Exam 7: Activity-Based Costing and Management

List two benefits and two costs companies incur when they implement an ABC costing system.

Quick Start Engines has two departments, Assembly and Testing. You are given the following information about the costs of 5 activities that occur at the manufacturing plant monthly: Activity Total Costs Volume of Cost Driver Material handling $100,000 200,000 parts Supervision of direct labour 105,000 70 employees Janitorial and cleaning 150,000 3,000 hours Machining 240,000 6,000 machine hours Total costs $595,000 The above activities are used by the two departments as follows: Assembly Testing Material handling 150,000 parts 50,000 parts Supervision of direct labour 30 employees 40 employees Time spent cleaning 2,000 hours 1,000 hours Number of machine hours 4,000 machine hours 2,000 machine hours How much of the total activity costs will be allocated to Assembly?

Costs assigned to an activity pool for vaccinating children at a Well Child clinic are $2,700 per month. Number of vaccinations is chosen as cost driver. On average, 300 vaccinations are given monthly. What is the ABC allocation rate for this activity?