Exam 17: Activity-Based Costing

Hayward Industries manufactures dining chairs and tables. The following information is available: Hayward is considering switching from one overhead rate based on labor hours to activity-based costing. Instructions Perform the following analyses for these two components of overhead: a. Compute total machine setups and inspection costs assigned to each product, using a single overhead rate. b. Compute total machine setups and inspection costs assigned to each product, using activity-based costing. c. Comment on your findings.

American Delights manufactures a wide variety of holiday and seasonal decorative items. American's activity-based costing overhead rates are: The Snow Man project involved three purchase orders, 4,000 square feet/days, 60 machine hours, and 40 direct labor hours. The cost of direct materials on the job was $19,000 and the direct labor rate is $30 per hour. Instructions Determine the total cost of the Snow Man project.

Activity-based costing is used in

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 Goo is as follows: Compute the amount of overhead assigned to Goo.

A non-value-added activity in a service enterprise is

Traditional costing systems use multiple predetermined overhead rates.

Advances in computerized systems, technological innovation, global competition, and automation have changed the manufacturing environment drastically by

As compared to a low-volume product, a high-volume product

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 Case 165 using traditional costing using direct labor hours is

Compute activity-based costing rates from the following budgeted data for Upton Golf Co.:

Which of the following is a value-added activity?

The primary benefit of activity-based costing is ___________________ product costing.

Castleman, Inc. designs, prints, and delivers advertising copy for companies throughout the tri-state area. Sometimes this entails designing and printing a single copy and other times multiple copies of the same advertisement. Listed below are typical activity costs: (a) Printer ink. (b) Paper (c) Depreciation on equipment (d) Machine setup costs (e) Designing (f) Supervisory salaries (g) Ordering materials (h) Delivery (i) Building insurance (j) Printing Instructions Classify each of these activities as either unit-level, batch-level, product-level, or facility-level.

Feather, Inc. produces phasers (sales of 200,000 units per year) and force field enhancers (sales of 25,000 units per year). If Feather switches from traditional costing to activity-based costing, what is the likely effect on overhead assigned to the two products?

Plant management is a batch-level activity.

Foxx Company incurs $480,000 overhead costs each year in its three main departments, setup ($30,000), machining ($330,000), and packing ($120,000). 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 Foxx's two products is as follows: Using ABC, how much overhead is assigned to Product B1 each year?

Which of the following is a product-level activity?

Low-volume products often require more special handling than high-volume products.

Value-added activities