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Exam 4: Accounting for Factory Overhead

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Question 1

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To successfully employ an ABC system, a company must first identify:

A) Non-volume related activities in the factory that create costs.
B) Cost drivers.
C) Cost pools.
D) Overhead allocation rates.

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Question 2

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The Lucas Manufacturing Company has two production departments (fabrication and assembly) and three service departments (general factory administration, factory maintenance, and factory cafeteria) . A summary of costs and other data for each department, prior to allocation of service department costs for the year ended June 30, appears below: The costs of the general factory administration department, factory maintenance department, and factory cafeteria are allocated on the basis of direct labor hours, square footage occupied, and number of employees, respectively. Assuming that Lucas elects to use the sequential method to distribute service department costs (starting with the factory cafeteria) , what would be the amount of factory cafeteria costs that would be allocated to the factory maintenance department?

A) $3,314
B) $6,960
C) $5,800
D) $0

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B

Question 3

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Perry Company has two service departments, Maintenance and Human Resources, and two production departments, Machining and Assembly. The following data have been estimated for next year's operations: The Human Resources Department services all departments. Requirements: (1) Distribute the service department costs using the direct distribution method. (2) Distribute the service department costs using the sequential distribution method with the department servicing the greatest number of other departments being distributed first. (3) Using the results from the direct distribution method, calculate the predetermined factory overhead rate for the machining department using labor hours as the basis.

The method of distributing service department costs to production departments which makes no attempt to determine the extent to which one service department renders its services to another department is the:

Estimates made for a production department of the Automate Company for the month of October show: Factory overhead is applied on the basis of direct labor hours. On October 31, the records show these actual figures: Prepare the entry or entries to 1) apply factory overhead to production; 2) record actual factory overhead incurred assuming all items were purchased from vendors; 3) close out the two factory overhead account balances to set up the overapplied or underapplied factory overhead; and 4) to close the balance in under- or overapplied factory overhead to Cost of Goods Sold.

Which of the following costs would not be included in factory overhead in the manufacture of a student's desk?

If over- or underapplied factory overhead would materially distort net income if the entire amount was charged to Cost of Goods Sold, it should be:

Which of the following statements is true? I. An expense-type factory overhead analysis spreadsheet makes it possible to distribute expenses on a departmental basis as they are incurred. II) A department-type factory overhead analysis worksheet makes it possible to distribute expenses on a departmental basis as they are incurred.

Which of the following statements about service departments and their costs is not true?

The controller has asked you to examine different distribution methods for applying factory overhead to the various production orders that are processed during a year. The following information was taken from the annual budget: a.Determine the following factory overhead application rates under each of the following methods:(1)Direct labor cost(2)Direct labor hours(3)Machine hours b.Determine the under- or overapplied factory overhead under each of the following methods:(1) Direct labor cost(2) Direct labor hours(3) Machine hours

If a company uses a factory overhead ledger, at the end of the month, an accountant should:

Which of the following statements about using the direct labor hour method of applying factory overhead to production is false?

Consider the following costs: I. The cost of electricity which is used to power machinery and light the plant. II) Depreciation on the building which houses both the factory and the sales office. Which of the following statements is true?

Variable overhead costs include all of the following except:

Overapplied overhead will always result when a predetermined factory overhead rate is employed and:

Dean Corporation has two service departments, Power and Maintenance, and two production departments, Painting and Polishing. The following data have been estimated for next year's operations: Requirements: (1) a) For which service department would you use kilowatt hours to allocate service costs. b) For which service department would you use square footage to allocate service costs. (2) Distribute the service department costs using the direct distribution method. (3) Prepare the journal entries to distribute the costs of the service departments to the production departments given the results of your calculations.

Methods for separating semivariable costs into their fixed and variable components include all of the following except the:

Once the amounts of the service department allocations have been determined, a journal entry should be prepared to record the distributions, the result of which is:

Which of the following is most likely to be considered a service department in a manufacturing plant?

The following cost is an example of a variable factory overhead cost: