Question 1

How does ABC differ from using multiple departmental rates?

Accepted Answer

ABC differs from using multiple departme

Question 2

Direct labor,direct materials,and manufacturing overhead are all product costs.Why is overhead more difficult to account for than either direct labor or direct materials?

Accepted Answer

Overhead costs are not directl

Question 3

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:
   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.

Accepted Answer

The answer of A company has two products: Big and...

Question 4

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.
   Freeze Frame's total expected overhead costs and related overhead data are shown below:
  
-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?

Accepted Answer

a.$540,000/90,000 DLH = $6 per DLH
b.($6

Question 5

Data concerning volume-related measures are readily available in most manufacturing settings.

Accepted Answer

A) True 
 B)False

Question 6

________ is considered while choosing a cost allocation base for activity costs in ABC costing.

Accepted Answer

A) The marketing strategy of the products being produced 
B) The product sales price 
C) The availability of reliable data and metrics 
D) The number of employees in direct labor 
E) The number of departments 
A) The marketing strategy of the products being produced 
B) The product sales price 
C) The availability of reliable data and metrics 
D) The number of employees in direct labor 
E) The number of departments

Question 7

Compared to the plantwide overhead rate method,the departmental overhead rate method usually results in more accurate overhead allocations.

Accepted Answer

A) True 
 B)False

Question 8

Examples of volume-related measures include direct labor hours and machine hours.

Accepted Answer

A) True 
 B)False

Question 9

Name and briefly describe three overhead rate methods.

Accepted Answer

The plantwide overhead rate method uses

Question 10

The departmental overhead rate method traces costs to each department and then determines an allocation base for each department.

Accepted Answer

A) True 
 B)False

Question 11

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

Accepted Answer

Activity 1: $425,000/(1,700 +

Question 12

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 departmental overhead rates based on machine hours in Department A and machine hours in Department B.

Accepted Answer

A) $4.50 per MH in Dept.A; $4.50 per MH in Dept.B. 
B) $7.50 per MH in Dept.A; $7.50 per MH in Dept.B. 
C) $4.50 per MH in Dept.A; $7.50 per MH in Dept.B. 
D) $2.70 per MH in Dept.A; $6.00 per MH in Dept.B. 
E) $0.60 per MH in Dept.A; $0.80 per MH in Dept.B. 
A) $4.50 per MH in Dept.A; $4.50 per MH in Dept.B. 
B) $7.50 per MH in Dept.A; $7.50 per MH in Dept.B. 
C) $4.50 per MH in Dept.A; $7.50 per MH in Dept.B. 
D) $2.70 per MH in Dept.A; $6.00 per MH in Dept.B. 
E) $0.60 per MH in Dept.A; $0.80 per MH in Dept.B.

Question 13

Which of the following costing systems is more accurate for overhead cost allocation and most likely to allow managers the ability to make better pricing decisions?

Accepted Answer

A) Departmental overhead allocation rates. 
B) Plantwide overhead rate. 
C) Activity-based costing. 
D) Traditional costing system. 
E) Direct costing. 
A) Departmental overhead allocation rates. 
B) Plantwide overhead rate. 
C) Activity-based costing. 
D) Traditional costing system. 
E) Direct costing.

Question 14

A company estimates that overhead costs for the next year will be $7,200,000 for indirect labor,$400,000 for factory utilities,and $43,000 for depreciation on factory machinery.The company uses direct labor hours as its overhead allocation base.If 955,375 direct labor hours are planned for this next year,what is the company's plantwide overhead rate?

Accepted Answer

($7,200,000 + $400,0

Question 15

Product costs consist of direct labor,direct materials,and overhead (indirect)costs.

Accepted Answer

A) True 
 B)False

Question 16

________ costs support the company as a whole.

Accepted Answer

A) Batch-level 
B) Product-level 
C) Unit-level 
D) Facility-level 
E) Activity 
A) Batch-level 
B) Product-level 
C) Unit-level 
D) Facility-level 
E) Activity

Question 17

Departments are the cost objects when the plantwide overhead rate method is used.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) $3.45 per DLH 
B) $5.45 per DLH 
C) $0.29 per DLH 
D) $0.26 per DLH 
E) $0.20 per DLH 
A) $3.45 per DLH 
B) $5.45 per DLH 
C) $0.29 per DLH 
D) $0.26 per DLH 
E) $0.20 per DLH

Question 19

ABC can be used to assign costs to any cost object that is of management interest.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A) It is logical to use this method when overhead resources are consumed by various products in substantially the same way throughout multiple departments. 
B) It is logical to use this method when overhead resources are consumed by various products in substantially different ways throughout multiple departments. 
C) Each department has the same rate for the same activity pool. 
D) It requires one overhead cost pool and one rate. 
E) It is the same as activity-based costing. 
A) It is logical to use this method when overhead resources are consumed by various products in substantially the same way throughout multiple departments. 
B) It is logical to use this method when overhead resources are consumed by various products in substantially different ways throughout multiple departments. 
C) Each department has the same rate for the same activity pool. 
D) It requires one overhead cost pool and one rate. 
E) It is the same as activity-based costing.

Exam 17: Activity-Based Costing and Analysis

How does ABC differ from using multiple departmental rates?

Direct labor,direct materials,and manufacturing overhead are all product costs.Why is overhead more difficult to account for than either direct labor or direct materials?

Data concerning volume-related measures are readily available in most manufacturing settings.

________ is considered while choosing a cost allocation base for activity costs in ABC costing.

Compared to the plantwide overhead rate method,the departmental overhead rate method usually results in more accurate overhead allocations.

Examples of volume-related measures include direct labor hours and machine hours.

Name and briefly describe three overhead rate methods.

The departmental overhead rate method traces costs to each department and then determines an allocation base for each department.

Which of the following costing systems is more accurate for overhead cost allocation and most likely to allow managers the ability to make better pricing decisions?

Product costs consist of direct labor,direct materials,and overhead (indirect)costs.

________ costs support the company as a whole.

Departments are the cost objects when the plantwide overhead rate method is used.

ABC can be used to assign costs to any cost object that is of management interest.

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

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