Exam 18: Activity-Based Costing

Botosan Factory has budgeted factory overhead for the year at $13,500,000, and budgeted direct labor hours for the year are 10,000,000. If the actual direct labor hours for the month of May are 350,000, the overhead allocated for May is

Kaumajet Factory produces two products: table lamps and desk lamps. It has two separate departments: Fabrication and Assembly. The factory overhead budget for the Fabrication Department is $550,000, using 500,000 direct labor hours. The factory overhead budget for the Assembly Department is $400,000, using 80,000 direct labor hours. -Scoresby Co. uses 6 machine hours and 2 direct labor hours to produce Product X. It uses 8 machine hours and 16 direct labor hours to produce Product Y. Scoresby's Assembly and Finishing departments have factory overhead rates of $240 per machine hour and $160 per direct labor hour, respectively. How much total factory overhead will be allocated to a unit of each of the two products?

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours.​ ​ -The factory overhead allocated per unit of Product B in the Painting Department if Blue Ridge Marketing Inc. uses the multiple production department factory overhead rate method is

Dawson Company manufactures small table lamps and desk lamps. The following shows the activities per product and the total overhead information: ​ -Bonnington Company manufactures small table lamps and desk lamps. The following shows the activities per product: Using the following information prepared by Bonnington Company, the total factory overhead to be allocated to small table lamps is

A single plantwide factory overhead rate assumes that all overhead is directly related to one activity representing the entire plant.

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours.​ ​ -The factory overhead allocated per unit of Product A in the Finishing Department if Blue Ridge Marketing Inc. uses the multiple production department factory overhead rate method is

Beauty Beyond Words Salon uses an activity-based costing system to determine the cost of services. The salon has determined the costs of services by activity and activity usage as follows: ​ -Determine the cost of services for a highlight.

When applied by service companies, the use of the single and multiple department overhead rate methods will not lead to the same kinds of cost distortions often faced by manufacturing companies with those methods.

Activity cost pools are assigned to products, using factory overhead rates for each activity.

Blackwelder Factory produces two similar products: small table lamps and desk lamps. The total factory overhead budget is $640,000 with 400,000 estimated direct labor hours. It is further estimated that small table lamp production will require 275,000 direct labor hours, and desk lamp production will need 125,000 direct labor hours.​ -Using a single plantwide factory overhead rate with an allocation base of direct labor hours, the factory overhead that Blackwelder Factory will allocate to desk lamp production if actual direct labor hours for the period for desk lamps is 118,000 would be

Activity-based costing can only be used to allocate manufacturing factory overhead.

Kettle Factory produces two similar products: gloves and mittens. The total factory overhead budget is $1,050,000 with 600,000 estimated direct labor hours. It is further estimated that glove production will require 375,000 direct labor hours and mitten production will require 225,000 direct labor hours. a.Determine the single plantwide factory overhead rate based on direct labor hours. b.How much is the factory overhead cost per pair of gloves if each pair requires 2 hours to produce? c.How much is the factory overhead cost per pair of mittens if each pair takes 1.5 hours to produce? d.How much total factory overhead will be allocated to glove production if 187,500 pairs are budgeted and 190,000 pairs are actually produced during the period? e.How much total factory overhead will be allocated to mitten production if 150,000 pairs are budgeted and 140,000 pairs are actually produced during the period?

Managers depend on accurate factory overhead allocation to make decisions regarding product mix and product price.

The activity information from an ABC product costing system can be used to isolate cost improvement opportunities.

Service organizations can use activity-based costing to allocate selling and administrative costs to services provided.

Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication Department, which has an estimated overhead of $84,000. All of the labor hours take place in the Assembly Department, which has an estimated total overhead of $72,000.​ -Ramapo Company uses a single plantwide overhead rate to apply all factory overhead costs. The single plantwide rate, if it is based on machine hours instead of labor hours, is

Skagit Company manufactures Hooks and Nooks. The following shows the activities per product and total activity information: ​ -The total factory overhead to be allocated to each unit of Hooks is

Aleutian Company produces two products: Rings and Dings. They are manufactured in two departments: Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication Department, which has estimated total factory overhead of $90,000. All of the labor hours take place in the Assembly Department, which has estimated total factory overhead of $105,000.Aleutian Company uses the multiple production department factory overhead rate method. The Fabrication Department uses machine hours as an allocation base, and the Assembly Department uses direct labor hours. -The Assembly Department's factory overhead rate is

Anazi Leather Company manufactures leather handbags and moccasins. The company has been using the single plantwide factory overhead rate method but has decided to evaluate the multiple production department factory overhead rate method to allocate factory overhead. The factory overhead estimated per unit together with direct materials and direct labor will help determine selling prices.​ Handbags = 60,000 units, 3 hours of direct labor Moccasins= 40,000 units, 2 hours of direct labor Total budgeted factory overhead cost = $360,000 The company has two different production departments: Cutting and Sewing. The Cutting Department has a factory overhead budget of $80,000. Each unit will require 1 direct labor hour or a total of 100,000 direct labor hours.​ The Sewing Department estimates factory overhead in the amount of $280,000. Handbags require 2 hours of sewing time, and Moccasins require 1 hour for a total of 160,000 direct labor hours.​ Using the multiple production department factory overhead rate method, compute the total factory overhead to be allocated to each product using direct labor hours as the allocation base.

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to five separate activity pools. The budgeted activity cost and activity base data by product are provided below. ​ -The activity-based cost for each wire drive unit is