Exam 11: Activity-Based Costing

Figure 11-2 Owens Ltd. 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. In addition, there is a sustaining process with two activities: providing utilities (plantwide) and providing space. Costs have been assigned to each activity using direct tracing and resource drivers: Engineering £1,000,000 Setups 900,000 Machining 2,000,000 Inspection 800,000 Providing space 250,000 Providing utilities 180,000 Activity drivers for each activity have been identified and their practical capacities listed: Machine hours 25,000 Setups 200 Engineering hours 5,000 Inspection hours 2,500 The costs of facility-level activities are assigned using machine hours. -Refer to Figure 11-2. What is the cost pool rate for the batch-level activities?

All of the following are nonunit-based activity drivers EXCEPT

Figure 11-6 Peach, SA., has identified the following overhead costs and cost drivers for next year: Overhead Item Expected Cost \multicolumn 1 c Cost Driver Expected Quantity Setup costs £200,000 Number of setups 500 Ordering costs 80,000 Number of orders 3,200 Maintenance 400,000 Machine hours 4,000 Power 40,000 Kilowatt hours 80,000 The following are two of the jobs completed during the year: Direct materials £750 £2,000 Direct labour £700 £2,400 Units completed 100 160 Direct labour hours 50 80 Number of setups 1 4 Number of orders 4 5 Machine hours 20 25 Kilowatt hours 30 50 The company's normal activity is 4,000 direct labour hours. -Refer to Figure 11-6. If Peach, SA., used activity-based cost drivers to allocate overhead costs, the unit cost for Job 401 would be (round to two decimal places)

Figure 11-2 Owens Ltd. 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. In addition, there is a sustaining process with two activities: providing utilities (plantwide) and providing space. Costs have been assigned to each activity using direct tracing and resource drivers: Engineering £1,000,000 Setups 900,000 Machining 2,000,000 Inspection 800,000 Providing space 250,000 Providing utilities 180,000 Activity drivers for each activity have been identified and their practical capacities listed: Machine hours 25,000 Setups 200 Engineering hours 5,000 Inspection hours 2,500 The costs of facility-level activities are assigned using machine hours. -Refer to Figure 11-2. What is the cost pool overhead rate for the unit-level activities?

Flanigan Manufacturing uses an activity-based cost system. The company produces Product R and Product X. Information concerning the two products is as follows: Product R Froduct X Units produced 30,000 50,000 Direct labour hours 24,000 26,000 Engineering labour (hours) 4,000 6,000 Setups 20 30 Kilowatt hours 5,000 7,000 The following costs are reported: Power £24,000 Engineering 140,000 Setups 120,000

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

Which of the following items would be classified as committed resources (short-term)?

More accurate product costing information is produced by assigning costs using

If activity-based costing is used, insurance on the plant would be classified as a

Maintenance of the production equipment would be classified as a

Figure 11-2 Owens Ltd. 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. In addition, there is a sustaining process with two activities: providing utilities (plantwide) and providing space. Costs have been assigned to each activity using direct tracing and resource drivers: Engineering £1,000,000 Setups 900,000 Machining 2,000,000 Inspection 800,000 Providing space 250,000 Providing utilities 180,000 Activity drivers for each activity have been identified and their practical capacities listed: Machine hours 25,000 Setups 200 Engineering hours 5,000 Inspection hours 2,500 The costs of facility-level activities are assigned using machine hours. -Refer to Figure 11-2. What is(are) the batch-level activity(ies)?

If activity-based costing is used, product inspections would be classified as a

Figure 11-1 Ubben Manufacturing uses an activity-based costing system. The company produces Model X and Model Y. Information relating to the two products is as follows: Model X Model Y Units produced 20,000 40,000 Machine hours 8,000 10,000 Direct labour hours 14,000 16,000 Engineering labour (hours) 1,000 1,400 Setups 40 60 The following costs are reported: Engineering £48,000 Setups 100,000 Machine-rel ated overhead 144,000 -Refer to Figure 11-1. Setups would be classified as a

Which of the following items would be classified as flexible resources?

Godwin Ltd. 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. In addition, there is a sustaining process with two activities: providing utilities (plantwide) and providing space. Costs have been assigned to each activity using direct tracing and resource drivers: Engineering £250,000 Setups 225,000 Machining 500,000 Inspection 200,000 Providing space 62,500 Providing utilities 45,000 Activity drivers for each activity have been identified and their practical capacities listed: Machine hours 25,000 Setups 200 Engineering hours 5,000 Inspection hours 2,500 The costs of facility-level activities are assigned using machine hours. a.Identify the activities within each process as unit-level, batch-level, product-level, or facility-level. b.Create homogeneous cost pools. Identify the activities that belong to each pool and the activity driver that will be used for computing pool rates. c.Build an activity relational (i.e. cost) table. d.Compute the cost pool rates.

Which of the following quantities is an example of an activity driver in activity-based costing?