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Concept explainers
Concept introduction:
Manufacturing overhead allocation:
Manufacturing overhead cost is the pool of all indirect costs incurred for the production. These are the costs which are not directly traceable to the product.
Activity Based Costing (ABC): ABC costing method is generally used to allocate the overhead costs to the product using activity rates differently for each activity. Unlike traditional method, the ABC costing method does not use the plant wide overhead rate, rather it used different allocation rate for different production activity.
To indicate:
Three disadvantages of plant wide overhead allocation rate.
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Chapter 4 Solutions
MANAGERIAL ACCOUNTING FUND. W/CONNECT
- Match each of the following cost pools with the most appropriate cost allocation base and determine the overhead rates, using each allocation base only once:arrow_forwardDescribe the two-stage process for departmental overhead rates.arrow_forwardWhat are the two most frequently used methods of distributing service department costs to production departments?arrow_forward
- Which types of overhead allocation methods result in the use of more than one overhead rate during the same time period? Select one: O a. Departmental overhead rate method and activity-based costing. O b. Plantwide overhead rate method and departmental overhead rate method. O c. Departmental overhead rate method and cost pool overhead rate method. O d. Activity-based costing and plantwide overhead rate method. O e. Cost pool overhead rate method and plantwide overhead rate method.arrow_forwardThe overhead absorption rate used to allocate manufacturing overhead is calculated by: Select one: a. dividing the total estimated manufacturing overhead costs by the total estimated quantity of the allocation base b. dividing the total actual manufacturing overhead costs by the total estimated quantity of the cost driver c. dividing the total estimated manufacturing overhead by the total actual quantity of the cost driver d. dividing the total estimated quantity of the cost driver by the total estimated manufacturing overhead costsarrow_forwardCalculate appropriate overhead absorption rates for the three production departments.arrow_forward
- b) Calculate appropriate overhead absorption rates for the three production departments.arrow_forwardWhich statement is false? Using a single plantwide overhead allocation rate is the simplest method of allocating overhead costs. An allocation system that uses departmental overhead allocation rates is more refined than one that uses a plantwide overhead allocation rate. Allocation focuses on indirect costs. The predetermined overhead allocation rate is based on actual costs.arrow_forwardCalculate division margins in percentage terms prior to allocating fixed overhead costs.arrow_forward
- The overhead absorption rate used to allocate manufacturing overhead is calculated by: Select one: a. dividing the total actual manufacturing overhead costs by the total estimated quantity of the cost driver b. dividing the total estimated quantity of the cost driver by the total estimated manufacturing overhead costs c. dividing the total estimated manufacturing overhead costs by the total estimated quantity of the allocation base d. dividing the total estimated manufacturing overhead by the total actual quantity of the cost driver The predetermined manufacturing overhead rate is usually computed: Select one: A. At the end of the financial year B. At the beginning of the financial year C. During the financial year D. When overheads have been incurredarrow_forwardThe direct method as used is one method that can be used to re-assign service department cost.Discuss two other methods that can be used to re-assign service department overheads.arrow_forwardThe overhead absorption rate used to allocate manufacturing overhead is calculated by: Select one: a. dividing the total actual manufacturing overhead costs by the total estimated quantity of the cost driver b. dividing the total estimated quantity of the cost driver by the total estimated manufacturing overhead costs c. dividing the total estimated manufacturing overhead costs by the total estimated quantity of the allocation base d. dividing the total estimated manufacturing overhead by the total actual quantity of the cost driver 2.The predetermined manufacturing overhead rate is usually computed:Select one:A. At the end of the financial yearB. During the financial yearC. When overheads have been incurredD. At the beginning of the financial year 3. The traditional cost drivers used in computing overhead absorption rates are: Select one: a. floor space, rent and rates, machinery value b. direct labour hours, machine cost, direct labour cost c. direct labour hours, machine hours,…arrow_forward
- Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage LearningPrinciples of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage Learning
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