Exam 3: How Does an Organization Use Activity-Based Costing to Allocate Overhead Costs

One important reason that managers allocate overhead costs to products is to provide information for decision making.

Which of the following is not an advantage of using activity-based costing (ABC)?

Exhibit 3-3 Metro Inc.has two production departments (Lamination and Molding)and three service departments (Human Resources,Technology Support,and Purchasing).Service department costs are allocated to production departments using the direct method.The $200,000 costs of Human Resources are allocated based on the number of employees in each production department.The $400,000 costs of Technology Support are allocated based on hours of technology support used by each production department.The $120,000 of Purchasing is allocated on the pounds of raw materials purchased for each production department.Information for each production department is as follows: -Refer to Exhibit 3-3.Using the direct method of allocating service department costs to production departments,how much of the Technology Support service department costs should be allocated to the Lamination Department?

Which of the following statements best describes the major difference between activity-based costing (ABC)and activity-based management (ABM)?

Which of the following items is not a product or customer-level activity?

Exhibit 3-3 Metro Inc.has two production departments (Lamination and Molding)and three service departments (Human Resources,Technology Support,and Purchasing).Service department costs are allocated to production departments using the direct method.The $200,000 costs of Human Resources are allocated based on the number of employees in each production department.The $400,000 costs of Technology Support are allocated based on hours of technology support used by each production department.The $120,000 of Purchasing is allocated on the pounds of raw materials purchased for each production department.Information for each production department is as follows: -Refer to Exhibit 3-3.Using the direct method of allocating service department costs to production departments,how much of the Purchasing service department costs should be allocated to the Molding Department?

Which of the following shows the steps required to implement activity-based costing in the correct order?

Gabriel Company uses the department approach for allocating overhead.The Assembly Department uses direct labor hours as its allocation base and the Grinding Department uses machine hours as its allocation base.The data for each is as follows: What is the allocation rate for each Department (round to the nearest cent)?

U.S.Generally Accepted Accounting Principles require all manufacturing costs be allocated to products for inventory costing purposes.

All of the following can be performed using ABC and ABM except:

Kathy Edwards owns a landscape maintenance service that has two major segments,residential and commercial.Kathy is trying to decide whether she should use traditional costing or activity-based costing,so she develops the following estimates for her analysis and asks you to help. The business also has overhead costs for equipment maintenance,transportation,and general activities of $360,000.

Exhibit 3-3 Metro Inc.has two production departments (Lamination and Molding)and three service departments (Human Resources,Technology Support,and Purchasing).Service department costs are allocated to production departments using the direct method.The $200,000 costs of Human Resources are allocated based on the number of employees in each production department.The $400,000 costs of Technology Support are allocated based on hours of technology support used by each production department.The $120,000 of Purchasing is allocated on the pounds of raw materials purchased for each production department.Information for each production department is as follows: -Refer to Exhibit 3-3.Using the direct method of allocating service department costs to production departments,how much of the Human Resource service department costs should be allocated to the Lamination Department?

Organizations that use activity-based costing to allocate overhead typically have many different products and complex operations.

Which of the following is not a reason that managers allocate overhead costs to products?

Companies with one product that requires very little variation in production may not benefit from an ABC system as much as companies with multiple products and complex production processes.

The following estimated overhead cost information is available for Michaels Company for the most recent year. The company anticipates the following activity levels during the year: 5,000 purchase orders issued;7,000 shipments received;80,000 machine setups performed;and 9,000 inspections conducted. What is the overhead rate for the quality control activity?

Step one of an activity-based costing (ABC)system is to:

As costing systems become more complex,they become more expensive to implement.

Which of the following focuses on promoting the efficient use of resources?

Which of the following is an advantage of using activity-based costing (ABC)?