Exam 7: Activity-Based Costing: a Tool to Aid Decision Making

Activity-based costing is a costing method that is designed to provide managers with product cost information for internal decision-making.

Direct materials costs are usually excluded from the costs that are allocated to activity cost pools in an activity-based costing system.

Annika Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 4,000 units and of Product B is 1,000 units. There are three activity cost pools, with total cost and activity as follows: The activity-based costing cost per unit of Product A is closest to:

Bartow Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs--equipment expense and indirect labor--are allocated to the three activity cost pools--Processing, Supervising, and Other--based on resource consumption. Data to perform these allocations appear below: Distribution of Resource Consumption Across Activity Cost Pools: In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow:Activity: How much overhead cost is allocated to the Processing activity cost pool under activity-based costing in the first stage of allocation?

Groleau Corporation has an activity-based costing system with three activity cost pools--Processing, Setting Up, and Other. The company's overhead costs, which consist of factory utilities and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources. Costs in the Processing cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. Data concerning the two products and the company's costs and activity-based costing system appear below: Distribution of Resource Consumption Across Activity Cost Pools Required:a. Assign overhead costs to activity cost pools using activity-based costing.b. Calculate activity rates for each activity cost pool using activity-based costing.c. Determine the amount of overhead cost that would be assigned to each product using activity-based costing.d. Determine the product margins for each product using activity-based costing.

Daston Company manufactures two products, Product F and Product G. The company expects to produce and sell 1,750 units of Product F and 1,950 units of Product G during the current year. Data relating to the company's three activity cost pools are given below for the current year: Required:Using the activity-based costing approach, determine the overhead cost per unit for each product. (Round your answers to 2 decimal places.)

The following data have been provided by Hooey Corporation from its activity-based costing accounting system: Distribution of Resource Consumption across Activity Cost Pools: The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.Required:a. Determine the total amount of supervisory wages and factory utilities costs that would be allocated to the Machining activity cost pool.b. Determine the total amount of supervisory wages and factory utilities costs that would NOT be assigned to products.

Grassie Corporation is conducting a time-driven activity-based costing study in its Customer Service Department. The company has provided the following data to aid in that study: On the Capacity Analysis report in time-driven activity-based costing, the"unused capacity in minutes" would be closest to:

Beckley Corporation has provided the following data from its activity-based costing accounting system: Distribution of Resource Consumption across Activity Cost Pools: The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.Required:a. Determine the total amount of indirect factory wages and factory equipment depreciation costs that would be allocated to the Product Processing activity cost pool.b. Determine the total amount of indirect factory wages and factory equipment depreciation costs that would NOT be assigned to products.

Nissley Wedding Fantasy Corporation makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system: The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake. The measure of complexity is the number of tiers in the cake. The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and wedding bells, which are accounted for separately.Data concerning two recent orders appear below: Assuming that the company charges $465.39 for the Twersky wedding cake, what would be the overall margin on the order?

In a Cost Analysis report in time-based activity-based costing, the time-driven activity rate for an activity is computed by dividing the minutes required of the resource per unit of activity by the cost per minute of the resource supplied.

Sorice Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Processing, $20,200; Supervising, $11,000; and Other, $66,800. Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: The activity rate for the Supervising activity cost pool under activity-based costing is closest to:

The controller of Hendershot Corporation estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below: The total materials handling cost for the year is expected to be $16,754.50.If the materials handling cost is allocated on the basis of material moves, the total materials handling cost allocated to the specialty windows is closest to: (Round your intermediate calculations to 4 decimal places.)

Hollifield Corporation is conducting a time-driven activity-based costing study in its Order Fulfillment Department. The company has provided the following data to aid in that study: On the Capacity Analysis report in time-driven activity-based costing, the "impact on expenses of matching capacity with demand" would be closest to:

Immen Corporation manufactures two products: Product B82O and Product P99Y. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products B82O and P99Y. Using the ABC system, how much total manufacturing overhead cost would be assigned to Product P99Y?

Weisgarber Corporation is conducting a time-driven activity-based costing study in its Customer Service Department. The company has provided the following data to aid in that study: Required: a. Prepare a time-driven activity-based costing Customer Cost Analysis report that determines the total Customer Service Department cost assigned to Customer G. b. Prepare a time-driven activity-based costing Capacity Analysis report for the Customer Service Department that determines the impact on expenses of matching capacity with demand.

Bennette Corporation has provided the following data concerning its overhead costs for the coming year: The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year: The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs.The distribution of resource consumption across activity cost pools is given below: The activity rate for the Order Processing activity cost pool is closest to:

Nissley Wedding Fantasy Corporation makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system: The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake. The measure of complexity is the number of tiers in the cake. The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and wedding bells, which are accounted for separately.Data concerning two recent orders appear below: Suppose that the company decides that the present activity-based costing system is too complex and that all costs (except for the costs of purchased decorations) should be allocated on the basis of the number of guests. In that event, what would you expect to happen to the costs of cakes?

Roediger Corporation is conducting a time-driven activity-based costing study in its Customer Service Department. The company has provided the following data to aid in that study: On the Customer Cost Analysis report in time-driven activity-based costing, the total cost assigned to Customer Q would be closest to:

Wedd Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Processing, $49,800; Supervising, $27,500; and Other, $24,900. Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: What is the overhead cost assigned to Product O6 under activity-based costing? (Round your intermediate calculations to 2 decimal places.)