Exam 5: Activity-Based Costing

Which of the following is a facility-level activity?

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?

Which of the following is a batch-level activity?

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

When using a single cost driver to allocate overhead costs, the amount of overhead costs that are applied is

Not all activities labelled non-value-added are totally wasteful, nor can they be totally eliminated.

Which of the following factors would suggest a switch to 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 If machining hours are used as a base, how much overhead is assigned to Product One each year?

ABC usually results in less appropriate management decisions.

Traditionally, overhead is allocated based on direct labour cost or direct labour hours.

The primary benefit of ABC is it provides

ABC eliminates all arbitrary cost allocations.

ABC is particularly useful when overhead costs are an insignificant portion of total costs.

Which of the following is NOT a benefit of activity-based costing?

Each of the following is a limitation of activity-based costing EXCEPT that

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: Product One Product Two Number of setups 20 20 Machining hours 1,000 4,000 Orders packed 150 350 Number of product Manufactured 600 400 Using ABC, how much overhead is assigned to Product Two each year?

A relevant unit-level cost driver for a spa is

A cost driver does NOT generally have a direct cause-effect relationship with the resources consumed.

Which of the following is an example of unit-level activity in a major automotive parts distribution company?

ABC leads to enhanced control over overhead costs.