Exam 9: Activity-Based Costing

Maxim Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products. Last year,Product P involved 33 batches,1 customer orders,and 368 assembly hours.Required: How much overhead cost would be assigned to Product P using the company's activity-based costing system? Show your work!

JamMaster Audio Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,Boom and Wow,about which it has provided the following data: Boom Wow Direct materials per unit \ 14.90 \ 44.30 Direct labor per unit \ 4.20 \ 25.20 Direct labor-hours per unit 0.20 1.20 Annual production 40,000 15,000 The company's estimated total manufacturing overhead for the year is $1,809,600 and the company's estimated total direct labor-hours for the year is 26,000.The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below: Activities and Activity Estimated Owerhead Measures Cost Assembling products (DLHs) \ 702,000 Preparing batches (batches) 132,600 Engrave (wHs) 975,000 Total Acturities Boom Wow Total Assembling products 8,000 18,000 26,000 Preparing batches 884 442 1,326 Engrave 702 1,248 1,950 Required: a.Determine the unit product cost of each of the company's two products under the traditional costing system.b.Determine the unit product cost of each of the company's two products under activity-based costing system.

In an activity-based costing (ABC)system,what should be used to assign departmental manufacturing overhead costs to products produces in varying lot sizes?

Using direct labor costs to allocate overhead costs in an activity-based costing (ABC)system will encourage management to reduce labor costs.

Direct labor cost (DLC)and direct labor hours (DLH)are examples of volume-related cost drivers in the cost hierarchy.

Russell Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,Slow and Fast,about which it has provided the following data: Slow Fast Direct materials per unit \ 14.10 \ 43.40 Direct labor per \ 3.20 \ 25.60 unit Direct labor-hours per unit 0.20 1.60 Annual production 30,000 15,000 The company's estimated total manufacturing overhead for the year is $1,526,700 and the company's estimated total direct labor-hours for the year is 30,000.The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below: Activities and Actirity Measures Estimeted Overhead cost Assembling products (DLHs) \ 720,000 Preparing batches (batches) 362,700 Product support (product variations) 444,000 Total \ 1,526,700 The manufacturing overhead that would be applied to a unit of product Fast under the activity-based costing system is closest to:

Which of the following is not a step involved in activity-based costing?

Allure Company manufactures and distributes two products,M and XY.Overhead costs are currently allocated using the number of units produced as the allocation base.The controller has recommended changing to an activity-based costing (ABC)system.She has collected the following information: Acturity Cost Driser Amount M XY Production Number of \ 82,000 8 12 setups setups Material Number of 48,000 56 24 handling parts Packaging Number of 130,000 80,000 50,000 costs units What is the total overhead allocated to Product M using the current system?

Which one of the following accounts is not used in an activity-based costing (ABC)system?

Sebastian Corporation's activity-based costing system has three activity cost pools-Machining,Batch Setup,and Other.The company's overhead costs,which consist of equipment depreciation and indirect labor,are allocated to the cost pools in proportion to the activity cost pools' consumption of resources. Equipment depreciation (total) \ 27,000 Indirect labor (total) \ 7,000 Machining Batch Setup Other Equipment depreciation 0.40 0.30 0.30 Indirect labor 0.20 0.30 0.50 Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Batch Setup cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. MHs Batches Product Snorkel 8,100 400 Product Fin Total 10,000 2,000 Additional data concerning the company's products appears below: Product Snorkel Product Fin Sales (total) \ 71,400 \ 57,600 Direct materials (total) \ 21,900 \ 19,900 Direct labor (total) \ 33,700 \ 25,100 Required: a.Assign overhead costs to activity cost pools using activity-based costing.b.Calculate activity rates for each activity cost pool using activity-based costing.c.Determine the amount of overhead cost that would be assigned to each product using activity-based costing.d.Determine the product margins for each product using activity-based costing.

Which of the following would not be a batch-related activity?

Property taxes are an example of a cost that would be considered to be:

When applying activity based costing,the first step would be to compute the cost driver rates.

Smithville Industries has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,Manual and Power,about which it has provided the following data: Manua Power Direct materials per unit \ 27.50 \ 64.90 Direct labor per unit \ 7.80 \ 23.40 Direct labor-hours per unit 0.60 1.80 Annual production 40,000 15,000 The company's estimated total manufacturing overhead for the year is $2,675,460 and the company's estimated total direct labor-hours for the year is 51,000.The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below: Activities and Actirity Estimated Overhead Measures Cost Supporting direct labor (DLHs) \ 1,326,000 Setting up machines (setups) 456,960 Parts administration (part 892,500 types) Total Manual Power Total Supporting direct labor 24,000 27,000 51,000 Setting up 2,346 510 2,856 machines Parts administration 1,122 663 1,786 Required: a.Determine the manufacturing overhead cost per unit of each of the company's two products under the traditional costing system.b.Determine the manufacturing overhead cost per unit of each of the company's two products under activity-based costing system.

Volume-based costing allocates indirect product costs based on the volume of output,using such allocation bases as direct labor hours,machine hours,or the amount of direct material used in the production process.Activity-based costing (ABC)has consistently shown that Volume-based costing ___________ the cost of high volume products and ______________ the cost of low volume products. High Volume Products Low Volume Products A. Overstates Overstates B. Overstates Understates C. Understates Overstates D. Understates Understates

Brenda's Big Burgers,a small hamburger restaurant and take-out drive-through,has identified the following resources that it uses in its business: Required: Suggest a proper cost driver for each of the following items

Activity-based costing (ABC)can be applied to administrative activities (e.g. ,purchasing)but not to marketing activities.

Before using activity-based costing (ABC),managers must apply the cost-benefit principle to the additional recordkeeping costs associated with ABC.

The Mega Construction Company recently switched to activity-based costing (ABC)from the department allocation method.The department method allocated overhead costs at a rate of $60 per machine hour.The cost accountant for the Finishing Department has gathered the following data: Activity Cost Drivers Rate Material handling Tons of material handled \ 80 Machine setups Number of production runs 3,750 Utilities Machine hours 25 Quality control Number of inspections 500 During April,Mega purchased and used $100,000 of direct materials at $20 per ton.There were eight (8)production runs using a total of 12,000 machine hours in April.The manager of the Finishing Department needed 12 inspections.Actual overhead costs totaled $820,000 for the month.How much overhead costs were applied to the Work-in-Process Inventory during April using activity-based costing?

Upton Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,Long and Short,about which it has provided the following data: Long Short Direct materials per unit \ 14.20 \ 48.30 Direct labor per unit \ 16.80 \ 50.40 Direct labor-hours per unit 0.80 2.40 Annual production 45,000 10,000 The company's estimated total manufacturing overhead for the year is $3,170,400 and the company's estimated total direct labor-hours for the year is 60,000.The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below: Activities and Actirity Measures Estimeted Overhead cost Supporting direct labor (DLHs) \ 1,740,000 Setting up machines (setups) 422,400 Parts administration (part 1,008,000 ypes) Total \3 ,170,400 Unit product cost of Product Short under the activity-based costing system is closest to: