Exam 17: Activity-Based Costing and Analysis

Upside Down,Incorporated designs custom storage spaces to eliminate clutter in both residential and business settings.The following data pertain to a recent reporting period: Required a.Use ABC to compute overhead rates for each activity. b.Assign costs to a 3,000 square foot job that requires 70 contact hours,20 design hours,and 14 days to complete.

From an ABC perspective,what causes costs to be incurred?

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,and plans to use 50,000 direct labor hours for this next year.If a product uses 5 direct labor hours,then it will be assigned $200 in overhead costs.

ABC systems ________.

Gold 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.

A company's total expected overhead costs and related overhead data are shown in the following table: a.Compute estimated manufacturing overhead costs for Department A. b.Compute estimated manufacturing overhead costs for Department B. c.Compute the departmental overhead rate based on direct labor hours for Department A. d.Compute the departmental overhead rate based on machine hours for Department B.

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

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

The ________ is the target of the cost assignment.

Would the following activities at a manufacturer of shampoo be best classified as unit-level,batch-level,product-level,or facility level activities?

Aztec Industries produces bread which goes through two operations, mixing and baking, before it is ready to be packaged. Next year's expected costs and activities are shown below. -Compute Aztec's departmental overhead rate for the mixing department based on machine hours.

Management's pricing and cost decisions for a product are influenced by that product's cost assignments.

Put the following ABC implementation steps in order ________. A Use the activity overhead rates to assign overhead costs to cost objects. B Compute the allocation rates. C Trace overhead costs to cost pools. D Identify the activities and the overhead costs they cause.

The cost object of the plantwide overhead rate method is:

Explain some of the disadvantages of the departmental overhead rate method.

Facility-level costs are not traceable to individual product lines,batches or units.

ABC assumes all costs in a ________ can be grouped together because they all impact the 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 similar proportions.

Red Raider Company uses a plantwide overhead rate with machine hours as the allocation base.Next year,400,000 units are expected to be produced requiring 1.2 machine hours each.How much overhead will be assigned to each unit produced given the following estimated amounts?

A company has two products: X and Y.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 X is 161,100 units,and the annual production and sales level of Product Y is 275,200 units. a.Compute the approximate overhead cost per unit of Product X under activity-based costing. b.Compute the approximate overhead cost per unit of Product Y under activity-based costing.