Exam 4: Activity-Based Costing and Analysis

Name and briefly describe three overhead rate methods.

The more activities tracked by activity-based costing, the more accurately overhead costs are assigned.

In activity-based costing, an activity can involve several related tasks.

Explain some of the disadvantages of the departmental overhead rate method.

By definition, costs classified as overhead are consumed in basically the same manner regardless of the process involved.

When products differ in batch size and complexity, they usually consume different amounts of ________.

Which types of overhead allocation methods result in the use of more than one overhead rate during the same time period?

A company uses activity-based costing to determine the costs of its three products: A, B, and C. The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table: Compute the company's activity rates under activity-based costing for each of the three activities.

Superior Products Manufacturing identified the following data in its two production departments. Make the following independent calculations (Round to two decimals). a. Compute a plantwide overhead rate using machine hours as the allocation base. b. Compute a plantwide overhead rate using direct labor hours as the allocation base.

How does ABC differ from using multiple departmental rates?

Turtle Company produces t-shirts that go through two operations, cutting and sewing, before they are complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for the cutting department based on direct labor hours is $2.69 per direct labor hour (rounded to two decimals).

The major advantages of using a single plantwide overhead rate are ________ and ________.

West Company estimates that overhead costs for the next year will be $5,240,000 for indirect labor and $550,000 for factory utilities. The company uses machine hours as its overhead allocation base. If 150,000 machine hours are planned for this next year, what is the company's plantwide overhead rate?

A company has two products: AA and BB. It uses a plantwide overhead allocation method based on activity 33 and has prepared the following analysis showing budgeted costs and activities. Use this information to compute the company's plantwide overhead rate.

A company has two products: Big and Little. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools: Annual production and sales level of big product is 62,525 units, and the annual production and sales level of little product is 251,900 units. a. Compute the approximate overhead cost per unit of big product under activity-based costing. b. Compute the approximate overhead cost per unit of little product under activity-based costing.

A company estimates that overhead costs for the next year will be $7,200,000 for indirect labor, $400,000 for factory utilities, and $43,000 for depreciation on factory machinery. The company uses direct labor hours as its overhead allocation base. If 955,375 direct labor hours are planned for this next year, what is the company's plantwide overhead rate?

A ________ is a collection of costs that are related to the same or similar activity.

Western Company allocates $10 overhead to products based on the number of machine hours used. The company uses a plantwide overhead rate with machine hours as the allocation base. Given the amounts below, how many machine hours does the company expect in department 2?

Direct labor, direct materials, and manufacturing overhead are all product costs. Why is overhead more difficult to account for than either direct labor or direct materials?

A company estimates that costs for the next year will be $500,000 for indirect labor, $50,000 for factory utilities, and $1,000,000 for the CEO's salary. The company uses machine hours as its overhead allocation base. If 25,000 machine hours are planned for this next year, then the plantwide overhead rate is $22 per machine hour.