Which of the following statements is true?1. Departmental overhead rates will correctly assign overhead costs in situations where acompany has a range of products that differ in volume, lot size, or complexity ofproduction.2. When a company implements activity-based costing, manufacturing overhead cost isoften shifted from low volume products to high volume products, with a higher unit costresulting for the high volume products.3. Organization-sustaining activities are carried out regardless of which customers areserved, which products are produced, how many batches are run, or how many units aremade.

FalseWhen allocating overhead expenses to goods, the departmental overhead rates can occasionally…

Answered: Which of the following statements is…

Business

Accounting

Which of the following statements is true?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter7: Allocating Costs Of Support Departments And Joint Products

Section: Chapter Questions

Problem 29E: A CPA would recommend changing from plantwide overhead rate application to departmental rates under...

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Question

Which of the following statements is true?
1. Departmental overhead rates will correctly assign overhead costs in situations where a
company has a range of products that differ in volume, lot size, or complexity of
production.
2. When a company implements activity-based costing, manufacturing overhead cost is
often shifted from low volume products to high volume products, with a higher unit cost
resulting for the high volume products.
3. Organization-sustaining activities are carried out regardless of which customers are
served, which products are produced, how many batches are run, or how many units are
made.

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Activity-based costing systems: A. use a single predetermined overhead rate based on machine hours instead of on direct labor B. frequently increase the overhead allocation to at least one product while decreasing the overhead allocation to at least one other product C. limit the number of cost pools D. always result in an increase of at least one products selling price
From the choices presented in parentheses, choose the appropriate term for completing each of the following sentences: a. A product, sales territory, department, or activity to which costs are traced is called a (direct cost, cost object). b. Advertising costs are usually viewed as (period, product) costs. c. Factory overhead costs combined with direct labor costs are called (prime, conversion) costs. d. Feedback is often used to (improve, direct) operations. e. A sacrifice made to obtain some benefit is a (cost, expense). f. The balance sheet of a manufacturer would include an account for (cost of goods sold, work in process inventory). g. The implementation of automatic, robotic factory equipment normally (increases, decreases) the direct labor component of product costs.
Which is not a step In activity-based costing? A. identify the activities performed by the organization B. identify the cost driver(s) associated with each activity C. compute a cost rate per production D. assign costs to products by multiplying the cost driver rate by the volume of the cost driver units consumed by the product
Classify the following cost drivers as structural, executional, or operational. a. Number of plants b. Number of moves c. Degree of employee involvement d. Capacity utilization e. Number of product lines f. Number of distribution channels g. Engineering hours h. Direct labor hours i. Scope j. Product configuration k. Quality management approach l. Number of receiving orders m. Number of defective units n. Employee experience o. Types of process technologies p. Number of purchase orders q. Type and efficiency of layout r. Scale s. Number of functional departments t. Number of planning meetings
Under what circumstances might the activity-based costing method provide more accurate product costs than the multiple production department factory overhead rate method?
Which is not a task typically associated with ABC systems? A. calculating the overhead application rate for each cost pool B. applying a single cost rate C. identifying a cost driver D. more correctly allocating overhead costs
Happy Trails has this information for its manufacturing: Â Its income statement under absorption costing is: Prepare an income statement with variable costing and a reconciliation statement between both methods.
Refer to the data in Exercise 7.22. The company has decided to simplify its method of allocating support service costs by switching to the direct method. Required: 1. Allocate the costs of the support departments to the producing departments using the direct method. (Round allocation ratios to four significant digits. Round allocated costs to the nearest dollar.) 2. Using direct labor hours, compute departmental overhead rates. (Round to the nearest cent.)
A company has traditionally allocated its overhead based on machine hours but collected this information to change to activity based costing: A. How much overhead would be assigned to each unit under the traditional allocation method? B. How much overhead would be assigned to each unit under activity-based costing?
Lean manufacturing uses value streams to produce a family of products that require the same manufacturing sequence. Value-stream costing is an approach often used to determine the unit product costs in a lean manufacturing environment. Which of the following best describes how unit costs are calculated using value-stream costing? a. Value stream costs divided by units shipped b. Value stream costs divided by units produced c. (Total prime costs + overhead costs assigned to the value stream using a plantwide rate) divided by units produced d. Activity-based costing assignments within the value stream
Which is not a step in analyzing the cost driver for manufacturing overhead? A. Identify the cost B. identify non-value-added costs C. analyze the effect on manufacturing overhead D. identify the correlation between the potential driver and manufacturing overhead
Explain why service companies use different activity bases than manufacturing companies to classify costs as fixed or variable.