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 purchasing overhead cost will be assigned to Product X using the number of purchase orders?

Erickson Company made the following predictions for the current year: Factory averhead costs \ 300,000 Direct labour hours 50,000 hours Machine hours 100,00 hours Job A2 (which was started and completed in May)used 3,000 direct labour hours,2,000 machine hours,and $57,000 of prime costs. -Refer to the figure.If factory overhead is applied based on direct labour hours,what is the cost of Job A2 for the Erickson Company?

Hunter Company manufactures two products (XX and YY).The overhead costs have been divided into four cost pools that use the following activity drivers: Number of Number of Number of Labour Labour Product Orders Setups Transactions Hours XX 60 20 50 2,000 YY 20 80 70 500 Cost per pool \ 16,000 \ 13,000 \ 2,400 \ 20,000 a.Compute the allocation rates for each of the activity drivers listed. b.Allocate the overhead costs to Products XX and YY using activity-based costing. c.Compute the overhead rate using labour hours under the functional-based costing system. d.Allocate the overhead costs to Products XX and YY using the functional-based costing system overhead rate calculated in part (c).

What procedure does unit-based product costing use?

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.What is the unit cost of Product Y?

What is characteristic of approximately relevant ABC system?

Zipp Company manufactures two products (X and Y). The overhead costs ($84,000) have been divided into three cost pools that use the following activity drivers: Product Number of setups Machine Hours Packine Orders 10 500 75 Y 10 2,000 175 Cost per pod \ 9,000 \ 60,000 \ 15,000 -Refer to the figure.What is the allocation rate per packing order using activity-based costing?

What is the term for the proportion of an overhead activity utilized by a product?

Erickson Company made the following predictions for the current year: Factory averhead costs \ 300,000 Direct labour hours 50,000 hours Machine hours 100,00 hours Job A2 (which was started and completed in May)used 3,000 direct labour hours,2,000 machine hours,and $57,000 of prime costs. -Refer to the figure.If factory overhead is applied based on machine hours,what is the cost of Job A2 for the Erickson Company?

What aids management in achieving objectives such as product or customer costing,continuous improvement,and environmental management?

If activity-based costing is used,what type of activity would insurance on the plant be classified as?

Vaughn, Inc., has identified the following overhead costs and activity drivers for next year: Expected Expected Overhead Item Cost Activity Driver Quantity Setup costs \ 200,000 Number of setups 250 Ordering costs 80,000 Number of orders 1,600 Maintenance 400,000 Machine hours 2,000 Power 40,000 Kilowatt hours 40,000 The following are two of the jobs completed during the year: Job 10A Jab20 E Direct materials \ 3,000 \ 4,000 Direct labour \ 2,800 \ 4,800 Units completed 100 160 Direct labour hours 50 80 Number of setups 1 4 Number of orders 4 5 Machine hours 20 25 Kilnwratt houre 30 \ 5 The company's normal activity is 2,000 direct labour hours. -Refer to the figure.If the four activity drivers are used to allocate overhead costs,what would be the total overhead allocated to Job 10A?

What is the term for the collected data sets that are organized and interrelated for use by an organization's ABC information system?

Zipp Company manufactures two products (X and Y). The overhead costs ($84,000) have been divided into three cost pools that use the following activity drivers: Product Number of setups Machine Hours Packine Orders 10 500 75 Y 10 2,000 175 Cost per pod \ 9,000 \ 60,000 \ 15,000 -Refer to the figure.If the number of machine hours is used to assign machine hour cost,what is the amount of machine hour cost to be assigned to Product X?

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 is the new pool rate for batch inspection costs?

What does unit-level product costing assign?

Zipp Company manufactures two products (X and Y). The overhead costs ($84,000) have been divided into three cost pools that use the following activity drivers: Product Number of setups Machine Hours Packine Orders 10 500 75 Y 10 2,000 175 Cost per pod \ 9,000 \ 60,000 \ 15,000 -Refer to the figure.What is the allocation rate per setup using activity-based costing?

What is the term for a costing system that uses actual costs for direct materials and labour and predetermined overhead rates to apply overhead?

Carlson Company uses a predetermined rate to apply overhead.At the beginning of the year,Carlson estimated its overhead costs at $240,000,direct labour hours at 40,000,and machine hours at 10,000.Actual overhead costs incurred were $249,280,actual direct labour hours were 41,000,and actual machine hours were 11,000. What is the predetermined overhead rate per machine hour for Carlson?

Moss Corporation has the following activities: creating bills of materials (BOM), studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tooling. The general ledger accounts reveal the following expenditures for manufacturing engineering: Salaries \ 5,000 Equpment 40,000 Supplies 10,000 Total \ 125000 The equipment is used for two activities: improving processes and designing tooling.Thirty-five percent of the equipment's time is used for improving processes and 65 percent is used for designing tools.The salaries are for two engineers.One is paid $50,000,while the other earns $25,000.The $50,000 engineer spends 40 percent of his time training employees in new processes and 60 percent of his time on improving processes.The remaining engineer spends equal time on all activities.Supplies are consumed in the following proportions: Creating BOMs 25\% Studying capabilities 10\% Improving processes 20\% Training employees 25\% Designing tooling 20\% -Refer to the figure.What is the cost assigned to the creating BOMs activity?