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

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 overhead cost assigned to Product O7 under 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. How much overhead cost is allocated to the Order Filling activity cost pool under activity-based costing?

Direct labor-hours or direct labor cost should not be used as a measure of activity in an activity-based costing system.

Kenrick Corporation uses activity-based costing to compute product margins.In the first stage, the activity-based costing system allocates two overhead accounts-equipment expense and indirect labor-to 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: Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. The activity rate for the Processing activity cost pool under activity-based costing is closest to:

Ravelo Corporation has provided the following data from its activity-based costing system: Data concerning the company's product L19B appear below: According to the activity-based costing system, the average cost of product L19B 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 all of the costs listed above are avoidable costs in the event that an order is turned down, what amount would the company have to charge for the Nie wedding cake to just break even?

Poskey Corporation uses an activity-based costing system with three activity cost pools.The company has provided the following data concerning its costs and its activity based costing system: How much cost, in total, would be allocated in the first-stage allocation to the Assembly activity cost pool?

Hochberg Corporation uses an activity-based costing system with the following three activity cost pools: The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs: The distribution of resource consumption across activity cost pools is given below: The activity rate for the Fabrication activity cost pool is closest to:

Glassey 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, $20, 000;Supervising, $33, 500;and Other, $16, 500.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 Processing activity cost pool under activity-based costing is closest to:

Barnette Corporation has an activity-based costing system with three activity cost pools-Processing, Setting Up, and Other.The company's overhead costs, which consist of factory utilities and indirect labor, are allocated to the cost pools in proportion to the activity cost pools' consumption of resources.Costs in the Processing 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.Data concerning the two products and the company's costs and activity-based costing system appear below: Distribution of Resource Consumption Across Activity Cost Pools: 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.

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. The activity rate for the Supervising activity cost pool under activity-based costing is closest to:

When a company shifts from a traditional cost system in which manufacturing overhead is applied based on direct labor-hours to an activity-based costing system with batch-level and product-level costs, the unit product costs of low volume products typically decrease whereas the unit product costs of high volume products typically increase.

Assembling a product is an example of a(n):

In activity-based costing, organization-sustaining costs should be included in product costs for internal management reports that are used for decision-making.

Vontungeln Corporation uses activity-based costing to compute product margins.In the first stage, the activity-based costing system allocates two overhead accounts-equipment depreciation and supervisory expense-to three activity cost pools-Machining, Order Filling, and Other-based on resource consumption.Data to perform these allocations appear below: In the second stage, 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. Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins. How much overhead cost is allocated to the Machining activity cost pool under activity-based costing in the first stage of allocation?

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. How much overhead cost is allocated to the Supervising activity cost pool under activity-based costing?

Batch-level activities are performed each time a unit is produced.

Kenrick Corporation uses activity-based costing to compute product margins.In the first stage, the activity-based costing system allocates two overhead accounts-equipment expense and indirect labor-to 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: Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins. What is the product margin for Product U4 under activity-based costing?

Mciver 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, $10, 900;Order Filling, $10, 500;and Other, $75, 600.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: The activity rate for the Machining activity cost pool under activity-based costing is closest to:

Setting up a machine to change from producing one product to another is an example of a(n):