Exam 4: Activity-Based Costing

Product i's total time used for all primary activities is equal to:

Materials handling would be classified as a __________ activity when using activity-level costing.

Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. Costs have been assigned to each activity using direct tracing and resource drivers: Activity Expected Cost Activity Driver Activity Capacity Engineering \ 1,000,000 engineering hours 5,000 hours Setups \ 900,000 setups 200 setups Machining \ 2,000,000 machine hours 25,000 machine hours Inspection \ 800,000 inspection hours 2,500 inspection hours Owens produces two models: Model $X$ and Model Y. The following table shows how the two products consume activity. Model C Model D Units completed 300,000 200,000 Engineering hours 1,000 4,000 Setups 80 120 Machine hours 20,000 5,000 Inspection hours 1,500 1,000 First determine the overhead costs assigned to model D using the two most expensive activities for cost pools. The costs of the two relatively inexpensive activities are allocated to the two most expensive activities in proportion to their costs. (Round to two decimal places.)The engineering cost assigned to model D would be

The following information pertains to Whitestone Industries for 2018: Estimated total overhead costs for 2018 \ 37,500 Estimated direct labor costs for 2018 25,000 Actual direct labor costs 22,500 Actual overhead costs 36,000 Activity base Direct labor costs What is the predetermined overhead rate for Whitestone Industries for 2018?

Carriage Manufacturing uses an activity-based costing system. The company produces Model 21 and Model 22. Information relating to the two products is as follows: Model 21 Model 22 Units produced 24,000 30,000 Machine hours 7,500 8,500 Direct labor hours 8,000 12,000 Material handling (number of moves) 4,000 6,000 Setups 5,000 7,000 The following costs are reported: Material handling \ 40,000 Labor-related overhead 120,000 Setups 60,000 Labor-related overhead costs assigned to Model 21 are

Predetermined overhead rates are calculated at the end of each year using the formula: overhead rate = budgeted annual driver level/budgeted annual driver level.

The Fast & Furious Company produces two products: toy planes and toy race cars. They use departmental overhead rates for the two production departments: molding and finishing. Molding uses machine hours to assign overhead and Finishing uses direct labor hours. 50,000 planes and 250,000 race cars are produced. Please find the following data: Molding Finishing T otal Estimated Overhead \ 250,000 \ 100,000 \ 350,000 Actual Overhead \ 240,000 \ 120,000 \ 360,000 Expected Direct Labor Hours planes 5,000 5,000 10,000 race cars 5,000 35,000 40,000 Expected Machine Hours planes 17,000 3,000 20,000 race cars 3,000 7,000 10,000 Actual Direct Labor Hours planes 4,500 5,300 10,000 race cars 5,500 34,500 40,000 Actual Machine Hours planes 16,500 3,500 20,000 race cars 3,200 6,800 10,000 What are the departmental overhead rates for the molding and finishing department respectively?

Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G. Information relating to the two products is as follows: Model F Model G Units produced 24,000 30,000 Machine hours 7,500 8,500 Direct labor hours 8,000 12,000 Material handling (number of moves) 4,000 6,000 Setups 5,000 7,000 Purchase orders 30 40 Inspections 10,000 14,000 Product line variations 8 12 The following overhead costs are reported for the following activities of the production process: Material handling \ 40,000 Labor-related overhead 120,000 Setups 60,000 Product design 100,000 Batch inspections 120,000 Central purchasing 70,000 Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below: Activity Cost Pool Driver Pool Rate Model F Activity Model F Cost Model G Activity Model G Cost Total Material handling \ 40,000 10,000 \ 4 4,000 \ 16,000 6,000 \ 24,000 \ 40,000 Labor related \ 120,000 20,000 \ 6 8,000 \ 48,000 12,000 \ 72,000 \ 120,000 overhead Setups \ 60,000 12,000 \ 5 5,000 \ 25,000 7,000 \ 35,000 \ 60,000 Product design \ 100,000 20 \ 5,000 8 \ 40,000 12 \ 60,000 \ 100,000 Batch Inspections \ 120,000 24,000 \ 5 10,000 \ 50,000 14,000 \ 70,000 \ 120,000 Central purchasing \ 70,000 70 \ 1,000 30 \ 30,000 40 \ 40,000 \ 70,000 total \2 09,000 \3 01,000 \5 10,000 Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment. Under the equally accurate reduced ABC system, using consumption ratios for labor related and batch inspections, what allocation rate would be used to assign labor related costs? (round to 5 decimal places)

If activity-based costing is used, set-ups would be classified as a

The nonfinancial and financial data that describe individual activities is called:

The Wellness Clinic is considering a time-driven activity based costing system. Given the following data: Resources Activities time/activity supervisi on \ 60,000 treating patients 1.40 supplies and uniforms \ 80,000 providing hygienic care 1.00 sal aries \ 350,000 responding to requests 0.60 computer \ 10,000 monitoring patients 1.00 monitor \ 25,000 Total \ 525,000 Total nursing hours (practical capacity) 15,000 What is the activity rate for responding to requests?

Material amounts of underapplied or overapplied overhead should be

Samson Company recently installed an activity-based relational database. Using the information contained in the activity relational table, the following pool rates were computed: $400 per purchase order $24 per machine hour, Process 1 $30 per machine hour, Process 2 $80 per engineering hour Two products are produced by Special Products: L and M. The plant has two manufacturing processes, Process 1 and Process 2. Other processes include engineering, product handling, and procurement. Product L goes through Process 1 while Product M goes through Process 2. The product relational table for Special Products is as follows: Product L ActivityDriver \# Name Activity Usage 1 Units 200,000 2 Purchase Orders 250 3 Machine Hours 80,000 4 Engineering Hours 1,250 Product M Activity Driver \# Name Activity Usage 1 Units 25,000 2 Purchase Orders 125 3 Machine Hours 10,000 4 Engineering Hours 1,500 ActivityDriver \# Name Activity Usage 1 Units 200,000 2 Purchase Orders 250 3 Machine Hours 80,000 4 Engineering Hours 1,250 What is the unit cost of Product M?

Samson Company recently installed an activity-based relational database. Using the information contained in the activity relational table, the following pool rates were computed: $400 per purchase order $24 per machine hour, Process 1 $30 per machine hour, Process 2 $80 per engineering hour Two products are produced by Special Products: L and M. The plant has two manufacturing processes, Process 1 and Process 2. Other processes include engineering, product handling, and procurement. Product L goes through Process 1 while Product M goes through Process 2. The product relational table for Special Products is as follows: Product L ActivityDriver \# Name Activity Usage 1 Units 200,000 2 Furchase Orders 250 3 Machine Hours 80,000 4 Engineering Hours 1,250 Product M Activity Driver \# Name Activity Usage 1 Units 25,000 2 Furchase Orders 125 3 Machine Hours 10,000 4 Engineering Hours 1,500 ActivityDriver \# Name Activity Usage 1 Units 200,000 2 Purchase Orders 250 3 Machine Hours 80,000 4 Engineering Hours 1,250 How much purchasing overhead cost will be assigned to Product L using the number of purchase orders?

Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G. Information relating to the two products is as follows: Model F Model G Units produced 24,000 30,000 Machine hours 7,500 8,500 Direct labor hours 8,000 12,000 Material handling (number of moves) 4,000 6,000 Setups 5,000 7,000 Purchase orders 30 40 Inspections 10,000 14,000 Product line variations 8 12 The following overhead costs are reported for the following activities of the production process: Material handling \ 40,000 Labor-related overhead 120,000 Setups 60,000 Product design 100,000 Batch inspections 120,000 Central purchasing 70,000 Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below: Activity Cost Pool Driver Pool Rate Model F Activity Model F Cost Model G Activity Model G Cost Total Material handling \ 40,000 10,000 \ 4 4,000 \ 16,000 6,000 \ 24,000 \ 40,000 Labor related \ 120,000 20,000 \ 6 8,000 \ 48,000 12,000 \ 72,000 \ 120,000 overhead Setups \ 60,000 12,000 \ 5 5,000 \ 25,000 7,000 \ 35,000 \ 60,000 Product design \ 100,000 20 \ 5,000 8 \ 40,000 12 \ 60,000 \ 100,000 Batch Inspections \ 120,000 24,000 \ 5 10,000 \ 50,000 14,000 \ 70,000 \ 120,000 Central purchasing \ 70,000 70 \ 1,000 30 \ 30,000 40 \ 40,000 \ 70,000 total \2 09,000 \3 01,000 \5 10,000 Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment. Under the equally accurate reduced ABC system, using consumption ratios for labor related and batch inspections, the overhead assigned to labor related activities would be? (round to 5 decimal places)

Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. Costs have been assigned to each activity using direct tracing and resource drivers: Activity Expected Cost Activity Driver Activity Capacity Engineering \ 1,000,000 engineering hours 5,000 hours Setups \ 900,000 setups 200 setups Machining \ 2,000,000 machine hours 25,000 machine hours Inspection \ 800,000 inspection hours 2,500 inspection hours Owens produces two models: Model $X$ and Model Y. The following table shows how the two products consume activity. Model C Model D Units completed 300,000 200,000 Engineering hours 1,000 4,000 Setups 80 120 Machine hours 20,000 5,000 Inspection hours 1,500 1,000 Using the activity ratios for engineering and machining, what is the overhead rate for machining? (round to two decimal places)

The Brookstone Company produces 9 volt batteries and AAA batteries. The Brookstone Company uses a plantwide rate to apply overhead based on direct labor hours. The following data is given: Actual Overhead \ 325,000 Estimated Overhead \ 350,000 Estimated Activity: 9 volt battery 100,000 direct labor hours AAA battery 400,000 direct labor hours Actual Activity: 9 volt battery 125,000 direct labor hours AAA battery 400,000 direct labor hours Units Produced: 9 volt battery 500,000 AsA battery 250,000 If the accounts had the following balances, how much will cost of goods sold be adjusted? Raw M aterials Inventory \ 200,000 Work in Frocess Inventory \ 100,000 Finished Goods Inventory \ 200,000 Cost of Goods Sold \ 500,000

The Sterling Company applies manufacturing overhead. At the end of the year the following data were available: Actual Manufacturing Overhead \ 115,000 Estimated Manufacturing Overhead \ 110,000 Applied Manufacturing Overhead \ 100,000 The following accounts had the unadjusted balances: Raw Materials Inventory \ 100,000 Work-in-Frocess Inventory \ 100,000 Finished Goods Inventory \ 100,000 Cost of Goods Sold \ 300,000 What is the journal entry if the amount is considered material? a. Work-in-Frocess \ 1,000 Finished Goods \ 1,000 Cost of Goods Sold \ 3,000 Manufacturing overhead \5 ,000 b. Work-in-Process \ 3,000 Finished Goods \ 3,000 Cost of Goods Sold \ 9,000 Manufacturing overhead \1 5,000 c. Manufacturing overhead \5 ,000 Work-in-Process \ 1,000 Finished Goods \ 1,000 Cost of Goods Sold \ 3,000 d. Manufacturing overhead \1 5,000 Work-in-Process \ 3,000 Finished Goods \ 3,000 Cost of Goods Sold \ 9,000 $\text { e. None of these }$

Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G. Information relating to the two products is as follows: Model F Model G Units produced 24,000 30,000 Machine hours 7,500 8,500 Direct labor hours 8,000 12,000 Material handling (number of moves) 4,000 6,000 Setups 5,000 7,000 Purchase orders 30 40 Inspections 10,000 14,000 Product line variations 8 12 The following overhead costs are reported for the following activities of the production process: Material handling \ 40,000 Labor-related overhead 120,000 Setups 60,000 Product design 100,000 Batch inspections 120,000 Central purchasing 70,000 Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below: Activity Cost Pool Driver Pool Rate Model F Activity Model F Cost Model G Activity Model G Cost Total Material handling \ 40,000 10,000 \ 4 4,000 \ 16,000 6,000 \ 24,000 \ 40,000 Labor related \ 120,000 20,000 \ 6 8,000 \ 48,000 12,000 \ 72,000 \ 120,000 overhead Setups \ 60,000 12,000 \ 5 5,000 \ 25,000 7,000 \ 35,000 \ 60,000 Product design \ 100,000 20 \ 5,000 8 \ 40,000 12 \ 60,000 \ 100,000 Batch Inspections \ 120,000 24,000 \ 5 10,000 \ 50,000 14,000 \ 70,000 \ 120,000 Central purchasing \ 70,000 70 \ 1,000 30 \ 30,000 40 \ 40,000 \ 70,000 total \2 09,000 \3 01,000 \5 10,000 Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment. Using ABC as the benchmark, what is the percentage error in the cost assigned to Model G using the approximately relevant ABC approach? (round to 4 decimal places)

The use of __________ activity drivers to assign costs tends to __________ high-volume products.