Exam 13: Activity-Based Costing: a Tool to Aid Decision Making

Orzel 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:

Which of the following levels of costs should not be allocated to products for decision-making purposes?

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

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

What is the overhead cost assigned to Product C4 under activity-based costing?

Duckhorn Housecleaning 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 Lumbard family, requested 31 jobs during the year that required a total of 62 hours of housecleaning. For this service, the client was charged $1,620. Required: a. Compute the activity rates (i.e., cost per unit of activity) for the activity cost pools. Round off all calculations to the nearest whole cent. b. Using the activity-based costing system, compute the customer margin for the Lumbard family. Round off all calculations to the nearest whole cent. c. 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 Lumbard family. Round off all calculations to the nearest whole cent.

What is the overhead cost assigned to Product L6 under activity-based costing?

What is the product margin for Product L2 under activity-based costing?

How much cost, in total, would be allocated in the first-stage allocation to the Order Size activity cost pool?

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

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

What is the product margin for Product I6 under activity-based costing?

Which terms would make the following sentence true? Manufacturing companies that benefit the most from activity-based costing are those where overhead costs are a _________ percentage of total product cost and where there is ___________ diversity among the various products that they produce.

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:

What is the product margin for Product L6 under activity-based costing?

Chuang Corporation's activity-based costing system has three activity cost pools-Machining, Setting Up, and Other. The company's overhead costs have already been allocated to these cost pools as follows: 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. The following table shows the machine-hours and number of batches associated with each of the company's two products: Additional data concerning the company's products appears 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. c. Determine the product margins for each product using activity-based costing.

What is the overhead cost assigned to Product H2 under activity-based costing?

Belsky Corporation has provided the following data from its activity-based costing system: The company makes 490 units of product Q19S a year, requiring a total of 1,080 machine-hours, 60 orders, and 20 inspection-hours per year. The product's direct materials cost is $46.42 per unit and its direct labor cost is $20.22 per unit. According to the activity-based costing system, the average cost of product Q19S is closest to:

Swagg Jewelry Corporation manufactures custom jewelry. In the past, Swagg has been using a traditional overhead allocation system based solely on direct labor-hours. Sensing that this system was distorting costs and selling prices, Swagg has decided to switch to an activity-based costing system using three activity cost pools. Information on these activity cost pools are as follows: Job #309 incurred $900 of direct material, 30 hours of direct labor at $40 per hour, 80 machine hours, and 5 inspections. Required: a. What is the cost of the job under the activity-based costing system? b. Relative to the activity-based costing system, would Job #309 have been overcosted or undercosted under the traditional system and by how much?

If substantial batch-level or product-level costs exist, then overhead allocation based on a measure of volume such as direct labor-hours alone: