Exam 5: Activity-Based Costing and Activity-Based Management

Milan Company has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year: The accounting records show the Mossman Job consumed the following resources: Under activity-based costing, what is the amount of machine maintenance costs allocated to the Mossman Job? (Do not round any intermediary calculations.)

As product diversity and indirect costs increase, it is usually best to switch away from a broad averaging system to an activity-based cost system.

Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called activity based costing.

Indirect labor and distribution costs would most likely be in the same activity-cost pool.

Refining a cost system involves which of the following?

Canton Corp. manufactures two sizes of ceramic paperweights, regular and jumbo. The following information applies to their expectations for the planning period: Expected direct costs amounts to $927,000 for the period. Support cost requirements of both products are substantially different from one another. Zitriks uses an ABC costing system. Which of the following is true of Canton's overhead costing?

If the separate activities of design, process design, and prototyping are combined into one activity called "design" in an ABC system, management is forming one homogeneous cost pool.

Which of the following statements is true of costing systems?

It is usually difficult to find good cost driver (cause-and-effect relationship) between ________ and a cost allocation base.

The following conditions with departmental indirect-cost rates will result in allocation of costs similar to ABC costing except:

ABC systems provide greater insight than traditional systems into the management of indirect costs.

Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year: The accounting records show the Mossman Job consumed the following resources: Which method of allocation probably best estimates actual overhead costs used? Why?

Is it advisable to ignore facility-sustaining cost drivers during product costing?

Which of the following is true of refinement of a costing system?

As ABC systems get very detailed and more cost pools are created, more allocations are necessary to calculate activity costs for each cost pool, which increases the chances of misidentifying the costs of different activity cost pools.

Excellent Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2018, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages. For 2018 Excellent Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis: During 2018, two customers, Money Managers and Hospital Systems, are expected to use the following printing services: When costs are assigned using the single cost driver, number of pages printed, then ________.

Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2018, manufacturing overhead cost estimates total $1,800,000 for an annual production capacity of 20 million pages. For 2018 Velshi Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis: During 2018, two customers, Money Managers and Hospital Systems, are expected to use the following printing services: Using the three cost pools to allocate overhead costs, what is the total manufacturing overhead cost estimate for Money Managers during 2018? (Do not round interim calculations. Round the final answer to the nearest cent.)

North Street Corporation manufactures two models of motorized go-carts, a standard and a deluxe model. The following activity and cost information has been compiled: Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used, what is the total amount of overhead cost assigned to the standard model? (Do not round interim calculations. Round the final answer to the nearest whole dollar.)

Canton's Corp. manufactures two sizes of ceramic paperweights, regular and jumbo. The following information applies to their expectations for the planning period: Expected direct costs amounts to $9,130,000 for the period. Support cost requirements of both products are substantially different from one another. Canton uses an ABC costing system. Which of the following statements is true of implementing an ABC system?

A single indirect-cost rate distorts product costs because ________.