Overhead Costs

1. Using activity-based systems, the stage of the management cycle that identifies actions that will reduce the full product or service cost is

a. planning.

b. executing.

c. reviewing.

d. reporting.

2. Lasso Corp. budgeted $250,000 of overhead cost for 2001. Actual overhead costs for the year were $240,000. Lasso's plant-wide allocation base, machine hours, was budgeted at 50,000 hours. Actual machine hours were 40,000. Budgeted units to be produced are 100,000 units. Lasso's plant-wide factory overhead rate for 2001 is:

a. $1.25 per unit

b. $6.00 per machine hour

c. $6.25 per machine hour

d. $5.00 per machine hour

3. Hoskins Co. uses a plant-wide factory overhead rate based on direct labor hours. Overhead costs would be overcharged to which of the following departments?

a. A labor-intensive department.

b. A capital-intensive department.

c. A material-intensive department.

d. None of the above.

4. Using multiple department factory overhead rates instead of a single plant-wide factory overhead rate:

a. results in more accurate product costs.

b. results in distorted product costs.

c. is simpler and less costly.

d. applies overhead costs to all departments equally.

5. Using a plant-wide factory overhead rate distorts product cost when:

a. products require different ratios of allocation-base usage in each production department.

b. significant differences exist in the factory overhead rates used across different production departments.

c. both A and B exist

d. either A or B exist

6. Zinn Co. uses 3 machine hours and 1 direct labor hour to Produce Product X. It uses 4 machine hours and 8 direct labor hours to produce Product Y. Zinn's assembly and finishing Departments have factory overhead rates of $240 per machine hour and $160 per direct labor hour, respectively. How much overhead cost will be charged to the two products?

a. Product X - $240; Product Y = $160.

b. Product X - $400; Product Y = $400.

c. Product X - $880; Product Y = $2,240.

d. Product X - $720; Product Y = $1,280.

(See attached file for full problem description)