Question 1

What are the overhead rates used to apply material handling (MH)and storage costs (SC)using activity-based costing?

Accepted Answer

A) MH $300/batch; SC $2.73/unit. 
B) MH $300/batch; SC $.20/lb. 
C) MH $525/batch; SC $.205/unit. 
D) MH $700/batch; SC $.205/lb. 
E) MH $700/batch; SC $8.20/lb. 
A) MH $300/batch; SC $2.73/unit. 
B) MH $300/batch; SC $.20/lb. 
C) MH $525/batch; SC $.205/unit. 
D) MH $700/batch; SC $.205/lb. 
E) MH $700/batch; SC $8.20/lb.

Question 2

The premise of ABC is that it takes activities to make products and provide services and these activities drive costs.

Accepted Answer

A) True 
 B)False

Question 3

K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utilities.The company uses direct labor hours as its overhead allocation base.If 80,000 direct labor hours are planned for this next year,how much overhead would be assigned to a product requiring 4 direct labor hours?

Accepted Answer

A) $46.25 
B) $36.25 
C) $185.00 
D) $145.00 
E) None of the choices 
A) $46.25 
B) $36.25 
C) $185.00 
D) $145.00 
E) None of the choices

Question 4

Activity-based costing involves four steps: (1)identify activities and the costs they cause,(2)group similar activities into cost pools,(3)determine an activity rate for each activity cost pool,and (4)allocate overhead costs to products using those activity rates.

Accepted Answer

A) True 
 B)False

Question 5

Kinetic Company estimates that overhead costs for the next year will be $1,600,000 for indirect labor and $400,000 for factory utilities.The company uses direct labor hours as its overhead allocation base.If 50,000 direct labor hours are planned for this next year,then the plantwide overhead rate is $.025 per direct labor hour.

Accepted Answer

A) True 
 B)False

Question 6

Identify each of the following activities as unit level (U),batch level (B),product level (P),or facility level (F)to indicate the way each is incurred with respect to production.
_____ (1)Providing electricity
_____ (2)Sampling product quality
_____ (3)Cutting parts
_____ (4)Receiving shipments
_____ (5)Organizing production
_____ (6)Printing checks
_____ (7)Providing personnel support
_____ (8)Calibrating machines
_____ (9)Cleaning workplace
_____ (10)Assembling components

Accepted Answer

(1)F,(2)B,(3)U,(4)B,

Question 7

Assume New Belgium Brewing Company manufactures and distributes three types of beer and that estimated per unit product costs and related information for the next year are shown in the following table:
   a.If New Belgium Brewing Company uses a plantwide overhead rate based on machine hours,what is the total product cost per unit of Cocoa Mole Ale?
b.Blue Paddle is a traditional brew made in large quantities with long production runs.Somersault is a seasonal beer made in small batches.Cocoa Mole Ale is a specialty beer also made in small batches.Which of the overhead allocation methods studied in this chapter would you recommend that New Belgium Brewing Company use and why?

Accepted Answer

a.
Total overhead:
= ($12,000 x 30 units

Question 8

A major disadvantage of using a plantwide overhead rate is the extreme difficulty in gathering the needed information.

Accepted Answer

A) True 
 B)False

Question 9

A company produces paint that goes through two operations,operation A and operation B,before it is complete.Expected costs and activities for the two departments are shown below.Given this information,the departmental overhead rate for Department B based on machine hours is $4 per machine hour.

Accepted Answer

A) True 
 B)False

Question 10

Compute Tasty's departmental overhead rate for the mixing department based on direct labor hours.

Accepted Answer

A) $1.50 per DLH. 
B) $5.00 per DLH. 
C) $0.75 per DLH. 
D) $0.60 per DLH. 
E) $1.67 per DLH. 
A) $1.50 per DLH. 
B) $5.00 per DLH. 
C) $0.75 per DLH. 
D) $0.60 per DLH. 
E) $1.67 per DLH.

Question 11

Blast Rocket Company manufactures candy-coated popcorn treats that go through two operations,popping and baking,before they are complete.Expected costs and activities for the two departments are shown in the following table:
   a.Compute a departmental overhead rate for the popping department based on direct labor hours.
b.Compute a departmental overhead rate for the baking department based on machine hours.

Accepted Answer

a.$357,000/238,000 D

Question 12

All of the following are examples of facility sustaining costs except:

Accepted Answer

A) Costs of cleaning the workplace. 
B) Costs of custodial work. 
C) Costs of personnel support. 
D) Costs of sampling product quality. 
E) Costs of employee recreational facilities. 
A) Costs of cleaning the workplace. 
B) Costs of custodial work. 
C) Costs of personnel support. 
D) Costs of sampling product quality. 
E) Costs of employee recreational facilities.

Question 13

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.
   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.

Accepted Answer

The answer of Bark Mode,Incorporated produces and distributes two types...

Question 14

When using the plantwide overhead rate method,total budgeted overhead costs are combined into one overhead cost pool.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following companies would be best served by a plantwide overhead rate?

Accepted Answer

A) A company that manufactures many different products and whose operations are an equal mix of labor and mechanized work. 
B) A company that manufactures few products and whose operations are labor intensive. 
C) A company that manufactures many different products and whose operations are highly mechanized. 
D) A company whose products use overhead resources in very different ways. 
E) A company whose products differ in batch size and complexity and consume different amounts of overhead resources. 
A) A company that manufactures many different products and whose operations are an equal mix of labor and mechanized work. 
B) A company that manufactures few products and whose operations are labor intensive. 
C) A company that manufactures many different products and whose operations are highly mechanized. 
D) A company whose products use overhead resources in very different ways. 
E) A company whose products differ in batch size and complexity and consume different amounts of overhead resources.

Question 16

Outer Limits,Inc.produces fencing units which require two processes,A and B,to complete.The best-selling type of fence is made of PVC.Information related to the 8,000 units of pvc fencing produced annually is shown below.
   Outer Limits' total expected overhead costs and related overhead data are shown below.The company uses departmental overhead rates based on machine hours in department A and direct labor hours in department B.
   Determine the total amount of overhead assigned to each unit of PVC fencing.

Accepted Answer

Dept.A rate: $54,600/6,500 MH = $8.40 pe

Question 17

Bond 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.

Accepted Answer

A) 1.75 DLH per unit of G2. 
B) 6.14 DLH per unit of G2. 
C) 9.3 DLH per unit of G2. 
D) 0.66 DLH per unit of G2. 
E) 11.25 DLH per unit of G2. 
A) 1.75 DLH per unit of G2. 
B) 6.14 DLH per unit of G2. 
C) 9.3 DLH per unit of G2. 
D) 0.66 DLH per unit of G2. 
E) 11.25 DLH per unit of G2.

Question 18

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 in the following table:
   Compute the company's budgeted overhead cost for each of the three products under activity-based costing.

Accepted Answer

The answer of A company uses activity-based costing to determine...

Question 19

________ is an outgrowth of ABC that draws on the link between activities and cost incurrence for better management.

Accepted Answer

Activity-b

Question 20

Activity-based costing eliminates the need for overhead allocation rates.

Accepted Answer

A) True 
 B)False

What are the overhead rates used to apply material handling (MH)and storage costs (SC)using activity-based costing?

The premise of ABC is that it takes activities to make products and provide services and these activities drive costs.

Activity-based costing involves four steps: (1)identify activities and the costs they cause,(2)group similar activities into cost pools,(3)determine an activity rate for each activity cost pool,and (4)allocate overhead costs to products using those activity rates.

A major disadvantage of using a plantwide overhead rate is the extreme difficulty in gathering the needed information.

A company produces paint that goes through two operations,operation A and operation B,before it is complete.Expected costs and activities for the two departments are shown below.Given this information,the departmental overhead rate for Department B based on machine hours is $4 per machine hour.

Compute Tasty's departmental overhead rate for the mixing department based on direct labor hours.

All of the following are examples of facility sustaining costs except:

When using the plantwide overhead rate method,total budgeted overhead costs are combined into one overhead cost pool.

Which of the following companies would be best served by a plantwide overhead rate?

Bond 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.

________ is an outgrowth of ABC that draws on the link between activities and cost incurrence for better management.

Activity-based costing eliminates the need for overhead allocation rates.

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Time Value of Money

Investments

Lean Principles and Accounting

Filters

Exam 17: Activity-Based Costing and Analysis

What are the overhead rates used to apply material handling (MH)and storage costs (SC)using activity-based costing?

The premise of ABC is that it takes activities to make products and provide services and these activities drive costs.

Activity-based costing involves four steps: (1)identify activities and the costs they cause,(2)group similar activities into cost pools,(3)determine an activity rate for each activity cost pool,and (4)allocate overhead costs to products using those activity rates.

A major disadvantage of using a plantwide overhead rate is the extreme difficulty in gathering the needed information.

A company produces paint that goes through two operations,operation A and operation B,before it is complete.Expected costs and activities for the two departments are shown below.Given this information,the departmental overhead rate for Department B based on machine hours is $4 per machine hour.

Compute Tasty's departmental overhead rate for the mixing department based on direct labor hours.

All of the following are examples of facility sustaining costs except:

When using the plantwide overhead rate method,total budgeted overhead costs are combined into one overhead cost pool.

Which of the following companies would be best served by a plantwide overhead rate?

Bond 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.

________ is an outgrowth of ABC that draws on the link between activities and cost incurrence for better management.

Activity-based costing eliminates the need for overhead allocation rates.

Accounting in Business

Accounting for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash,fraud,and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Time Value of Money

Investments

Lean Principles and Accounting

Filters