Exam 6: Activity-Based Costing

Newman Company recently installed an activity-based relational database. Using the information contained in the activity relational table, the following pool rates were computed: $400 per purchase order $24 per machine hour, Process 1 $30 per machine hour, Process 2 $80 per engineering hour Two products are produced by Special Products: X and Y. The plant has two manufacturing processes, Process 1 and Process 2. Other processes include engineering, product handling, and procurement. Product X goes through Process 1 while Product Y goes through Process 2. The product relational table for Special Products is as follows: Product X: Activity Driver \# and Name Activity Usage 1 Units 200,000 2 Purchase orders 250 3 Machine hours 80,000 4 Engineering hours 1,250 Product X: Activity Driver \# and Name Activity Usage 1 Units 25,000 2 Purchase orders 125 3 Machine hours 10,000 4 Engineering hours 1,500 -Refer to the figure.How much machine overhead cost will be assigned to Product X using Process 1?

Which of the following quantities is an example of an activity driver in used when the activity is providing hygienic care to patients in a hospital?

Gibson Company uses a predetermined overhead rate of $5 per machine hour to apply overhead.During the year,32,500 machine hours were worked.Actual manufacturing overhead cost for the year was $187,500.Company records showed the following account balances at the end of the year: Materials \ 22,500 Work in process 37,500 Finished goods 50,000 Cost of goods sold 112,500 a.Determine the amount of underapplied or overapplied overhead. b.Assuming the amount of underapplied or overapplied overhead is material,determine underapplied or overapplied overhead that would be allocated to the following accounts if the allocation is made using ending account balances: Work in Process Finished Goods Cost of Goods Sold c.Assuming the amount of underapplied or overapplied overhead is material,calculate the new balance of the following accounts after underapplied or overapplied overhead has been allocated: Work in Process Finished Goods Cost of Goods Sold d.Determine the balance of Cost of Goods Sold if underapplied or overapplied overhead is immaterial.

What is a component of the overhead rates of the traditional functional-based product costing?

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 consumption ratios for labour-related and machine hours,what would be the overhead cost assigned to Model X (rounded to two decimal places)?

Owens Corporation 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. Costs have been assigned to each activity using direct tracing and resource drivers: Activity Expected Cost Activity Driver Activity Capacity Engineering \ 1,000,000 engineerng hours 5,000 hours Setups \ 900,000 setups 200 setups Machining \ 2,000,000 machine hours 25,000 machine hours Inspection \ 800,000 inspection hours 2,500 inspection hour Owens produces two models: Model X and Model Y.The following table shows how the two products consume activity. Model X Model Y Units completed 300,000 200,000 Engineering hours 1,000 4,000 Setups 80 120 Machine hours 20,000 5,000 Inspection hours 1,500 1,000 -Refer to the figure.What are the global consumption ratios of X and Y,respectively (rounded to two decimal places)?

Lyons,Inc.,has identified the following overhead costs and activity drivers for next year: Setup costs \ 150,000 Number of setups 1,200 Ordering costs 40,000 Number of orders 10,000 Maintenance 200,000 Machine hours 16,000 Power 20,000 Kilowatt hours 100,000 The following are the two product models completed during the year: Madel XX Madel YY Direct materials \ 2,250 \ 2,500 Direct labour 3,000 1,875 Units completed 375 300 Direct labour hours 90 110 Nurber of setsps 6 8 Nurmber of arders 8 15 Machine hours 180 150 Kilowatt hours 90 120 The company's normal activity is 20,000 direct labour hours. a.Determine the unit cost for each job using direct labour hours to apply overhead. b.Determine the unit cost for each job using the four activity drivers.(Round amounts to 2 decimal places.) c.Which method produces the more accurate cost assignment? Why?

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 labour cost is assigned to Model X in this approximately relevant ABC system?

What is the term for nonfinancial and financial data that describe individual actions?

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 setup costs assigned to Model 2?

Ubben Manufacturing uses an activity-based costing system. The company produces Model X and Model Y. Information relating to the two products is as follows: Units produced 20,000 40,000 Machine hours 8,000 10,000 Direct labour hours 14,000 16,000 Material handling (number of moves) 1,000 1,400 Setups 40 60 The following costs are reported: Enpreering \4 8,000 Setups 100,000 Machine-related werhead 144,000 -Refer to the figure.What type of activity would setups be classified as?

Cabrini Company produces two products: toy trucks and toy cars. The company uses departmental overhead rates for the two production departments: Moulding and Finishing. Moulding uses machine hours to assign overhead and Finishing uses direct labour hours; 50,000 trucks and 250,000 cars are produced. Please find the following data: Moulding Finishing Total Estimated overhead \ 250,000 \ 100,000 \ 350,000 Actual overhead \ 240,000 \ 120,000 \ 360,000 Expected direct labour hours Trucks 5,000 5,000 10,000 Cars 5,000 35,000 40,000 Expected machine hours Trucks 17,000 3,000 20,000 Cars 3,000 7,000 10,000 Actual direct labour hours Trucks 4,500 5,300 10,000 Cars 5,500 34,500 40,000 Actual machine hours Trucks 16,500 3,500 20,000 Cars 3,200 6,800 10,000 -Refer to the figure.How much was overhead overapplied or underapplied?

Owens Corporation 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. Costs have been assigned to each activity using direct tracing and resource drivers: Activity Expected Cost Activity Driver Activity Capacity Engineering \ 1,000,000 engineerng hours 5,000 hours Setups \ 900,000 setups 200 setups Machining \ 2,000,000 machine hours 25,000 machine hours Inspection \ 800,000 inspection hours 2,500 inspection hour Owens produces two models: Model X and Model Y.The following table shows how the two products consume activity. Model X Model Y Units completed 300,000 200,000 Engineering hours 1,000 4,000 Setups 80 120 Machine hours 20,000 5,000 Inspection hours 1,500 1,000 -Refer to the figure.Using the activity ratios for engineering and machining,what is the overhead rate for machining (rounded to two decimal places)?

What is the term for a grouping of logically related information?

What is a secondary activity?

Newman Company recently installed an activity-based relational database. Using the information contained in the activity relational table, the following pool rates were computed: $400 per purchase order $24 per machine hour, Process 1 $30 per machine hour, Process 2 $80 per engineering hour Two products are produced by Special Products: X and Y. The plant has two manufacturing processes, Process 1 and Process 2. Other processes include engineering, product handling, and procurement. Product X goes through Process 1 while Product Y goes through Process 2. The product relational table for Special Products is as follows: Product X: Activity Driver \# and Name Activity Usage 1 Units 200,000 2 Purchase orders 250 3 Machine hours 80,000 4 Engineering hours 1,250 Product X: Activity Driver \# and Name Activity Usage 1 Units 25,000 2 Purchase orders 125 3 Machine hours 10,000 4 Engineering hours 1,500 -Refer to the figure.How much engineering overhead cost will be assigned to Product Y using engineering hours?

What type of activity would maintenance of the production equipment be classified as?

Assume the following: Actual overhead costs equalled estimated overhead.Actual direct labour hours exceeded estimated direct labour hours used to calculate the predetermined overhead rate.If overhead is applied using the predetermined overhead rate,what will be the impact on the overhead?

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 Manufacturing Overhead was $12,000 underapplied and considered material,what is the journal entry?

Which of the following statements is characteristic of ABC?