Exam 6: Activity-Based Costing

What is the term for a simple list of activities identified in an ABC system?

The following information is provided for the year: Actual direct labour hours worked 27,500 Budgeted overhead \5 25,000 Budgeted direct labour hours 30,000 Actual overhead costs incurred \4 81,250 If normal costing is used,what is the amount of overhead applied for the year?

Providence Company uses departmental manufacturing overhead rates to apply overhead.Direct labour cost is used to apply manufacturing overhead in Department A and machine hours are used for Department B. Dept. A Dept. B Direct labour cost \ 56,000 \ 33,000 Factory overhead \ 67,200 \ 45,000 Direct labour hours 8,000 9,000 Machine hours 4,000 15,000 What predetermined overhead rate would be used for departments A and B,respectively?

If unit-based product costing is used,which of the following would be traced directly to the product?

Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table below: ModelX ModelY Units produced 24,000 30,000 Machine hours 7,500 8,500 Direct labour hours 8,000 12,000 Material handling (number of moves) 4,000 6,000 Setups 5,000 7,000 Purchase orders 30 40 nspections 10,000 14,000 Product line variatinns. 8 12 The following overhead costs are reported for the following activities of the production process: Material handling \ 40,000 Labour-related overhead 120,000 Setups 60,000 Product design 100,000 Batch inspections 120,000 Central purchasing 70,000 Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table below: Activity Cost Pool Model Model X Model Model Y Pool Driver Rate X Cost Y Cost Total Activity Activity Material handling \ 40,000 10,000 \ 4 4,000 \ 16,000 6,000 \ 24,000 \ 40,000 Labour- related overhead \ 120,000 20,000 \ 6 8,000 \ 48,000 12,000 \ 72,000 \ 120,000 Setups \ 60,000 12,000 \ 5 5,000 \ 25,000 7,000 \ 35,000 \ 60,000 Product design \ 100,000 20 \ 5,000 8 \ 40,000 12 \ 60,000 \ 100,000 Batch inspections \ 120,000 24,000 \ 5 10,000 \ 50,000 14,000 \ 70,000 \ 120,000 Central purchasing \ 70,000 70 \ 1,000 30 \ 30,000 40 \ 40,000 \ 70,000 Total \ 209,000 \ 301,000 \ 510,000 Jones Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment. -Refer to the figure.Under this new approach,what cost would be assigned to the labour-related cost pool?

Quint Manufacturing uses an activity-based costing system. The company produces Model 1 and Model 2. Information relating to the two products is as follows: Units produced 24,000 30,000 Machine hours 7,500 8,500 Direct labour hours 8,000 12,000 Material handling (number of moves) 4,000 6,000 Setups 5,000 7,000 The following costs are reported: Materal handling 40,000 Labour-related overhead 120,000 Setugs 60,000 -Refer to the figure.What are the labour-related overhead costs assigned to Model 1?

Funk Manufacturing Company produces specially machined parts.The parts are produced in batches in one continuous manufacturing process.Each part is custom produced and requires special engineering design activity (based on customer specifications).Once the design is completed,the equipment can be set up for batch production.Once the batch is completed,a sample is taken and inspected to see if the parts are within the tolerances allowed.Thus,the manufacturing process has four activities: engineering,setups,machining,and inspecting.In addition,there is a sustaining process with two activities: providing utilities (plant-wide)and providing space.Costs have been assigned to each activity using direct tracing and resource drivers: Engineering \ 125,000 Setups 112,500 Machining 250,000 Inspection 100,000 Providing space 31,250 Providing utilities 22,500 Activity drivers for each activity have been identified and their practical capacities listed: Machine hours 50,000 Setups 400 Engineering hours 10,000 Inspection hours 5,000 The costs of batch-level activities are assigned using number of setups. The costs of facility-level activities are assigned using machine hours. a.Identify the activities within each process as unit-level,batch-level,product-level,or facility-level. b.Build an activity relational table. c.Compute the pool rates.

Isidora’s Clinic is considering a time-driven activity-based costing system. Given the following data: Resources Activities Time/Activity Supervision \ 60,000 Treating patients 1.40. Supplies and uniforms \ 80,000 Providing hygienic care 1.00 Salaries \ 350,000 Respond to requests 0.60 Computer \ 10,000 Monitor patients 1.00 Monitor \ 25,000 Total \ 525,000 Total nursing hours (practical capacity) 15,000 -Refer to the figure.What is the activity rate for treating patients?

If operations run on less than full capacity,what is the result on cost driver rates?

For a labour-intensive manufacturing operation,which of the following would be the most appropriate activity driver?

What are consumption ratios?

The Data Maintenance Corporation provided the following data about its resources and activities. Resources Activities Clerical Hours Supervision \ 140,000 Processing accounts 10,000 Phone and supplies 80,000 Issuing statements 2,000 Salaries 250,000 Processing data 10,000 Computer 20,000 Answering customer inquiries 3,000 Total \ 490,000 Total 25,000 In addition,computers are used for issuing statements (30 percent)and processing data (70 percent).Phones,supplies,and answering customer inquiries are 60 percent,with the other 40 percent divided equally among the remaining activities,including supervision.The supervisor spends 100 percent of his/her time on supervision.In addition to the 25,000 clerical hours,there are 2,000 hours of supervision used (the hours used by the supervising clerk's activity which is not listed above) Prepare a work distribution matrix for the primary activities.

Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table below: ModelX ModelY Units produced 24,000 30,000 Machine hours 7,500 8,500 Direct labour hours 8,000 12,000 Material handling (number of moves) 4,000 6,000 Setups 5,000 7,000 Purchase orders 30 40 nspections 10,000 14,000 Product line variatinns. 8 12 The following overhead costs are reported for the following activities of the production process: Material handling \ 40,000 Labour-related overhead 120,000 Setups 60,000 Product design 100,000 Batch inspections 120,000 Central purchasing 70,000 Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table below: Activity Cost Pool Model Model X Model Model Y Pool Driver Rate X Cost Y Cost Total Activity Activity Material handling \ 40,000 10,000 \ 4 4,000 \ 16,000 6,000 \ 24,000 \ 40,000 Labour- related overhead \ 120,000 20,000 \ 6 8,000 \ 48,000 12,000 \ 72,000 \ 120,000 Setups \ 60,000 12,000 \ 5 5,000 \ 25,000 7,000 \ 35,000 \ 60,000 Product design \ 100,000 20 \ 5,000 8 \ 40,000 12 \ 60,000 \ 100,000 Batch inspections \ 120,000 24,000 \ 5 10,000 \ 50,000 14,000 \ 70,000 \ 120,000 Central purchasing \ 70,000 70 \ 1,000 30 \ 30,000 40 \ 40,000 \ 70,000 Total \ 209,000 \ 301,000 \ 510,000 Jones Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment. -Refer to the figure.Under this new approach using the new rates,what are the overhead costs assigned to Model Y in this approximately relevant ABC system?

Kramer Company has decided to use a predetermined rate to assign factory overhead to production.The following predictions have been made for the current year: Total factory overhead costs \ 150,000 Direct labour hours 40,000 hours Direct labour costs \ 200,000 Machine hours 60,000 hours a.Compute the predetermined factory overhead rate under three different bases: (1)direct labour hours,(2)direct labour costs,and (3)machine hours. b.Assume that actual factory overhead was $152,500 and that Kramer elected to apply factory overhead to work in process based on direct labour hours.If actual direct labour was 42,000 hours for 2011,was factory overhead overapplied or underapplied? By how much? c.Kramer Company follows the policy of writing off any under- or overapplied factory overhead balance to cost of goods sold at the end of the year.Make the entry necessary at the end of 2011 to dispose of the factory overhead balance determined in Part (b).

What is the formula used to calculate a predetermined overhead rate?

If activity-based costing is used,what type of activity would setups be classified as?

How should material amounts of underapplied or overapplied overhead be disposed of?

The Ogunquit Company uses a predetermined overhead rate. The following accounts have these unadjusted balances: Raw Materials \ 20,000 Work in Process \ 40,000 Finished Goods \ 10,000 Cost of Goods Sold \ 50,000 -Refer to the figure.If Overhead is underapplied by $12,000 and considered immaterial,what would be the journal entry?

Which of the following is NOT an appropriate approach to estimating practical capacity in a time-driven ABC system?

Which of the following is a unit-based activity driver?