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

It is acceptable to allocate selling costs to products when following U.S.Generally Accepted Accounting Principles.

Which of the following items is not a batch-level activity?

Exhibit 3-1 Hydrate Inc.makes two types of sports drinks and is implementing an activity-based costing system.Previously,all overhead had been applied on the basis of machine hours.The company produces 22,500 units of Sports Light and 42,284 units of Thirst Quench.Additional data is as follows: -Refer to Exhibit 3-1.Using ABC,what is the cost per order for the Materials Ordering 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: Number of Technology Pounds of Employees Support Hours Raw Materials Lamination 40 600 30,000 Molding Total -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 Molding Department?

Exhibit 3-2 Dublin Pie Company sells cherry pies and apple pies in bulk online.Estimated overhead costs for 2016 total $600,000.The accountant for Dublin identified the following information for its activity-based costing system. Activity Allocation Base Proportion of Total Overhead Cost Purchasing Number of purchase orders 25\% Processing Number of units 60\% Sales Number of sales orders 15\% The estimated activity level for each type of pie and in total is as follows: Cherry Pies Apple Pies Total Number of purchase orders 10,000 15,000 25,000 Number of units 30,000 70,000 100,000 Number of sales orders 1,000 4,000 5,000 -Refer to Exhibit 3-2.How much total overhead should be assigned to Sales Order 115 for Cherry Pies,if it requires 2 purchase orders for a total of 300 pies (or units)?

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

All of the following are methods of allocating overhead costs except:

All of the following are disadvantages of activity-based costing (ABC)except:

Which of the following items is a unit-level activity?

Exhibit 3-1 Hydrate Inc.makes two types of sports drinks and is implementing an activity-based costing system.Previously,all overhead had been applied on the basis of machine hours.The company produces 22,500 units of Sports Light and 42,284 units of Thirst Quench.Additional data is as follows: -Refer to Exhibit 3-1.What is the total overhead cost for Sports Light using ABC?

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

The following estimated overhead cost information is available for Michaels Company for the most recent year. Activity Allocation base Overhead cost Purchasing Number of purchase orders \ 400,000 Receiving Number of shipments received \ 210,000 Machine Setups Number of setups \ 320,000 Quality Control Number of inspections \ 90,000 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?

Exhibit 3-1 Hydrate Inc.makes two types of sports drinks and is implementing an activity-based costing system.Previously,all overhead had been applied on the basis of machine hours.The company produces 22,500 units of Sports Light and 42,284 units of Thirst Quench.Additional data is as follows: -Refer to Exhibit 3-1.What is the overhead cost per unit for Sports Light when all overhead is applied based on machine hours?

Indirect manufacturing costs are easily traceable to products.

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

Exhibit 3-2 Dublin Pie Company sells cherry pies and apple pies in bulk online.Estimated overhead costs for 2016 total $600,000.The accountant for Dublin identified the following information for its activity-based costing system. Activity Allocation Base Proportion of Total Overhead Cost Purchasing Number of purchase orders 25\% Processing Number of units 60\% Sales Number of sales orders 15\% The estimated activity level for each type of pie and in total is as follows: Cherry Pies Apple Pies Total Number of purchase orders 10,000 15,000 25,000 Number of units 30,000 70,000 100,000 Number of sales orders 1,000 4,000 5,000 -Refer to Exhibit 3-2.What is the overhead rate for the processing activity?

Eaton Company uses activity-based costing to allocate overhead costs to products.When figuring the cost of ordering raw materials,which of the following is likely the best cost driver for this activity?

A collection of overhead costs,typically organized by department or activity,is called a:

Facility-level activities are activities required to develop,produce and sell specific types of products.

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: Number of Technology Pounds of Employees Support Hours Raw Materials Lamination 40 600 30,000 Molding Total -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 Molding Department?