Question

Question 36

True or false: With advancements in technology, more and more costs that once were classified as "indirect" can now be economically traced and thus become "direct"

True

False

Question 37

True or false: "Cost of Goods Sold" divided by the units sold is an accurate estimate of variable costs per unit in CVP analysis.

True

False

question: 38

A restaurant has a variety of costs including utilities, table napkins, potatoes & building rent. Which of these costs would most likely be classified as "fixed/indirect"

in relation to the cost of a chicken dinner

a) utilities

b) rent

c) napkins

d) potatoes

Question: Company "Q" produces 3 products referred to as "One", "Two" & "Three", who last month used the following, respectfully: $1,000, $2,000 and $3,000 worth of production labour; 100, 100 and 200 hours of machining hours; 20, 60 and 100 hours of inspection services. Last month indirect costs totaled as follows: inspection costs totaled $4,500, supervision costs totaled $24,000, and machine maintenance costs totaled $8.000.

Last month indirect costs for product lines "One", "Two" and "Three" totaled respectfully:

a) $18,500, $11,500, $6,500

b) $11,500, $18.500, $6,500

c) $6,500. $11.500, 18,500

d) $12.167 for each product line

Answer 1

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With advancements in technology, more and more costs that once were classified as "indirect" can now be economically traced and thus become "direct"

False. Some costs will always be untraceable and indirect.

"Cost of Goods Sold" divided by the units sold is an accurate estimate of variable costs per unit in CVP analysis.

False. Total variable costs divided by the units sold is an accurate estimate of variable costs per unit in CVP analysis.

Answer 38

Utilities and rent.

Answer 39		D				E	F=D/E
Activity cost pool	Activity Measure	Total cost	One	Two	Three	Activity usage	ABC rates
Inspection costs	Hours of inspection	4,500.00	20.00	60.00	100.00	180.00	25.00
Supervision costs	Direct labor costs	24,000.00	1,000.00	2,000.00	3,000.00	6,000.00	4.00
Machine maintenance cost	Machine hours	8,000.00	100.00	100.00	200.00	400.00	20.00
Total Cost assigned		36,500.00

One		See F	G	H=F*G
Activity cost pool	Activity Measure	ABC Rates	Activity used	Cost assigned
Inspection costs	Hours of inspection	25.00	20.00	500.00
Supervision costs	Direct labor costs	4.00	1,000.00	4,000.00
Machine maintenance cost	Machine hours	20.00	100.00	2,000.00
Total Cost assigned				6,500.00
Two		See F	I	J=F*I
Activity cost pool	Activity Measure	ABC Rates	Activity used	Cost assigned
Inspection costs	Hours of inspection	25.00	60.00	1,500.00
Supervision costs	Direct labor costs	4.00	2,000.00	8,000.00
Machine maintenance cost	Machine hours	20.00	100.00	2,000.00
Total Cost assigned				11,500.00
Three		See F	I	J=F*I
Activity cost pool	Activity Measure	ABC Rates	Activity used	Cost assigned
Inspection costs	Hours of inspection	25.00	100.00	2,500.00
Supervision costs	Direct labor costs	4.00	3,000.00	12,000.00
Machine maintenance cost	Machine hours	20.00	200.00	4,000.00
Total Cost assigned				18,500.00
So answer is option c.