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

Even departmental overhead rates will not correctly assign overhead costs in situations where a company has a range of products that differ in volume,lot size,or complexity of production.

Would the following activities at a manufacturer of canned soup be best classified as unit-level,batch-level,product-level,or organization-sustaining activities?

Sibble 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, $12,400; Supervising, $4,400; and Other, $5,200. 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: -What is the overhead cost assigned to Product H3 under activity-based costing?

Andujo Company allocates materials handling cost to the company's two products using the below data: The total materials handling cost for the year is expected to be $115,776. -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 modular homes? (Round off your answer to the nearest whole dollar. )

Laningham Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs-equipment depreciation and supervisory expense-are allocated 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. Activity data for the company's two products follow: -How much overhead cost is allocated to the Machining activity cost pool under activity-based costing in the first stage of allocation?

Yentzer Corporation has an activity-based costing system with three activity cost pools-Processing,Setting Up,and Other.The company's overhead costs consist of equipment depreciation and indirect labor and are allocated to the cost pools in proportion to the activity cost pools' consumption of resources.Equipment depreciation totals $72,000 and indirect labor totals $8,000.Data concerning the distribution of resource consumption across activity cost pools appear below: Required: Assign overhead costs to activity cost pools using activity-based costing.

Pressler 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.

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: -Suppose that the company decides that the present activity-based costing system is too complex and that all costs (except for the costs of purchased decorations)should be allocated on the basis of the number of guests.In that event,what would you expect to happen to the costs of cakes?

Dykema 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 Q7 under activity-based costing?

Traughber 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: -What is the overhead cost assigned to Product B4 under activity-based costing?

Costs classified as batch-level costs should depend on the number of batches processed rather than on the number of units produced,the number of units sold,or other measures of volume.

Goold 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. -The activity rate for Machining under activity-based costing is closest to:

Roshannon 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. -How much overhead cost is allocated to the Processing activity cost pool under activity-based costing in the first stage of allocation?

Encarnacion 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 overhead cost assigned to Product C6 under activity-based costing?

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

Encarnacion 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?

Schmeider Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products. Data concerning two products appear below: Required: How much overhead cost would be assigned to each of the two products using the company's activity-based costing system?

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

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

Groch 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 Q9 under activity-based costing?