Exam 8: Activity Based Costing: a Tool to Aid Decision-Making

Data concerning three of Hatt Corporation's activity cost pools appear below: Required: Compute the activity rates for each of the three cost pools. Show your work!

An activity-based costing system is generally easier to set up and run than a traditional cost system.

Accola Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 1,100 units and of Product B is 700 units. There are three activity cost pools, with estimated costs and expected activity as follows: -Assuming that actual activity turns out to be the same as expected activity, the total amount of overhead cost allocated to Product X would be closest to:

Changing a cost accounting system is likely to meet with little resistance in an organization since it is a technical matter of little interest to individuals outside of the accounting department.

Kleppe Corporation has provided the following data from its activity-based costing accounting system: The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products. -How much indirect factory wages and factory equipment depreciation cost would be assigned to the Customer Orders activity cost pool?

Activity-based costing uses a number of activity cost pools, each of which is allocated to products on the basis of direct labor-hours.

In activity-based costing, organization-sustaining costs should not be included in product costs for internal management reports that are used for decision-making. However, companies frequently include organization-sustaining costs in product costs to satisfy external reporting requirements.

Whiting Corporation has provided the following data concerning its overhead costs for the coming year: The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year: The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs. The distribution of resource consumption across activity cost pools is given below: The activity rate for the Assembly activity cost pool is closest to:

Lifsey 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 the company charges $556.96 for the Smith wedding cake, what would be the overall margin on the order?

Morsell Corporation has provided the following data from its activity-based costing accounting system: The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products. -How much supervisory wages and factory supplies cost would be assigned to the Batch Processing activity cost pool?

When combining activities in an activity-based costing system, activities should be grouped together at the same level. For example, batch-level activities should not be combined with unit-level activities.

Tomczak 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!

Accola Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 1,100 units and of Product B is 700 units. There are three activity cost pools, with estimated costs and expected activity as follows: -The activity rate for the batch setup activity cost pool is closest to:

Cuna Corporation has provided the following data concerning its overhead costs for the coming year: The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year: The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs. The distribution of resource consumption across activity cost pools is given below: The activity rate for the Order Processing activity cost pool is closest to:

Dilloo Company 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: The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. You have been asked to complete the first-stage allocation of costs to the activity cost pools. -How much cost, in total, should NOT be allocated to orders and products in the second stage of the allocation process if the activity-based costing system is used for internal decision-making?

The Coletti 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 Tubman family, requested 26 jobs during the year that required a total of 104 hours of housecleaning. For this service, the client was charged $1,420. Required: a. Using the activity-based costing system, compute the customer margin for the Tubman 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 Tubman family. Round off all calculations to the nearest whole cent.

Overhead allocation based solely on a measure of volume such as direct labor-hours: