Exam 17: Activity-Based Costing and Analysis

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. Compute the company's budgeted cost for each of the three activities under activity-based costing.

How much overhead cost will be assigned to each unit of product using activity-based costing (ABC)?

The following data relates to Black-Out Company's estimated amounts for next year. What is the company's plantwide overhead rate if machine hours are the allocation base? $\bold{\text{(Round your answer to two decimal places.)}}$

A ________ is a collection of costs that are related to the same or similar activity.

The usefulness of overhead allocations based on a plantwide overhead rate depends on two crucial assumptions: (1)the overhead cost is correlated with the allocation base; and (2)all products use overhead cost in dissimilar proportions.

Cleveland Choppers manufactures two types of motorcycles,a Base and a Loaded model.The following activity and costs have been gathered: The number of components and number of setups are chosen as activity-cost drivers for overhead.Assuming an ABC costing system is being used. -What is the total overhead cost assigned to the Loaded model?

A quality-inspection cost is an example of unit-level costs.

A company expects next year's overhead costs to be $400,000.During this time,the company also expects to produce 1,000,000 units,have 200,000 direct labor hours,and 800,000 machine hours. Make the following independent calculations. a.Compute a plantwide overhead rate using units of production as the allocation base. b.Compute a plantwide overhead rate using direct labor hours as the allocation base. c.Compute a plantwide overhead rate using machine hours as the allocation base.

What are three advantages of activity-based costing over traditional volume-based allocation methods?

The more activities tracked by activity-based costing,the more accurately overhead costs are assigned.

Consider the following activities that take place in a medical clinic. (a)Cleaning exam rooms. (b)Heating and air conditioning the clinic. (c)Sending blood work to a lab. (d)Dispensing medicine. Which of the following statements is true?

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: 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?

A company identified the following partial list of activities,costs,and activity drivers expected for the next year: -Calculate activity rates for each of the three activities using activity-based costing (ABC).

Rising Sun,Inc.produces granola that requires two processes,mixing and baking,to complete.The best-selling type of granola is cherry almond delight.Information related to the 100,000 units of cherry almond delight produced annually is shown in the following table: Rising Sun's total expected overhead costs and related overhead data are shown below.The company uses departmental overhead rates based on machine hours in the mixing department and direct labor hours in the baking department. Determine the total product cost of this product line and each unit of cherry almond delight.

What is the basic principle underlying activity-based costing?

A company produces computer chips that go through two departments,department A1 and department 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.

When products differ in batch size and complexity,they usually consume different amounts of overhead resources.

Wall Nuts, Inc. produces paneling that requires two processes, A and B, to complete. Oak is the best-selling of all the many types of paneling produced. Information related to the 40,000 units of oak paneling produced annually is shown in the following table: Wall Nuts' total expected overhead costs and related overhead data are shown below. -Use the data for Wall Nuts,Inc.to compute the dollar amount of overhead applied to each unit of oak paneling,assuming the company uses departmental overhead rates based on machine hours in Department A and machine hours in Department B.

When products differ in batch size and complexity,they usually consume different amounts of ________.

ABC is more costly to implement and maintain than more traditional overhead costing systems.