Exam 17: Activity-Based Costing

Horton, Reiser, and Associates, a law firm, employs ABC. The following budgeted data for each of the activity cost pools is provided for the year 2016. During 2016 the firm worked 660 research hours, 10,000 professional hours, and prepared 25,000 document pages. Instructions Compute the total overhead applied during 2016.

Identifying and classifying activities is the

All of the following statements are correct except that

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

The presence of any of the following factors would suggest a switch to ABC except when

Peters, Inc. produces 3 products: P1, Q2, and R3. P1 requires 400 purchase orders, Q2 requires 600 purchase orders, and R3 requires 1,000 purchase orders. Peters has identified an ordering and receiving activity cost pool with allocated overhead of $240,000 for which the cost driver is purchase orders. Direct labor hours used on each product are 50,000 for P1, 40,000 for Q2, and 110,000 for R3. How much ordering and receiving overhead is assigned to each product?

Which of the following is a limitation of activity-based costing?

In traditional costing systems, direct labor cost is often used for the assignment of all ____________________.

In activity-based costing, overhead costs are allocated to ____________________, then assigned to products.

Engineering design is a value-added activity.

The first step in activity-based costing is to assign overhead costs to products, using cost drivers.

Noland Company manufactures two models of its banjo, the Basic and the Luxury. The Basic model requires 10,000 direct labor hours and the Luxury requires 30,000 direct labor hours. The company produces 3,400 units of the Basic model and 600 units of the Luxury model each year. The company inspects one Basic for every 100 produced, and inspects one Luxury for every 10 produced. The company expects to incur $112,800 of total inspecting costs this year. How much of the inspecting costs should be allocated to the Basic model using ABC costing?

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

The presence of any of the following factors would suggest a switch to ABC except when

A company incurs $4,050,000 of overhead each year in three departments: Ordering and Receiving, Mixing, and Testing. The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs 1,500 tests per year in producing 200,000 drums of Goo and 600,000 drums of Slime. The following data are available: Production information for Slime is as follows: Compute the amount of overhead assigned to Slime.

Some ______________________ increase the perceived worth of a product or service to customers.

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

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

ABC is generally more costly to implement than traditional costing.