Exam 5: Activity-Based-Costing: a Tool to Aid Decision Making

Andruschack Corporation uses activity-based costing to determine product costs for external financial reports.The company has provided the following data concerning its activity-based costing system: The activity rate for the batch setup activity cost pool is closest to:

Thoen Nuptial Bakery makes very elaborate wedding cakes to order.The company has an activity-based costing system with three activity cost pools.The activity rate for the Size-Related activity cost pool is $0.96 per guest.(The greater the number of guests, the larger the cake. )The activity rate for the Complexity-Related cost pool is $54.24 per tier.(Cakes with more tiers are more complex. )Finally, the activity rate for the Order-Related activity cost pool is $56.44 per order.(Each wedding involves one order for a cake. )The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and shortening.The activity rates do not include the costs of purchased decorations such as miniature statues and wedding bells, which are accounted for separately. Data concerning two recent orders appear below: Assuming that the company charges $584.18 for the Strobl wedding cake, what would be the overall margin on the order?

Brannum Corporation has provided the following data from its activity-based costing accounting system: Distribution of Resource Consumption across Activity Cost Pools: The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products. Required: a.Determine the total amount of supervisory wages and factory utilities costs that would be allocated to the Unit Processing activity cost pool.Show your work! b.Determine the total amount of supervisory wages and factory utilities costs that would NOT be assigned to products.Show your work!

Garhart Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products. Data concerning two products appear below: Required: a.How much overhead cost would be assigned to Product R57J using the company's activity-based costing system? Show your work! b.How much overhead cost would be assigned to Product W17B using the company's activity-based costing system? Show your work!

Koutz Corporation uses activity-based costing to compute product margins.Overhead costs have already been allocated to the company's three activity cost pools-Processing, Supervising, and Other.The costs in those activity cost pools appear below: Processing costs are assigned to products using machine-hours (MHs)and Supervising costs are assigned to products using the number of batches.The costs in the Other activity cost pool are not assigned to products.Activity data appear below: Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. What is the product margin for Product O7 under activity-based costing?

Manton Corporation uses an activity based costing system to assign overhead costs to products.In the first stage, two overhead costs-equipment expense and indirect labor-are allocated to the three activity cost pools-Processing, Supervising, and Other-based on resource consumption.Data to perform these allocations appear below: In the second stage, Processing costs are assigned to products using machine-hours (MHs)and Supervising costs are assigned to products using the number of batches.The costs in the Other activity cost pool are not assigned to products.Activity data for the company's two products follow: The activity rate for the Processing activity cost pool under activity-based costing is closest to:

Product-level activities relate to how many batches are run or units of product are made.

Studler Corporation has an activity-based costing system with three activity cost pools-Processing, Supervising, and Other.In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption.Data used in the first stage allocations follow: Processing costs are assigned to products using machine-hours (MHs)and Supervising costs are assigned to products using the number of batches.The costs in the Other activity cost pool are not assigned to products.Activity data for the company's two products follow: The activity rate for the Supervising activity cost pool under activity-based costing is closest to:

Trainor Corporation uses activity-based costing to assign overhead costs to products.Overhead costs have already been allocated to the company's three activity cost pools as follows: Processing, $29, 200;Supervising, $13, 000;and Other, $26, 800.Processing costs are assigned to products using machine-hours (MHs)and Supervising costs are assigned to products using the number of batches.The costs in the Other activity cost pool are not assigned to products.Activity data appear below: The activity rate for the Supervising activity cost pool under activity-based costing is closest to:

The Thornes Cleaning Brigade Company provides housecleaning services to its clients.The company uses an activity-based costing system for its overhead costs.The company has provided the following data from its activity-based costing system. The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. One particular client, the Lazzara family, requested 37 jobs during the year that required a total of 222 hours of housecleaning.For this service, the client was charged $2, 350. Required: a.Using the activity-based costing system, compute the customer margin for the Lazzara family.Round off all calculations to the nearest whole cent. b.Assume the company decides instead to use a traditional costing system in which all costs are allocated to customers on the basis of cleaning hours.Compute the margin for the Lazzara family.Round off all calculations to the nearest whole cent.

Senff Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Data concerning two products appear below: How much overhead cost would be assigned to Product V91Z using the activity-based costing system?

Vassallo Corporation's activity-based costing system has three activity cost pools-Machining, Setting Up, 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. Costs in the Machining cost pool are assigned to products based on machine-hours (MHs)and costs in the Setting Up cost pool are assigned to products based on the number of batches.Costs in the Other cost pool are not assigned to products. Additional data concerning the company's products appears below: 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.

Keske Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other.In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to the three activity cost pools based on resource consumption.Data used in the first stage allocations follow: Machining costs are assigned to products using machine-hours (MHs)and Order Filling costs are assigned to products using the number of orders.The costs in the Other activity cost pool are not assigned to products.Activity data for the company's two products follow: Finally, the costs of Machining and Order Filling are combined with the following sales and direct cost data to determine product margins. What is the overhead cost assigned to Product L6 under activity-based costing?

Lake Corporation has an activity-based costing system with three activity cost pools-Processing, Supervising, and Other.In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption.Data used in the first stage allocations follow: Processing costs are assigned to products using machine-hours (MHs)and Supervising costs are assigned to products using the number of batches.The costs in the Other activity cost pool are not assigned to products.Activity data for the company's two products follow: Finally, the costs of Processing and Supervising are combined with the following sales and direct cost data to determine product margins. What is the product margin for Product L2 under activity-based costing?

Andruschack Corporation uses activity-based costing to determine product costs for external financial reports.The company has provided the following data concerning its activity-based costing system: The total amount of overhead cost allocated to Product X would be closest to:

Schwering Corporation uses activity-based costing to assign overhead costs to products.Overhead costs have already been allocated to the company's three activity cost pools as follows: Machining, $20, 800;Order Filling, $30, 400;and Other, $48, 800.Machining costs are assigned to products using machine-hours (MHs)and Order Filling costs are assigned to products using the number of orders.The costs in the Other activity cost pool are not assigned to products.Activity data appear below: What is the overhead cost assigned to Product U1 under activity-based costing?

Munar Corporation uses activity-based costing to compute product margins.Overhead costs have already been allocated to the company's three activity cost pools-Machining, Order Filling, and Other.The costs in those activity cost pools appear below: Machining costs are assigned to products using machine-hours (MHs)and Order Filling costs are assigned to products using the number of orders.The costs in the Other activity cost pool are not assigned to products.Activity data appear below: Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins. What is the product margin for Product X6 under activity-based costing?

Activity rates in activity-based costing are computed by dividing costs from the second-stage allocations by the activity measure for each activity cost pool.

Chuang Corporation's activity-based costing system has three activity cost pools-Machining, Setting Up, and Other.The company's overhead costs have already been allocated to these cost pools as follows: Costs in the Machining cost pool are assigned to products based on machine-hours (MHs)and costs in the Setting Up cost pool are assigned to products based on the number of batches.Costs in the Other cost pool are not assigned to products.The following table shows the machine-hours and number of batches associated with each of the company's two products: Additional data concerning the company's products appears below: Required: a.Calculate activity rates for each activity cost pool using activity-based costing. b.Determine the amount of overhead cost that would be assigned to each product using activity-based costing. c.Determine the product margins for each product using activity-based costing.

Activity-based costing is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect only variable costs.