FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 17: Activity-Based Costing and Analysis

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 31

Short Answer

Review LaterAdd Note

Review Later

The ________________________ is the target of the cost assignment.

Correct Answer

verified

Show Answer

Question 32

True/False

Review LaterAdd Note

Review Later

The cost to heat a manufacturing facility can be directly linked to the number of units produced.

A) True
B) False

Correct Answer

verified

Show Answer

Question 33

True/False

Review LaterAdd Note

Distorted product cost information can result in poor decisions.

What are the main advantages of traditional volume-based allocation methods compared to activity-based costing?

Multiple cost pools are used when allocating overhead using the plantwide overhead rate method.

Aztec Industries produces bread which goes through two operations, mixing and baking, before it is ready to be packaged. Next year's expected costs and activities are shown below. -Compute Aztec's departmental overhead rate for the baking department based on machine hours.

Base Runner, Inc. manufactures baseball bats which go through two operations, cutting and sanding, before they are complete. Expected costs and activities for the two departments are shown below. $\begin{array} { | l | c | c | } \hline & \text { Cutting } & \text { Sanding } \\\hline \text { Direct labor hours } & 50,000 \mathrm { DLH } & 5,000 \mathrm { DLH } \\\hline \text { Machine hours } & 25,000 \mathrm { MH } & 50,000 \mathrm { MH } \\\hline \text { Overhead costs } & \$ 50,000 & \$ 37,500 \\\hline\end{array}$ (a.) Compute a departmental overhead rate for the cutting department based on machine hours. (b.) Compute a departmental overhead rate for the sanding department based on machine hours.

Facility level costs are not traceable to individual product lines, batches or units.

A company has two products: A1 and B2. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools. Annual production and sales level of Product A1 is 8,480 units, and the annual production and sales level of Product B2 is 22,310 units. What is the approximate overhead cost per unit of Product A1 under activity-based costing?

________________________ focuses on activities and the cost of carrying out activities.

Case Company allocates $5.00 overhead to each unit produced. The company uses a plantwide overhead rate with machine hours as the allocation base. Given the amounts below, how many machine hours does the company expect in department 2? $\begin{array} { l c c } \text { Estimated: } & \text { Department 1 } & \text { Department 2 } \\\text { Manufacturing overhead costs } & \$ 250,000 & \$ 150,000 \\\text { Direct labor hours } & 8,000 \mathrm { DLH } & 12,000 \mathrm { DLH } \\\text { Machine hours } & 55,000 \mathrm { MH } & ? \mathrm { MH }\end{array}$

A company uses activity-based costing to determine the costs of its three products: A, B andC. The activity rates and activity levels for each of the company's three activity cost pools are shown below. $\begin{array} { | l | l | r | r | r | } \hline & & { \text { Budgeted Activity } } \\\hline \begin{array} { l } \text { Activity Cost } \\\text { Pool }\end{array} & \text { Activity Rate } & \text { Product A } & \text { Product B } & \text { Product C } \\\hline \text { Activity 1 } & \$ 48 & 3,500 & 1,000 & 500 \\\hline \text { Activity 2 } & \$ 51 & 300 & 2,100 & 600 \\\hline \text { Activity 3 } & \$ 73 & 400 & 200 & 1,400 \\\hline\end{array}$ Compute the company's budgeted overhead cost for each of the three products under activity-based costing.

A company uses activity-based costing to determine the costs of its three products: A, B and C. The budgeted cost and activity for each of the company's three activity cost pools are shown below. $\begin{array} { | l | l | r | r | r | } \hline & & { \text { Budgeted Activity } } \\\hline \begin{array} { l } \text { Activity Cost } \\\text { Pool }\end{array} & \begin{array} { l } \text { Budgeted } \\\text { Cost }\end{array} & \text { Product A } & \text { Product B } & \text { Product C } \\\hline \text { Activity 1 } & \$ 425,000 & 1,700 & 680 & 1,870 \\\hline \text { Activity 2 } & \$ 144,900 & 1,890 & 1,575 & 2,835 \\\hline \text { Activity 3 } & \$ 85,000 & 2,400 & 1,000 & 1,600 \\\hline\end{array}$ Compute the company's activity rates under activity-based costing for each of the three activities.

A company has two products: A andB. It uses activity based costing and has prepared the following analysis showing budgeted costs and activities. Use this information to compute (a) the company's overhead rates on each of the three activities and (b) the amount of overhead allocated to ProductA.

Product costs consist of direct labor, direct materials and ______________.

Slosh, Inc. produces washing machines which require two processes, assembling and finishing, to complete. The company's bestselling machine is the commercial washer. Information related to the 500 commercial washers produced annually is shown below. Slosh's total expected overhead costs and related overhead data are shown below. The company uses departmental overhead rates based on direct labor hours in the assembling department and machine hours in the finishing department. Determine the total product cost of this product line and each individual commercial washer.

Activities are the cost objects of the second stage of ABC.

Ridley Company estimates that overhead costs for the next year will be $6,870,000 for indirect labor and $450,000 for factory utilities. The company uses machine hours as its overhead allocation base. If 160,000 machine hours are planned for this next year, what is the company's plantwide overhead rate?

A company produces garden benches which go through two operations, operation 1A1 and operation 2B2, before they are complete. Expected costs and activities for the two departments are shown below. Both departments have departmental overhead rates based on machine hours. Therefore, the overhead rates for department 1A1 and department 2B2 are the same. $\begin{array}{lcc}&\text { Department } & \text { Department } \\&1 \mathrm{~A} 1 & 2 \mathrm{~B} 2\\\text { Machine hours } & 70,000 \mathrm{MH} & 60,000 \mathrm{MH} \\\text { Direct labor hours } & 56,350 \mathrm{DLH} & 50,160 \mathrm{DLH} \\\text { Overhead costs } & \$ 225,400 & \$ 250,800\end{array}$

Explain cost flows for the departmental overhead rate method.