Exam 4: Activity Based Costing and Analysis

Tarnish Industries uses departmental overhead rates and is planning on a $4.10 per machine hour overhead rate for the finishing department. Compute the estimated manufacturing overhead cost for the finishing department given the information shown in the table.

Compared to the departmental overhead rate method, the plantwide overhead rate method usually results in more accurate overhead allocations.

Compute Aztec's departmental overhead rate for the mixing department based on machine hours.

The ________ is the target of the cost assignment.

Malone has 33,000 total estimated direct labor hours for next year.

________ is considered while choosing a cost allocation base for activity costs in ABC costing.

A quality-inspection cost is an example of unit-level costs.

Tarnish Industries uses departmental overhead rates and is planning on a $2 per machine hour overhead rate for the molding department. Compute the estimated manufacturing overhead cost for the molding department given the information shown in the table.

Explain cost flows for activity-based costing.

Cleveland Choppers manufactures two types of motorcycles, a Base and a Loaded model. The following activity and costs have been gathered: The number of components and number of setups are chosen as activity-cost drivers for overhead. Assuming an ABC costing system is being used, what is the total overhead cost assigned to the Loaded model?

A company uses activity-based costing to determine the costs of its three products: A, B, and C. The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table: What are the activity rates for the three activities under activity-based costing?

What is the reason for pooling costs?

Activity-based costing often shifts overhead costs from large volume, standardized products to low-volume, specialty products that consume disproportionate resources.

A company has two products: A and B. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools: Annual production and sales level of Product A is 34,300 units, and the annual production and sales level of Product B is 69,550 units. What is the approximate overhead cost per unit of Product A under activity-based costing?

Multiple cost pools are used when allocating overhead using the plantwide overhead rate method.

ABC costing might lead to:

Activity-based costing involves four steps: (1) identify activities and the costs they cause, (2) group similar activities into cost pools, (3) determine an activity rate for each activity cost pool, and (4) allocate overhead costs to products using those activity rates.

All of the following are examples of facility sustaining costs except:

Sparks Company produces and distributes two types of garden sculptures, Plain and Fancy. Budgeted cost and activity for each of its three activity cost pools are shown below. The company plans to produce and sell 64,000 plain units and 49,150 fancy units. a. Compute the approximate overhead cost per unit of Plain under activity-based costing. b. Compute the approximate overhead cost per unit of Fancy under activity-based costing.

Facility-level costs are not traceable to individual product lines, batches or units.