Exam 4: Activity Based Costing

If a company's plant-wide overhead rate is allocated based on direct labour hours,then each job will be allocated manufacturing overhead based on the total direct labour hours incurred on the job,regardless of the manufacturing department in which those hours were incurred.

Sparrow Manufacturing manufactures small parts and uses an activity-based costing system. The following parts were produced in October with the following information: Total unit cost for part B is

Rhapsody Corporation manufactures several different products and uses an activity-based costing system.Information from its system for the year for all products follows: The annual production and sales of one of its products,the Sizzler,are 1,000 units.The following data relate to the production and sales of Sizzlers in the most recent year: Required: A.Calculate the activity cost pool rates for each of the three activity cost pools listed. B.Calculate the average cost of one Sizzler.

Companies that use departmental overhead rates trace direct materials and direct labour to cost objects just as in a traditional costing systems.

The Highland Corporation uses departmental overhead rates to allocate its manufacturing overhead to jobs.The company has two departments-cutting and painting.The Cutting Department uses a departmental overhead rate of $15 per machine hour,while the Painting Department uses a departmental overhead rate of $9 per direct labour hour.Job 586 used the following direct labour hours and machine hours in the two departments: The cost for direct labour is $25 per direct labour hour and the cost of the direct materials used by Job 586 is $900. Required: What was the total cost of Job 586 if the Highland Corporation used the departmental overhead rates to allocate manufacturing overhead?

Hinckley & Granger Company had the following activities,estimated indirect activity costs,and allocation bases: Hinckley & Granger uses activity-based costing. The above activities are used by Departments P and Q as follows: What is the cost per driver unit for the account verification activity?

Hinckley & Granger Company had the following activities,estimated indirect activity costs,and allocation bases: Hinckley & Granger uses activity-based costing. The above activities are used by Departments P and Q as follows: How much of the correspondence cost will be assigned to Department P?

The benefits of using the ABC costing system are higher if the company

Green Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers.Green Bags Company sells the bags in cases of 1,000 bags.The bags come in three sizes-Large,Medium,and Small.Currently,Green Bags Company uses a single plant-wide overhead rate to allocate its $7,141,100 of annual manufacturing overhead.Of this amount,$1,875,000 is associated with the Large Bag line,$2,992,500 is associated with the Medium Bag line,and $2,273,600 is associated with the Small Bag line.Green Bags Company is currently running a total of 37,000 machine hours-12,500 in the Large Bag line,13,300 in the Medium Bag line,and 11,200 in the Small Bag line.Green Bags Company uses machine hours as the cost driver for manufacturing overhead costs. The plant-wide manufacturing overhead rate would be closest to

Bond Industries uses departmental overhead rates to allocate its manufacturing overhead to jobs.The company has two departments,Assembly and Sanding.The Assembly Department uses a departmental overhead rate of $20 per machine hour,while the Sanding Department uses a departmental overhead rate of $15 per direct labour hour.Job 542 used the following direct labour hours and machine hours in the two departments: The cost for direct labour is $25 per direct labour hour and the cost of the direct materials used by Job 542 is $1,200. How much manufacturing overhead would be allocated to Job 542 using the departmental overhead rates?

Traditions Home Accessories Company manufactures pillows using an activity-based costing system to allocate all manufacturing conversion costs.The following information is provided for the month of June: Each pillow consists of 3 parts;the total direct materials cost per pillow is $8.00. If the cost to purchase the same pillow from a supplier is $17.00,what should Traditions Home Accessories do to maximize profits?

Activity-based management refers to using activity-based cost information to make decisions that may increase profits while satisfying customers' needs.

Companies often refine their cost allocation systems to minimize the amount of cost distortion caused by the simpler cost allocation systems.

Clucker Chicken produces several styles of precooked and package chicken wings (drums, tips,buffalo and coated with a variety of spices and sauces).Each style of wing requires different preparation time,different cooking and draining times and different packaging.Therefore the company management has decided to try ABC costing to better capture the manufacturing overhead costs incurred by each style of wing.The following activities related to yearly manufacturing overhead costs and cost drivers have been identified: Compute the activity cost allocation rates for each activity assuming the following total estimated activity for the year: 45,000 hours preparation time,45,000 cooking and draining hours,and 9,000,000 packages.

Activity-based costing considers ________ to be the fundamental cost object.

Pittinger Company manufactures cuckoo clocks and uses an activity-based costing system to allocate all manufacturing conversion costs.Each cuckoo clock consists of 10 separate parts totaling $120 in direct materials,and requires 2.0 hours of machine time to produce.Additional information follows: What is the total manufacturing cost per cuckoo clock?

Sparrow Manufacturing manufactures small parts and uses an activity-based costing system. The following parts were produced in October with the following information: Total manufacturing costs for part C is

Using factory utilities would most likely be classified as a

Franklin Corporation manufactures a wide variety of products and uses an activity-based costing system.Data from its activity-based costing system for all products follows: What is the engineering cost pool rate per engineering hour?

Kepple Manufacturing currently uses a traditional costing system.The company allocates overhead to its two products,Zips and Dees,using a predetermined manufacturing overhead rate based on direct labour hours.Here is data related to the company's two products: Information about the company's estimated manufacturing overhead for the year follows: Total estimated direct labour hours for the company for the year are 110,000 hours. The company is evaluating whether it should use an activity-based costing system in place of its traditional costing system.Additional information about production needed for the activity-based costing system follows: The amount of manufacturing overhead that would be allocated to one unit of Zips using the traditional costing system would be closest to