A company produces healing elements that go through two operations, casting and
ID: 2465523 • Letter: A
Question
A company produces healing elements that go through two operations, casting and assembling, before they are complete. Expected costs and activities for the two departments are shown below Given this information, the departmental overhead rate for the assembling department based on direct labor hours is $5 per direct labor hour. A company produces garden benches that go through two operations, operation 1A 1 and operation 2B2, before they are complete. Expected costs and activities for the two departments are shown departments have departmental overhead rates hosed on machine hours. Therefore, the overhead rates for department 1A1 and department 2B2 are the same. Activities causing overhead cost in an organization arc typically separated into four levels: (1) direct activities. (2) indirect activities. (3) batch level activities. and (4) facility level activities. True False Product design costs are an example of a unit level activity. True False Batch level costs vary with the number of units produced. True False A qualify-inspection cost is an example of unit-level costs. True False Plant wide overhead rates typically do a better job of matching each department's overhead costs to the products using the department's resources than do departmental overhead rates. True False Total variable costs change in proportion to changes in volume of activity. True False As the volume increases, fixed cost per unit of output remains constant. True False As the level of volume of activity increases, the variable cost per unit remains constant. True False A step-wise variable cost can be separated into a fixed component and a variable component. True FalseExplanation / Answer
23. True
Total overhead is $37500
Total Labor hours are 7500
Hence, 37500/7500 = $5 per labor hour
24. False
For Department 1A1,
Total Machine hours are 70000
Total overheads is $ 225400
Hence, $ 225400/70000 = $ 3.22 per machine hour
For Department 2B2,
Total machine hours are 60000
Total overheads is $ 250800
Hence, $ 250800/60000 = $ 4.18 per machine hour
Both overhead rates are different
25. False
Activities causing overhead cost are typically separated by Cost drivers, it is very difficult to identify the direct or indirect overhead.
26. False, The product design cost is product level activity
27. True, Activity based costing is the method of costing where all the costs are assigned to all products and services according to the actual consumption of resources by them.
28. False, for Batch level cost, it does not matter how many units are produced in the batch.
29. False, quality inspection cost is example of batch level cost.
30. False, Plantwide overhead rates are more accurate for single product manufacturers, whereas business with multiple departments and manufacturing section, departmental overhead rates are more accurate.
31. False, total variable cost varies with changes in units produced.
32. True, Variable cost per unit increases proportionately with the increase in volume in activities.
33. False, as the volume increases, the fixed cost per unit decreases.
34. False, as the level of activities increases, the variable cost per unit does not increases.
35. True, Stepwise variable cost is also semi fixed cost. It can be separated into fixed component and variable component.
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