Mansfield Corporation estimates its manufacturing overhead costs to be $160,000 and its direct labor costs to be $320,000 for 2007. The actual manufacturing labor costs were $80,000 for job 1, $120,000 for job 2 and $160,000 for job 3 during 2007. Manufacturing overhead is applied to jobs on the basis of direct labor costs using a predetermined overhead rate. The actual manufacturing overhead cost for the year was $172,000. The amount of the manufacturing overhead variance during 2007 was: $ 8,000 Overapplied $12,000 Overapplied $12,000 Underapplied $ 8,000 Underapplied Question 2 10 points Save Stoughton Furniture uses a job-order cost system. The following debits (credits) appeared in the Work-in-Process inventory account for July 2007: Stoughton applies overhead to production at a predetermined rate of 80% based on direct labor cost. Job 80, the only job still in process at the end of July, has been charged with direct labor of $20,000. The amount of direct materials charged to job 80 was: $60,000 $44,000 $16,000 $ 8,000 Question 3 10 points Save Setup labor costs required for setting up equipment for flexible production facilities for manufacturing would be an example of: Unit-level activity Batch-level activity Product-level activity Customer-level activity Question 4 10 points Save Ferguson Molding Company produces custom bottle caps and jar covers for large cosmetic companies. Each customer owns the custom-made molds that are used for the caps and jar covers, so caps are produced only to customer order. Each order requires the setting of molds in molding machines. Two full time mechanics, whose combined total annual salary and benefits are $160,000 per year, are employed setting up and breaking down the molding machines. An order consists of anywhere from 50,000 to 500,000 units. 80 orders were received during the year 2008 for individual custom production runs. The total number of units produced was 8 million. The machine operator's labor to operate the molding machine to produce a run of custom jar covers is an example of: Facility-level activity Product-level activity Batch-level activity Customer-level activity Question 5 10 points Save The Dedham Cooperative Bank is considering either a bank wide overhead rate or departmental overhead rates to allocate $2,000,000 of indirect costs. The bank wide rate would be based on either direct labor hours or the number of loans processed. The departmental rates would be based on direct labor time for Consumer Loans and a dual rate based on direct labor time and the number of loans processed for Commercial Loans. The following information was gathered for the upcoming period: Management estimates that it now costs $2,000 to analyze and close a commercial loan. This amount has been included in the $2,000,000 of indirect costs. If the remaining indirect costs are allocated based on the number of loans processed, how much of the indirect costs should be allocated to the Consumer Department? $960,000 $1,040,000 $1,600,000 $400,000 Question 6 10 points Save Which of the following indicates that a company may benefit from an Activity-Based Costing system? Standard high-volume goods and services show significant profits Indirect costs are insignificant in proportion to direct costs The company loses relatively high priced bids Goods and services are complex and may require many different processes or inputs Question 7 10 points Save Parkhurst Company manufactures and distributes two types of back braces, adult braces, and pediatric braces to two types of customers, hospitals and physicians. Information on the customers and products is presented below. (Assume operating costs are allocated based upon sales) If Parkhurst Company desires a return on sales of 25%, costs must be reduced by: $ 1,000,000 $ 1,650,000 $ 22,350,000 $ 27,750,000 Question 8 10 points Save Calumet Inc is investigating its phone ordering costs and hoping to trace those costs to each of its three customer types, individuals, book stores and internet sales. Calumet uses in-house phone service for regular hours questions and orders and an outside source for weekend evening phone service. If Calumet believes the contribution margin on Internet customers is insufficient to cover the phone service costs and other related customer costs. An appropriate response would be: Raise the cost of books sold on the Internet "Charge" internet customers for phone service by replacing the toll free number shown on the web page with a toll call number Use a separate phone numbers for Internet customers and increase the hold time for such customers to reduce the overall phone service costs All of the above Question 9 10 points Save The predetermined overhead rate for manufacturing overhead for Mansfield Corporation was $8.00 per direct labor hour. The estimated labor rate was $10.00 per hour. If the estimated direct labor cost was $150,000, what was the estimated manufacturing overhead? $ 93,750 $ 75,000 $120,000 $ 15,000 Question 10 10 points Save Which of the following statements regarding traditional cost accounting systems is False? Products are often over or under costed in traditional cost accounting systems Most traditional cost accounting systems do not trace individual costs to products The advantage of traditional cost accounting systems is their simplicity Traditional cost accounting systems can be sufficient to meet managers' cost information needs as long as the level of indirect costs is relatively high compared to the level of direct costs