Exam 7: Activity-Based Costing: a Tool to Aid Decision Making

How much cost,in total,should NOT be allocated to orders and customer support in the second stage of the allocation process if the activity-based costing system is used for internal decision making?

(Appendix 7A)The predetermined overhead rate (i.e. ,activity rate)for Activity 2 under the activity-based costing system is closest to which of the following?

The overhead cost per unit of Product B under the traditional costing system is closest to which of the following?

Kya,Inc.manufactures two models of high-pressure steam valves,the XR7 model and the ZD5 model.Budgeted manufacturing overhead cost and operating data regarding production and sales of 2,000 units of the XR7 model and 8,000 units of the ZD5 model for 2005 follow: Required: a)Identify and briefly explain each of the three cost drivers as either unit-level or batch-level or product-level or organization-sustaining level. b)Calculate the budgeted manufacturing overhead cost for each unit of the two models,using only one unit-level cost driver. c)Calculate the budgeted manufacturing overhead cost for each unit of the two models,using the activity-based-costing (ABC)method. d)Assume Kya,Inc.will use only the unit-level driver.Compared to the ABC method,by how much (in terms of total allocated/applied manufacturing overhead cost),if any,will the total output of each model be either under-costed or over-costed? e)Is the result obtained in part (d)above consistent with your expectations? Explain.

Which of the following statements about overhead allocation based on volume alone is correct?

(Appendix 7A)Bullie Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labour-hours (DLHs).The company has two products,D31X and U75X,about which it has provided the following data: The company's estimated total manufacturing overhead for the year is $1,147,650 and the company's estimated total direct labour-hours for the year is 35,000. The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below: Required: a.Determine the manufacturing overhead cost per unit of each of the company's two products under the traditional costing system. b.Determine the manufacturing overhead cost per unit of each of the company's two products under activity-based costing system.

The activity rate for Activity 3 is closest to which of the following?

What is a duration driver?

(Appendix 7A)Werger Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labour-hours (DLHs).The company has two products,W82R and L48S,about which it has provided the following data: The company's estimated total manufacturing overhead for the year is $1,521,960 and the company's estimated total direct labour-hours for the year is 22,000. The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below: Required: a.Determine the unit product cost of each of the company's two products under the traditional costing system. b.Determine the unit product cost of each of the company's two products under activity-based costing system.

How much cost,in total,would be allocated in the first-stage allocation to the Order Size activity cost pool?

(Appendix 7A)The manufacturing overhead that would be applied to a unit of product R58G under the company's traditional costing system is closest to:

The activity rate under the activity-based costing system for Activity 3 is closest to which of the following?

Goel Company,a wholesale distributor,uses activity-based costing for its overhead costs.The company has provided the following data concerning its annual overhead costs and its activity-based costing system: Distribution of Resource Consumption: The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.The amount of activity for the year is as follows: Required: Compute the activity rates (i.e. ,cost per unit of activity)for the Filling Orders and Product Support activity cost pools by filling in the table below:

The overhead cost per unit of Product P under activity-based costing is closest to which of the following?

What would be the total overhead cost per customer according to the activity-based costing system,rounded to the nearest whole dollar? In other words,what would be the overall activity rate for the Customer Support activity cost pool?

Huish Awnings makes custom awnings for homes and businesses.The company uses an activity-based costing system for its overhead costs.The company has provided the following data concerning its annual overhead costs and its activity cost pools: Overhead Costs: The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.The amount of activity for the year is as follows: Required: a)Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:

Organization-sustaining activities are carried out regardless of how many units are made,how many batches are run,or how many different products are made.

Flyer Corporation manufactures two products,Product A and Product A.Product B is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct labour hours.The company estimated it would incur $396,000 in manufacturing overhead costs and produce 5,500 units of Product B and 22,000 units of Product A during the current year.Unit costs for materials and direct labour are: Required: a)Compute the predetermined overhead rate under the current method of allocation,and determine the unit product cost of each product for the current year. b)The company's overhead costs can be attributed to four major activities.These activities and the amount of overhead cost attributable to each for the current year are given below: A.Product B is the more complex of the two products,requiring three hours of direct labour time per unit to manufacture,compared to one and one-half hours of direct labour time for Product B.Product B is of fairly recent origin,having been developed as an attempt to enter a market closely related to that of Product

In general,duration drivers are more accurate measures of the consumption of resources than transaction drivers.

Worker recreational facilities are examples of costs that would ordinarily be considered to be incurred at which of the following activity levels?