Exam 4: Activity-Based Costing and Analysis

The ________________________ is the target of the cost assignment.

Machine setup costs are an example of a batch level activity.

A company has two products: A and B.It uses activity-based costing and has prepared the following analysis showing budgeted costs and activities.Use this information to compute (a)the company's overhead rates for each of the three activities and (b)the amount of overhead allocated to Product A. Budgeted Activity Activity Cost Pool Budgeted Overhead Cost Product A Product B Total Activity 1 \ 160,000 400 1,600 2,000 Activity 2 \ 110,000 2,000 1,000 3,000 Activity 3 \ 180,000 1,200 10,800 12,000 Total budgeted overhead \ 450,000

Time Bender Company makes watches and clocks.The following estimated data are available for the company's next fiscal year: Total direct labor costs: $1,700,000 Total setup costs: $190,000 Watches Clocks Expected production 800,000 100,000 Direct labor hours needed 68,000DLH 17,000DL.H Machine setups needed 1,000 setups 1,000 setups Determine the setup cost per unit for the watches and the clocks if setup costs are assigned using a plantwide overhead rate based on direct labor hours.(Round to two decimal places.)

What are the main advantages of traditional volume-based allocation methods compared to activity-based costing?

A company has two products: Big and Little.It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools: Budgeted Activity Activity Cost Pool Budgeted Cost Big Product Little Product Activity 1 \ 7,000 1,200 2,800 Activity 2 \ 91,000 5,250 1,750 Activity 3 \ 88,000 ,200 4,800 Annual production and sales level of big product is 62,525 units, and the annual production and sales level of little product is 251,900 units. a.Compute the approximate overhead cost per unit of big product under activity-based costing. b.Compute the approximate overhead cost per unit of little product under activity-based costing.

A company produces garden benches that go through two operations, operation 1A1 and operation 2B2, before they are complete.Expected costs and activities for the two departments are shown below.Both departments have departmental overhead rates based on machine hours.Therefore, the overhead rates for department 1A1 and department 2B2 are the same. Department Department 1 2 Machine hours 70,000 60,000 Direct labor hours 56,350 50,160 Overhead costs \ 225,400 \ 250,800

Superior Products Manufacturing identified the following data in its two production departments: Assembly Firishing Marufacturing overhead costs \ 225,000 \ 420,000 Direct labor hours worked 6,600 10,000 Machine hours used 2,400 5,200 Compute departmental overhead rates assuming the Assembly rate is based on machine hours and the Finishing rate is based on direct labor hours.

Which of the following is not true?

Yellow Company uses a plantwide overhead rate with machine hours as the allocation base.Use the following information to solve for the amount of machine hours estimated per unit of product RST. Direct material cost per unit of RST \ 12 Total estimated manufacturing overhead \ 200,000 Total cost per unit of RST \ 75 Total estimated machine hours 100,000 Direct labor cost per unit of RST \ 23

Explain cost flows for activity-based costing.

The _______________ stage of ABC is to compute an activity rate for each cost pool and then use this rate to allocate overhead costs to products.

A method of assigning overhead costs to a product using a single overhead rate is:

In competitive markets, the price of a given product is established through the forces of supply and demand.

Activity-based costing first assigns costs to products and then uses these product costs to assign costs to manufacturing activities.

Bark Mode, Incorporated produces and distributes two types of security systems, Standard and Deluxe.Budgeted cost and activity for each of its three activity cost pools are shown below. The company plans to produce and sell 120,000 standard units and 80,000 deluxe units. Budgeted Activity Activity Cost Pool Budgeted Cost Stardard Deluxe Packaging \ 100,000 120,000 finished units 80,000 firished urits Material hardling \ 49,600 600,000 total parts 640,000 total parts Production setups \ 120,000 6 total setups 14 total setups a.Compute the approximate overhead cost per unit of standard under activity-based costing. b.Compute the approximate overhead cost per unit of deluxe under activity-based costing.

Assume that a pet food manufacturer is considering adding two types of pet food to its existing product line. Research had determined that good demand exists for dog food in 40-pound bags and cat food in 1/2pound cans. The company identified the following partial list of activities, costs, and activity drivers expected for the next year: Activity Expected Costs Cost Driver Handling materials \ 105,000 Number of batches made Storage costs \ 820,000 Weight of finished product Dog Food Cat Food Production volume 100,000 units 200,000 units Batches made 200 batches 150 batches -Refer to the data above.How much overhead cost will be assigned to the dessert bar product line using activity-based costing (ABC)?

Assume that a pet food manufacturer is considering adding two types of pet food to its existing product line. Research had determined that good demand exists for dog food in 40-pound bags and cat food in 1/2pound cans. The company identified the following partial list of activities, costs, and activity drivers expected for the next year: Activity Expected Costs Cost Driver Handling materials \ 105,000 Number of batches made Storage costs \ 820,000 Weight of finished product Dog Food Cat Food Production volume 100,000 units 200,000 units Batches made 200 batches 150 batches -Refer to the data above.What are the overhead rates used to apply material handling (MH)and storage costs (SC)using activity-based costing?

Lake Prairie Company uses a plantwide overhead rate with machine hours as the allocation base.Next year, 500,000 units are expected to be produced taking .75 machine hours each.How much overhead will be assigned to each unit produced given the following estimated amounts? Estimated: Department 1 Departnent 2 Marufacturing overhead costs \ 3,107,500 \ 1,520,000 Direct labor hours 150,000DLH 200,000 Machine hours 200,000 175,000

Freeze Frame, Inc.produces cameras that require three processes, A, B, and C, to complete.Digital camera model #789 is the best-selling of all the many types of cameras produced.Information related to the 550,000 units of digital camera model #789 produced annually is shown below. Direct materials \ 450,000 Direct labor Department A (7,000 DLL \times\ 21 per DLH ) \ 147,000 Department B (25,000 DLH \times\ 19 per DLH) \ 475,000 Department C (10,000 DLHH \times\ 26 per DLH) \ 260,000 Machine Hours Department A 42,000 Department B 23,000 Department C 38,000 Freeze Frame's total expected overhead costs and related overhead data are shown below: Department A Departrnent B Cepartrnent C Direct labor hours 90,000 75,000 42,000 Machine hours 67,500 135,000 53,200 Manufacturing overhead costs \ 540,000 \ 675,000 \ 399,000 a.Compute a departmental overhead rate for department A based on direct labor hours. b.How much overhead is associated with model 789 from department A? c.Compute a departmental overhead rate for department B based on direct labor hours. d.How much overhead is associated with model 789 from department B? e.Compute a departmental overhead rate for department C based on direct labor hours. f.How much overhead is associated with model 789 from department C? g What is the per unit cost of the 550,000 units of model 789?