Cost Allocation Techniques Paper 7


The most important criterion in accurate cost allocations is


A capital-intensive manufacturer of large construction equipment has a manufacturing process that relies heavily on specialized machinery. This machinery is run by a relatively small number of highly skilled laborers. In determining its predetermined overhead rate, what allocation base should the company use?


A company has budgeted overhead costs at its normal capacity based on machine hours. Variable factory overhead is $180,000, and fixed factory overhead is $560,000. If the firm operates at a slightly lower rate of activity, it will expect total


A manufacturing process normally produces defective units equal to 1% of production. Defective units are subsequently reworked and sold. The cost of reworking these defective units should be charged to


During the current accounting period, a manufacturing company purchased $70,000 of raw materials, of which $50,000 of direct materials and $5,000 of indirect materials were used in production. The company also incurred $45,000 of total labor costs and $20,000 of other manufacturing overhead costs. An analysis of the work-in-process control account revealed $40,000 of direct labor costs. Based upon the above information, what is the total amount accumulated in the overhead control account?


Wagner Corporation applies factory overhead based upon machine hours. At the beginning of the year, Wagner budgeted factory overhead at $250,000 and estimated that 100,000 machine hours would be used to make 50,000 units of product. During the year, the company produced 48,000 units using 97,000 machine hours. Actual overhead for the year was $252,000. Under a standard cost system, the amount of factory overhead applied during the year was


"From the following budgeted data, calculate the budgeted indirect cost rate that would be used in a normal costing system."
Total direct labor hours $250,000
Total indirect labor hours 50,000
Direct costs 10,000,000
Total indirect labor related costs 5,000,000
Total indirect nonlabor related costs 7,000,000


"Baldwin Printing Company uses a job order costing system and applies overhead based on machine hours. A total of 150,000 machine hours have been budgeted for the year. During the year, an order for 1,000 units was completed and incurred the following:"
Direct material costs $1,000
Direct labor costs 1,500
Actual overhead 1,980
Machine hours 450
"The accountant calculated the inventory cost of this order to be $4.30 per unit. The annual budgeted overhead in dollars was"


Patterson Corporation expects to incur $70,000 of factory overhead and $60,000 of general and administrative costs next year. Direct labor costs at $5 per hour are expected to total $50,000. If factory overhead is to be applied per direct labor hour, how much overhead will be applied to a job incurring 20 hours of direct labor?


In allocating factory service department costs to producing departments, which one of the following items would most likely be used as an activity base?


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