UDayton ACC 208 Block Exam 2 Study Guide Questions And Answers With Latest Updates

Arbot Co. manufactures appliances at three manufacturing facilities in the United States. Each location has a plant manager who oversees the manufacturing process for that location. Segmented income statements are prepared for each plant and for each product manufactured in the plant. The salary of each plant manager is a: - Answer-traceable fixed cost to the plant and a common fixed cost for the individual product lines made in the plant SPS Products has two divisions—Catalog Sales and Online Sales. For the last quarter the Catalog Sales segment margin was ($5,000). Online sales were $100,000. Online Sales contribution margin was $60,000, and its segment margin was $40,000. If Catalog Sales are discontinued, it is estimated that online sales will increase by 10%. Discontinuing Catalog Sales should increase company profits by: - Answer-($100,000 x 10% x $60,000/$100,000) = $6,000 $6,000 +$5,000 = $11,000 A traceable fixed cost: - Answer-a fixed cost that is incurred because of the existence of the segment The general guideline is to treat as traceable only those costs - Answer-that would disappear over time if the segment was discontinued Segment contribution margin equals segment revenue minus - Answer-the variable expenses for the segment Using absorption costing for segmented income statements can lead to: - Answer-under-costing of segments omission of upstream and downstream costs Costs that can be traced directly to a segment: - Answer-should not be allocated to other segments Incorrectly or arbitrarily assigning common costs to segments: - Answer-could reduce the overall profits of the company holds managers responsible for costs they cannot controldistorts the profitability of segments Which of the following is NOT a common mistake made in preparing segmented income statements? - Answer-Computing contribution margin instead of gross margin GAAP and IFRS rules: - Answer-create problems in reconciling internal and external reports require that the same method be used for both internal and external segment reporting require segmented financial data be included in annual reports the predetermined overhead rate per direct labor dollar for Dept. A is: Est. Manufacturing Overhead: $338,000 Est. Direct Labor Hours: 130,000 - Answer-POHR = Est. Manufacturing OH / Est. DLH = $338,000 / 130,000 = $2.60 per DLH When a company creates overhead rates based on the actions it performs, it is employing an approach called - Answer-activity-based costing Allocation bases that do not drive overhead costs: - Answer-can cause product costs to become distorted Underapplied or overapplied overhead is the: - Answer-difference between overhead applied to work in process and actual overhead (Applied - Actual) The adjustment for underapplied overhead: - Answer-increases cost of goods sold and decreases net income When all of a company's job cost sheets are viewed collectively, they form what is known as a - Answersubsidiary ledgerTypical cost drivers include: - Answer-- computer time - flight-hours - machine-hours In a system that uses multiple predetermined overhead rates, overhead is applied: - Answer-in each department as jobs proceed through the department Which of the following would not be considered a direct labor cost in a service firm that uses job-order costing? - Answer-The salary of the manager at a hair salon (would be considered OH) Cost-plus pricing occurs when: - Answer-a markup percentage is added to the cost of a job An allocation base should be: - Answer-cost driver (T/F): Under-applied or over-applied overhead occurs because overhead is applied to jobs using a predetermined rate based on estimates of costs and activity levels. - Answer-True A cost driver is: - Answer-a factor that causes overhead costs to occur Which of the following is only true in a multiple predetermined overhead rate system? - Answer-each department has its own POHR Which of the following would not be considered a job in a service firm that uses job-order costing? - Answer-the tax department of an accounting firm A multiple predetermined overhead rate system is more accurate than a plantwide overhead rate system because it: - Answer-reflects differences in how overhead costs are incurred within departments Which of the following would be considered direct materials in a service firm that uses job-order costing? - Answer-paperwork at a law firm(know difference btwn materials and assets) Compared to a plantwide overhead rate system, a multiple predetermined overhead rate system is: - Answer-more complex, but more accurate traceable fixed cost - Answer-A fixed cost that is incurred because of the existence of a particular business segment and that would be eliminated if the segment were eliminated (fixed cost for the store) common fixed cost - Answer-A fixed cost that supports more than one business segment, but is not traceable in whole or in part to any one of the business segments. (fixed cost for each product line sold) absorption costing - Answer-A costing method that includes all manufacturing costs—direct materials, direct labor, and both variable and fixed manufacturing overhead—in unit product costs. Discontinuing a profitable segment results in: - Answer-the loss of the segment's revenues a reduction in the overall profits of the company Common mistakes made by companies when assigning costs to segments include: - Answer-omitting costs that should be included inappropriately assigning traceable fixed costs arbitrarily allocating common fixed costs In activity-based costing, non-manufacturing and manufacturing costs are assigned to products on a - Answer-cause and effect basis In traditional costing, ______ costs are assigned to products. - Answer-manufacturing A characteristic essential for successful implementation of ABC is: - Answer-a link to how people are evaluated and rewardedPlace the steps for implementing ABC in order: - Answer-1. define activities, activity cost pools, and activity measure. 2. assign overhead costs to activity cost pools. 3. calculate activity rate 4. assign overhead costs to cost objects 5. prepare management reports. Organization-sustaining activities include: - Answer-heating a factory setting up a computer network An activity-based costing system: - Answer-may exclude some manufacturing costs from product costs uses numerous overhead cost pools Which costing method assigns only manufacturing costs to products? - Answer-traditional absorption costing Why is top management support needed when ABC is implemented? - Answer-Leadership is instrumental in motivating employees to embrace ABC. What type of activities are carried out regardless of which customers are served, which products are produced, how many batches are run or how many units are produced? - Answer-organization-sustaining Activity-based costing uses numerous - Answer-overhead cost pools In ABC, any event that causes consumption of overhead resources is an - Answer-activity Power to run production equipment would be a - Answer-unit-level activityIdentifying the activities that will form the foundation for the system: - Answer-often involves interviewing employees can be time-consuming involves a great deal of judgment In traditional costing, - Answer-manufacturing costs are assigned to products