Exam 4: Activity-Based Costing

Figure 4-9 Summer Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are listed as follows: Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours. 100,000 direct labor hours are budgeted for next year. The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent. Estimates for the proposed job are as follows: The plant manager has heard of a new way of applying overhead that uses cost pools and activity drivers. Expected activity for the four activity drivers that would be used are: -Refer to Figure 4-9. What is the total cost of the proposed job if Winter Manufacturing uses direct labor hours as its only activity driver?

Figure 4-4 Mannitou Company made the following predictions for 2016: Job A2 (which was started and completed in June) used 3,000 direct labor hours, 2,000 machine hours, and $57,000 of prime costs. -Assume the following: Actual overhead costs equaled estimated overhead. Actual direct labor hours exceeded estimated direct labor hours used to calculate the predetermined overhead rate. If overhead is applied using the predetermined overhead rate, then overhead is

If applied overhead is greater than actual overhead it is called overapplied overhead.

If a firm has implemented activity-based procedures for home office expenses, it will

Figure 4-5 The Brookstone Company produces 9 volt batteries and AAA batteries. The Brookstone Company uses a plantwide rate to apply overhead based on direct labor hours. The following data is given: -Refer to Figure 4-5. How much overhead is applied to each 9 volt batteries and AAA batteries respectively? (round to 2 decimal places)

Figure 4 - 3 The records of Family Manufacturing show the following information: -Refer to Figure 4-3. The amount of overapplied or underapplied overhead is

Offering greater product accuracy than an activity-based costing system is not a characteristic of a costing system.

Figure 4-15 Carriage Manufacturing uses an activity-based costing system. The company produces Model 21 and Model 22. Information relating to the two products is as follows: The following costs are reported: -Refer to Figure 4-15. Labor-related overhead costs assigned to Model 21 are

Figure 4-19 Attraction Corporation produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. In addition, there is a sustaining process with two activities: providing utilities (plant wide) and providing space. Costs have been assigned to each activity using direct tracing and resource drivers: Activity drivers for each activity have been identified and their practical capacities listed: The costs of facility-level activities are assigned using machine hours. -Refer to 4-19. What is (are) the facility-level activity(ies)?

Figure 4-11 Longview Manufacturing Company manufactures two products (I and II). The overhead costs ($58,000) have been divided into three cost pools that use the following activity drivers: -Refer to Figure 4-11. What is the allocation rate per labor transaction using ABC?

Unit-level drivers are factors that measure the demands placed on unit-level activities by products.

Figure 4-13 The Molotov plant of Kaboom Industries has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows: The plant currently applies overhead using direct labor hours and expected capacity of 50,000 direct labor hours. The following data have been assembled for use in developing a bid for a proposed job: Total expected machine hours for all jobs during the year is 25,000, and the total expected number of inspections is 1,500. -Refer to Figure 4-13. Using direct labor hours to assign overhead, the total cost of the potential job would be

A department that is capital-intensive most likely would use a predetermined departmental overhead rate based on which of the following activity bases?

Figure 4-9 Summer Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are listed as follows: Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours. 100,000 direct labor hours are budgeted for next year. The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 10 percent. Estimates for the proposed job are as follows: The plant manager has heard of a new way of applying overhead that uses cost pools and activity drivers. Expected activity for the four activity drivers that would be used are: -The use of unit-based activity drivers to assign costs tends to

The method that first traces costs to a department and then to products is called:

Refer to Figure 4-22. What is the activity rate for responding to requests?

The overhead rates of the traditional functional-based product costing use

Figure 4-18 Marion Manufacturing uses an activity-based costing system. The company produces Model X and Model Y. Information relating to the two products is as follows: The following costs are reported: -Refer to Figure 4-18. Machine-related overhead would be classified as a

If unit-based product costing is used, which of the following would be traced directly to the product?

Figure 4-11 Longview Manufacturing Company manufactures two products (I and II). The overhead costs ($58,000) have been divided into three cost pools that use the following activity drivers: -Refer to Figure 4-11. What is the allocation rate per order using ABC?