Exam 4: Activity-Based Costing

The following overhead cost information is available for Henderson Inc. for 2008: During the year, 4,000 purchase orders were issued; 2,400 shipments were received; 4,500 machine setups were performed; and 2,500 inspections were conducted. If Job #101 required 2 purchase orders, 6 shipments, 3 machine setups, and 5 inspections to complete, how much overhead should be assigned to Job #101?

Which of the following types of companies would be most likely to benefit from activity-based costing?

Which of the following types of costs are usually not allocated to products?

Which of the following would be the least likely cost driver for an activity such as product testing?

Which of the following is a key feature of activity-based costing?

Johnson Manufacturing Johnson Manufacturing anticipates incurring $850,000 in overhead costs this year. After implementing activity-based costing (ABC), the company's controller identified the following related information: The number of activities expected is as follows: Refer to the Johnson Manufacturing information above. What will be the overhead rate for the production activity?

Which of the following would most likely be a product-level cost?

Which of the following statements comparing traditional and activity-based costing (ABC) is true?

Give two examples for each of the four types of cost classifications.

Which of the following would be the least likely cost driver for an activity such as the repair and maintenance of factory equipment?

What are the benefits and limitations of activity-based costing (ABC) systems?

Aunt Lucy's Candies Aunt Lucy's Candies sells standard and premium chocolate candies through its catalog business. Many of the candies are sold in bulk to other companies. Last year, the company incurred $400,000 in overhead costs. After implementing activity-based costing (ABC), the company's controller identified the following information: The number of activities for standard and premium candies is as follows: Refer to the Aunt Lucy's Candies information above. What is the overhead rate for the purchasing activity?

Which of the following statements is false regarding cost drivers?

Which of the following statements is true regarding a cost driver?

Jones Construction currently uses traditional costing where overhead is applied based on direct labor hours. Using traditional costing, the applied overhead rate is $24 per direct labor hour. They are considering a switch to activity-based costing (ABC). The company controller has come up with preliminary overhead rates for each of the following activities: One of the company's current jobs has the following information available: Which of the following statements is true when comparing the total overhead allocated to the job using traditional versus ABC costing?

Thurman Brothers Construction manufactures and installs standard and custom-made cabinetry for residential homes. Last year, the company incurred $600,000 in overhead costs when a total of 10,000 direct labor hours were incurred. After implementing activity-based costing (ABC), the company's accountant identified the following related information: The number of activities for standard and custom-made cabinets is as follows: During the past year, Thurman accepted a customer order for a set of custom-made cabinets that would require the following: Required:

Can activity-based costing (ABC) be used by service companies? If so, is the implementation of an ABC system in a service company different than that of a manufacturing company?

What is meant by the term "activity" in activity-based costing (ABC)? How are costs allocated in ABC?

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs wouldmost likely be a facility-level cost?

Define "cross subsidies" and tell what kind of product costing system is likely to have them. What happens to cross subsidies in activity-based costing (ABC)?