Which of the following is false? Multiple Cholce Overhead costing accuracy is Improved by the use of multiple departmental rates rather than a single overhead rate. The departmental overhead rate method uses more overhead rates than the plantwde overhead rate method. The departmental overhead method assigns overhead on the basis of volume-related measures. The departmental overhead rate method and the plantwide overhead rate method both comply with GAAP and can be used for external reporting. The departmental overhead rate method does not assign overhead on the basis of volume-related measures.

Which of the following is false? Multiple Cholce Overhead costing accuracy is Improved by the use of multiple departmental rates rather than a single overhead rate. The departmental overhead rate method uses more overhead rates than the plantwde overhead rate method. The departmental overhead method assigns overhead on the basis of volume-related measures. The departmental overhead rate method and the plantwide overhead rate method both comply with GAAP and can be used for external reporting. The departmental overhead rate method does not assign overhead on the basis of volume-related measures.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 13MC: Activity-based costing systems: A. use a single predetermined overhead rate based on machine hours...

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Explain how a plantwide overhead rate, using a unit-based driver, can produce distorted product costs. In your answer, identify two major factors that impair the ability of plantwide rates to assign cost accurately.
A CPA would recommend changing from plantwide overhead rate application to departmental rates under which of the following circumstances? a. The plant produces one product. b. The plant produces multiple products that may or may not pass through all producing departments. c. The plant produces multiple products that pass through all of the producing departments. d. The plant produces many different products that consume the same amount of resources in each producing department.
Under what two conditions would the multiple production department factory overhead rate method provide more accurate product costs than the single plantwide factory overhead rate method?
Why does a company use a standard costing system? A. to identify variances from actual cost that assist them in maintaining profits B. to identify nonperformers in the workplace C. to identify what vendors are unreliable D. to identify defective materials
The fixed factory overhead variance is caused by the difference between which of the following? A. actual and standard allocation base B. actual and budgeted Units C. actual fixed overhead and applied fixed overhead D. actual and standard overhead rates
Activity-based department rate product costing and product cost distortions Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: The activity-base usage quantities and units produced for the two products follow: Instructions Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is 420,000 and 294,000 for the Subassembly and Final Assembly departments, respectively. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Determine the total and per-unit cost assigned to each product under activity-based costing. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods. production department factory overhead rate and activity-based costing methods.
The following items are associated with a traditional cost accounting information system, an activity-based cost accounting information system, or both (that is, some elements are common to the two systems): a. Usage of direct materials b. Direct materials cost assigned to products using direct tracing c. Direct labor cost incurrence d. Direct labor cost assigned to products using direct tracing e. Setup cost incurrence f. Setup cost assigned using number of setups as the activity driver g. Setup cost assigned using direct labor hours as the activity driver h. Cost accounting personnel i. Submission of a bid, using product cost plus 25 percent j. Purchasing cost incurrence k. Purchasing cost assigned to products using direct labor hours as the activity driver l. Purchasing cost assigned to products using number of orders as the activity driver m. Materials handling cost incurrence n. Materials handling cost assigned using the number of moves as the activity driver o. Materials handling cost assigned using direct labor hours as the activity driver p. Computer q. Costing out of products r. Decision to continue making a part rather than buying it s. Printer t. Customer service cost incurred u. Customer service cost assigned to products using number of complaints as the activity driver v. Report detailing individual product costs w. Commission cost x. Commission cost assigned to products using units sold as the activity driver y. Plant depreciation z. Plant depreciation assigned to products using direct labor hours Required: 1. For each cost system, classify the relevant items into one of the following categories: a. Interrelated parts b. Processes c. Objectives d. Inputs e. Outputs f. User actions 2. Explain the choices that differ between the two systems. Which system will provide the best support for the user actions? Explain. 3. Draw an operational model that illustrates each cost accounting systemwith the items that belong to the system used as examples for each component of the model. 4. Based on the operational models, comment on the relative costs and benefits of the two systems. Which system should be chosen?
Which of the following is a reason a company would implement activity-based costing? A. The cost of record keeping is high. B. The additional data obtained through traditional allocation are not worth the cost. C. They want to improve the data on which decisions are made. D. A company only has one cost driver.
Classify the following cost drivers as structural, executional, or operational. a. Number of plants b. Number of moves c. Degree of employee involvement d. Capacity utilization e. Number of product lines f. Number of distribution channels g. Engineering hours h. Direct labor hours i. Scope j. Product configuration k. Quality management approach l. Number of receiving orders m. Number of defective units n. Employee experience o. Types of process technologies p. Number of purchase orders q. Type and efficiency of layout r. Scale s. Number of functional departments t. Number of planning meetings
Which of the following product situations is better suited to job order costing than to process costing? A. Each product batch is exactly the same as the prior batch. B. The costs are easily traced to a specific product. C. Costs are accumulated by department. D. The value of work in process is based on assigning standard costs.
Which is not a task typically associated with ABC systems? A. calculating the overhead application rate for each cost pool B. applying a single cost rate C. identifying a cost driver D. more correctly allocating overhead costs
Why would a manufacturing company with multiple production departments still prefer to use a single plantwide overhead rate?