Exam 7: Activity-Based Costing and Activity-Based Management

Even when direct materials and direct labor comprise the majority of product costs, manufacturing overhead allocation is still a major issue.

Place an "X" in the column that corresponds to the type of activity level referred to in each scenario.

When managers reduce the workforce without considering the activities that employees perform, which of the following is not a likely consequence?

Although the total amount of allocated overhead differs between a traditional overhead allocation method and activity-based overhead allocations, we can still compare the percentage of overhead allocated to each product.

Which of the following is the most appropriate cost driver for delivery of goods?

A&W Manufacturing uses an activity-based costing system for its cutting department.The activity cost totals $148,000.The number of cuts is the cost driver.The cutting department processed a total of 9,000 batches with an average cuts per batch of 6 and total cuts of 46,250.What is the activity rate for the cutting department?

Under activity-based costing, selling and administrative costs should be allocated to products if they are incurred to provide resources that are consumed by unit-level, batch-level, or product-level activities.

At a Dole pineapple processing plant, which of the following is not a value-added activity?

First-stage allocation is the process of assigning manufacturing overhead costs to activity pools.

Turnbull Company produces two products and their overhead consists of setups $20,000; machining $2,220,000; and packing $80,000.Data for the current year follow: The overhead allocated to Beta assuming a single overhead rate based on machine hours and assuming ABC, respectively, are

Which of the following is considered a product-level activity?

The greatest use of activity-based costing information for managers is for

Ayala Inc.computed an overhead rate for machining costs ($1,500,000) of $15 per machine hour.Machining costs are driven by machine hours.If computed based on direct labor hours, the overhead rate for machining costs would be $30 per direct labor hour.The company produces two products, Hammer and Tong.Hammer requires 60,000 machine hours and 20,000 direct labor hours, while Tong requires 40,000 machine hours and 30,000 direct labor hours.Using activity-based costing, machining costs assigned to each product is

Activities that support the products or services a company provides are classified as a(n)

Clover Manufacturing Company makes two products.Using the traditional allocation method, the company has allocated overhead based on estimated total direct labor cost of $125,000.Clover recently implemented an activity-based costing system and had determined that overhead can be broken into three overhead pools: cutting, machine setups, and shipping.The following is a summary of company information: Required: a.Calculate the company's overhead rate as a percentage of direct labor cost. b.Calculate the company's overhead rates using the activity-based costing pools.

Identifying activities performed in the organization is the first step in developing activity-based product costs.Which of the following is a way to identify these activities?

Assume that activity cost totals $180,000.The company produced an average of 40 units per batch and the number of batches produced is 9,000.Calculate the activity rate.

Since a batch-level activity is based on the existence of the batch, a batch consumes resources

Activity-based costing information can be used to make decisions regarding pricing, customer profitability, distribution channel profitability, and process improvement.

Which of the following is considered a unit-level activity?