usually will undercost complicated or complex products

highlight the different levels of activities