Zeta Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of manufacturing overhead that should be assigned to each of the two product lines from the information given below.$\begin{array}{lcc} & \text { Wall Mirrors } & \begin{array}{c} \text { Specialty } \\ \text { Windows } \end{array} \\ \text { Total units produced } & 25 & 25 \\ \text { Total number of material moves } & 5 & 15 \\ \text { Direct labor hours per unit } & 200 & 200 \end{array}$ $\text { Budgeted material-handling costs are } \$ 50,000 \text {. }$Under a costing system that allocates manufacturing overhead on the basis of direct labor hours, the material-handling cost per wall mirror is:

A) $0. B) $500. C) $1,000. D) $2,000. E) $5,000. A) $0. B) $500. C) $1,000. D) $2,000. E) $5,000.

Exam 5: Activity-Based Costing and Customer Profitability Analysis

Zeta Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of manufacturing overhead that should be assigned to each of the two product lines from the information given below. Wall Mirrors Specialty Windows Total units produced 25 25 Total number of material moves 5 15 Direct labor hours per unit 200 200 $\text { Budgeted material-handling costs are } \$ 50,000 \text {. }$ Under a costing system that allocates manufacturing overhead on the basis of direct labor hours, the material-handling cost per wall mirror is:

(Multiple Choice)

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Question 41

Everlast Co. manufactures a variety of drill bits. The company's plant is partially automated. The budget for the year includes $432,000 payroll for 4,800 direct labor-hours. Listed below is cost driver information used in the product-costing system:What is the total manufacturing overhead for the current product order if the firm assigns overhead costs based on machine hours?

(Multiple Choice)

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Question 42

Pairing Company has the following cost drivers identified as A through F for determining product manufacturing overhead costs. (A) Number of pieces of equipment (B) Number of direct material purchase orders (C) Number of production runs (D) Square feet of warehouse space (E) Number of machine hours (F) Square feet of factory space For each of the following activity cost pools, choose the letter of the most appropriate cost driver for each cost pool. Heating costs Machinery power costs Machinery set-up costs Equipment maintenance costs Materials storage costs Purchasing department costs

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Question 43

Shaver Co. manufactures a variety of electric razors for men and women. The company's plant is partially automated. Listed below is cost driver information used in the product-costing system:What is the total manufacturing overhead assigned to the current order for Women's Razors if the firm uses a volume-based plant wide overhead rate based on direct labor hours?

(Multiple Choice)

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Question 44

Volume-based Versus ABC Overhead Rate: Medical Arts Hospital (MAH) uses a hospital-wide overhead rate based on nurse-hours.The intensive care unit (ICU), which has 30 beds, applies overhead using patient-days.Its budgeted cost and operating data for the year follow: Hospital Budget Information Hospital total overhead \ 57,600,000 Hospital total nurse-hours 1,152,000 $Volume-based Versus ABC Overhead Rate: Medical Arts Hospital (MAH) uses a hospital-wide overhead rate based on nurse-hours.The intensive care unit (ICU), which has 30 beds, applies overhead using patient-days.Its budgeted cost and operating data for the year follow: \begin{array} { | l | r | } \hline { \text { Hospital Budget Information } } \\ \hline \text { Hospital total overhead } & \$ 57,600,000 \\ \hline \text { Hospital total nurse-hours } & 1,152,000 \\ \hline \end{array} Required: 1.Calculate the ICU's overhead costs for the month of June using a.The hospital-wide rate b.The ICU department-wide rate c.The cost driver rates for the ICU department 2.Explain the differences and determine which overhead assignment method is more appropriate$ Required: 1.Calculate the ICU's overhead costs for the month of June using a.The hospital-wide rate b.The ICU department-wide rate c.The cost driver rates for the ICU department 2.Explain the differences and determine which overhead assignment method is more appropriate

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Question 45

Classify each of the following costs as unit-level (U), batch-level (B), product-level (P), or facility-level (F) costs and identify an appropriate example of a possible cost driver for each item: (1) Parts administration (2) Production scheduling (3) Materials handling (4) Machine operations (5) Personnel administration and training (6) Plant security (7) Machine setups (8) Engineering changes (9) Product design (10) Rent for factory plant

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Question 46

Everlast Co. manufactures a variety of drill bits. The company's plant is partially automated. The budget for the year includes $432,000 payroll for 4,800 direct labor-hours. Listed below is cost driver information used in the product-costing system:Using ABC, how much material handling overhead is assigned to the order?

(Multiple Choice)

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Question 47

Which one of the following is a high value-added activity?

(Multiple Choice)

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Question 48

Elimination of low-value-added activities in a firm should:

(Multiple Choice)

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Question 49

Demski Company has used a two-stage cost allocation system for many years.In the first stage, plant overhead costs are allocated to two production departments, P1 and P2, based on machine hours.In the second stage, Demski uses direct labor hours to assign overhead costs from the production departments to individual products A andB. Budgeted factory overhead costs for the year are $300,000.Both the budgeted and actual machine hours in P1 and P2 are 12,000 and 28,000 hours, respectively. After attending a seminar to learn the potential benefits of adopting an activity-based costing system (ABC), Ted Demski, the president of Demski Company, is considering implementing an ABC system.Upon his request, the controller at Demski Company has compiled the following information for analysis: $Demski Company has used a two-stage cost allocation system for many years.In the first stage, plant overhead costs are allocated to two production departments, P1 and P2, based on machine hours.In the second stage, Demski uses direct labor hours to assign overhead costs from the production departments to individual products A andB. Budgeted factory overhead costs for the year are $300,000.Both the budgeted and actual machine hours in P1 and P2 are 12,000 and 28,000 hours, respectively. After attending a seminar to learn the potential benefits of adopting an activity-based costing system (ABC), Ted Demski, the president of Demski Company, is considering implementing an ABC system.Upon his request, the controller at Demski Company has compiled the following information for analysis: Demski manufactures two types of product, A and B, for which the following information is available: \begin{array}{lrr}&A&B\\ \text { Units produced and sold } & 5,000 & 10,000 \\ \text { Direct materials } & \$ 200,000 & \$ 250,000 \\ \text { Direct labor costs } & \$ 80,000 & 150,000 \\ \text { Direct labor hours in P1 } & 1,500 & 3,000 \\ \text { Direct labor hours in P2 } & 1,500 & 4,000 \\ \text { Setup hours } & 700 & 300 \\ \text { Inspection hours } & 1,500 & 1,000 \\ \text { Power (kilowatt hours) } & 12,500 & 12,500 \end{array} Required: 1.Determine the unit cost for each of the two products using the traditional two-stage allocation method.Round calculations to 2 decimal places. 2.Determine the unit cost for each of the two products using the proposed ABC system. 3.Compare the unit manufacturing costs for product A and product B computed in requirements 1 and 2. (a) Why do two the cost systems differ in their total cost for each product? (b) Why might these differences be important to the Demski Company? Answer may vary Feedback: 1.Unit cost for each of two products using the traditional two-stage allocation method:$ Demski manufactures two types of product, A and B, for which the following information is available: A B Units produced and sold 5,000 10,000 Direct materials \ 200,000 \ 250,000 Direct labor costs \ 80,000 150,000 Direct labor hours in P1 1,500 3,000 Direct labor hours in P2 1,500 4,000 Setup hours 700 300 Inspection hours 1,500 1,000 Power (kilowatt hours) 12,500 12,500 Required: 1.Determine the unit cost for each of the two products using the traditional two-stage allocation method.Round calculations to 2 decimal places. 2.Determine the unit cost for each of the two products using the proposed ABC system. 3.Compare the unit manufacturing costs for product A and product B computed in requirements 1 and 2. (a) Why do two the cost systems differ in their total cost for each product? (b) Why might these differences be important to the Demski Company? Answer may vary Feedback: 1.Unit cost for each of two products using the traditional two-stage allocation method: $Demski Company has used a two-stage cost allocation system for many years.In the first stage, plant overhead costs are allocated to two production departments, P1 and P2, based on machine hours.In the second stage, Demski uses direct labor hours to assign overhead costs from the production departments to individual products A andB. Budgeted factory overhead costs for the year are $300,000.Both the budgeted and actual machine hours in P1 and P2 are 12,000 and 28,000 hours, respectively. After attending a seminar to learn the potential benefits of adopting an activity-based costing system (ABC), Ted Demski, the president of Demski Company, is considering implementing an ABC system.Upon his request, the controller at Demski Company has compiled the following information for analysis: Demski manufactures two types of product, A and B, for which the following information is available: \begin{array}{lrr}&A&B\\ \text { Units produced and sold } & 5,000 & 10,000 \\ \text { Direct materials } & \$ 200,000 & \$ 250,000 \\ \text { Direct labor costs } & \$ 80,000 & 150,000 \\ \text { Direct labor hours in P1 } & 1,500 & 3,000 \\ \text { Direct labor hours in P2 } & 1,500 & 4,000 \\ \text { Setup hours } & 700 & 300 \\ \text { Inspection hours } & 1,500 & 1,000 \\ \text { Power (kilowatt hours) } & 12,500 & 12,500 \end{array} Required: 1.Determine the unit cost for each of the two products using the traditional two-stage allocation method.Round calculations to 2 decimal places. 2.Determine the unit cost for each of the two products using the proposed ABC system. 3.Compare the unit manufacturing costs for product A and product B computed in requirements 1 and 2. (a) Why do two the cost systems differ in their total cost for each product? (b) Why might these differences be important to the Demski Company? Answer may vary Feedback: 1.Unit cost for each of two products using the traditional two-stage allocation method:$

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Question 50

Volume-based rates produce inaccurate product cost when:

(Multiple Choice)

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Question 51

Activity-based costing systems:

(Multiple Choice)

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Question 52

Which of the following activities is a facility-level activity?

(Multiple Choice)

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Question 53

Skateline Inc.designs and manufactures roller skates.The following data pertain to two of its major customers: FantasticSkates and SkateToday. Required: Compare the net proceeds from each customer to Skateline Inc.30 days after sale.(rounded to nearest dollar for each step where applicable).

(Essay)

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Question 54

Volume-based overhead rates may cause undesirable strategic effects such as:

(Multiple Choice)

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Question 55

All of the following statements regarding activity-based costing systems are true except they:

(Multiple Choice)

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Question 56

National Inc. manufactures two models of CMD that can be used as cell phones, MPX, and digital camcorders.Using the firm's volume-based costing, applied factory overhead per unit for the High F model is (rounded to the nearest cent):

(Multiple Choice)

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Question 57

Which of the following is a benefit of activity-based costing?

(Multiple Choice)

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Question 58

National Inc. manufactures two models of CMD that can be used as cell phones, MPX, and digital camcorders.What is the overhead application rate using the firm's volume-based costing system (rounded to the nearest percent or cents)?

(Multiple Choice)

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Question 59

Shaver Co. manufactures a variety of electric razors for men and women. The company's plant is partially automated. Listed below is cost driver information used in the product-costing system:Using ABC, how much batch-level overhead is assigned to the current order for Women's Razors based on pounds of raw materials?

(Multiple Choice)

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Question 60

Showing 41 - 60 of 149

Which one of the following is a high value-added activity?

Elimination of low-value-added activities in a firm should:

Volume-based rates produce inaccurate product cost when:

Activity-based costing systems:

Which of the following activities is a facility-level activity?

Skateline Inc.designs and manufactures roller skates.The following data pertain to two of its major customers: FantasticSkates and SkateToday. Required: Compare the net proceeds from each customer to Skateline Inc.30 days after sale.(rounded to nearest dollar for each step where applicable).

Volume-based overhead rates may cause undesirable strategic effects such as:

All of the following statements regarding activity-based costing systems are true except they:

National Inc. manufactures two models of CMD that can be used as cell phones, MPX, and digital camcorders.Using the firm's volume-based costing, applied factory overhead per unit for the High F model is (rounded to the nearest cent):

Which of the following is a benefit of activity-based costing?

National Inc. manufactures two models of CMD that can be used as cell phones, MPX, and digital camcorders.What is the overhead application rate using the firm's volume-based costing system (rounded to the nearest percent or cents)?

Cost Management and Strategy

Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map

Basic Cost Management Concepts

Job Costing

Process Costing

Cost Allocation: Departments, Joint Products, and By-Products

Cost Estimation

Short-Term Profit Planning: Cost-Volume-Profit CVP Analysis

Strategy and the Master Budget

Decision Making With a Strategic Emphasis

Strategy and the Analysis of Capital Investments

Cost Planning for the Product Life Cycle: Target Costing, Theory of Constraints, and Strategic Pricing

Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management

Operational Performance Measurement: Further Analysis of Productivity and Sales

The Management and Control of Quality

Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Strategic Performance Measurement: Investment Centers and Transfer Pricing

Management Compensation, Business Analysis, and Business Valuation

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