Exam 4: Activity-Based Costing

Figure 4-19 Owens 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.In addition, there is a sustaining process with two activities: providing utilities (plantwide) and providing space.Costs have been assigned to each activity using direct tracing and resource drivers: Activity drivers for each activity have been identified and their practical capacities listed: The costs of facility-level activities are assigned using machine hours. - Refer to Figure 4-19.What is (are) the unit-level activity(ies)?

Figure 4-16 Newman Company recently installed an activity-based relational database.Using the information contained in the activity relational table, the following pool rates were computed: $400 per purchase order $24 per machine hour, Process 1 $30 per machine hour, Process 2 $80 per engineering hour Two products are produced by Special Products: X and Y.The plant has two manufacturing processes, Process 1 and Process 2.Other processes include engineering, product handling, and procurement.Product X goes through Process 1 while Product Y goes through Process 2.The product relational table for Special Products is as follows: - Refer to Figure 4-16.How much machine overhead cost will be assigned to Product X using Process 1?

If activity-based costing is used, electricity usage would be an example of a

Figure 4-10 The Emmanuele Company has collected the following data for use in calculating product costs: Activity Data: (expected and actual) Departmental Data: (expected and actual) - Refer to Figure 4-10.Emmanuele Company uses departmental overhead rates: Molding uses machine hours and Assembly uses labor hours.What is the unit product cost for brooms if departmental overhead rates are used?

Kramer Company has decided to use a predetermined rate to assign factory overhead to production.The following predictions have been made for 2011: Required:

Figure 4-21 Jones Manufacturing uses an activity-based costing system.The company produces Model X and Model Y.Information relating to the two products is as follows: The following overhead costs are reported for the following activities of the production process: Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table below: Jones Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment. - Refer to Figure 4-21.Using ABC as the benchmark, What is the percentage error in the cost assigned to Model Y using the approximately relevant ABC approach? (round to 4 decimal places)

Figure 4-1 Adams Company predicted factory overhead for 2010 and 2011 would be $120,000 for each year.The predicted activity for 2010 and 2011 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 2009 and 2010 was $120,000.Assume that it takes one direct labor hour to make one finished unit. - Refer to Figure 4-1.When the normal factory overhead rate is used, the gross profits for 2010 and 2011, respectively, are

Which of the following is NOT an advantage of a time-driven ABC system?

Figure 4-16 Newman Company recently installed an activity-based relational database.Using the information contained in the activity relational table, the following pool rates were computed: $400 per purchase order $24 per machine hour, Process 1 $30 per machine hour, Process 2 $80 per engineering hour Two products are produced by Special Products: X and Y.The plant has two manufacturing processes, Process 1 and Process 2.Other processes include engineering, product handling, and procurement.Product X goes through Process 1 while Product Y goes through Process 2.The product relational table for Special Products is as follows: - Refer to Figure 4-16.What is the unit cost of Product Y?

Godwin 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.In addition, there is a sustaining process with two activities: providing utilities (plantwide) and providing space.Costs have been assigned to each activity using direct tracing and resource drivers: Activity drivers for each activity have been identified and their practical capacities listed: The costs of batch-level activities are assigned using number of setups. The costs of facility-level activities are assigned using machine hours. Required:

If operations run on less than full capacity, what is the result on cost driver rates?

Figure 4-21 Jones Manufacturing uses an activity-based costing system.The company produces Model X and Model Y.Information relating to the two products is as follows: The following overhead costs are reported for the following activities of the production process: Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table below: Jones Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment. - Refer to Figure 4-21.Under this new approach using consumption ratios for labor related and machine hours, the overhead assigned to labor related activities would be? (round to 5 decimal places)

Figure 4-9 Winter Manufacturing has four categories of overhead.The four categories and expected overhead costs for each category for next year are listed as follows: Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours.100,000 direct labor hours are budgeted for next year. The company has been asked to submit a bid for a proposed job.The plant manager feels that obtaining this job would result in new business in future years.Usually bids are based upon full manufacturing cost plus 10 percent. Estimates for the proposed job are as follows: The plant manager has heard of a new way of applying overhead that uses cost pools and activity drivers.Expected activity for the four activity drivers that would be used are: -Refer to Figure 4-9.What is the amount of overhead allocated to the proposed job if Winter Manufacturing uses direct labor hours as its only activity driver?

Figure 4-21 Jones Manufacturing uses an activity-based costing system.The company produces Model X and Model Y.Information relating to the two products is as follows: The following overhead costs are reported for the following activities of the production process: Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table below: Jones Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment. - Refer to Figure 4-21.Under this new approach, what cost would be assigned to the labor related cost pool?

The proportion of an overhead activity consumed by a product is the

Figure 4-16 Newman Company recently installed an activity-based relational database.Using the information contained in the activity relational table, the following pool rates were computed: $400 per purchase order $24 per machine hour, Process 1 $30 per machine hour, Process 2 $80 per engineering hour Two products are produced by Special Products: X and Y.The plant has two manufacturing processes, Process 1 and Process 2.Other processes include engineering, product handling, and procurement.Product X goes through Process 1 while Product Y goes through Process 2.The product relational table for Special Products is as follows: - Refer to Figure 4-16.How much engineering overhead cost will be assigned to Product Y using engineering hours?

Products might consume overhead in different proportions due to differences in

Figure 4-10 The Emmanuele Company has collected the following data for use in calculating product costs: Activity Data: (expected and actual) Departmental Data: (expected and actual) - Refer to Figure 4-10.What is the activity rate for moving materials?

Figure 4-8 Zipp Company manufactures two products (X and Y).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 4-4 Erickson Company made the following predictions for 2011: Job A2 (which was started and completed in May) used 3,000 direct labor hours, 2,000 machine hours, and $57,000 of prime costs. - Refer to Figure 4-4.If factory overhead is applied based on machine hours, the cost of Job A2 for the Erickson Company is