25 multiple-choice questions, each question is worth 3 points for a total of 75

Question

25 multiple-choice questions, each question is worth 3 points for a total of 75 points. 1. Which of the following would be the most appropriate cost driver to allocate costs associated with engineering department costs (they design new products)? A. Number of customer orders B. Number of machine hours used in manufacturing C. Number of production setups D. Number of new product designs 2. Moyle Corporation has provided the following data from its activity-based costing accounting system: Total Cost Total Activity Activity Cost Pools Designing products Setting up batches Assembling products 396,900 2,450 product design hours $8,580 390 batch set-ups $115,520 7,220 assembly hours The activity rate for the "designing products" activity cost pool is closest to: A. $396,900 per product design hour B, $162 per product design hour C. $62 per product design hour D. $52 per product design hour 3. Delta Company has two products, A and B. The company uses activity-based costing. Total cost in cost pool $12,000 $5,000 42,000 Activity (# cost driver units) 15 12 Cost Pool Product A ProductB 10 20 30 Total 25 25 42 Activit Activity 2 Activity Compute allocated overhead costs for product A A. $4,800 B. $30,000 C. 538,800 D. $59,000 4. Alpha Company produces two products-A and B. A is a high volume basic product. B is a low volume and is custom designed, 60% of B's costs design and machine setup, while A's major portions of costs are direct costs l and direct labor hours as its cost driver to allocate indirect costs. Which of premium product. Production of B is based on customer orders Alpha uses a single cost pool ost s indirect costs as it is using a single cost pool to allocate indirect costs B's indirect costs as it is using a single cost pool to allocate indirect costs. t. Alpha will Indkers sindiret s as it i using a single cost pool t allecate indirect costs st A's indirect costs because A has high direct costs D. Alpha will underco

Explanation / Answer

Question - 1 ......... Correct choice is Option - D

As given the question, principle activity of the engineering department is developing new designs. So perfect cost driver for such activity is number of new designs created.

Question - 2 ..........Correct choice is Option - B

396900 / 2450 hours = 162 per design hour

Question - 3 ...........Correct choice is Option - C

Product - A total cost allocation = 12000* (10/25) + 5000* (20/25) + 42000 * (30/42) = 38,800

Question - 4 .........Correct choice is option - B

Product - A being high volume product, will have more labour hours. Incidentally the use of single overhead recovery rate based on labor hours will put more overhead cost for product - A. Thus it implies that undercosting is done with product - B

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