Exam 5: Activity-Based-Costing

Canterra Co.incurs $160,000 of overhead costs each year in its three main departments, setup ($10,000), machining ($110,000), and packing ($40,000).The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year.Information about Canterra's 2 products is as follows: Number of setups 20 20 Machining hours 1,000 4,000 Orders packed 150 350 Number of product Manu?fartured 600 400 Using ABC, how much overhead is assigned to Product Two each year?

Use the following information to answer questions Poodle Company manufactures two products, Mini A and Maxi B.Poodle's overhead costs consist of setting up machines, $800,000; machining, $2,000,000; and inspecting, $600,000.Information on the two products is: Direct labour hours 15,000 25,000 Machine setups 600 400 Machine hours 24,000 26,000 Inspections 800 700 -Overhead applied to Mini A using traditional costing and direct labour hours is

A company incurs $1,200,000 of overhead each year in three departments, Processing, Packaging, and Testing.The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of oil and 600,000 drums of sludge.The following data are available: Department Estimated use of Driver Cost Processing 800 \ 500,000 Packaging 200,000 500,000 Testing 2,000 200,000 Production information for sludge is as follows: Department Estimated use of Driver Processing 500 Packaging 80,000 Testing 400 Calculate the amount of overhead assigned to sludge.

Which of the following is true?

Activity-based costing has been found to be useful in each of the following service industries except

Use the following information to answer questions Poodle Company manufactures two products, Mini A and Maxi B.Poodle's overhead costs consist of setting up machines, $800,000; machining, $2,000,000; and inspecting, $600,000.Information on the two products is: Direct labour hours 15,000 25,000 Machine setups 600 400 Machine hours 24,000 26,000 Inspections 800 700 -Overhead applied to Mini A using activity-based costing is

One of Astro Fireworks Company's activity cost pools is machine setups, with estimated overhead of $200,000.Astro produces sparklers (75 setups)and lighters (25 setups).How much of the machine setup cost pool should be assigned to sparklers?

A critical component of an activity-based accounting system is

Activity-based costing is used in $\quad$$\quad$ a) $\quad$$\quad$$\quad$$\quad$ Yes No b) $\quad$$\quad$$\quad$$\quad$ Yes Yes c) $\quad$$\quad$$\quad$$\quad$ No Yes d) $\quad$$\quad$$\quad$$\quad$ No No

Which best describes the flow of overhead costs in an activity-based costing system?

Canterra Co.incurs $160,000 of overhead costs each year in its three main departments, setup ($10,000), machining ($110,000), and packing ($40,000).The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year.Information about Canterra's 2 products is as follows: Number of setups 20 20 Machining hours 1,000 4,000 Orders packed 150 350 If machining hours are used as a base, how much overhead is assigned to Product One each year?

Which of the following is typical of traditional costing systems?

A major advantage in changing from a traditionally based costing system to an activity-based costing system is

Sleep-Tight manufactures mattresses for the hotel industry.It has two products, Downy and Firm and total overhead of $504,000.The company plans to manufacture 200 Downy mattresses and 300 Firm mattresses this year.In manufacturing the mattresses, the company must perform 700 material moves for the Downy and 300 for the Firm; it processes 114 purchase orders for the Downy and 90 for the Firm; and the company's employees work 2,800 direct labour hours on the Downy product and 3,500 on the Firm.Sleep-Tight's total material handling costs are $300,000 and its total purchasing costs are $204,000. Using ABC, how much overhead would be assigned to the Downy product?

Hammock Company manufactures two models of its hammock, the Superior and the Deluxe.The Superior model requires 10,000 direct labour hours and the Deluxe requires 40,000 direct labour hours.The company produces 4,000 units of the Superior model and 1,000 units of the Deluxe model each year.The company produces the Superior model in batch sizes of 200, while it produces the Deluxe model in batch sizes of 100.The company expects to incur $120,000 of total setup costs this year.How much of the setup costs are allocated to the Superior model using ABC costing?

In companies where there is good reason to change from a traditionally based costing system to an activity-based costing system, management might expect

The use of activity-based costing in service industries

A well designed activity-based costing system starts with

Which of the following is a value-added activity?

Activity-based costing normally allocates overhead costs