Exam 4: Activity-Based Costing

The justification for not using a departmental rate for overhead cost assignment is that it increases accuracy.

Figure 4-8 Tandem Company manufactures two products (D and F). The overhead costs ($84,000) have been divided into three cost pools that use the following activity drivers: Refer to Figure 4-8. Using functional-based costing, what is the amount of overhead cost to be assigned to Product D using machine hours as the allocation base?

A possible solution to overcome distortions caused by unit level rates is

Figure 4-20 Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. Costs have been assigned to each activity using direct tracing and resource drivers: Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity. Refer to Figure 4-20. First, determine the overhead costs assigned to model D using the two most expensive activities for cost pools. The costs of the two relatively inexpensive activities are allocated to the two most expensive activities in proportion to their costs. (Round to two decimal places.)What is the error in the overhead cost assigned to model D using ABC (4 driver model) as the benchmark?

The following information pertains to Whitestone Industries for 2014: What is the predetermined overhead rate for Whitestone Industries for 2014?

Figure 4-6 The Fast & Furious Company produces two products: toy planes and toy race cars. They use departmental overhead rates for the two production departments: molding and finishing. Molding uses machine hours to assign overhead and Finishing uses direct labor hours. 50,000 planes and 250,000 race cars are produced. Please find the following data: Refer to Figure 4-6. What is the overhead per unit for race cars? (round to 3 decimal places)

Figure 4-11 Longview Manufacturing Company manufactures two products (I and II). The overhead costs ($58,000) have been divided into three cost pools that use the following activity drivers: Refer to Figure 4-11. What is the allocation rate per order using ABC?

If activity-based costing is used, modifications made by engineering to the product design of several products would be classified as a

An activity-based costing system traces costs to activities and then to products and other cost objects.

Figure 4-1 The Foremost Company predicted factory overhead for 2013 and 2014 would be $120,000 for each year. The predicted activity for 2013 and 2014 were 30,000 and 20,000 direct labor hours, respectively. Additional data are as follows: The company assumes that the long-run normal production level is 20,000 direct labor hours per year. The actual factory overhead cost for the end of 2013 and 2014 was $120,000. Assume that it takes one direct labor hour to make one finished unit. Refer to Figure 4-1. When the annual estimated factory overhead rate is used, the gross profits for 2013 and 2014, respectively, are

The following information is provided by the Sutton Corporation for the year: If normal costing is used, budgeted overhead used to calculate the predetermined rate would be

__________ drivers create distortions when different products utilize resources differently. or

Bienvenue, Inc., has identified the following overhead costs and activity drivers for next year: The following are two of the jobs completed during the year: The company's normal activity is 4,000 direct labor hours. If the activity drivers are used to allocate overhead costs, the unit cost (rounded to two decimal places) for Job DD would be

Figure 4-12 The Gardenview Corporation has identified the following overhead costs and activity drivers for next year: The following are two of the jobs completed during the year: The company's normal activity is 2,000 direct labor hours. Refer to Figure 4-12. If kilowatt hours are used to assign power costs, the amount of power costs assigned to Job 6A would be

Figure 4-8 Tandem Company manufactures two products (D and F). The overhead costs ($84,000) have been divided into three cost pools that use the following activity drivers: Refer for Figure 4-8. What is the allocation rate per packing order using activity-based costing?

Figure 4-20 Quasi-Tech Corporation produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. Costs have been assigned to each activity using direct tracing and resource drivers: Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity. Refer to Figure 4-20. Determine the engineering costs assigned to model C using the two most expensive activities for cost pools. The costs of the two relatively inexpensive activities are allocated to the two most expensive activities in proportion to their costs. (Round to two decimal places.)The engineering cost assigned to model C would be

If overhead is a significant proportion of the unit manufacturing costs, the distortion caused by using multi-level drivers can be serious.

Figure 4-2 The following information is provided by the Sandman Corporation for the year: Refer to Figure 4-2. The actual overhead rate for applying manufacturing overhead is

The use of __________ activity drivers to assign costs tends to __________ high-volume products. or

Activity-based costing uses only unit-level drivers for costing.