14. A chair manufacture maker customs chairs using hand tools, wood, glue, and varnish. Which of the following is true? A) The costs of wood and glue would be treated as direct costs. B) Wood, glue, and varnish would all be direct materials. C) Wood would be accounted for as a direct cost, and glue and varnish as indirect cost. D) The concepts of direct and indirect costs are not applicable here. 15. Overhead costs A) can be traced to cost objects in a cost-effective manner. B) cannot be traced to cost objects cost effectively but can be allocated to cost objects. C) primarily are variable costs. D) are not incurred by most companies. 16. Ransom Manufacturing Company operates its three production departments within a single facility. Each department produces its own productions and maintains its own production equipment. Although they share a common facility, each department is overseen by separate supervisor. Which one of the following costs is a direct cost of each department? A) Lease payment facility B) Depreciation of the facility C) Plant manager salary D) Cost of goods sold 17. The KnitWitt Corporation manufactures knitted shawls and scarves. The company expects to incur $1,500,000 in overhead cost during 2010. The following budget information is for 2010: Shawls Scarves Total Number of units expected to be produced 50,000 100,000 150,000 Direct labor hours 250,000 800,000 1,050,000 Machine hours 100,000 80,000 180,000 If the company uses direct labor hours as the cost driver, what amount of overhead cost will be allocated to Shawls? A) $357,500 B) $750,000 C) $470,000 D) $833,000

14. A chair manufacture maker customs chairs using hand tools, wood, glue, and varnish. Which of the following is true? A) The costs of wood and glue would be treated as direct costs. B) Wood, glue, and varnish would all be direct materials. C) Wood would be accounted for as a direct cost, and glue and varnish as a direct cost. D) The concepts of direct and indirect costs are not applicable here. 15. Overhead costs A) can be traced to cost objects in a cost-effective manner. B) cannot be traced to cost objects cost effectively but can be allocated to cost objects. C) primarily are variable costs. D) are not incurred by most companies. 16. Ransom Manufacturing Company operates its three production departments within a single facility. Each department produces its own productions and maintains its own production equipment. Although they share a common facility, each department is overseen by separate supervisor. Which one of the following costs is a direct cost of each department? A) Lease payment facility B) Depreciation of the facility C) Plant manager salary D) Cost of goods sold 17. The KnitWitt Corporation manufactures knitted shawls and scarves. The company expects to incur $1,500,000 in overhead cost during 2010. The following budget information is for 2010: Number of units expected to be produced Direct labor hours Machine hours Shawls 50,000 Scarves 100,000 Total 150,000 250,000 100,000 800,000 80,000 1,050,000 180,000 If the company uses direct labor hours as the cost driver, what amount of overhead cost will be allocated to Shawls? A) $357,500 B) $750,000 C) $470,000 D) $833,000