hours in the assembly department to allocate overhead costs to Work-in-

Process. During the current year, the company incurred $50,000 of

overhead costs in the fabrication department and $75,000 of overhead
costs in the assembly department. The company also reported the
following results in the production of its standard and deluxe bicycles.  
 
Standard Deluxe
Machine hours (fabrication) 1,000 4,000
Direct labor hours (assembly) 4,000 6,000
 
Using a two-stage cost allocation, how much overhead should be allocated
to the production of deluxe bicycles in the current year?
Multiple Choice

 $40,000

 $75,000

 $85,000Correct

 $50,000

None of these.

If the Beginning Balance (BB) equals the Ending Balance (EB), then the Transfers
In (TI) equal the Transfers Out (TO).
The term "product" often refers to an organization's output and includes both tangible items (e.g., chair, desk,
etc.) and intangible items (e.g., services provided).

True

The only purpose of cost information is to determine the individual product cost on a per unit basis in order to
value inventory.

False

In general, indirect costs are allocated, while direct costs are assigned.

True

Overestimating a period's allocation base will understate the predetermined overhead rate.

True

Solanki Corporation had a beginning inventory in Work-in-Process of $42,000. During

the current year, the company incurred the following manufacturing costs: direct
materials, $120,000; direct labor, $140,000; and overhead, $100,000. The company's
ending Work-in-Process inventory was $27,000. What is the cost transferred to the
finished goods inventory?

Multiple Choice

 None of these.

 $360,000

 $390,000

 $385,000

 $375,000
The selection of an appropriate cost allocation base is more important for single-stage cost allocation systems
than for two-stage cost allocation systems.

False

one of the most common decisions facing managers is determining the price at which to sell one of their
products or to provide their services.

True

The Transfers In (TI) costs in the basic cost flow model of a manufacturing firm are direct materials, direct
labor, and manufacturing overhead.

True

Which of the following is a principle underlying the design of cost management

systems?

Multiple Choice

 Costing systems may differ in the basic flow of costs from accounts to
products.

 All costing systems accumulate costs in the same manner.

  The costing system should be designed so that its benefits exceed its
costs.Correct

Only the first and third statements above.

 All of these.
Direct labor cost is used to allocate manufacturing overhead to Work-in-Process. The
budgeted overhead is $600,000 and the company expects to use 5,000 direct labor hours
to make 20,000 units of product. If the average wage rate is $20 per hour, what is the
predetermined rate used to allocate overhead to Work-in-Process?

Multiple Choice

 None of these.

 300%

 150%

 600%Correct
 450%
Which of the following manufacturing costs are allocated to products indirectly using an
allocation base?

Multiple Choice
 OverheadCorrect

"Direct materials" and "Direct labor" only.

 All of these.

 Direct materials
 Direct labor

The two-stage cost allocation process allocates costs to multiple cost pools and
then to individual cost objects using different allocation bases.
Group startsTrue or False

True

The Nicto Company incurred the following costs to produce 5,000 chairs in February:
direct materials, $20,000; direct labor, $30,000; and manufacturing overhead, $25,000.
What was the cost assigned to each chair produced?

Multiple Choice

 $10.00

 $20.00

 $25.00

 $15.00Correct
 None of these.
What type of accounting system would most likely be used when identical products are
produced through uniform production steps?

Multiple Choice

 None of these.

 Job order costing

 Batch process costing

 Process costingCorrect
 Individual product costing
Process costing systems do not separate and record direct material and direct labor costs for each individual unit
of product.

True

Ridgeway Corporation uses direct labor hours to allocate overhead to Work-in-Process.

The company's budgeted overhead is $420,000 and it expects to produce 40,000 vases
this period. It takes 2 direct labor hours to produce one vase. If 60,000 direct labor hours
are actually worked during the period, how much overhead should be allocated to the
Work-in-Process inventory?

Multiple Choice

 $630,000

 $210,000

 $420,000

 None of these.

 $315,000
The Schuler Insurance Company processed 60,000 claims in March. It takes an average
of 6 hours to process each claim. The company incurred $240,000 of labor and $840,000
of overhead costs during March. What was the cost to process each claim?

Multiple Choice

 $16.00

 $18.00Correct

 None of these.

 $4.00

 $12.00
Pasqua Corporation budgeted manufacturing overhead to be $1,400,000 in the coming
year. The company uses direct labor hours to allocate overhead to Work-in-Process. The
estimated hours for the year total 70,000 direct labor hours. If 72,000 direct labor hours
were actually worked during the period, how much overhead was allocated to the Work-
in-Process inventory?

Multiple Choice
 $1,440,000Correct

 $1,520,000

 None of these.

 $1,200,000

 $1,400,000