Exam 17: Activity-Based Costing and Analysis

Compared to the departmental overhead rate method, the plantwide overhead rate method usually results in more accurate overhead allocations.

The ________________________ overhead rate method uses multiple volume-based measures to allocate overhead costs to products.

Allocated overhead ____________________________ vary depending upon the allocation method used.

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 Azetec's departmental overhead rate for the mixing department based on machine hours.

Products are the first stage cost objects when using a departmental overhead rate method.

Assume that the Oregon Ice Cream Company is considering the costs of two of their product lines - ice cream sandwiches and dessert bars. The company identified the following partial list of activities, costs, and activity drivers expected for the next year. Activity Expected Costs Cost Driver Extrusion Costs \ 637,500 Number batches made Packaging Costs \ 44,000 Number of units made Ice Cream Sandwiches Dessert Bars Production volume 350,000 units 200,000 units Batches made 400 batches 350 batches -Refer to the data above. How much overhead cost will be assigned to the desert bar product line using activity-based costing (ABC)?

A company produces heating elements which go through two operations, casting and assembling, before they are complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for the assembling department based on direct labor hours is $5 per direct labor hour. Casting Assembling Direct labor hours 1,875 7,500 Machine hours 12,500 3,750 Overhead costs \ 75,000 \ 37,500

A company has two products: X and Y. 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 X is 161,100 units, and the annual production and sales level of Product Y is 275,200 units. (a.) Compute the approximate overhead cost per unit of Product X under activity-based costing. (b.) Compute the approximate overhead cost per unit of Product Y under activity-based costing.

Kudzu Company sells two products Big X and Little X. Current direct material and direct labor costs are detailed below. Next year, the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year's overhead is estimated to be $525,000. The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $20 per hour and the company expects to manufacture 16,000 units of Big X and 18,000 units of Little X next year. Direct Direct Material Labor Dollars Per Unit Per Unit Big X \ 5 \ 20 Little X \ 3 \ 10 -Kudzu has 34,000 total estimated direct labor hours for next year. Direct labor hours per unit of Big X = $20/$20 = 1 DLH Direct labor hours per unit of Little X = $10/$20 = .5 DLH Estimated direct labor hours = (1 x 16,000) + (.5 x 18,000) = 25,000 direct labor hours

Assume that a pet food manufacturer is considering adding two types of pet food to their existing product line. Research had determined that there is good demand for dog food in forty pound bags and cat food in one-half pound cans. The company identified the following partial list of activities, costs, and activity drivers expected for the next year. -Refer to the data above. What are the overhead rates used to apply material handling (MH) and storage costs (SC) using activity-based costing?

A company's total expected overhead costs and related overhead data are shown below. (a.) Compute estimated manufacturing overhead costs for department A. (b.) Compute estimated manufacturing overhead costs for department B.

The premise of ABC is that it takes ____________________ to make products and provide services.

When products differ in batch size and complexity, they usually consume different amounts of ____________________________.

What are three advantages of activity-based costing over traditional volume-based allocation methods?

A _____________________ is a collection of costs that are related to the same or similar activity.

The following data relates to Lead Company's estimated amounts for next year. Estimated: Department 1 Department 2 Manufacturing overhead costs \ 1,200,000 \ 3,400,000 Direct labor hours 560,000 780,000 Machine hours 91,000 23,000 What is the company's plantwide overhead rate if direct-labor hours are the allocation base? (Round to two decimal places)

Product design costs are an example of a unit level activity.

A company produces computer chips which go through two operations, operation A1 and operation B2, before they are complete. Expected costs and activities for the two departments are shown below. Departmental overhead rates are based on machine hours in department A1 and direct labor hours in department B2. Therefore, the overhead rates for department A1 and department B2 are $3.62 per machine hour and $5.73 per direct labor hour, respectively. Department Department 1 2 Machine hours 40,000 30,000 Direct labor hours 36,200 28,650 Overhead costs \ 144,800 \ 171,900

Look Up!, Inc. manufactures and distributes three types of hot air balloons. The company currently uses a plantwide overhead allocation method based on direct labor hours. This rate amounts to $200 per direct labor hour. Estimated per unit product costs and related information for the next year are shown below. If Look Up! changes the plantwide overhead allocation base to machine hours, what is the total product cost per deluxe unit?

Freeze Frame, Inc. produces cameras which require three processes, A, B and C, to complete. Digital camera model #789 is the best selling of all the many types of cameras produced. Information related to the 550,000 units of digital camera model #789 produced annually is shown below. Freeze Frame's total expected overhead costs and related overhead data are shown below. (a.) Compute a departmental overhead rate for department A based on machine hours. (b.) How much overhead is associated with model 789 from department A? (c.) Compute a departmental overhead rate for department B based on direct labor hours. (d.) How much overhead is associated with model 789 from department B? (e.) Compute a departmental overhead rate for department C based on machine hours. (f.) How much overhead is associated with model 789 from department C? (g) What is the per unit cost of the 550,000 units of model 789?