Exam 6: Activity-Based Costing: a Tool to Aid Decision Making

The Spurling 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 Vandal family,requested 32 jobs during the year that required a total of 192 hours of housecleaning.For this service,the client was charged $2,200. Required: a.Using the activity-based costing system,compute the customer margin for the Vandal 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 Vandal family.Round off all calculations to the nearest whole cent.

Which of the following is not a limitation of activity-based costing?

Personnel administration is an example of (an):

Day 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.Data concerning the company's costs and activity-based costing system appear below: Required: Assign overhead costs to activity cost pools using activity-based costing.

An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because:

Organization-sustaining activities are activities of the general organization that support specific products.

In activity-based costing,some manufacturing costs may be excluded from product costs.

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

Kozloff Wedding Fantasy Company makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system: The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake. The measure of complexity is the number of tiers in the cake. The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.) 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 Winterhalter wedding cake to just break even?

Kach Corporation uses an activity-based costing system with three activity cost pools.The company has provided the following data concerning its costs: The distribution of resource consumption across the three activity cost pools is given below: How much cost,in total,would be allocated in the first-stage allocation to the Other activity cost pool?

Tresselt 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 indirect factory wages and factory equipment depreciation costs that would be allocated to the Product Processing activity cost pool.Show your work! b.Determine the total amount of indirect factory wages and factory equipment depreciation costs that would NOT be assigned to products.Show your work!

In general,duration drivers are more accurate measures of the consumption of resources than transaction drivers.

The controller of Ferrence Company estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below: The total materials handling cost for the year is expected to be $16,486.40. -If the materials handling cost is allocated on the basis of material moves,how much of the total materials handling cost would be allocated to the specialty windows? (Round off your answer to the nearest whole dollar. )

Managing and sustaining product diversity requires many more overhead resources such as production schedulers and product design engineers than managing and sustaining a single product.The costs of these resources can be accurately allocated to products on the basis of direct labor-hours.

Irie Corporation has an activity-based costing system with three activity cost pools-Machining,Setting Up,and Other.The company's overhead costs have already been allocated to the cost pools and total $18,900 for the Machining cost pool,$20,500 for the Setting Up cost pool,and $23,600 for the Other cost pool.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.Data concerning the two products appear 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.

Wecker 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 V09X using the activity-based costing system?

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

Ormond 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, $6,800; Order Filling, $10,700; and Other, $4,500. 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:

The practice of assigning the costs of idle capacity to products can result in unstable unit product costs.

The following data have been provided by Kelch Corporation from its activity-based costing accounting system: Distribution of Resource Consumption across Activity Cost Pools: 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. -How much factory supervision and indirect factory labor cost would NOT be assigned to products using the activity-based costing system?