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Exam 4: Accrual Accounting Concepts

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Question 21

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Nott Company manufactures two products, pillows and comforters.The company has estimated its overhead in the order-processing department to be $600,000.The company produces 50,000 pillows and 80,000 comforters each year.Pillow production requires 25,000 machine hours, comforter production requires 50,000 machine hours.The company places raw materials orders 10 times per month, 2 times for raw materials for pillows and the remainder for raw materials for comforters.How much of the order processing overhead should be allocated to comforters?

A) $300,000
B) $400,000
C) $369,232
D) $480,000

E) A) and D)
F) A) and B)

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Question 22

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Gant Accounting performs two types of services, Audit and Tax.Gant's overhead costs consist of computer support, $300,000; and legal support, $150,000.Information on the two services is: Overhead applied to audit services using activity-based costing is

A) $150,000.
B) $180,000.
C) $270,000.
D) $300,000.

E) None of the above
F) A) and D)

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Question 23

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Which of the following is a non-value-added activity?

A non-value-added activity in a service enterprise is

Hale Company manufactures two models of its couch, the Mini and the Maxi.The Mini model requires 10,000 direct labor hours and the Maxi model requires 40,000 direct labor hours.The company produces 4,000 units of the Mini model and 1,000 units of the Maxi model each year.The company produces the Mini model in batch sizes of 200, while it produces the Maxi model in batch sizes of 100.The company expects to incur $360,000 of total setup costs this year.How much of the setup costs are allocated to the Mini model using ABC costing?

Which of the following is not a batch-level activity?

Which of the following is not typical of traditional costing systems?

Which of the following is not a unit-level activity?

Engineering design is a value-added activity.

Gant Accounting performs two types of services, Audit and Tax.Gant's overhead costs consist of computer support, $300,000; and legal support, $150,000.Information on the two services is: $\begin{array} { l r r } & { \text { Audit } } &{ \text { Tax } } \\\text { Direct labor cost } & \$ 50,000 & \$ 100,000 \\\text { CPU minutes } & 40,000 & 10,000 \\\text { Legal hours used } & 200 & 800\end{array}$ Overhead applied to tax services using traditional costing is

Foxx Company incurs $480,000 overhead costs each year in its three main departments, setup ($30,000) , machining ($330,000) , and packing ($120,000) .The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year.Information about Foxx's two products is as follows: $\begin{array} { l c c } & \text { ProductA1 } & \text { Product B1 } \\\text { Number of setups } & 20 & 20 \\\text { Machining hours } & 1,000 & 4,000 \\\text { Orders packed } & 150 & 350 \\\text { Number of products manufactured } & 600 & 400\end{array}$ Using ABC, how much overhead is assigned to Product B1 each year?

The presence of any of the following factors would suggest a switch to ABC except when

An activity-based overhead rate is computed as follows:

Which of the following is a unit-level activity?

Plant management is a batch-level activity.

Identifying and classifying activities is the

Which of the following is a value-added activity?

Inventory storage costs are reduced in just-in-time processing.

Rework costs typically increase in just-in-time processing.

Boswell Company manufactures two products, Regular and Supreme.Boswell's overhead costs consist of machining, $3,000,000; and assembling, $1,500,000.Information on the two products is: $\begin{array} { l c c } & \text { Regular } & \text { Supreme } \\\text { Direct labor hours } & 10,000 & 15,000 \\\text { Machine hours } & 10,000 & 30,000 \\\text { Number of parts } & 90,000 & 160,000\end{array}$ Overhead applied to Supreme using activity-based costing is