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

In traditional costing systems,all manufacturing costs are assigned to products-even manufacturing costs that are not caused by the products.

Lionel Corporation manufactures two products,Product B and Product H.Product H is of fairly recent origin,having been developed as an attempt to enter a market closely related to that of Product B.Product H 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 $450,000 in manufacturing overhead costs and produce 7,500 units of Product H and 30,000 units of Product B 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: B.Product H is the more complex of the two products,requiring two hours of direct labour time per unit to manufacture,compared to one hour of direct labour time for Product

Arranging for a shipment of a number of different products to a customer is an example of an activity at which of the following levels?

What would be the total overhead cost per order according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Filling Orders activity cost pool?

(Appendix 7A)The predetermined overhead rate under the traditional costing system is closest to:

(Appendix 7A)The manufacturing overhead that would be applied to a unit of product R09O under the activity-based costing system is closest to:

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

Unit-level activities arise as a result of the total volume of production and are performed each time a unit is produced.

To the nearest whole dollar,how much wages and salaries cost would be allocated to a customer who placed eight orders in a year?

The overhead cost per unit of Product B 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?

Setting up equipment is an example of an activity at which of the following levels?

Which of the following activity levels is an example of the clerical activity associated with processing purchase orders to produce an order for a standard product?

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?

Activity-based-costing (ABC)charges products for the cost of capacity used,NOT for idle capacity. Required: a)The use of which activity level,budgeted (same as expected)or maximum capacity,is consistent with ABC? Explain. b)How might the use of ABC based on maximum capacity activity level enhance a firm's ability to compete on price? Explain.

To the nearest whole dollar,how much wages and salaries cost would be allocated to a customer who placed four orders in a year? Do not round intermediate calculations.

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

According to the activity-based costing system,what was the total cost (including the costs of raw ingredients)of the function mentioned above,rounded to the nearest whole dollar?

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

Testing a prototype of a new product is an example of an activity at which of the following levels?