Exam 4: Activity Based Costing and Analysis

Plantwide overhead rates typically do a better job of matching each department's overhead costs to the products using the department's resources than do departmental overhead rates.

The following data relates to Black-Out 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.)

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: Compute the company's activity rates under activity-based costing for each of the three activities.

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

The cost object of the plantwide overhead rate method is:

Upside Down, Incorporated designs custom storage spaces to eliminate clutter in both residential and business settings. The following data pertain to a recent reporting period: Required a. Use ABC to compute overhead rates for each activity. b. Assign costs to a 3,000 square foot job that requires 70 contact hours, 20 design hours, and 14 days to complete.

Inside Out, Company designs custom showroom spaces in interior design marts across the country. The following data pertain to a recent reporting period.\ Design Department Client consultation 750 contact hours $127,500 Drawing 1,200 design hours $96,000 Models 15,000 square feet $21,000 Project Management Supervision 225 days $40,500 Billings 150 jobs $54,000 Required a. Use ABC to compute overhead rates for each activity. b. Assign costs to a 3,000 square-foot job that requires 70 contact hours, 20 design hours, and 14 days to complete.

Direct labor, direct materials, and manufacturing overhead are all product costs. Why is overhead more difficult to account for than either direct labor or direct materials?

ABC assumes all costs are ________ because over the long run the company can adjust the amount of assets utilized.

Two big benefits of ABC costing are a) more accurate product cost information and b) more detailed information on costs and the drivers of those costs.

How much overhead cost will be assigned to each product line using activity-based costing (ABC)?

How does ABC differ from using multiple departmental rates?

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 a product requiring 10 machine hours will be assigned $220 in overhead.

If the direct labor time estimates are met, Malone will allocate $12.59 of overhead cost to each unit of Little X.

________ is an outgrowth of ABC that draws on the link between activities and cost incurrence for better management.

Overhead costs are often affected by many issues and are frequently too complex to be explained by any one factor.

Overhead costs:

Red Raider Company uses a plantwide overhead rate with direct labor hours as the allocation base. Next year, 400,000 units are expected to be produced requiring 0.9 direct-labor hours each. How much overhead will be assigned to each unit produced given the following estimated amounts?

From an ABC perspective, what causes costs to be incurred?

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 B under activity-based costing?