1. The traditional approach to cost allocation:

a Tends to over-cost high volume core products

b Usually requires more cost pools than ABC

c Produces more accurate costs than other allocation methods

2. VelCraft allocates costs from its payroll dept and the maintenance dept to its production depts. Using the direct method of allocation. Payroll dept costs are allocated based on # of employees in dept and maintenance dept costs are allocated based on number of sq feet that production dept occupies within the factory.

Dept	Costs	# of employees	# of sq feet
Payroll	150,000	2	2,000
Maintenance	220,000	8	64,000
Molding		75	100,000
Finishing		50	60,000
Packaging		25	40,000

a 23,438

b 73,333

c 25,000

3. Which of the following would not occur when the direct method is used in manufacturing company?

a Personnel dept costs are allocated to maint dept.

b Maint dept costs are allocated to mixing dept

c Security dept costs are allocated to packaging dept

4. Which of the following statements is true concerning lump-sum allocations of service dept costs?

a They make fixed costs appear to be variable to the manager receiving the allocation

b They are not affected by the activity level in the dept receiving the allocation

c They do not make fixed costs appear to be variable to the manager receiving the allocation and are affected by the activity level in the dept receiving the allocation

5. Which of the following is least likely to be a cost objective?

a Salaries such as those in the accounting and personnel dept

b Individual products such as spades and mowers

c Depts. Such as assembly and finishing

6. Happy foods uses ABC costing. Which of the following most likely to be a cost driver for the cost of cashiering at a convenience store?

a Cost of items purchased

b Number of customers processed

c Number of employees handling the job

7. Teal sports offers 2 different types of water sport activities-sailfish rentals and banana boat rides. The company has two different activities-lifeguarding and maintenance-that provide input into its cost objectives. Data estimated on overhead for the year:

Activity	Driver	Estimated overhead costs	Sailfish rental estimate	Boat rides estimate
Lifeguarding	# of labor hours	63,940	3,280 hrs	2,280 hrs
Maintenance	Hours or riding time	88,000	1,500 hrs	2,500 hrs

a $42.20

b 73.24

c 33.84