Exam 4: Activity-Based Costing

Non-unit-based drivers are factors that measure the demands that cost objects place on activities.

Figure 4-14 Lawson Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are as follows: Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours. 20,000 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 15 percent. Estimates for the proposed job are as follows: In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based activity driver, direct labor hours. 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 4-14. If the number of inspections is used to assign inspection costs, the amount of inspection costs allocated to the proposed job would be SUPPORTING CALCULATIONS: $90,000/1,000 = $90 $90 × 6 = $540

The difference between actual overhead and applied overhead is an underapplied overhead.

Overhead assignments should reflect the amount of overhead demanded by each product.

Figure 4-20 Quasi-Tech 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. Costs have been assigned to each activity using direct tracing and resource drivers: Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity. -Refer to Figure 4-20. Determine the engineering costs assigned to model C using the two most expensive activities for cost pools. The costs of the two relatively inexpensive activities are allocated to the two most expensive activities in proportion to their costs. (Round to two decimal places.) The engineering cost assigned to model C would be

Which of the following quantities is an example of an activity driver in activity-based costing?

Figure 4-10 The Manoli Company has collected the following data for use in calculating product costs: Activity Data: (expected and actual) Departmental Data: (expected and actual) -Refer to Figure 4-10. What is the activity rate for moving materials?

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 amount of overhead allocated to the proposed job if Winter Manufacturing uses direct labor hours as its only activity driver?

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: -Which of the following is NOT a limitation of a plantwide overhead rate?

Activity-based costing uses only unit-level drivers for costing.

Figure 4-7 The Cherokee Company uses a predetermined overhead rate. The following accounts have these unadjusted balances: Raw Materials $20,000 Work in Process $40,000 Finished Goods $10,000 Cost of Goods Sold $50,000 -Refer to Figure 4-7. If Manufacturing overhead was $12,000 overapplied and considered immaterial, what is the journal entry?

Unit-based product costing uses which of the following procedures?

Figure 4-7 The Cherokee Company uses a predetermined overhead rate. The following accounts have these unadjusted balances: Raw Materials $20,000 Work in Process $40,000 Finished Goods $10,000 Cost of Goods Sold $50,000 -Refer to Figure 4-7. If overhead is underapplied by $12,000 and considered immaterial, the journal entry would be

Figure 4-1 The Foremost Company predicted factory overhead for 2016 and 2017 would be $120,000 for each year. The predicted activity for 2016 and 2017 were 30,000 and 20,000 direct labor hours, respectively. Additional data are as follows: The company assumes that the long-run normal production level is 20,000 direct labor hours per year. The actual factory overhead cost for the end of 2016 and 2017 was $120,000. Assume that it takes one direct labor hour to make one finished unit. -Refer to Figure 4-2. The actual overhead rate for applying manufacturing overhead is

There are many two-driver combinations that may be used to reduce the ABC system without sacrificing accuracy.

Figure 4-20 Quasi-Tech 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. Costs have been assigned to each activity using direct tracing and resource drivers: Owens produces two models: Model X and Model Y. The following table shows how the two products consume activity. -Refer to Figure 4-20. How much overhead is assigned to Model C using the 4 activity drivers?

All of the following are unit-based activity drivers EXCEPT

If activity-based costing is used, security is an example of a

Figure 4-6 The Fast & Furious Company produces two products: toy planes and toy race cars. They use departmental overhead rates for the two production departments: molding and finishing. Molding uses machine hours to assign overhead and Finishing uses direct labor hours. 50,000 planes and 250,000 race cars are produced. Please find the following data: -Motorsports, Inc. had a predetermined overhead rate of $2 per direct labor hour. The direct labor hours were estimated to be 25,000. The actual manufacturing overhead incurred was $47,000 and 24,000 actual direct labor hours were worked. How much was overhead over/under applied last year?

A(n) is a grouping of logically related information.