Exam 17: Activity-Based Costing

Reynoso Corporation manufactures titanium and aluminum tennis racquets. Reynoso's total overhead costs consist of assembly costs and inspection costs. The following information is available: Reynoso is considering switching from one overhead rate based on labor hours to activity-based costing. Using activity-based costing, how much assembly cost is assigned to titanium racquets?

Nott Company manufactures two products, pillows and comforters. The company has estimated its overhead in the order-processing department to be $600,000. The company produces 50,000 pillows and 80,000 comforters each year. Pillow production requires 25,000 machine hours, comforter production requires 50,000 machine hours. The company places raw materials orders 10 times per month, 2 times for raw materials for pillows and the remainder for raw materials for comforters. How much of the order processing overhead should be allocated to comforters?

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

Randel Manufacturing has five activity cost pools and two products (a budget tape vacuum and a deluxe tape vacuum). Information is presented below: Instructions Compute the overhead cost per unit for each product. Production is 700,000 units of Budget and 200,000 units of Deluxe. Round your answer to the nearest cent.

Nancy Lake owns a small department store in a metropolitan area. For twenty years, the accountant has applied overhead to the various departments-Women's Apparel, Men's Apparel, Cosmetics, Housewares, Shoes, and Electronics-based on the basis of employee hours worked. Nancy Lake's daughter, who is an accounting student at a local university, has suggested her mother should consider using activity-based costing (ABC). In an attempt to implement ABC, Nancy Lake and her daughter have identified the following activities. Instructions Determine a cost driver for each of the activities listed below.

Non-value-added activities

Companies that switch to ABC often find they have

In traditional costing systems, overhead is generally applied based on

Zimmerman Company manufactures two products, Board 12 and Case 165. Zimmerman's overhead costs consist of setting up machines, $2,400,000; machining, $5,400,000; and inspecting, $1,800,000. Information on the two products is: Overhead applied to Board 12 using activity-based costing is

Which of the following is a unit-level activity?

Jayson Woods, PSC is an architectural firm that uses activity-based costing. The three activity cost pools used by Jayson Woods are: Salaries and Wages, Travel Expense, and Plan Reproduction Expense. The firm has provided the following information concerning activity and costs: Instructions Calculate the total cost to be allocated to the (a) Project Assignment, (b) Business Development, and (c) Other activity cost pools.

Gant Accounting performs two types of services, Audit and Tax. Gant's overhead costs consist of computer support, $300,000; and legal support, $150,000. Information on the two services is: Overhead applied to tax services using activity-based costing is

Two of the activity cost pools for Molina Company are (a) machining ($325,000) and (b) inspections ($42,000). Possible cost drivers are direct labor hours (2,550), machine hours (12,500), square footage (2,000), and number of inspections (200). Instructions Compute the overhead rate for each activity.

Which would be an appropriate cost driver for the purchasing activity cost pool?

Predetermined overhead rates in traditional costing are often based on

The primary benefit of ABC is it provides

The first step in activity-based costing is to

The general approach to identifying activities, activity cost pools, and cost drivers is used by a service company in the same manner as a manufacturing company.

Which of the following is not a batch-level activity?

Which of the following is not a product-level activity?