Exam 4: Activity-Based Costing

Figure 4-14 Spear Manufacturing has four categories of overhead.The four categories and expected overhead costs for each category for next year are as follows: Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours.20,000 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 15 percent.Estimates for the proposed job are as follows: In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based activity driver, direct labor hours.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 4-14.If material moves are used to assign material handling costs, the amount of material handling costs allocated to the proposed job would be

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 to Figure 4-8.Using functional-based costing, what is the amount of overhead cost to be assigned to Product X using machine hours as the allocation base?

Which of the following is NOT a limitation of a plantwide overhead rate?

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, which activities would be selected as the cost pools?

Figure 4-6 Cabrini Company produces two products: toy trucks and toy 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 trucks and 250,000 cars are produced.Please find the following data: -Refer to Figure 4-6.How much was overhead over or underapplied?

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 4-19.What is (are) the facility-level activity(ies)?

The use of unit-based activity drivers to assign costs tends to

Unit-based product costing uses which of the following procedures?

Which of the following quantities is an example of an activity driver in activity-based costing?

An activity-based costing system uses which of the following procedures?

Unit-level product costing assigns

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 batch-level activity(ies)?

For a labor-intensive manufacturing operation, which of the following would be the most appropriate activity driver?

A costing system that uses actual costs for direct materials and labor and predetermined overhead rates to apply overhead is called a(n)

A(n)_______________ is a grouping of logically related information.

Figure 4-6 Cabrini Company produces two products: toy trucks and toy 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 trucks and 250,000 cars are produced.Please find the following data: -Refer to Figure 4-6.How much overhead is applied to the trucks?

King Manufacturing has four categories of overhead.The four categories and expected overhead costs for each category for next year are as follows: Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours.50,000 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 30 percent. Estimates for the proposed job are as follows: In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based activity driver, direct labor hours.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: Required:

If activity-based costing is used, setups would be classified as a

Figure 4-18 Ubben 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 costs are reported: - Refer to Figure 4-18.Machine-related overhead would be classified as a

Unit-level cost drivers create distortions when