Exam 4: Activity Based Costing and Analysis

A company has two products: AA and BB. It uses a plantwide overhead allocation method based on activity 33 and has prepared the following analysis showing budgeted costs and activities. Use this information to compute the company's plantwide overhead rate.

Superior Products Manufacturing identified the following data in its two production departments. Make the following independent calculations (Round to two decimals). a. Compute a plantwide overhead rate using machine hours as the allocation base. b. Compute a plantwide overhead rate using direct labor hours as the allocation base.

Assume that the Assembly Department allocates overhead using a plantwide overhead rate based on machine hours. How much total overhead will be assigned to a product that requires 1 direct labor hour and 2.5 machine hours in the Assembly Department, and 3.5 direct labor hours and 0.5 machine hours in the Finishing Department?

When calculating the departmental overhead rate, the numerator should be?

A ________ is a collection of costs that are related to the same or similar activity.

Outer Limits, Inc. produces fencing units which require two processes, A and B, to complete. The best-selling type of fence is made of PVC. Information related to the 8,000 units of pvc fencing produced annually is shown below. Outer Limits' total expected overhead costs and related overhead data are shown below. The company uses departmental overhead rates based on machine hours in department A and direct labor hours in department B. Determine the total amount of overhead assigned to each unit of PVC fencing.

The following data relates to Spurrier Company's estimated amounts for next year. What is the company's plantwide overhead rate if direct labor hours are the allocation base? (Round your answer to two decimal places.)

The ________ stage of ABC is to compute an activity rate for each cost pool and then use this rate to allocate overhead costs to products.

Gray Company uses a plantwide overhead rate with machine hours as the allocation base. Use the following information to solve for the amount of machine hours estimated per unit of product Q.

How much overhead cost will be assigned to the ice cream sandwich product line using activity-based costing (ABC)?

The first step in using the departmental overhead rate method requires that overhead be traced to each of the company's departments.

The following data relates to Mangini Company's estimated amounts for next year. What is the company's plantwide overhead rate if machine hours are the allocation base? (Round your answer to two decimal places.)

The cost to heat a manufacturing facility can be directly linked to the number of units produced.

The departmental overhead rate method uses a different overhead rate for each production department.

Use the above data for Wall Nuts, Inc. to compute the total manufacturing cost per unit of oak paneling assuming the company uses departmental overhead rates based on machine hours in Department A and machine hours in Department B.

Use the data for Wall Nuts, Inc. to compute the dollar amount of overhead applied to each unit of oak paneling, assuming the company uses departmental overhead rates based on machine hours in Department A and machine hours in Department B.

A company estimates that costs for the next year will be $500,000 for indirect labor, $50,000 for factory utilities, and $1,000,000 for the CEO's salary. The company uses machine hours as its overhead allocation base. If 25,000 machine hours are planned for this next year, then the plantwide overhead rate is $22 per machine hour.

ABC is more costly to implement and maintain than more traditional overhead costing systems.

Assume New Belgium Brewing Company manufactures and distributes three types of beer and that estimated per unit product costs and related information for the next year are shown in the following table: a. If New Belgium Brewing Company uses a plantwide overhead rate based on machine hours, what is the total product cost per unit of Cocoa Mole Ale? b. Blue Paddle is a traditional brew made in large quantities with long production runs. Somersault is a seasonal beer made in small batches. Cocoa Mole Ale is a specialty beer also made in small batches. Which of the overhead allocation methods studied in this chapter would you recommend that New Belgium Brewing Company use and why?

Overhead costs cannot be ________ in the same way that direct materials and direct labor can.