Deck 5: Activity-Based Costing

Question 1

An activity-based costing that is designed for internal decision making may not confor? to generally accepted accounting principles. Which of the following would cause that to be the case?

A)Direct manufacturing costs for labour and material are included.
B)Indirect manufacturing costs for indirect labour are included.
C)Some non-manufacturing costs are assigned to products.
D)Indirect manufacturing costs for indirect materials are included.

Answer 1

C

Question 2

Which of the following would be considered as a prevention cost

A)Rework costs.
B)Scrap costs.
C)Inspection of completed products prior to shipment to customers.
D)Supplier management.

Answer 2

D

Question 3

Setting up equipment is an example of a:

A)product-level activity.
B)unit-level activity.
C)batch-level activity.
D)facility-level activity.

Answer 3

C

Question 4

Reference: 05-14
Brooke Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were: $$\begin{array} { | l | l | l | l | } \hline \text { Actrilty Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} & { \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 777,400 & 26,000 & \text { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,814,400 & 28,000 & \text { setups } \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & \$ 478,800 & 18,000 & \text { DLHs } \\\hline \begin{array} { l } \text { The actual activity for the year } \\\text { was: }\end{array} & & & \\\hline & & \text { Actual Activity for the Year } \\\hline \text { Actrvity Cost Pools } & \text { Total } & \text { Product } X & \text { Product } Y \\\hline \text { Machine related (machine-hours) } & 28,000 & 17,000 & 11,000 \\\hline \text { Batch setup (setups) } & 28,000 & 7,000 & 21,000 \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & 18,000 & 9,000 & 9,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $3,064,400.

-If total overapplied or underapplied overhead is closed to the Cost of Goods Sol? account at the end of each year, the entry to Cost of Goods Sold would have been:

A)$33,000 credit.
B)$66,000 debit.
C)$33,000 debit.
D)$66,000 credit.

Question 5

Which of the following would be classified as a product-level activity

A)Cafeteria facilities available to and used by all employees.
B)Machine setup for a batch of a standard product.
C)Advertising a product.
D)Human resource management.

Question 6

Reference: 05-13
Bressler Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were: $$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} & { \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 332,800 & 16,000 & \mathrm { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,580,500 & 29,000 & \text { setups } \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & \$ 305,600 & 16,000 & \text { DLHs } \\\hline \begin{array} { l } \text { The actual activity for the year } \\\text { was: }\end{array} & & & \\\hline & & \text { Actual Activity for the Year } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product X } & \text { Product } Y \\\hline \text { Machine related (machine-hours) } & 15,000 & 7,000 & 8,000 \\\hline \text { Batch setup (setups) } & 30,000 & 22,000 & 8,000 \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & 15,000 & 12,000 & 3,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $2,202,600.

-The credits to the Manufacturing Overhead control account during the year (prior t? closing out the balance)would have totalled:

A)$2,233,500.
B)$2,249,700.
C)$2,202,600.
D)$2,218,050.

Question 7

What is the allocation rate for Materials Handling using Activity Based Costing

A)$9
B)$30
C)$18
D)$45

Question 8

Reference: 05-14
Brooke Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were:
Estima
$$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overheod Cost }\end{array} & { \text { Expected Activity } } \\\hline \text { Machane related (machine-hours) } & \$ 777,400 & 26,000 & \text { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,814,400 & 28,000 & \text { setups } \\\hline \begin{array} { l } \text { Gentral factory (direct } \\\text { labour-hours) }\end{array} & \$ 478,800 & 18,000 & \text { DLHs } \\\hline \begin{array} { l } \text { The actual activity for the year } \\\text { was: }\end{array} & & & \\\hline & & \text { Protual Activity for the Year } \\\hline \text { Actrvity Cost Pools } & \text { Total } & 17,000 & 11,000 \\\hline \text { Machane related (machine-hours) } & 28,000 & 7,000 & 21,000 \\\hline \text { Batch setup (setups) } & 28,000 & 9,000 & 9,000 \\\hline \begin{array} { l } \text { Gentral factory (direct } \\\text { labour-hours) }\end{array} & 18,000 & & \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $3,064,400.

-The debits to the Manufacturing Overhead control account during the year (prior to closing out the balance)would have totalled:

A)$3,130,400.
B)$3,097,400.
C)$3,064,400.
D)$3,076,500.

Question 9

Matt Company uses activity-based costing. The annual production and sales of Product A are 8,000 units and of Product B are 6,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows: $$\begin{array} { | c | l | l | l | l | } \hline \text { Activity } & \text { Estimated } & \text { Expected Activity } \\\hline \text { Cost Pool } & \text { Cost } & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity } 1 & \$ 20,000 & 100 & 400 & 500 \\\hline \text { Activity 2 } & \$ 37,000 & 800 & 200 & 1,000 \\\hline \text { Activity 3 } & \$ 91,200 & 800 & 3,000 & 3,800 \\\hline\end{array}$$ The cost per unit of Product A under activity-based costing is closest to:

A)$2.40.
B)$6.60.
C)$3.90.
D)$10.59.

Question 10

Assuming the predetermined overhead rate is $10.00, what is the total overhead allocated to each washing mitt using the current costing system?

A)$2.00
B)$10.00
C)$4.00
D)$2.67

Question 11

Reference: 05-04
Monson Company has two products: G and P. The company uses activity-based costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \begin{array} { l } \text { Estimated Ovhd. } \\\text { Cost }\end{array} & \text { Product G } & \text { Product P } & \text { Total } \\\hline \text { Activity 1 } & \$ 30,000 & 200 & 400 & 600 \\\hline \text { Activity 2 } & \$ 24,000 & 600 & 900 & 1,500 \\\hline \text { Activity 3 } & \$ 80,000 & 400 & 3,600 & 4,000 \\\hline\end{array}$$ The annual production and sales of Product G is 10,640 units. The annual production and sales of Product P is
26,600.

-The activity rate under the activity-based costing system for Activity 2 is closest to:

A)$26.67.
B)$21.97.
C)$89.33.
D)$16.00.

Question 12

Reference: 05-01
Acton Company has two products: A and B. The annual production and sales of Product A are 800 units and of Product B are 500 units. The company has traditionally used direct labour-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labour-hours per unit and Product B requires
0.2 direct labour-hours per unit. The total estimated overhead for next period is $92,023.
The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory-with estimated overhead costs and expected activity as
follows: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \begin{array} { l } \text { Estimated } \\\text { Overhead } \\\text { Costs }\end{array} & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 14,487 & 500 & 600 & 1,100 \\\hline \text { Activity 2 } & \$ 64,800 & 2,500 & 500 & 3,000 \\\hline \text { General Factory } & \$ 12,736 & 240 & 100 & 340 \\\hline \text { Total } & \$ 92,023 & & & \\\hline\end{array}$$ (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour-hours.)

-The overhead cost per unit of Product B under the traditional costing system is closest to:

A)$2.63.
B)$54.13.
C)$4.32.
D)$7.49.

Question 13

Testing a prototype of a new product is an example of a:

A)product-level activity.
B)unit-level activity.
C)facility-level activity.
D)batch-level activity.

Question 14

Reference 05-16
Washie manufactures two types of products for washing vehicles: the washing mitt, and the polishing cloth. Up to this point, Washie has been utilizing traditional costing with one plant-wide overhead rate using machine hours as the allocation base. The company has been receiving complaints that the polishing mitt seems over-priced. Management is wondering if there's merit to this claim since the washing mitt is a more complex product
compared to the polishing cloth. As such, management has gathered information on the potential activity areas to be used. $\begin{array}{|l|l|l|}\hline \text { Activity } & \text { Activity Measure } & \begin{array}{l}\text { Estimated } \\\text { Manufacturing } \\\text { Overhead Cost }\end{array} \\\hline \text { Design } & \text { Design hours } & \$ 12,000 \\\hline \text { Setups } & \text { Number of set-ups } & 40,000 \\\hline \text { Materials Handling } & \text { Meters of fabric } & 30,000 \\\hline \text { Production } & \text { Machine Hours } & 250,000 \\\hline\end{array}$
The company expected has determined the expected activity for each of the product lines:
During the year, the company sold 100,000 washing mitts and 50,000 polishing cloths. Direct costs are $\$ 8.00$ for washing mitts and $\$ 2.00$ for polishing costs.
$\begin{array}{|l|l|l|}\hline \text { Activity Measure } & \text { Washing Mitt } & \text { Polishing Cloth } \\\hline \# \text { of design hours } & 50 & 5 \\\hline \# \text { of setups } & 30 & 20 \\\hline \# \text { of meters of fabric } & 4,000 & 1,000 \\\hline \# \text { of machine hours } & 40,000 & 10,000 \\\hline\end{array}$

-Compute the predetermined overhead rate using machine hours as the basis for allocating overhead costs to products.

A)$8.30
B)$6.64
C)$33.20
D)$5.00

Question 15

Reference: 05-01
Acton Company has two products: A and B. The annual production and sales of Product A are 800 units and of Product B are 500 units. The company has traditionally used direct labour-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labour-hours per unit and Product B requires
0.2 direct labour-hours per unit. The total estimated overhead for next period is $92,023.
The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory-with estimated overhead costs and expected activity as
follows: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \begin{array} { l } \text { Estimated } \\\text { Overhead } \\\text { Costs }\end{array} & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 14,487 & 500 & 600 & 1,100 \\\hline \text { Activity 2 } & \$ 64,800 & 2,500 & 500 & 3,000 \\\hline \text { General Factory } & \$ 12,736 & 240 & 100 & 340 \\\hline \text { Total } & \$ 92,023 & & & \\\hline\end{array}$$ (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour-hours.)

-The overhead cost per unit of Product A under the activity-based costing system is closest to:

A)$11.24.
B)$86.97.
C)$70.79.
D)$81.20.

Question 16

Reference: 05-11
Andruschack Corporation uses activity-based costing to determine product costs for external financial reports. Overapplied or underapplied overhead is closed to the Cost of Goods Sold account at the end of each year. The
company has provided the following data concerning its activity-based costing system: $$\begin{array}{l}\begin{array} { | l | l | } \hline \begin{array} { l } \text { Activity Cost Pools (and Activity } \\\text { Measures) }\end{array} & \text { Estimated Overhead Cost } \\\hline \text { Machine related (machine-hours) } & \$ 213,000 \\\hline \text { Batch setup (setups) } & \$ 339,000 \\\hline \text { General factory (direct labour-hours) } & \$ 193,200 \\\hline\end{array}\\\\\begin{array} { | l | l | l | l | } \hline & & { \text { Expected Activity } } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product } X & \text { Product } Y \\\hline \text { Machine related } & 10,000 & 3,000 & 7,000 \\\hline \text { Batch setup } & 10,000 & 4,000 & 6,000 \\\hline \text { General factory } & 14,000 & 7,000 & 7,000 \\\hline\end{array}\end{array}$$

-Assuming that the actual overhead costs of the three pools totalled $746,000 and actual activity was equal to expected activity, what would be the required entry to the Cost of Goods Sold account?

A)$800 credit.
B)$800 debit.
C)$600 credit.
D)$600 debit

Question 17

Reference: 05-14
Brooke Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were: $$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} &{ \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 777,400 & 26,000 & \text { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,814,400 & 28,000 & \text { setups } \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & \$ 478,800 & 18,000 & \text { DLHs } \\\hline \begin{array} { l } \text { The actual activity for the year } \\\text { was: }\end{array} & & & \\\hline & & \text { Actual Activity for the Year } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product X } & \text { Product Y } \\\hline \text { Machine related (machine-hours) } & 28,000 & 17,000 & 11,000 \\\hline \text { Batch setup (setups) } & 28,000 & 7,000 & 21,000 \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & 18,000 & 9,000 & 9,000 \\\hline\end{array}$$ Estimated
The actual total manufacturing overhead cost incurred for the year was $3,064,400.

-The credits to the Manufacturing Overhead control account during the year (prior to closing out the balance)would have totalled:

A)$3,130,400.
B)$3,097,400.
C)$3,064,400.
D)$3,076,500.

Question 18

Departmental overhead rates may not correctly assign overhead costs due to:

A)the high correlation between direct labour-hours and the incurrence of overhead costs.
B)the use of direct labour-hours in allocating overhead costs to products rather than machine time or quantity of materials used.
C)difficulties associated with identifying cost pools for the first stage of the allocation process.
D)overreliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced, lot size, or complexity of production.

Question 19

$$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \begin{array} { l } \text { Estimated } \\\text { Overhead } \\\text { Cost }\end{array} & \text { Expected Activity } \\\hline \text { Activity 1 } & \$ 34,300 & 1,400 \\\hline \text { Activity 2 } & \$ 20,520 & 1,800 \\\hline \text { Activity 3 } & \$ 36,112 & 1,600 \\\hline\end{array}\\\text { Actual activity for the current year was as follows: }\\\begin{array} { | l | l | } \hline & \text { Actual Activity } \\\hline \text { Activity 1 } & 1,415 \\\hline \text { Activity 2 } & 1,805 \\\hline \text { Activity 3 } & 1,585 \\\hline\end{array}\end{array}$$ The amount of overhead applied for Activity 3 during the year was closest to

A)$36,107.00.
B)$30,026.50.
C)$36,112.00.
D)$35,773.45.

Question 20

Which of the following would not be considered as an internal failure cost

A)Quality training.
B)Scrap costs.
C)Investigation of cause of failure.
D)Rework costs.

Question 21

Purchase order processing is an example of a:

A)facility-level activity.
B)batch-level activity.
C)unit-level activity.
D)product-level activity.

Question 22

Reference: 05-02
Addy Company has two products: A and B. The annual production and sales of Product A are 1,700 units and of Product B are 1,100 units. The company has traditionally used direct labour-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labour-hours per unit and Product B requires
0.6 direct labour-hours per unit. The total estimated overhead for next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory-with estimated overhead costs and expected activity as
follows: $\begin{array}{|l|l|l|l|l|}\hline \text { Activity } & &{\text { Expected Activity }} \\\hline \text { Cost Pool } & \begin{array}{l}\text { Estimated } \\\text { Overhead Costs }\end{array} & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 30,528 & 1,000 & 600 & 1,600 \\\hline \text { Activity 2 } & \$ 17,385 & 1,700 & 200 & 1,900 \\\hline \text { General Factory } & \$ 50,872 & 510 & 660 & 1,170 \\\hline \text { Total } & \$ 98,785 & & & \\\hline\end{array}$ (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour-hours.)

-The predetermined overhead rate per DLH under the traditional costing system is closest to:

A)$19.08.
B)$43.48.
C)$9.15.
D)$84.43.

Question 23

Reference: 05-02
Addy Company has two products: A and B. The annual production and sales of Product A are 1,700 units and of Product B are 1,100 units. The company has traditionally used direct labour-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labour-hours per unit and Product B requires
0.6 direct labour-hours per unit. The total estimated overhead for next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory-with estimated overhead costs and expected activity as
follows:
$\begin{array}{|l|l|l|l|l|}\hline \text { Activity } & &{\text { Expected Activity }} \\\hline \text { Cost Pool } & \begin{array}{l}\text { Estimated } \\\text { Overhead Costs }\end{array} & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 30,528 & 1,000 & 600 & 1,600 \\\hline \text { Activity 2 } & \$ 17,385 & 1,700 & 200 & 1,900 \\\hline \text { General Factory } & \$ 50,872 & 510 & 660 & 1,170 \\\hline \text { Total } & \$ 98,785 & & & \\\hline\end{array}$ (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour-hours.)

-The predetermined overhead rate (i.e., activity rate)for Activity 2 under the activity-based costing system is closest to:

A)$86.93.
B)$51.99.
C)$10.23.
D)$9.15.

Question 24

Reference: 05-05
Abel Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A are 200 units and of Product B are 400 units. There are three activity cost pools, with estimated costs and expected activity as follows: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & \text { Expected Activity } \\\hline \text { Cost Pool } & \text { Estimated Cost } & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 16,660 & 600 & 100 & 700 \\\hline \text { Activity 2 } & \$ 18,450 & 1,100 & 700 & 1,800 \\\hline \text { Activity 3 } & \$ 9,731 & 60 & 160 & 220 \\\hline\end{array}$$

-The activity rate for Activity 2 is closest t?

A)$10.25.
B)$24.91.
C)$16.77.
D)$26.36.

Question 25

Reference: 05-09
Aujla Corporation uses activity-based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity-based costing system: $$\begin{array} { | l | l | } \hline \text { Activity Cost Pools (and Activity Measures) } & \text { Estimated Overhead Cost } \\\hline \text { Machine related (machine-hours) } & \$ 239,000 \\\hline \text { Batch setup (setups) } & \$ 234,900 \\\hline \text { General factory (direct labour-hours) } & \$ 159,300 \\\hline\end{array}$$ $\text { Expected Activity }$
$\begin{array}{llll}\text { Activity Cost } & \text { Total } & \text { Product } X & \text { Product } Y\\\text { Pools }\\\text { Machine related } & 10,000 & 4,000 & 6,000 \\\text { Batch setup } & 9,000 & 8,000 & 1,000 \\\text { General factory } & 9,000 & 3,000 & 6,000\end{array}$

-Assuming that actual activity turns out to be the same as expected activity, the total amount of overhead cost allocated to Product X would be closest to:

A)$357,500.
B)$235,000.
C)$316,600.
D)$563,000.

Question 26

Reference: 05-12
Brenot Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were: $$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} & { \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 379,600 & 13,000 & \text { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,144,800 & 27,000 & \text { setups } \\\hline \text { General factory (direct labour-hours) } & \$ 420,500 & 29,000 & \text { DLHs } \\\hline \text { The actual activity for the year was: } & & & \\\hline & & \text { Actual Activity for the Year } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product X } & \text { Product Y } \\\hline \text { Machine related (machine-hours) } & 13,000 & 11,000 & 2,000 \\\hline \text { Batch setup (setups) } & 26,000 & 3,000 & 23,000 \\\hline \text { General factory (direct labour-hours) } & 30,000 & 24,000 & 6,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $1,942,300.

-The activity rate computed at the beginning of the year for the batch setup activity cost pool is closest to:

A)$74.80.
B)$42.40.
C)$49.80.
D)$381.60.

Question 27

The clerical activity associated with processing purchase orders to produce an order for a standard product is an example of a:

A)facility-level activity.
B)batch-level activity.
C)product-level activity.
D)unit-level activity.

Question 28

Reference: 05-08
Albin Company uses activity-based costing to compute product costs for external reports. The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool. Estimated costs and activities for the current year are presented below for the three activity cost pools: $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Estimated Overhead Cost } & \text { Expected Activity } \\\hline \text { Activity } 1 & \$ 42,700 & 2,000 \\\hline \text { Activity 2 } & \$ 24,934 & 2,600 \\\hline \text { Activity 3 } & \$ 49,289 & 2,300 \\\hline\end{array}\\\text { Actual costs and activities for the current year were as follows: }\\\begin{array} { | l | l | l | } \hline & \text { Actual Overhead Cost } & \text { Actual Activity } \\\hline \text { Activity } 1 & \$ 42,855 & 1,995 \\\hline \text { Activity 2 } & \$ 24,794 & 2,595 \\\hline \text { Activity 3 } & \$ 49,294 & 2,295 \\\hline\end{array}\end{array}$$

-The total credits to the Manufacturing Overhead account during the year were closest to:

A)$116,923.
B)$116,661.
C)$120,133.
D)$116,943.

Question 29

Reference: 05-02
Addy Company has two products: A and B. The annual production and sales of Product A are 1,700 units and of Product B are 1,100 units. The company has traditionally used direct labour-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labour-hours per unit and Product B requires
0.6 direct labour-hours per unit. The total estimated overhead for next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory-with estimated overhead costs and expected activity as
follows: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \begin{array} { l } \text { Estimated } \\\text { Overhead Costs }\end{array} & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 30,528 & 1,000 & 600 & 1,600 \\\hline \text { Activity 2 } & \$ 17,385 & 1,700 & 200 & 1,900 \\\hline \text { General Factory } & \$ 50,872 & 510 & 660 & 1,170 \\\hline \text { Total } & \$ 98,785 & & & \\\hline\end{array}$$ (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour-hours.)

-The overhead cost per unit of Product B under the traditional costing system is closest to:

A)$5.49.
B)$26.09.
C)$11.45.
D)$50.66.

Question 30

Reference: 05-07
Alam Company uses activity-based costing to compute product costs for external reports. The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool. Overapplied or underapplied overhead is closed to the Cost of Goods Sold account at the end of each year. Estimated costs and activities for the current year are presented below for the three activity cost pools: $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Estimated Overhead Cost } & \text { Expected Activity } \\\hline \text { Activity 1 } & \$ 29,328 & 1,200 \\\hline \text { Activity 2 } & \$ 30,024 & 2,400 \\\hline \text { Activity 3 } & \$ 65,142 & 2,200 \\\hline\end{array}\\\text { Actual costs and activities for the current year were as follows: }\\\begin{array} { | l | l | l | } \hline & \text { Actual Overhead Cost } & \text { Actual Activity } \\\hline \text { Activity 1 } & \$ 29,238 & 1,185 \\\hline \text { Activity 2 } & \$ 29,899 & 2,415 \\\hline \text { Activity 3 } & \$ 65,117 & 2,225 \\\hline\end{array}\end{array}$$

-The total credits to the Manufacturing Overhead account during the year were closest to:

A)$125,055.
B)$124,494.
C)$125,667.
D)$124,254.

Question 31

Reference: 05-13
Bressler Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were:
$$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} & { \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 332,800 & 16,000 & \text { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,580,500 & 29,000 & \text { setups } \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & \$ 305,600 & 16,000 & \text { DLHs } \\\hline \begin{array} { l } \text { The actual activity for the year } \\\text { was: }\end{array} & & & \\\hline & & \text { Actual Activity for the Year } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product X } &\text { Product } Y \\\hline \text { Machine related (machine-hours) } & 15,000 & 7,000 & 8,000 \\\hline \text { Batch setup (setups) } & 30,000 & 22,000 &8,000\\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & 15,000 & 12,000 & 3,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $2,202,600.

-The debits to the Manufacturing Overhead control account during the year (prior to closing out the balance)would have totalled:

A)$2,249,700.
B)$2,223,500.
C)$2,218,050.
D)$2,202,600.

Question 32

Reference: 05-02
Addy Company has two products: A and B. The annual production and sales of Product A are 1,700 units and of Product B are 1,100 units. The company has traditionally used direct labour-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labour-hours per unit and Product B requires
0.6 direct labour-hours per unit. The total estimated overhead for next period is $98,785.
The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory-with estimated overhead costs and expected activity as
follows:
$$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \begin{array} { l } \text { Estimated } \\\text { Overhead Costs }\end{array} & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 30,528 & 1,000 & 600 & 1,600 \\\hline \text { Activity 2 } & \$ 17,385 & 1,700 & 200 & 1,900 \\\hline \text { General Factory } & \$ 50,872 & 510 & 660 & 1,170 \\\hline \text { Total } & \$ 98,785 & & & \\\hline\end{array}$$ (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour-hours.)

-The overhead cost per unit of Product B under the activity-based costing system is closest to

A)$26.09.
B)$38.16.
C)$35.28.
D)$50.66.

Question 33

Reference: 05-04
Monson Company has two products: G and P. The company uses activity-based costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \begin{array} { l } \text { Estimated Ovhd. } \\\text { Cost }\end{array} & \text { Product G } & \text { Product P } & \text { Total } \\\hline \text { Activity 1 } & \$ 30,000 & 200 & 400 & 600 \\\hline \text { Activity 2 } & \$ 24,000 & 600 & 900 & 1,500 \\\hline \text { Activity 3 } & \$ 80,000 & 400 & 3,600 & 4,000 \\\hline\end{array}$$ The annual production and sales of Product G is 10,640 units. The annual production and sales of Product P is
26,600.

-The overhead cost per unit of Product P under activity-based costing is closest to:

A)$30.16.
B)$10.00.
C)$4.00.
D)$6.88.

Question 34

Reference: 05-07
Alam Company uses activity-based costing to compute product costs for external reports. The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool. Overapplied or underapplied overhead is closed to the Cost of Goods Sold account at the end of each year. Estimated costs and activities for the current year are presented below for the three activity cost pools: $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Estimated Overhead Cost } & \text { Expected Activity } \\\hline \text { Activity 1 } & \$ 29,328 & 1,200 \\\hline \text { Activity 2 } & \$ 30,024 & 2,400 \\\hline \text { Activity 3 } & \$ 65,142 & 2,200 \\\hline\end{array}\\\text { Actual costs and activities for the current year were as follows: }\\\begin{array} { | l | l | l | } \hline & \text { Actual Overhead Cost } & \text { Actual Activity } \\\hline \text { Activity 1 } & \$ 29,238 & 1,185 \\\hline \text { Activity 2 } & \$ 29,899 & 2,415 \\\hline \text { Activity 3 } & \$ 65,117 & 2,225 \\\hline\end{array}\end{array}$$

-The total debits to the Manufacturing Overhead account during the year were closest to:

A)$125,667.
B)$124,494.
C)$125,055.
D)$124,254.

Question 35

Reference: 05-14
Brooke Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were:
$$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} & { \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 777,400 & 26,000 & \text { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,814,400 & 28,000 & \text { setups } \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & \$ 478,800 & 18,000 & \text { DLHs } \\\hline \begin{array} { l } \text { The actual activity for the year } \\\text { was: }\end{array} & & & \\\hline & & \text { Actual Activity for the Year } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product X } & \text { Product } Y \\\hline \text { Machine related (machine-hours) } & 28,000 & 17,000 & 11,000 \\\hline \text { Batch setup (setups) } & 28,000 & 7,000 & 21,000 \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & 18,000 & 9,000 & 9,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $3,064,400.

-The activity rate computed at the beginning of the year for the batch setup activity cost pool is closest to:

A)$86.40.
B)$64.80.
C)$109.70.
D)$259.20.

Question 36

IBM is conducting a prototype testing of its newest product. This is an example of an activity at which level?

A)Unit level activity.
B)Batch level activity.
C)Facility level activity.
D)Product level activity.

Question 37

Reference: 05-01
Acton Company has two products: A and B. The annual production and sales of Product A are 800 units and of Product B are 500 units. The company has traditionally used direct labour-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labour-hours per unit and Product B requires
0.2 direct labour-hours per unit. The total estimated overhead for next period is $92,023.
The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory-with estimated overhead costs and expected activity as
follows: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \begin{array} { l } \text { Estimated } \\\text { Overhead } \\\text { Costs }\end{array} & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 14,487 & 500 & 600 & 1,100 \\\hline \text { Activity 2 } & \$ 64,800 & 2,500 & 500 & 3,000 \\\hline \text { General Factory } & \$ 12,736 & 240 & 100 & 340 \\\hline \text { Total } & \$ 92,023 & & & \\\hline\end{array}$$ (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour-hours.)

-The predetermined overhead rate per DLH under the traditional costing system is closest to:

A)$270.66.
B)$21.60.
C)$37.46.
D)$13.17.

Question 38

Which of the following would be classified as a product-level activity

A)Personnel administration.
B)Testing product prototypes.
C)Cafeteria facilities used by all employees.
D)Machine setups for standard products.

Question 39

Reference 05-15
Speed Demon Inc. manufactures two products: speedometers and odometers. During the month, it produced
2,000 speedometers and 3,000 odometers and incurred estimated overhead costs of $45,300. The company currently allocated overhead on the basis of direct labor hours. This month, the company incurred the following: $\begin{array}{|l|l|l|}\hline & \text { Speedometers } & \text { Odometers } \\\hline \text { Machine Hours } & 750 & 1,000 \\\hline \text { Labour Hours } & 1,200 & 800 \\\hline \text { Labor cost } & \$ 12,000 & 18,000 \\\hline\end{array}$

Management is considering implementing activity based costing. An analysis of estimated overhead costs revealed the following activities:

$\begin{array}{|l|l|l|l|l|}\hline \text { Activity } & \text { Total Cost } & \begin{array}{l}\text { Activity } \\\text { Measure }\end{array} & \begin{array}{l}\text { Use of Activity } \\\text { Measure by Product } \\\text { Line }\end{array} \\\hline & & & \text { Speedometers} & \text { Odometers } \\\hline \begin{array}{l}\text { Materials } \\\text { Handling }\end{array} & \$ 18,000 & \begin{array}{l}\text { of } \\\text { requisitions }\end{array} & 400 & 600 \\\hline \begin{array}{l}\text { Machine } \\\text { Set-ups }\end{array} & 12,600 & \# \text { of set-ups } & 150 & 300 \\\hline \begin{array}{l}\text { Quality } \\\text { Inspections }\end{array} & 14,700 & \begin{array}{l}\text { \# of } \\\text { inspections }\end{array} & 200 & 400 \\\hline\hline\end{array}$

-Assuming a current predetermined overhead rate of $10.00, what is the total overhead allocated to speedometers using the current costing system?

A)$45,000
B)$8,000
C)$12,000
D)$20,000

Question 40

What is the allocation rate for Machine Set-ups using Activity Based Costing

A)$6.30
B)$72.00
C)$28.00
D)$84.00

Question 41

Reference: 05-12
Brenot Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were: $$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & { \text { Expected Actrimated } } \\& \text { Overhead Cost } & \\\hline \text { Machine related (machine-hours) } & \$ 379,000 & 13,000 & \mathrm { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,144,800 & 27,000 & \text { setups } \\\hline \text { General factory (direct labour-hours) } & \$ 420,500 & 29,000 & \text { DLHs } \\\hline \text { The actual activity for the year was: } & & & \\\hline & & \text { Actual Actrvity for the Year } \\\hline \text { Actrity Cost Pools } & \text { Total } & \text { Product } X & \text { Product Y } \\\hline \text { Machine related (machine-hours) } & 13,000 & 11,000 & 2,000 \\\hline \text { Batch setup (setups) } & 26,000 & 3,000 & 23,000 \\\hline \text { General factory (direct labour-hours) } & 30,000 & 24,000 & 6,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $1,942,300.

-The total amount of overhead cost allocated to Product X during the year would be closest to:

A)$796,400.
B)$1,145,000.
C)$224,000.
D)$972,450.

Question 42

Reference: 05-11
Andruschack Corporation uses activity-based costing to determine product costs for external financial reports. Overapplied or underapplied overhead is closed to the Cost of Goods Sold account at the end of each year. The
company has provided the following data concerning its activity-based costing system: $$\begin{array}{l}\begin{array} { | l | l | } \hline \begin{array} { l } \text { Activity Cost Pools (and Activity } \\\text { Measures) }\end{array} & \text { Estimated Overhead Cost } \\\hline \text { Machine related (machine-hours) } & \$ 213,000 \\\hline \text { Batch setup (setups) } & \$ 339,000 \\\hline \text { General factory (direct labour-hours) } & \$ 193,200 \\\hline\end{array}\\\\\begin{array} { | l | l | l | l | } \hline & & { \text { Expected Activity } } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product } X & \text { Product } Y \\\hline \text { Machine related } & 10,000 & 3,000 & 7,000 \\\hline \text { Batch setup } & 10,000 & 4,000 & 6,000 \\\hline \text { General factory } & 14,000 & 7,000 & 7,000 \\\hline\end{array}\end{array}$$

-Assuming that actual activity turns out to be the same as expected activity, the total amount of overhead cost allocated to Product X would be closest to:

A)$339,000.
B)$372,600.
C)$296,100.
D)$298,000.

Question 43

Reference: 05-01
Acton Company has two products: A and B. The annual production and sales of Product A are 800 units and of Product B are 500 units. The company has traditionally used direct labour-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labour-hours per unit and Product B requires
0.2 direct labour-hours per unit. The total estimated overhead for next period is $92,023.
The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory-with estimated overhead costs and expected activity as
follows: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \begin{array} { l } \text { Estimated } \\\text { Overhead } \\\text { Costs }\end{array} & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 14,487 & 500 & 600 & 1,100 \\\hline \text { Activity 2 } & \$ 64,800 & 2,500 & 500 & 3,000 \\\hline \text { General Factory } & \$ 12,736 & 240 & 100 & 340 \\\hline \text { Total } & \$ 92,023 & & & \\\hline\end{array}$$ (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour-hours.)

-The predetermined overhead rate (i.e., activity rate)for Activity 1 under the activity-based costing system is closest to:

A)$83.66.
B)$24.15.
C)$13.17.
D)$28.97.

Question 44

Reference: 05-08
Albin Company uses activity-based costing to compute product costs for external reports. The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool. Estimated costs and activities for the current year are presented below for the three activity cost pools: $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Estimated Overhead Cost } & \text { Expected Activity } \\\hline \text { Activity 1 } & \$ 42,700 & 2,000 \\\hline \text { Activity 2 } & \$ 24,934 & 2,600 \\\hline \text { Activity 3 } & \$ 49,289 & 2,300 \\\hline\end{array}\\\text { Actual costs and activities for the current year were as follows: }\\\begin{array} { | l | l | l | } \hline & \text { Actual Overhead Cost } & \text { Actual Activity } \\\hline \text { Activity } 1 & \$ 42,855 & 1,995 \\\hline \text { Activity } 2 & \$ 24,794 & 2,595 \\\hline \text { Activity 3 } & \$ 49,294 & 2,295 \\\hline\end{array}\end{array}$$

-The total debits to the Manufacturing Overhead account during the year were closest to:

A)$116,923.
B)$116,943.
C)$116,661.
D)$120,133.

Question 45

Reference: 05-03
Arthur Company has two products: S and D. The company uses activity-based costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \begin{array} { l } \text { Estimated Ovhd. } \\\text { Cost }\end{array} & \text { Product S } & \text { Product D } & \text { Total } \\\hline \text { Activity 1 } & \$ 20,000 & 100 & 400 & 500 \\\hline \text { Activity 2 } & \$ 14,600 & 500 & 250 & 750 \\\hline \text { Activity 3 } & \$ 90,000 & 300 & 2,700 & 3,000 \\\hline\end{array}$$ The annual production and sales of Product S is 4,547 units. The annual production and sales of Product D is
7,913.

-The activity rate under the activity-based costing system for Activity 3 is closest to:

A)$33.33.
B)$29.32.
C)$30.00.
D)$41.53.

Question 46

Reference: 05-03
Arthur Company has two products: S and D. The company uses activity-based costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } && { \text { Expected Activity } } \\\hline \text { Cost Pool } & \begin{array} { l } \text { Estimated Ovhd. } \\\text { Cost }\end{array} & \text { Product S } & \text { Product D } & \text { Total } \\\hline \text { Activity 1 } & \$ 20,000 & 100 & 400 & 500 \\\hline \text { Activity 2 } & \$ 14,600 & 500 & 250 & 750 \\\hline \text { Activity 3 } & \$ 90,000 & 300 & 2,700 & 3,000 \\\hline\end{array}$$ The annual production and sales of Product S is 4,547 units. The annual production and sales of Product D is
7,913.

-The overhead cost per unit of Product S under activity-based costing is closest to:

A)$5.00.
B)$10.00.
C)$1.83.
D)$1.98.

Question 47

Reference: 05-05
Abel Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A are 200 units and of Product B are 400 units. There are three activity cost pools, with estimated costs and expected activity as follows: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & \text { Expected Activity } \\\hline \text { Cost Pool } & \text { Estimated Cost } & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 16,660 & 600 & 100 & 700 \\\hline \text { Activity 2 } & \$ 18,450 & 1,100 & 700 & 1,800 \\\hline \text { Activity 3 } & \$ 9,731 & 60 & 160 & 220 \\\hline\end{array}$$

-The overhead cost per unit of Product B is closest to:

A)$81.53.
B)$41.58.
C)$17.69.
D)$74.73.

Question 48

The cost of worker recreational facilities is an example of a cost that would ordinarily be considered to be

A)facility-level.
B)product-level.
C)batch-level.
D)unit-level.

Question 49

Reference: 05-07
Alam Company uses activity-based costing to compute product costs for external reports. The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool. Overapplied or underapplied overhead is closed to the Cost of Goods Sold account at the end of each year. Estimated costs and activities for the current year are presented below for the three activity cost pools: $$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \text { Estimated Overhead } \text { Cost } & \text { Expected Activity } \\\hline \text { Activity } 1 & \$ 29,328 & 1,200 \\\hline \text { Activity } 2 & \$ 30,024 & 2,400 \\\hline \text { Activity 3 } & \$ 65,142 & 2,200 \\\hline\end{array}\\\text { Actual costs and activities for the current year were as follows: }\\\begin{array} { | l | l | l | } \hline & \text { Actual Overhead Cost } & \text { Actual Activity } \\\hline \text { Activity } 1 & \$ 29,238 & 1,185 \\\hline \text { Activity } 2 & \$ 29,899 & 2,415 \\\hline \text { Activity } 3 & \$ 65,117 & 2,225 \\\hline\end{array}\end{array}$$

-The entry to the Cost of Goods Sold account at the end of the year was (round your final answer to nearest dollar value):

A)$1,173 debit.
B)$801 debit.
C)$1,173 credit.
D)$801 credit.

Question 50

Reference: 05-06
Accola Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A are 1,100 units and of Product B are 700 units. There are three activity cost pools, with estimated costs and expected activity as follows: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & \text { Expected Activity } \\\hline \text { Cost Pool } & \text { Estimated Cost } & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 18,271 & 600 & 500 & 1,100 \\\hline \text { Activity 2 } & \$ 35,891 & 1,600 & 300 & 1,900 \\\hline \text { Activity } 3 & \$ 48,796 & 440 & 420 & 860 \\\hline\end{array}$$

-The activity rate for Activity 3 is closest to?

A)$26.67.
B)$119.72.
C)$116.18.
D)$56.74.

Question 51

Reference 05-16
Washie manufactures two types of products for washing vehicles: the washing mitt, and the polishing cloth. Up to this point, Washie has been utilizing traditional costing with one plant-wide overhead rate using machine hours as the allocation base. The company has been receiving complaints that the polishing mitt seems over-priced. Management is wondering if there's merit to this claim since the washing mitt is a more complex product
compared to the polishing cloth. As such, management has gathered information on the potential activity areas to be used. $\begin{array}{|l|l|l|}\hline \text { Activity } & \text { Activity Measure } & \begin{array}{l}\text { Estimated } \\\text { Manufacturing } \\\text { Overhead Cost }\end{array} \\\hline \text { Design } & \text { Design hours } & \$ 12,000 \\\hline \text { Setups } & \text { Number of set-ups } & 40,000 \\\hline \text { Materials Handling } & \text { Meters of fabric } & 30,000 \\\hline \text { Production } & \text { Machine Hours } & 250,000 \\\hline\end{array}$
The company expected has determined the expected activity for each of the product lines:
During the year, the company sold 100,000 washing mitts and 50,000 polishing cloths. Direct costs are $\$ 8.00$ for washing mitts and $\$ 2.00$ for polishing costs.
$\begin{array}{|l|l|l|}\hline \text { Activity Measure } & \text { Washing Mitt } & \text { Polishing Cloth } \\\hline \# \text { of design hours } & 50 & 5 \\\hline \# \text { of setups } & 30 & 20 \\\hline \# \text { of meters of fabric } & 4,000 & 1,000 \\\hline \# \text { of machine hours } & 40,000 & 10,000 \\\hline\end{array}$

-Compute the activity rate for Materials Handling using activity based costing.

A)$30.00
B)$6.00
C)$6.64
D)$7.50

Question 52

Reference: 05-13
Bressler Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were: $$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} & { \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 332,800 & 16,000 & \mathrm { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,580,500 & 29,000 & \text { setups } \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & \$ 305,600 & 16,000 & \text { DLHs } \\\hline \begin{array} { l } \text { The actual activity for the year } \\\text { was: }\end{array} & & & \\\hline & & \text { Actual Activity for the Year } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product X } & \text { Product } Y \\\hline \text { Machine related (machine-hours) } & 15,000 & 7,000 & 8,000 \\\hline \text { Batch setup (setups) } & 30,000 & 22,000 & 8,000 \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & 15,000 & 12,000 & 3,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $2,202,600.

-The total amount of overhead cost allocated to Product X during the year would be closest to:

A)$1,573,800.
B)$1,580,000.
C)$1,628,000.
D)$1,209,450.

Question 53

Which of the following would not be considered categories of quality costs

A)Direct material costs.
B)Prevention costs.
C)Appraisal costs.
D)External failure costs.

Question 54

Reference: 05-13
Bressler Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were: $$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} & { \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 332,800 & 16,000 & \mathrm { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,580,500 & 29,000 & \text { setups } \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & \$ 305,600 & 16,000 & \text { DLHs } \\\hline \begin{array} { l } \text { The actual activity for the year } \\\text { was: }\end{array} & & & \\\hline & & \text { Actual Activity for the Year } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product X } & \text { Product } Y \\\hline \text { Machine related (machine-hours) } & 15,000 & 7,000 &8,000 \\\hline \text { Batch setup (setups) } & 30,000 & 22,000 & 8,000 \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & 15,000 & 12,000 &3,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $2,202,600.

-The manufacturing overhead for the year is underapplied or overapplied by:

A)($30,900).
B)($15,450).
C)$15,450.
D)$30,900.

Question 55

Reference: 05-06
Accola Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A are 1,100 units and of Product B are 700 units. There are three activity cost pools, with estimated costs and expected activity as follows: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & \text { Expected Activity } \\\hline \text { Cost Pool } & \text { Estimated Cost } & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 18,271 & 600 & 500 & 1,100 \\\hline \text { Activity 2 } & \$ 35,891 & 1,600 & 300 & 1,900 \\\hline \text { Activity 3 } & \$ 48,796 & 440 & 420 & 860 \\\hline\end{array}$$

-The overhead cost per unit of Product A is closest to:

A)$57.20.
B)$22.70.
C)$47.89.
D)$59.23.

Question 56

Reference: 05-12
Brenot Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were: $$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} & { \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 379,600 & 13,000 & \text { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,144,800 & 27,000 & \text { setups } \\\hline \text { General factory (direct labour-hours) } & \$ 420,500 & 29,000 & \text { DLHs } \\\hline \text { The actual activity for the year was: } & & & \\\hline & & \text { Actual Activity for the Year } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product X } & \text { Product } Y \\\hline \text { Machine related (machine-hours) } & 13,000 & 11,000 & 2,000 \\\hline \text { Batch setup (setups) } & 26,000 & 3,000 & 23,000 \\\hline \text { General factory (direct labour-hours) } & 30,000 & 24,000 & 6,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $1,942,300.

-The debits to the Manufacturing Overhead control account during the year (prior to closing out the balance)would have totalled:

A)$1,932,200.
B)$1,917,000.
C)$1,942,300.
D)$1,929,650.

Question 57

Paul Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: $$\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & \text { Estimated } & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \text { Cost } & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity } 1 & \$ 22,000 & 400 & 100 & 500 \\\hline \text { Activity } 2 & \$ 16,240 & 380 & 200 & 580 \\\hline \text { Activity } 3 & \$ 14,600 & 500 & 250 & 750 \\\hline\end{array}$$ The activity rate under the activity-based costing system for Activity 3 is closest to:

A)$28.87.
B)$58.40.
C)$19.47.
D)$70.45.

Question 58

Reference 05-15
Speed Demon Inc. manufactures two products: speedometers and odometers. During the month, it produced
2,000 speedometers and 3,000 odometers and incurred estimated overhead costs of $45,300. The company currently allocated overhead on the basis of direct labor hours. This month, the company incurred the following: $\begin{array}{|l|l|l|}\hline & \text { Speedometers } & \text { Odometers } \\\hline \text { Machine Hours } & 750 & 1,000 \\\hline \text { Labour Hours } & 1,200 & 800 \\\hline \text { Labor cost } & \$ 12,000 & 18,000 \\\hline\end{array}$
Management is considering implementing activity based costing. An analysis of estimated overhead costs revealed the following activities:
$\begin{array}{|l|l|l|l|l|}\hline \text { Activity } & \text { Total Cost } & \begin{array}{l}\text { Activity } \\\text { Measure }\end{array} & \begin{array}{l}\text { Use of Activity } \\\text { Measure by Product } \\\text { Line }\end{array} \\\hline & & & \text { Speedometers } &\text { Odometers }\\\hline \begin{array}{l}\text { Materials } \\\text { Handling }\end{array} & \$ 18,000 & \begin{array}{l}\text { of } \\\text { requisitions }\end{array} & 400 & 600 \\\hline \begin{array}{l}\text { Machine } \\\text { Set-ups }\end{array} & 12,600 & \text { \#of set-ups } & 150 & 300 \\\hline \begin{array}{l}\text { Quality } \\\text { Inspections }\end{array} & 14,700 & \begin{array}{l}\text { of } \\\text { inspections }\end{array} & 200 & 400 \\\hline\end{array}$

-Assuming an allocation rate of $20 per requisition for the Materials Handling Activity, what is the total overhead allocated to speedometers?

A)$12,000
B)$20,000
C)$24,000
D)$8,000

Question 59

Overhead allocation based on volume alone:

A)will systematically overcost high-volume products and undercost low-volume products.
B)is a key aspect of the activity-based costing model.
C)must be used for external financial reporting.
D)will systematically overcost low-volume products and undercost high-volume products.

Question 60

Reference: 05-11
Andruschack Corporation uses activity-based costing to determine product costs for external financial reports. Overapplied or underapplied overhead is closed to the Cost of Goods Sold account at the end of each year. The
company has provided the following data concerning its activity-based costing system: $$\begin{array}{l}\begin{array} { | l | l | } \hline \begin{array} { l } \text { Activity Cost Pools (and Activity } \\\text { Measures) }\end{array} & \text { Estimated Overhead Cost } \\\hline \text { Machine related (machine-hours) } & \$ 213,000 \\\hline \text { Batch setup (setups) } & \$ 339,000 \\\hline \text { General factory (direct labour-hours) } & \$ 193,200 \\\hline\end{array}\\\\\begin{array} { | l | l | l | l | } \hline & & { \text { Expected Activity } } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product } X & \text { Product } Y \\\hline \text { Machine related } & 10,000 & 3,000 & 7,000 \\\hline \text { Batch setup } & 10,000 & 4,000 & 6,000 \\\hline \text { General factory } & 14,000 & 7,000 & 7,000 \\\hline\end{array}\end{array}$$

-The activity rate for the batch setup activity cost pool is closest to:

A)$84.80.
B)$56.50.
C)$74.50.
D)$33.90.

Question 61

Batch-level activities are performed each time a batch is handled or processed, regardless of how many units are in the batch.

Question 62

What is the company's current predetermined overhead rate?

A)$9.06
B)$56.63
C)$22.65
D)$37.75

Question 63

When there are batch-level or product-level costs, in comparison to a traditional cost
system, an activity-based costing system ordinarily will shift costs from high-volume to low-volume products.

Question 64

Reference: 05-10
Austad Corporation uses activity-based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity-based costing system: $$\begin{array}{l}\begin{array} { | l | l | } \hline \text { Activity Cost Pools (and Activity Measures) } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} \\\hline \text { Machine related (machine-hours) } & \$ 67,500 \\\hline \text { Batch setup (setups) } & \$ 273,700 \\\hline \text { General factory (direct labour-hours) } & \$ 204,000 \\\hline\end{array}\\\begin{array} { | l | l | l | l | } \hline & & { \text { Expected Activity } } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product } X & \text { Product } Y \\\hline \text { Machine related } & 5,000 & 4,000 & 1,000 \\\hline \text { Batch setup } & 7,000 & 3,000 & 4,000 \\\hline \text { General factory } & 8,000 & 1,000 & 7,000 \\\hline\end{array}\end{array}$$

-The activity rate for the batch setup activity cost pool is closest to:

A)$68.40.
B)$39.10.
C)$77.90.
D)$91.20.

Question 65

Human resource management is an example of an activity at which of the following levels?

A)Facility-level activity.
B)Product-level activity.
C)Batch-level activity.
D)Unit-level activity.

Question 66

Using activity-based costing is not useful in determining costs of quality.

Question 67

Unit-level activities are performed each time a unit is made.

Question 68

Assuming that actual activity turns out to be the same as expected activity, the total amount of overhead cost allocated to Product X would be closest to:

A)$272,600.
B)$274,000.
C)$234,000.
D)$196,800.

Question 69

$$\begin{array}{l}\begin{array} { | l | l | l | } \hline & \begin{array} { l } \text { Estimated } \\\text { Overhead } \\\text { Cost }\end{array} & \begin{array} { l } \text { Expected } \\\text { Activity }\end{array} \\\hline \text { Activity 1 } & \$ 11,916 & 900 \\\hline \text { Activity 2 } & \$ 12,360 & 1,200 \\\hline \text { Activity 3 } & \$ 19,950 & 1,000 \\\hline\end{array}\\\text { Actual activity for the current year was as follows: }\\\begin{array} { | l | c | } \hline & \begin{array} { l } \text { Actual } \\\text { Activity }\end{array} \\\hline \text { Activity 1 } & 915 \\\hline \text { Activity 2 } & 1,185 \\\hline \text { Activity 3 } & 965 \\\hline\end{array}\end{array}$$ The amount of overhead applied for Activity 2 during the year was closest to:

A)$12,205.50.
B)$12,460.00.
C)$16,905.75.
D)$12,360.00.

Question 70

Reference: 05-12
Brenot Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were: $$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} &{ \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 379,600 & 13,000 & \text { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,144,800 & 27,000 & \text { setups } \\\hline \text { General factory (direct labour-hours) } & \$ 420,500 & 29,000 & \text { DLHs } \\\hline \text { The actual activity for the year was: } & & & \\\hline & & \text { Actual Activity for the Year } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product X } & \text { Product } Y \\\hline \text { Machine related (machine-hours) } & 13,000 & 11,000 & 2,000 \\\hline \text { Batch setup (setups) } & 26,000 & 3,000 & 23,000 \\\hline \text { General factory (direct labour-hours) } & 30,000 & 24,000 & 6,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $1,942,300.

-The credits to the Manufacturing Overhead control account during the year (prior to closing out the balance)would have totalled:

A)$1,917,000.
B)$1,932,300.
C)$1,929,650.
D)$1,942,300.

Question 71

Reference: 05-09
Aujla Corporation uses activity-based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity-based costing system: $$\begin{array}{l}\begin{array} { | l | l | } \hline \text { Activity Cost Pools (and Activity Measures) } & \text { Estimated Overhead Cost } \\\hline \text { Machine related (machine-hours) } & \$ 239,000 \\\hline \text { Batch setup (setups) } & \$ 234,900 \\\hline \text { General factory (direct labour-hours) } & \$ 159,300 \\\hline\end{array}\\\begin{array} { | l | l | l | l | } \hline & & \text { Expected Activity } & \\\hline \begin{array} { l } \text { Activity Cost } \\\text { Pools }\end{array} & \text { Total } & \text { Product X } & \text { Product Y } \\\hline \text { Machine related } & 10,000 & 4,000 & \\\hline \text { Batch setup } & 9,000 & 8,000 & 6,000 \\\hline \text { General factory } & 9,000 & 3,000 & 1,000 \\\hline\end{array}\end{array}$$

-The activity rate for the batch setup activity cost pool is closest to:

A)$29.40.
B)$70.40.
C)$26.10.
D)$234.90.

Question 72

An activity-based costing system is generally easier to set up and run than a traditional cost system.

Question 73

Which of the following is not a limitation of activity-based costing

A)Implementing an activity based costing system is more costly than implementing a traditional direct labour-based costing system.
B)In practice, most managers insist on fully allocating all costs to products, customers, and other costing objects in an activity based costing system. This results in overstated costs.
C)More accurate product costs may result in better decisions.
D)Changing from a traditional direct labour based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers.

Question 74

Departmental overhead rates applied on the basis of a volume measure such as direct
labour-hours or machine-hours will eliminate any distortions in unit costs due to product diversity.

Question 75

Parts administration is an example of a:

A)facility-level activity.
B)unit-level activity.
C)batch-level activity.
D)product-level activity.

Question 76

Reference 05-16
Washie manufactures two types of products for washing vehicles: the washing mitt, and the polishing cloth. Up to this point, Washie has been utilizing traditional costing with one plant-wide overhead rate using machine hours as the allocation base. The company has been receiving complaints that the polishing mitt seems over-priced. Management is wondering if there's merit to this claim since the washing mitt is a more complex product
compared to the polishing cloth. As such, management has gathered information on the potential activity areas to be used. $\begin{array}{|l|l|l|}\hline \text { Activity } & \text { Activity Measure } & \begin{array}{l}\text { Estimated } \\\text { Manufacturing } \\\text { Overhead Cost }\end{array} \\\hline \text { Design } & \text { Design hours } & \$ 12,000 \\\hline \text { Setups } & \text { Number of set-ups } & 40,000 \\\hline \text { Materials Handling } & \text { Meters of fabric } & 30,000 \\\hline \text { Production } & \text { Machine Hours } & 250,000 \\\hline\end{array}$
The company expected has determined the expected activity for each of the product lines:
During the year, the company sold 100,000 washing mitts and 50,000 polishing cloths. Direct costs are $\$ 8.00$ for washing mitts and $\$ 2.00$ for polishing costs.
$\begin{array}{|l|l|l|}\hline \text { Activity Measure } & \text { Washing Mitt } & \text { Polishing Cloth } \\\hline \text { \# of design hours } & 50 & 5 \\\hline \text { \# of setups } & 30 & 20 \\\hline \text { \# of meters of fabric } & 4,000 & 1,000 \\\hline \text { \# of machine hours } & 40,000 & 10,000 \\\hline\end{array}$

-What is the allocation rate for Setups using activity based Costing?

A)$2,000
B)$800
C)$1,333
D)$6,640

Question 77

When activity-based costing is used, the flow of costs through the accounts is similar to a system using one plantwide overhead application rate other than the overhead costs are applied using multiple predetermined overhead rates.

Question 78

Reference: 05-14
Brooke Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were: $$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} & { \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 777,400 & 26,000 & \text { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,814,400 & 28,000 & \text { setups } \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & \$ 478,800 & 18,000 & \text { DLHs } \\\hline \begin{array} { l } \text { The actual activity for the year } \\\text { was: }\end{array} & & &\\\hline & & \text { Actual Activity for the Year } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product X } & \text { Product } Y \\\hline \text { Machine related (machine-hours) } & 28,000 & 17,000 & 11,000 \\\hline \text { Batch setup (setups) } & 28,000 & 7,000 & 21,000 \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & 18,000 & 9,000 & 9,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $3,064,400.

-The total amount of overhead cost allocated to Product X during the year would be closest to:

A)$1,535,000.
B)$768,000.
C)$1,201,300.
D)$1,814,000.

Question 79

Activity-based costing uses a number of activity cost pools, each of which is allocated to products on the basis of direct labour-hours.

Question 80

Reference: 05-13
Bressler Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were: $$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} & { \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 332,800 & 16,000 & \mathrm { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,580,500 & 29,000 & \text { setups } \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & \$ 305,600 & 16,000 & \mathrm { DLHs } \\\hline \begin{array} { l } \text { The actual activity for the year } \\\text { was: }\end{array} & & & \\\hline & & \text { Actual Activity for the Year } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product X } & \text { Product } Y \\\hline \text { Machine related (machine-hours) } & 15,000 & 7,000 & 8,000 \\\hline \text { Batch setup (setups) } & 30,000 & 22,000 & 8,000 \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & 15,000 & 12,000 & 3,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $2,202,600.

-The activity rate computed at the beginning of the year for the batch setup activity cost pool is closest to:

A)$54.50.
B)$197.60.
C)$74.00.
D)$71.80.