Which of the following statements are true? 1. The fact that one department may be labor intensive while another department is machine intensive explains in part why multiple predetermined overhead rates are often used in larger companies. 2. A company will improve job cost accuracy by using multiple overhead rates even if it cannot identify more than one overhead cost driver. 3. The appeal of using multiple departmental overhead rates is that they presumably provide a more accurate accounting of the costs caused by jobs. Only statement I is true. Statement I and III are true. Statements II and III are true. None of the statements are true.

Which of the following statements are true? 1. The fact that one department may be labor intensive while another department is machine intensive explains in part why multiple predetermined overhead rates are often used in larger companies. 2. A company will improve job cost accuracy by using multiple overhead rates even if it cannot identify more than one overhead cost driver. 3. The appeal of using multiple departmental overhead rates is that they presumably provide a more accurate accounting of the costs caused by jobs. Only statement I is true. Statement I and III are true. Statements II and III are true. None of the statements are true.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 23E: Refer to the data in Exercise 7.22. The company has decided to simplify its method of allocating...

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Refer to the data in Exercise 7.20. The company has decided to use the sequential method of allocation instead of the direct method. The support departments are ranked in order of highest cost to lowest cost. Required: 1. Allocate the overhead costs to the producing departments using the sequential method. (Take allocation ratios out to four significant digits. Round allocated costs to the nearest dollar.) 2. Using machine hours, compute departmental overhead rates. (Round the overhead rates to the nearest cent.)
Why would a manufacturing company with multiple production departments still prefer to use a single plantwide overhead rate?
Using a product profitability report to guide strategic decisions The controller of Boom Box Sounds Inc. prepared the following product profitability report for management, using activity-based costing methods for allocating both the factory overhead and the marketing expenses. As such, the controller has confidence in the accuracy of this report. In addition, the controller interviewed the vice president of marketing, who indicated that the floor loudspeakers were an older product that was highly recognized in the marketplace. The ribbon loudspeakers were a new product that was recently launched. The ribbon loudspeakers are a new technology that have no competition in the marketplace, and it is hoped that they will become an important future addition to the companys product portfolio. Initial indications are that the product is well received by customers. The controller believes that the manufacturing costs for all three products are in line with expectations. Floor Loudspeakers Bookshelf Loudspeakers Ribbon Loudspeakers Totals Sales 1,500,000 1,200,000 900,000 3,600,000 Less cost of goods sold 1,050,000 720,000 810,000 2,580,000 Gross profit 450,000 480,000 90,000 1,020,000 Less marketing expenses 600,000 120,000 72,000 792,000 Income from operations (150,000) 360,000 18,000 228,000 1. Calculate the gross profit and income from operations to sales ratios for each product. 2. Write a memo using the product profitability report and the calculations in (I) to make recommendations to management with respect to strategies for the three products.
These are tue/false questions. ____ 21. Differential revenue is the amount of increase or decrease in revenue expected from a particular course of action as compared with an alternative. ____ 22. Equivalent units of production are the number of units that could have been manufactured from start to finish during an accounting period. ____ 23. One of the differences in accounting for a process costing system compared to a job order system is that the amounts used to transfer goods from one department to the next comes from the cost of production report instead of job cost cards. ____ 24. The primary accounting tool for controlling and reporting for cost centers is a budget performance report. ____ 25. The dollars available from each unit of sales to cover fixed cost and profit is the unit variable cost.
True or False _____13. With the use of the algebraic method, each department’s costs are set out in anequation where total costs equals the sum of direct and allocated costs. _____14. When departmentalized rates is used to allocate overhead costs, all departmentsincluding service departments will compute for such rates. _____15. Over/under applied overhead must be closed and allocated to Cost of Goods Sold,Finished Goods and Raw Materials accounts, when the amount is considered material orsignificant.
(Appendix 3A) Method of Least Squares Farnsworth Company has gathered data on its overhead activities and associated costs for the past 10 months. Tracy Heppler, a member of the controller's department, has convinced management that overhead costs can be better estimated and controlled if the fixed and variable components of each overhead activity are known. One such activity is receiving raw materials (unloading incoming goods, counting goods, and inspecting goods), which she believes is driven by the number of receiving orders. Ten months of data have been gathered for the receiving activity and are as follows: Month Receiving Orders Receiving Cost 1 1,000 $18,000 2 700 15,000 3 1,500 28,000 4 1,200 17,000 5 1,300 25,000 6 1,100 21,000 7 1,600 29,000 8 1,400 24,000 9 1,700 27,000 10 900 16,000 Suppose that Tracy has gathered two more months of data: Month Receiving Orders Receiving Cost…
2. Answer the Bot Please. Using a predetermined overhead rate, an appropriate amount of factory overhead should be added to a job cost sheet. Select one: True False Operating expenses that are incurred for the benefit of the business as a whole and that cannot be traced directly to any specific department are known as nonallocated expenses. Select one: True False The difference between a department's gross profit and its operating expenses is known as the departmental direct operating profit. Select one: True False
CASE 2 Harry Potter has been appointed as a divisional controller at the Electronics Division of BMW Products. One of her main duties is to calculate the division’s predetermined overhead rate (POHR). Such a task is crucial, since POHR is used throughout the year and any under-applied or over-applied overhead is closed out to Cost of Goods Sold at fiscal year-end. The company’s allocation base across all its divisions is machine-hours. Having estimated next year’s total manufacturing overhead, Hopkins calculated the POHR, by dividing with the number of total machine-hours for the coming year, as projected by the production manager. Being sure about her assumptions and calculations, she went to the division’s manager, Harry Potter, for approval. Surprisingly, the manager suggested a modification in the allocation base, as per the following discussion: Harry: These are my calculations of next year’s POR. If you approve, we can update our job-order costing system accordingly for this…
iv. How else might FCA use the information available from its department-by-departmentanalysis of manufacturing overhead costs? v. FCA’s managers are wondering if they should further refine the department-by department costing system into an ABC system by identifying different activities within each department. Discuss the two (2) advantages and two (2) disadvantages of an ABC system, if it is to be implemented in this context?
Please give me step by step direction on the problem for the answer. Ch 26 pro 5 Single Plantwide and Multiple Production Department Factory Overhead Rate Methods and Product Cost Distortion The management of Cobalt Engines Inc. manufactures gasoline and diesel engines through two production departments, Fabrication, and Assembly. Management needs accurate product cost information in order to guide product strategy. Presently, the company uses a single plantwide factory overhead rate for allocating factory overhead to the two products. However, management is considering the multiple production department factory overhead rate method. The following factory overhead was budgeted for Cobalt: Fabrication Department factory overhead $360,000 Assembly Department factory overhead 144,000 Total $504,000 Direct labor hours were estimated as follows: Fabrication Department 3,600 hours Assembly Department 3,600 Total 7,200 hours In addition, the direct labor…