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ACCT 2123 Accounting II/Managerial Oklahoma City Community College

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Oklahoma City Community College

ACCT 2123 Accounting II/Managerial Oklahoma City Community College

1) The method that allocates costs in each cost pool using the same rate per unit is known
as the ________.
A) incremental cost-allocation method
B) reciprocal cost-allocation method
C) single-rate cost allocation method
D) dual-rate cost-allocation method
Diff: 1
Objective: 1
AACSB: Analytical thinking
2) The dual-rate cost-allocation method classifies costs in each cost pool into a ________.
A) budgeted-cost pool and an actual-cost pool
B) variable-cost pool and a fixed-cost pool
C) direct-cost pool and an indirect-cost pool
D) direct-cost pool and a reciprocal-cost pool
Diff: 1
Objective: 1
AACSB: Analytical thinking
3) The single-rate cost-allocation method may base the denominator choice on ________.
A) master-budget capacity utilization
B) fixed cost utilization
C) variable cost utilization
D) direct-cost utilization
Diff: 2
Objective: 1
AACSB: Analytical thinking
4) When using the dual-rate method, the fixed cost allocation is based on ________.
A) indirect usage
B) budgeted usage
C) incremental cost allocation
D) prime cost allocation
Diff: 1
Objective: 1
AACSB: Analytical thinking
5) Which of the following is an advantage of the single-rate method?
A) It is less costly to implement.
B) It classifies costs as fixed and variable costs.
C) It gives signals regarding how variable and fixed costs behave differently.
D) It helps the managers on short-run and long-run planning due to fixed cost allocation as
per budgeted usage.
Diff: 2
Objective: 1
AACSB: Analytical thinking
6) Which of the following is a disadvantage of single-rate method?
A) It is very costly to implement.
B) It may lead operating department managers to make sub-optimal decisions that are in
their own best interest.
C) It does not signal to department managers how variable costs and fixed costs behave
differently.
D) It requires managers to distinguish variable costs from fixed costs, which is often a
challenging task.
Diff: 2
Objective: 1
AACSB: Analytical thinking
7) Which of the following is an advantage of a dual-rate method?
A) It is the most widely used method in practice.
B) It is less costly to implement.
C) It avoids the expensive analysis for categorizing costs as either fixed or variable.
D) It allocates fixed cost as per the budgeted usage that helps in short and long-run
planning.
Diff: 2
Objective: 1
AACSB: Analytical thinking
8) Which of the following is a disadvantage of a dual-rate method?
A) It allocates fixed costs on the basis of budgeted long-run usage may tempt some
managers to underestimate their planned usage.
B) It may lead operating department managers to make sub-optimal decisions that are in
their own best interest.
C) It allocates fixed and variable-cost pool using the same cost-allocation base, which will
mislead managers in making decisions.
D) It does not guide department managers to make decisions that benefit both the
organization as a whole and each department.
Diff: 2
Objective: 1
AACSB: Analytical thinking
9) The advantage of using practical capacity to allocate costs ________.
A) is that it allows a downward supply spiral to develop
B) is that it focuses management’s attention on managing unused capacity
C) is that budgets are much easier to develop
D) is that it results in departments bearing a lower percentage of fixed costs
Answer: B
Diff: 2
Objective: 1
AACSB: Analytical thinking
10) The biggest advantage of using practical capacity to allocate costs is that it ________.
A) focuses the user’s division with the costs of overused capacity
B) never causes over or under-allocated overhead
C) burdens the user divisions with the costs of unused capacity
D) focuses management’s attention on unused capacity
Diff: 2
Objective: 1
AACSB: Analytical thinking
Budgeted costs of operating the copying facility
for 400,000 to 600,000 copies:
Fixed costs per year $60,000
Variable costs 3 cents (.03) per copy
Budgeted long-run usage in copies per year:
Marketing Department 120,000 copies
Operations Department 380,000 copies
Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Marketing Department was 80,000 copies and by the
Operations Department was 360,000 copies.
11) If a single-rate cost-allocation method is used, what amount of copying facility costs will
be budgeted for the Marketing Department?
A) $18,000
B) $3,600
C) $14,400
D) $16,800
Explanation: A) [(120,000/ (120,000 + 380,000)) × $60,000] + (120,000 × $0.03) =$18,000
Diff: 2
Objective: 1
AACSB: Application of knowledge
12) If a single-rate cost-allocation method is used, what amount of copying facility costs will
be allocated to the Marketing Department? Assume actual usage is used to allocate copying
costs.
A) $16,800
B) $18,000
C) $12,000
D) $9,600
Explanation: C) [(120,000) / (120,000 + 380,000)) × $60,000] + (120,000 × $0.03) =
$18,000
$18,000/120,000 copies = $0.15 per copy × 80,000 = $12,000
Diff: 3
Objective: 1
AACSB: Application of knowledge
13) If a dual-rate cost-allocation method is used, what amount of copying facility costs will
be budgeted for the Operations Department?
A) $57,000
B) $56,400
C) $60,490
D) $59,890
Explanation: A) [(380,000) / (120,000 + 380,000)) × $60,000] + (380,000 × $0.03) =
$57,000
Diff: 2
Objective: 1
AACSB: Application of knowledge
14) If a dual-rate cost-allocation method is used, what amount of copying facility costs will
be allocated to the Operations Department? Assume budgeted usage is used to allocate
fixed copying costs and actual usage is used to allocate variable copying costs.
A) $60,490
B) $59,890
C) $57,000
D) $56,400
Explanation: D) [(380,000) / (120,000 + 380,000)) × $60,000] + (360,000 × $0.03) =
56,400
Diff: 3
Objective: 1
AACSB: Application of knowledge
Answer the following questions using the information below:
The Speedjet Aircraft Corporation has a central materials laboratory. The laboratory has only
two users, the Large Plane Department and the Small Plane Department. The following data
apply to the coming budget year:
Budgeted costs of operating the materials laboratory
for 100,000 to 200,000 technician hours per year:
Fixed costs per year $8,000,000
Variable costs $70 per technician hour
Budgeted long-run usage in hours per year:
Large Plane Department 80,000 technician hours
Small Plane Department 70,000 technician hours
Budgeted amounts are used to calculate the allocation rates.
Actual usage for the year by the Large Plane Department was 70,000 technician hours and
by the Small Plane Department was 65,000 technician hours.
15) If a single-rate cost-allocation method is used, what is the allocation rate per hour used?
A) $97.33
B) $123.33
C) $146.67
D) $113.33
Explanation: B) Allocation rate per hour = ($8,000,000 + ($150,000 hours × $70))/ 150,000
hours = $123.33/ per hour used
Diff: 2
Objective: 1
AACSB: Application of knowledge
16) If a dual-rate cost-allocation method is used, what amount of materials laboratory costs
will be budgeted for the Large Plane Department?
A) $9,866,667
B) $8,226,667
C) $9,781,333
D) $9,881,333
Explanation: A) Budgeted materials laboratory costs for Large Plane Department =
[(80,000/ (80,000 +70,000)) × $8,000,000] + (80,000 × $70) = $9,866,667
Diff: 2
Objective: 1
AACSB: Application of knowledge
17) If a single-rate cost-allocation method is used, what amount of materials laboratory
costs will be allocated to the Large Plane Department? Assume actual usage is used to
allocate copying costs.
A) $8,166,666.67
B) $8,766,666.67
C) $8,433,333.33
D) $8,633,333.33
Explanation: D) ($8,000,000 + (150,000 hours × $70))/ 150,000 hours = $123.33/ per hour
used
Budgeted materials laboratory costs for Large Plane Department = $123.33 per hour ×
70,000 = $8,633,333.33
Diff: 3
Objective: 1
AACSB: Application of knowledge
18) If a dual-rate cost-allocation method is used, what amount of materials laboratory costs
will be allocated to the Large Plane Department? Assume budgeted usage is used to allocate
fixed materials laboratory costs and actual usage is used to allocate variable materials
laboratory costs.
A) $9,133,333
B) $9,166,667
C) $9,466,667
D) $9,666,667

Eplanation: B) Budgeted materials laboratory costs for Large Plane Department =
[(80,000/ (80,000 +70,000)) × $8,000,000] + (70,000 × $70) = $9,166,667
Diff: 3
Objective: 1
AACSB: Application of knowledge
19) If a dual-rate cost-allocation method is used, what amount of materials laboratory costs
will be budgeted for the Small Plane Department?
A) $10,575,000
B) $9,633,333
C) $8,433,333
D) $8,633,333
Explanation: D) Budgeted materials laboratory costs for Small Plane Department =
[(70,000/ (80,000 +70,000)) × $8,000,000] + (70,000 × $70) = $8,633,333
Diff: 2
Objective: 1
AACSB: Application of knowledge
20) If a dual-rate cost-allocation method is used, what amount of materials laboratory costs
will be allocated to the Small Plane Department? Assume budgeted usage is used to allocate
materials laboratory costs and actual usage is used to allocate variable materials laboratory
costs.
A) $8,225,000
B) $8,050,000
C) $8,483,333
D) $8,783,333
Explanation: B) Budgeted materials laboratory costs for Small Plane Department =
[(70,000/ (90,000 +70,000)) × $8,000,000] + (65,000 × $70) = $8,050,000
Diff: 3
Objective: 1
AACSB: Application of knowledge
Answer the following questions using the information below:
Illumination Corp operates one central plant that has two divisions, the Flashlight Division
and the Night Light Division. The following data apply to the coming budget year:
Budgeted costs of operating the plant for 2,000 to 3,000 hours:
Fixed operating costs per year $500,000
Variable operating costs $800 per hour
Budgeted long-run usage per year:
Flashlight Division 2,000 hours
Night Light Division 1000 hours
Practical capacity 4,000 hours
Assume that practical capacity is used to calculate the allocation rates.
Actual usage for the year by the Flashlight Division was 1,500 hours and by the Night Light
Division was 800 hours.
21) If a single-rate cost-allocation method is used, what amount of operating costs will be
budgeted for the Flashlight Division?
A) $1,850,000
B) $1,560,000
C) $1,740,000
D) $1,950,000
Explanation: A) Flashlight Division cost = [(2,000/4,000) × $500,000] + (2,000 × $800) =
$1,850,000
Diff: 2
Objective: 1
AACSB: Application of knowledge
22) If a single-rate cost-allocation method is used, what amount of cost will be allocated to
the Flashlight Division? Assume actual usage is used to allocate operating costs.
A) $1,247,500
B) $1,300,000
C) $1,487,500
D) $1,387,500
Explanation: D) Flashlight Division cost = [(2,000 / 4,000) × $500,000] + (2,000 × $800) =
$1,850,000
($1,850,000 / 2,000) × 1,500 = $1,387,500
Diff: 3
Objective: 1
AACSB: Application of knowledge
23) If a dual-rate cost-allocation method is used, what amount of operating costs will be
budgeted for the Night Light Division?
A) $890,000
B) $900,000
C) $925,000
D) $835,000
Explanation: C) Night Light Division cost = [(1,000 / 4,000) × $500,000] + (1,000 × $800) =
$925,000
Diff: 2
Objective: 1
AACSB: Application of knowledge
24) If a dual-rate cost-allocation method is used, what amount of cost will be allocated to the
Night Light Division? Assume budgeted usage is used to allocate fixed operating costs and
actual usage is used to allocate variable operating costs.
A) $810,000
B) $765,000
C) $790,000
D) $750,000
:  Night Light Division cost = [(1,000 / 4,000) × $500,000] + (800 × $800) =
$765,000
Diff: 3
Objective: 1
AACSB: Application of knowledge
25) The dual cost-allocation method classifies costs into two pools, a budgeted cost pool and
an actual cost pool.

Explanation: The dual cost-allocation method classifies costs into two pools, a variable cost
pool and a fixed cost pool.
Diff: 1
Objective: 1
AACSB: Analytical thinking

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ACCT 2123 Accounting II/Managerial Oklahoma City Community College

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