Multiple Choice

1.Aztec Builders allocates manufacturing overhead to jobs based on machine hours. The company has the following estimated costs for the upcoming year:

Direct materials used

$25,000

Direct labour costs

$62,000

Salary of factory supervisor

$41,000

Advertising expense

$33,000

Heating and lighting costs for factory

$21,000

Depreciation on factory equipment

$9,000

Sales commissions

$8,000

The firm estimates that 1,800 direct labour hours will be worked in the upcoming year, while 2,000 machine hours will be used during the year. The predetermined indirect allocation rate per machine hour is closest to

a.$56.

b.$36.

c.$100.

d.$15.

e.$40.

2)Blockbuster Entertainment manufactures digital video equipment. For each unit $1,475 of direct material is used and there is $1,500 of direct manufacturing labour at $30 per hour. Manufacturing overhead is applied at $35 per direct manufacturing labour hour. Calculate the cost of each unit.

a.$2,975

b.$4,025

c.$1,750

d.$3,150

e.$4,725

3)In an activity-cost pool

a.a measure of the activity performed serves as the cost allocation base.

b.the costs have a cause-and-effect relationship with the cost-allocation base for that activity.

c.the cost pools are homogeneous over time.

d.costs in a cost pool can always be traced directly to products.

e.each pool pertains to a narrow and focused set of costs.