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Exam 4: Accumulating and Assigning Costs to Products

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Question 41

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Under reciprocal cost allocation method:

A) the first step is to develop a reciprocal cost equation.
B) the first step is to allocate the service department costs to the production departments.
C) one service department is chosen to allocate costs first.
D) service department costs are allocated directly to the production departments.

E) B) and C)
F) B) and D)

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Question 42

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In job order costing,individual jobs and products will be allocated different amounts of overhead costs depending on whether a single cost pool or multiple cost pools is used.

A) True
B) False

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Question 43

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JB Juice Company uses a manufacturing process that has two distinct stages: the juicing process (P1) and the straining process (P2) . Raw material is consumed in P1 at the beginning of the process. No additional raw material is required in the second stage of the process (in P2) . The following information pertains to the production of 5,000 units of output in March 2011: Assume 5,000 units are 100% complete with respect to raw materials and conversion costs at the end of March. -The conversion costs for P1,the juicing process,total:

Wisconsin Electronics has received an order for 1,000 specially designed TV/VCR combinations. The following standards were compiled for this order: -Assume the company adds a 10% markup to arrive at a selling price.The bid price for this order totals:

Noble Printers has contracts to complete weekly supplements required by forty-six customers.For the year 2011,overhead cost estimates total $420,000 for an annual production capacity of 12 million pages. For 2011 Noble Printers has decided to evaluate the use of additional cost pools.After analyzing overhead costs,it was determined that the number of design changes,setups,and inspections are the primary overhead cost drivers.The following information was gathered during the analysis. During 2011,two customers,Wealth Managers and Health Systems,are expected to use the following printing services. Required: a. Calculate the cost driver rate if overhead costs are considered one large cost pool and are assigned based on 12 million pages of production capacity. b. Using the cost driver rate determined in (a),calculate the overhead cost estimate for Wealth Managers during 2011. c. Assuming cost pools for design changes,setups,and inspections are used,calculate the cost driver rates for each of the three cost pools. d. Using the cost driver rates determined in (c),calculate the overhead cost estimate for Wealth Managers during 2011. e. Review the overhead costs estimates computed in (b)and (d).Discuss what conclusions can be drawn from this exercise in regard to the use of cost pools.

In job order costing,explain how comparing actuals to the estimates for direct material and direct labor costs can be helpful to management.

In job order costing,only direct costs are used to determine the cost of a job.

Wisconsin Electronics has received an order for 1,000 specially designed TV/VCR combinations. The following standards were compiled for this order: -The estimated manufacturing overhead cost assigned to this order totals:

All of the following create problems with accurate product or job costing except:

Increasing prices in the face of falling demand is never a good strategy and can cause what is called a death spiral.

Costing systems that are used for the costing of like or similar units of products in mass production are called:

The raw material used in a product that can be easily traced to the product is generally classified as an indirect cost.

Conversion costs:

Does adding more cost pools always result in better overhead costs estimates? Why or why not?

For 2011, Steve's Plastics Manufacturing uses a normal job order costing system. The accounting records contain the following information: The only cost driver is machine hours. -Using normal job order costing,the amount of manufacturing overhead costs allocated to jobs during 2011 is:

In job order costing,the optimum number of cost pools is ________.

Wood Manufacturing is a small textile manufacturer using machine-hours as the single, plant-wide predetermined cost driver rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Winfield High School band jacket job: -What are the total manufacturing costs of this job?

Why do product costing systems using the direct method,sequential method,and reciprocal method allocate service department overhead costs first to the production departments before assigning them to individual jobs?

(Appendix)The direct allocation method recognizes possible interactions between service departments when allocating service department's costs to production departments.

More cost pools: