Exam 4: Activity-Based Costing

Figure 4-16 Samson Company recently installed an activity-based relational database. Using the information contained in the activity relational table, the following pool rates were computed: $400 per purchase order $24 per machine hour, Process 1 $30 per machine hour, Process 2 $80 per engineering hour Two products are produced by Special Products: L and M. The plant has two manufacturing processes, Process 1 and Process 2. Other processes include engineering, product handling, and procurement. Product L goes through Process 1 while Product M goes through Process 2. The product relational table for Special Products is as follows: Product L Product M -Refer to Figure 4-16. What is the unit cost of Product M?

If activity-based costing is used, set-ups would be classified as a

The use of activity drivers to assign costs tends to high-volume products.

Bayview Manufacturing Company has an accounts receivable department that performs three activities within the department: processing customer credit applications, invoicing customers, and performing collection activities. During interviews, the employee survey reports that they spend 15 percent of their time processing credit applications, 55 percent of their time invoicing customers, and 30 percent of their time on collection activities. The accounts receivable department employs 10 associates for a total cost of $200,000. Assume each associate works 8 hours per day, 20 days per month, but an estimate of practical capacity is 80 percent. After close observation of the employee's daily work, managers conclude the following: The estimated monthly quantities of work in the three activities are 500 credit applications, 18,000 invoices, and 900 collection calls. Required: 1. Under a traditional ABC system, what is the cost of one unit of activity? 2. Assuming the practical capacity information, what is the cost per minute of supplying capacity? 3. Under time-driven ABC, what are the cost driver rates for each activity?

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, what is the new pool rate for batch inspection costs?

Unit-based product costing assigns manufacturing and selling costs to products.

Tusker Corporation manufactures two products (S and T). The overhead costs have been divided into four cost pools that use the following activity drivers: a. Compute the allocation rates for each of the activity drivers listed. b. Allocate the overhead costs to Products S and T using activity-based costing. c. Compute the overhead rate using machine hours under the functional-based costing system. d. Allocate the overhead costs to Products S and T using the functional-based costing system overhead rate calculated in part (c).

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 the equally accurate reduced ABC system, what are the global consumption ratios for Model F and Model G respectively? (round to 2 decimal places)

The system that first traces costs to activities and then to products is called:

All of the following are non-unit-based activity drivers EXCEPT

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. Manoli Company uses departmental overhead rates: Molding uses machine hours and Assembly uses labor hours. What is the unit product cost for sweepers if departmental overhead rates are used?

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 D using the 4 activity drivers?

In an approximately relevant ABC system

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. What is the predetermined overhead rate? (round to 2 decimal places)

Figure 4-16 Samson Company recently installed an activity-based relational database. Using the information contained in the activity relational table, the following pool rates were computed: $400 per purchase order $24 per machine hour, Process 1 $30 per machine hour, Process 2 $80 per engineering hour Two products are produced by Special Products: L and M. The plant has two manufacturing processes, Process 1 and Process 2. Other processes include engineering, product handling, and procurement. Product L goes through Process 1 while Product M goes through Process 2. The product relational table for Special Products is as follows: Product L Product M -Refer to Figure 4-16. What is the unit cost of Product L?

The activity is a simple list of activities identified in an ABC system.

Figure 4-8 Tandem Company manufactures two products (D and F). The overhead costs ($84,000) have been divided into three cost pools that use the following activity drivers: -Refer to Figure 4-8. Using functional-based costing, what is the amount of overhead cost to be assigned to Product D using machine hours as the allocation base?

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. -Refer to Figure 4-12. If the four activity drivers are used to allocate overhead costs, total overhead allocated to Job 6A would be

After identifying and describing activities, the next step is to determine the cost of the performance of each activity.

Figure 4-8 Tandem Company manufactures two products (D and F). The overhead costs ($84,000) have been divided into three cost pools that use the following activity drivers: -Refer to Figure 4-8. If the number of machine hours is used to assign machine hour cost, determine the amount of machine hour cost to be assigned to Product D.