Question 1

Product costs consist of direct labor, direct materials and ______________.

Accepted Answer

manufactur

Question 2

________________________ focuses on activities and the cost of carrying out activities.

Accepted Answer

Activity-b

Question 3

Base Runner, Inc. manufactures baseball bats which go through two operations, cutting and sanding, before they are complete. Expected costs and activities for the two departments are shown below.
$$\begin{array} { | l | c | c | } 
\hline & \text { Cutting } & \text { Sanding } \
\hline \text { Direct labor hours } & 50,000 \mathrm { DLH } & 5,000 \mathrm { DLH } \
\hline \text { Machine hours } & 25,000 \mathrm { MH } & 50,000 \mathrm { MH } \
\hline \text { Overhead costs } & \$ 50,000 & \$ 37,500 \
\hline
\end{array}$$
(a.) Compute a departmental overhead rate for the cutting department based on machine hours.
(b.) Compute a departmental overhead rate for the sanding department based on machine hours.

Accepted Answer

(a.) $50,000/25,000

Question 4

A company has two products: A1 and B2. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools.
  
 Annual production and sales level of Product A1 is 8,480 units, and the annual production and sales level of Product B2 is 22,310 units. What is the approximate overhead cost per unit of Product A1 under activity-based costing?

Accepted Answer

A)  $8.00 
B)  $9.00 
C)  $10.00 
D)  $12.00 
E)  $4.00 
A)  $8.00 
B)  $9.00 
C)  $10.00 
D)  $12.00 
E)  $4.00

Question 5

Distorted product cost information can result in poor decisions.

Accepted Answer

A) True 
 B)False

Question 6

Aztec Industries produces bread which goes through two operations, mixing and baking, before it is ready to be packaged. Next year's expected costs and activities are shown below.
 
-Compute Aztec's departmental overhead rate for the baking department based on machine hours.

Accepted Answer

A)  $1.50 per MH. 
B)  $5.00 per MH. 
C)  $0.75 per MH. 
D)  $0.50 per MH. 
E)  $2.08 per MH. 
A)  $1.50 per MH. 
B)  $5.00 per MH. 
C)  $0.75 per MH. 
D)  $0.50 per MH. 
E)  $2.08 per MH.

Question 7

The cost to heat a manufacturing facility can be directly linked to the number of units produced.

Accepted Answer

A) True 
 B)False

Question 8

A company has two products: A andB. It uses activity based costing and has prepared the following analysis showing budgeted costs and activities. Use this information to compute (a) the company's overhead rates on each of the three activities and (b) the amount of overhead allocated to ProductA.

Accepted Answer

(a) (1) rate = $160,000/2,000

Question 9

What are the main advantages of traditional volume-based allocation methods compared to activity-based costing?

Accepted Answer

A)  Traditional volume-based methods are easier to use and less costly to implement and maintain. 
B)  Traditional volume-based methods are more accurate and allowed by GAAP. 
C)  Traditional volume-based methods are less accurate and easier to use. 
D)  Traditional volume-based methods are harder to use and more costly to implement and maintain. 
E)  There are no advantages to using traditional volume-based methods. 
A)  Traditional volume-based methods are easier to use and less costly to implement and maintain. 
B)  Traditional volume-based methods are more accurate and allowed by GAAP. 
C)  Traditional volume-based methods are less accurate and easier to use. 
D)  Traditional volume-based methods are harder to use and more costly to implement and maintain. 
E)  There are no advantages to using traditional volume-based methods.

Question 10

The ________________________ is the target of the cost assignment.

Accepted Answer

The answer of The ________________________ is the target of the...

Question 11

Slosh, Inc. produces washing machines which require two processes, assembling and finishing, to complete. The company's bestselling machine is the commercial washer. Information related to the 500 commercial washers produced annually is shown below.   
Slosh's total expected overhead costs and related overhead data are shown below. The company uses departmental overhead rates based on direct labor hours in the assembling department and machine hours in the finishing department.
 
Determine the total product cost of this product line and each individual commercial washer.

Accepted Answer

Assembling dept overhead: $4,000,000/50,

Question 12

Explain cost flows for the departmental overhead rate method.

Accepted Answer

The departmental overhead rate method us

Question 13

Case Company allocates $5.00 overhead to each unit produced. The company uses a plantwide overhead rate with machine hours as the allocation base. Given the amounts below, how many machine hours does the company expect in department 2?
$$\begin{array} { l c c } 
\text { Estimated: } & \text { Department 1 } & \text { Department 2 } \
\text { Manufacturing overhead costs } & \$ 250,000 & \$ 150,000 \
\text { Direct labor hours } & 8,000 \mathrm { DLH } & 12,000 \mathrm { DLH } \
\text { Machine hours } & 55,000 \mathrm { MH } & ? \mathrm { MH }
\end{array}$$

Accepted Answer

A)  25,000 MH. 
B)  137,500 MH. 
C)  82,500 MH. 
D)  88,000 MH. 
E)  33,000 MH. 
A)  25,000 MH. 
B)  137,500 MH. 
C)  82,500 MH. 
D)  88,000 MH. 
E)  33,000 MH.

Question 14

A company produces garden benches which go through two operations, operation 1A1 and operation 2B2, before they are complete. Expected costs and activities for the two departments are shown below. Both departments have departmental overhead rates based on machine hours. Therefore, the overhead rates for department 1A1 and department 2B2 are the same.
 $\begin{array}{lcc}&\text { Department } & \text { Department } \
&1 \mathrm{~A} 1 & 2 \mathrm{~B} 2\
\text { Machine hours } & 70,000 \mathrm{MH} & 60,000 \mathrm{MH} \
\text { Direct labor hours } & 56,350 \mathrm{DLH} & 50,160 \mathrm{DLH} \
\text { Overhead costs } & \$ 225,400 & \$ 250,800
\end{array}$

Accepted Answer

A) True 
 B)False

Question 15

Facility level costs are not traceable to individual product lines, batches or units.

Accepted Answer

A) True 
 B)False

Question 16

Ridley Company estimates that overhead costs for the next year will be $6,870,000 for indirect labor and $450,000 for factory utilities. The company uses machine hours as its overhead allocation base. If 160,000 machine hours are planned for this next year, what is the company's plantwide overhead rate?

Accepted Answer

A)  $.02186 per machine hour. 
B)  $42.9375 per machine hour. 
C)  $45.75 per machine hour. 
D)  $2.8125 per machine hour. 
E)  $.3555 per machine hour. 
A)  $.02186 per machine hour. 
B)  $42.9375 per machine hour. 
C)  $45.75 per machine hour. 
D)  $2.8125 per machine hour. 
E)  $.3555 per machine hour.

Question 17

Multiple cost pools are used when allocating overhead using the plantwide overhead rate method.

Accepted Answer

A) True 
 B)False

Question 18

Activities are the cost objects of the second stage of ABC.

Accepted Answer

A) True 
 B)False

Question 19

A company uses activity-based costing to determine the costs of its three products: A, B and
C. The budgeted cost and activity for each of the company's three activity cost pools are shown below. $$\begin{array} { | l | l | r | r | r | } 
\hline & & { \text { Budgeted Activity } } \
\hline \begin{array} { l } 
\text { Activity Cost } \
\text { Pool }
\end{array} & \begin{array} { l } 
\text { Budgeted } \
\text { Cost }
\end{array} & \text { Product A } & \text { Product B } & \text { Product C } \
\hline \text { Activity 1 } & \$ 425,000 & 1,700 & 680 & 1,870 \
\hline \text { Activity 2 } & \$ 144,900 & 1,890 & 1,575 & 2,835 \
\hline \text { Activity 3 } & \$ 85,000 & 2,400 & 1,000 & 1,600 \
\hline
\end{array}$$
Compute the company's activity rates under activity-based costing for each of the three activities.

Accepted Answer

Activity 1: $425,000/(1,700 +

Question 20

A company uses activity-based costing to determine the costs of its three products: A, B andC. The activity rates and activity levels for each of the company's three activity cost pools are shown below. $$\begin{array} { | l | l | r | r | r | } 
\hline & &  { \text { Budgeted Activity } } \
\hline \begin{array} { l } 
\text { Activity Cost } \
\text { Pool }
\end{array} & \text { Activity Rate } & \text { Product A } & \text { Product B } & \text { Product C } \
\hline \text { Activity 1 } & \$ 48 & 3,500 & 1,000 & 500 \
\hline \text { Activity 2 } & \$ 51 & 300 & 2,100 & 600 \
\hline \text { Activity 3 } & \$ 73 & 400 & 200 & 1,400 \
\hline
\end{array}$$
Compute the company's budgeted overhead cost for each of the three products under activity-based costing.

Accepted Answer

The answer of A company uses activity-based costing to determine...

Product costs consist of direct labor, direct materials and ______________.

________________________ focuses on activities and the cost of carrying out activities.

Distorted product cost information can result in poor decisions.

Aztec Industries produces bread which goes through two operations, mixing and baking, before it is ready to be packaged. Next year's expected costs and activities are shown below. -Compute Aztec's departmental overhead rate for the baking department based on machine hours.

The cost to heat a manufacturing facility can be directly linked to the number of units produced.

A company has two products: A andB. It uses activity based costing and has prepared the following analysis showing budgeted costs and activities. Use this information to compute (a) the company's overhead rates on each of the three activities and (b) the amount of overhead allocated to ProductA.

What are the main advantages of traditional volume-based allocation methods compared to activity-based costing?

The ________________________ is the target of the cost assignment.

Explain cost flows for the departmental overhead rate method.

Facility level costs are not traceable to individual product lines, batches or units.

Multiple cost pools are used when allocating overhead using the plantwide overhead rate method.

Activities are the cost objects of the second stage of ABC.

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costing

Decentralization and Performance Evaluation

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Investments and International Operations

Accounting for Partnerships

Appendix : Accounting With Special Journals

Filters

Exam 17: Activity-Based Costing and Analysis

Product costs consist of direct labor, direct materials and ______________.

________________________ focuses on activities and the cost of carrying out activities.

Distorted product cost information can result in poor decisions.

Aztec Industries produces bread which goes through two operations, mixing and baking, before it is ready to be packaged. Next year's expected costs and activities are shown below. -Compute Aztec's departmental overhead rate for the baking department based on machine hours.

The cost to heat a manufacturing facility can be directly linked to the number of units produced.

A company has two products: A andB. It uses activity based costing and has prepared the following analysis showing budgeted costs and activities. Use this information to compute (a) the company's overhead rates on each of the three activities and (b) the amount of overhead allocated to ProductA.

What are the main advantages of traditional volume-based allocation methods compared to activity-based costing?

The ________________________ is the target of the cost assignment.

Explain cost flows for the departmental overhead rate method.

Facility level costs are not traceable to individual product lines, batches or units.

Multiple cost pools are used when allocating overhead using the plantwide overhead rate method.

Activities are the cost objects of the second stage of ABC.

Introducing Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash and Internal Controls

Accounts and Notes Receivable

Long-Term Assets

Current Liabilities

Long-Term Liabilities

Corporate Reporting and Analysis

Reporting and Analyzing Cash Flows

Analyzing Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing and Performance Reporting

Master Budgets and Performance Planning

Flexible Budgets and Standard Costing

Decentralization and Performance Evaluation

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Investments and International Operations

Accounting for Partnerships

Appendix : Accounting With Special Journals

Filters