Exam 4: Activity-Based Costing

Figure 4-17 X-TREME Corporation has the following activities: creating bills of materials (BOM), studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tooling. The general ledger accounts reveal the following expenditures for manufacturing engineering: The equipment is used for two activities: improving processes and designing tooling. Thirty-five percent of the equipment's time is used for improving processes and 65 percent is used for designing tools. The salaries are for two engineers. One is paid $50,000, while the other earns $25,000. The $50,000 engineer spends 40 percent of his time training employees in new processes and 60 percent of his time on improving processes. The remaining engineer spends equal time on all activities. Supplies are consumed in the following proportions: -Refer to Figure 4-17. What is the cost assigned to the improving processes activity?

Classifying activities into four general categories facilitates product costing by associating the response to different types of activity drivers.

If overhead is a significant proportion of the unit manufacturing costs, the distortion caused by using multi-level drivers can be serious.

In the ABC systems, managers directly estimate the resource demands imposed by each product.

If activity-based costing is used, materials handling would be classified as a

Figure 4-12 The Gardenview Corporation has identified the following overhead costs and activity drivers for next year: The following are two of the jobs completed during the year: The company's normal activity is 2,000 direct labor hours. -The activity that aids management in achieving objectives such as product or customer costing, continuous improvement and environmental management is called:

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 activity-based costing and the appropriate activity drivers, the total cost of the potential job would be

Management information systems can be divided into a unit-based type and activity-based type.

The proportion of an overhead activity consumed by a product is the ratio.

drivers create distortions when different products utilize resources differently.

Figure 4-21 Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G. Information relating to the two products is as follows: The following overhead costs are reported for the following activities of the production process: Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below: Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment. -Refer to Figure 4-21. Under this new approach using the new rates, what labor cost is assigned to Model F in this approximately relevant ABC system?

The collected data sets that are organized and interrelated for use by an organization's ABC information system is(are):

Batch-level costs are assigned using

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. -The following information is provided for the year: If normal costing is used, the amount of overhead applied for the year is

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 underapplied and considered material, what is the journal entry?

Account balances from the Boilermakers Company are as follows: If underapplied or overapplied overhead is material and is allocated to Work in Process, Finished Goods, and Cost of Goods Sold (based on ending account balances), Cost of Goods Sold after adjustment would have a balance of

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. What are the global consumption ratios of Model C and D respectively? (round to two decimal places)

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: -Refer to Figure 4-6. What is the overhead per unit for race cars? (round to 3 decimal places)

For labor-intensive operations, the most appropriate activity driver would be the hours.

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 are the consumption ratios for rug cleaners for the departments on the basis of the departmental drivers (molding ;assembly)?