Multiple Choice Questions 1. A death spiral: a. happens when managers try to set higher prices to recover increasing reported costs. b. occurs when capacity is reduced. c. may happen when the market share is gaining. d. has to do with costs other than overhead. 2. In a two-stage cost allocation system: a. the first stage involves assigning overhead costs to cost pools. b. the cost pools may be departments. c. each cost pool requires an allocation rate. d. All of the above. 3. One of the cost pools at Toylands Store is the Personnel department that provides recruiting and training for Sales and Administrative departments and has an estimated overhead of $45,000. Sales department has 12 employees and Administrative department has 3. How much of the overhead cost of the Personnel department should be allocated to the Sales department? a. $9,000 b. $22,000 c. $36,000 d. $38,000 Use the following information to answer questions 4 through 7: The accountant of Toylands Manufacturing collected the following information: Activity Overhead costs Cost driver Machining Dept. Setup $200,000 Number of setups Machining 700,000 Machine hours Packaging Dept. Assembly 300,000 Direct labor hours Inspection 180,000 Number of inspections Product X1 Product X2 200 50 20,000 15,000 40,000 60,000 120 60 4. If Toylands Manufacturing uses a plantwide rate based on direct labor hours to allocate overhead costs, how much is product X1's share of overhead? a. $324,000 b. $416,000 c. $638,000 d. $552,000