Exam 4: Activity-Based Costing and Analysis

A company produces computer chips that go through two operations, operation A1 and operation B2, before they are complete.Expected costs and activities for the two departments are shown below.Departmental overhead rates are based on machine hours in department A1 and direct labor hours in department B2.Therefore, the overhead rates for department A1 and department B2 are $3.62 per machine hour and $5.73 per direct labor hour, respectively. Department Department Al B2 Machine hours 40,000 30,000 Direct labor hours 36,200 28,650 Overhead costs \ 144,800 \ 171,900

The departmental overhead rate method uses a different overhead rate for each production department.

Product design costs are an example of a unit level activity.

Greene Company uses a plantwide overhead rate with direct labor hours as the allocation base.Use the following information to solve for the amount of direct labor hours estimated per unit of product G2. Dreect material cost per unit of G 2 \ 7 Total estimated manufacturing overhead \ 795,000 Total cost per unit of G 2 \ 20 Total estimated direct labor hours 530,000 Direct labor cost per unit of G 2 \ 3.70

Which of the following would not be considered a product cost?

Batch level costs vary with the number of units produced.

A company has two products: A1 and B2.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 Product A1 Product B2 Activity 1 \ 48,000 1,200 4,800 Activity 2 4,760 Activity 3 7,200 Annual production and sales level of Product A1 is 8,480 units, and the annual production and sales level of Product B2 is 22,310 units.What is the approximate overhead cost per unit of Product B2 under activity-based costing?

Which of the following is true?

A company uses activity-based costing to determine the costs of its three products: A, B, and C.The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table: Budgeted Activity Activity Cost Pool Budgeted Cost Product A Product B Product C Activity 1 \ 425,000 1,700 680 1,870 Activity 2 \ 144,900 1,890 1,575 2,835 Activity 3 \ 85,000 2,400 1,000 1,600 Compute the company's activity rates under activity-based costing for each of the three activities.

In activity-based costing, an activity can involve several related tasks.

Which types of overhead allocation methods result in the use of more than one overhead rate during the same time period?

A company uses activity-based costing to determine the costs of its three products: A, B, and C.The activity rates and activity levels for each of the company's three activity cost pools are shown below. Budgeted Activity Activity Cost Pool Activity Rate Product A Product B Product C Activity 1 \ 19 700 1,150 650 Activity 2 \ 27 2,400 2,100 1,500 Activity 3 \ 62 600 1,350 1,050 Compute the company's budgeted cost for each of the three activities under activity-based costing.

Which of the following statements is true with regard to the plantwide overhead rate method?

A company has two products: A1 and B2.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 Product A1 Product B2 Activity 1 \ 48,000 1,200 4,800 Activity 2 4,760 Activity 3 7,200 Annual production and sales level of Product A1 is 8,480 units, and the annual production and sales level of Product B2 is 22,310 units.What is the approximate overhead cost per unit of Product A1 under activity-based costing?

Identify and explain the four control levels associated with activity-based costing.

A company allocates $7.50 overhead to each unit produced.The company uses a plantwide overhead rate with direct labor hours as the allocation base.Given the amounts below, how many direct labor hours does the company expect in department 2? Estirnated: Department 1 Departrnent 2 Maruffacturing overhead costs \ 74,358 \ 49,572 Direct labor hours 6,610 ? Machinehours 700

A _______________________ overhead rate is a single overhead rate determined by using volume-related measures.

Activity-based costing often shifts overhead costs from large volume, standardized products to low-volume, specialty products that consume disproportionate resources.

In competitive markets, price is established through the forces of _______________ and _______________.