Deck 18: Activity-Based Costing

Question 1

The use of a single plantwide factory overhead rate assumes that the activities causing overhead costs are the same across all departments and products.

Answer 1

True

Question 2

Managers depend on accurate factory overhead allocation to make decisions regarding product mix and product price.

Answer 2

True

Question 3

Multiple production department factory overhead rates are most useful when production departments significantly differ in their manufacturing processes.

Answer 3

True

Question 4

Bob's Biscuit Corporation budgeted $1,200,000 of factory overhead cost for the coming year. Its plantwide allocation base, machine hours, is budgeted at 100,000 hours. Budgeted units to be produced are 200,000 units. Bob's plantwide factory overhead rate is $12 per machine hour.

Question 5

If the activities causing overhead costs are different across different departments and products, use of a plantwide factory overhead rate will cause distorted product costs.

Question 6

Multiple production department factory overhead rates are less accurate than are plantwide factory overhead rates.

Question 7

If the budgeted factory overhead cost is $460,000, the budgeted direct labor hours are 80,000, and the actual direct labor hours are 6,700 for the month, the amount of factory overhead to be allocated is $38,525 (if the allocation is based on direct labor hours).

Question 8

A single plantwide factory overhead rate assumes that all overhead is directly related to one activity representing the entire plant.

Question 9

Multiple production department factory overhead rates are most useful when production departments are very similar in their manufacturing processes.

Question 10

A single plantwide factory overhead rate is computed by dividing total budgeted factory overhead by the total budgeted plantwide allocation base.

Question 11

Managers depend on the accuracy of product costing to make decisions regarding continuing operations and product mix.

Question 12

The selection of the factory overhead allocation method is important because the method selected determines the accuracy of the product cost.

Question 13

Zorn Co. budgeted $600,000 of factory overhead cost for the coming year. Its plantwide allocation base, machine hours, is budgeted at 100,000 hours. Budgeted units to be produced are 200,000 units. Zorn's plantwide factory overhead rate is $3 per hour.

Question 14

The single plantwide overhead rate method is very expensive to apply.

Question 15

The use of a plantwide factory overhead rate assumes that the activities causing overhead costs are different across different departments and products.

Question 16

Product costs consist of only direct materials and direct labor.

Question 17

When a plantwide factory overhead rate is used, the amount of overhead costs allocated to each product is the same.

Question 18

If the budgeted factory overhead cost is $460,000, the budgeted direct labor hours are 80,000, and the actual direct labor hours are 6,700 for the month, the factory overhead rate for the month is $68.65 (if the allocation is based on direct labor hours).

Question 19

Multiple production department factory overhead rates are more accurate than are plantwide factory overhead rates.

Question 20

Use of a plantwide factory overhead rate does not distort product costs when there are differences in the factory overhead rates across different production departments.

Question 21

Activity cost pools are assigned to products, using factory overhead rates for each activity.

Question 22

When applied by service companies, the use of the single and multiple department overhead rate methods will not lead to the same kinds of cost distortions often faced by manufacturing companies with those methods.

Question 23

Activity-based costing can only be used to allocate manufacturing factory overhead.

Question 24

In an effort to simplify the multiple production department factory overhead rate method, the same rate can be used for all departments.

Question 25

Use of a plantwide factory overhead rate distorts product costs when there are differences in the factory overhead rates across different production departments and when products require different ratios of allocation-base usage in each production department.

Question 26

Activity-based costing can be used to allocate period costs to various products that the company sells.

Question 27

Which of the following is not a factory overhead allocation method?

A)single plantwide rate
B)multiple production department rates
C)factory costing
D)activity-based costing

Question 28

Service companies can effectively use activity-based costing to compute product (service) costs.

Question 29

Activity-based costing is much easier to apply than single plantwide factory overhead allocation.

Question 30

Use of a plantwide factory overhead rate does not distort product costs when products require different ratios of allocation-base usage in each production department.

Question 31

Activity rates are computed by dividing the cost budgeted for each activity pool by the estimated activity base for that pool.

Question 32

The activity information from an ABC product costing system can be used to isolate cost improvement opportunities.

Question 33

When activity-based costing is used, the estimated total factory overhead cost for a product is the sum of the product's individual activity allocations.

Question 34

When production departments differ significantly in their manufacturing processes, it is recommended that the single plantwide factory overhead rate be used for allocating factory overhead.

Question 35

Which of the following does not rely on managerial decisions involving accurate product costing?

A)product constraints
B)emphasis of a product line
C)product mix
D)product price

Question 36

Service organizations can use activity-based costing to allocate selling and administrative costs to services provided.

Question 37

When activity-based costing is used, the number of activities will generally be the same as the number of production departments.

Question 38

Activity cost pools are factory overhead costs initially budgeted for activities, such as machine usage, inspections, moving, production setups, and engineering activities.

Question 39

In a service organization, the multiple department overhead rate method is the most effective in providing accurate information about the cost of services.

Question 40

ABC is used to allocate selling and administrative expenses to each product based on the product's individual differences in consuming these activities.

Question 41

Botosan Factory has budgeted factory overhead for the year at $13,500,000, and budgeted direct labor hours for the year are 10,000,000. If the actual direct labor hours for the month of May are 350,000, the overhead allocated for May is

A)$675,000
B)$470,630
C)$472,500
D)$236,250

Question 42

Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication Department, which has an estimated overhead of $84,000. All of the labor hours take place in the Assembly Department, which has an estimated total overhead of $72,000.​
Ramapo Company uses a single plantwide overhead rate to apply all factory overhead costs based on direct labor hours. The factory overhead allocated per unit of Dinks is

A)$77.00
B)$39.00
C)$19.50
D)$59.92

Question 43

Challenger Factory produces two similar products: regular widgets and deluxe widgets. The total factory overhead budget is $675,000 with 300,000 estimated direct labor hours. Deluxe widget production requires 3 direct labor hours for each unit, and regular widget production requires 2 direct labor hours for each unit.​
Using a single plantwide factory overhead rate with an allocation base of direct labor hours, the factory overhead that Challenger Factory will allocate to deluxe widget production if budgeted production for the period for deluxe widgets is 50,000 units and actual production of deluxe widgets for the period is 58,000 units would be

A)$391,500
B)$225,000
C)$261,000
D)$337,500

Question 44

Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication Department, which has an estimated overhead of $84,000. All of the labor hours take place in the Assembly Department, which has an estimated total overhead of $72,000.​
Ramapo Company uses a single plantwide overhead rate to apply all factory overhead costs. The single plantwide rate, if it is based on machine hours instead of labor hours, is

A)$9.00 per machine hour
B)$19.50 per machine hour
C)$7.43 per machine hour
D)$4.00 per machine hour

Question 45

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours.​ ​
The overhead from both production departments allocated to each unit of Product B if Blue Ridge Marketing Inc. uses the multiple production department factory overhead rate method is

A)$425.60 per unit
B)$115.20 per unit
C)$214.40 per unit
D)$320.00 per unit

Question 46

Kaumajet Factory produces two products: table lamps and desk lamps. It has two separate departments: Fabrication and Assembly. The factory overhead budget for the Fabrication Department is $550,000, using 500,000 direct labor hours. The factory overhead budget for the Assembly Department is $400,000, using 80,000 direct labor hours.
If a table lamp requires 2 hours of fabrication and 1 hour of assembly, the amount of factory overhead that Kaumajet Factory will allocate to each unit of table lamp using the multiple production department factory overhead rate method with an allocation base of direct labor hours is

A)$6.33
B)$4.91
C)$5.00
D)$7.20

Question 47

Common allocation bases are

A)direct labor dollars, direct labor hours, and direct material dollars
B)direct labor dollars, direct labor hours, and machine hours
C)direct labor dollars, direct labor hours, and machine dollars
D)machine dollars, direct labor dollars, and direct labor hours

Question 48

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours.​ ​
Using a single plantwide rate, the factory overhead allocated per unit of Product B is

A)$496
B)$144
C)$640
D)$320

Question 49

Roget Factory has budgeted factory overhead for the year at $15,500,000. It plans to produce 2,000,000 units of product. Budgeted direct labor hours are 1,050,000, and budgeted machine hours are 750,000. Using a single plantwide factory overhead rate based on direct labor hours, the factory overhead rate for the year is

A)$14.76
B)$20.67
C)$7.75
D)$77.50

Question 50

Blackwelder Factory produces two similar products: small table lamps and desk lamps. The total factory overhead budget is $640,000 with 400,000 estimated direct labor hours. It is further estimated that small table lamp production will require 275,000 direct labor hours, and desk lamp production will need 125,000 direct labor hours.​
Using a single plantwide factory overhead rate with an allocation base of direct labor hours, the factory overhead that Blackwelder Factory will allocate to small table lamp production if actual direct labor hours for the period for small table lamp production is 285,000 would be

A)$275,000
B)$285,000
C)$440,000
D)$456,000

Question 51

Adirondack Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead.​ ​
Using a single plantwide rate, the factory overhead allocated per unit of Product A in the Painting Department is

A)$236.32 per unit
B)$325.00 per unit
C)$147.70 per unit
D)$161.00 per unit

Question 52

Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication Department, which has an estimated overhead of $84,000. All of the labor hours take place in the Assembly Department, which has an estimated total overhead of $72,000.​
Ramapo Company uses a single plantwide overhead rate to apply all factory overhead costs based on direct labor hours. The factory overhead allocated per unit of Blinks is

A)$78.00
B)$19.50
C)$37.45
D)$56.00

Question 53

Blackwelder Factory produces two similar products: small table lamps and desk lamps. The total factory overhead budget is $640,000 with 400,000 estimated direct labor hours. It is further estimated that small table lamp production will require 275,000 direct labor hours, and desk lamp production will need 125,000 direct labor hours.​
Using a single plantwide factory overhead rate with an allocation base of direct labor hours, the factory overhead that Blackwelder Factory will allocate to desk lamp production if actual direct labor hours for the period for desk lamps is 118,000 would be

A)$118,000
B)$200,000
C)$188,800
D)$125,000

Question 54

Everest Co. uses a single plantwide factory overhead rate based on direct labor hours. Overhead costs would be overcharged to which of the following departments?

A)a labor-intensive department
B)a capital-intensive department
C)a materials-intensive department
D)all of these choices

Question 55

Adirondack Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead.​ ​
The single plantwide factory overhead rate for Adirondack Marketing Inc. is

A)$25.00 per dlh
B)$0.07 per dlh
C)$14.77 per dlh
D)$ 6.25 per dlh

Question 56

Pinnacle Corp. budgeted $700,000 of overhead cost for the current year. Actual overhead costs for the year were $650,000. Pinnacle's plantwide allocation base, machine hours, was budgeted at 100,000 hours. Actual machine hours were 80,000. A total of 100,000 units was budgeted to be produced and 98,000 units were actually produced. Pinnacle's plantwide factory overhead rate for the current year is

A)$8.13 per machine hour
B)$7.00 per machine hour
C)$6.50 per machine hour
D)$8.75 per machine hour

Question 57

Challenger Factory produces two similar products: regular widgets and deluxe widgets. The total factory overhead budget is $675,000 with 300,000 estimated direct labor hours. Deluxe widget production requires 3 direct labor hours for each unit, and regular widget production requires 2 direct labor hours for each unit.​
Using a single plantwide factory overhead rate with an allocation base of direct labor hours, the factory overhead that Challenger Factory will allocate to regular widget production if budgeted production of regular widgets for the period is 75,000 units and actual production of regular widgets for the period is 72,000 units would be

A)$168,750
B)$324,000
C)$162,000
D)$337,500

Question 58

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours.​ ​
The factory overhead allocated per unit of Product B in the Painting Department if Blue Ridge Marketing Inc. uses the multiple production department factory overhead rate method is

A)$49.60 per unit
B)$99.20 per unit
C)$28.80 per unit
D)$64.00 per unit

Question 59

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours.​ ​
The factory overhead allocated per unit of Product A in the Finishing Department if Blue Ridge Marketing Inc. uses the multiple production department factory overhead rate method is

A)$99.20 per unit
B)$49.60 per unit
C)$64.00 per unit
D)$28.80 per unit

Question 60

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours.​ ​
The overhead from both production departments allocated to each unit of Product A if Blue Ridge Marketing Inc. uses the multiple production department factory overhead rate method is

A)$396.80 per unit
B)$425.60 per unit
C)$320.00 per unit
D)$214.40 per unit

Question 61

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to five separate activity pools. The budgeted activity cost and activity base data by product are provided below. ​
Activity rates are determined by

A)dividing the actual cost for each activity pool by the actual activity base for that pool
B)dividing the cost budgeted for each activity pool by the estimated activity base for that pool
C)dividing the actual cost for each activity pool by the estimated activity base for that pool
D)dividing the cost budgeted for each activity pool by the actual activity base for that pool

Question 62

Kaumajet Factory produces two products: table lamps and desk lamps. It has two separate departments: Fabrication and Assembly. The factory overhead budget for the Fabrication Department is $550,000, using 500,000 direct labor hours. The factory overhead budget for the Assembly Department is $400,000, using 80,000 direct labor hours.
If a desk lamp requires 1 hour of fabrication and 2 hours of assembly, the total amount of factory overhead that Kaumajet Factory will allocate to desk lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours if 26,000 units are produced is

A)$540,000
B)$187,200
C)$475,000
D)$288,600

Question 63

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to five separate activity pools. The budgeted activity cost and activity base data by product are provided below. ​
The activity-based cost for each disk drive unit is

A)$92.25
B)$130.69
C)$394.12
D)$279.57

Question 64

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to five separate activity pools. The budgeted activity cost and activity base data by product are provided below. ​
The activity-based cost for each tape drive unit is

A)$97.73
B)$232.69
C)$394.12
D)$103.84

Question 65

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to five separate activity pools. The budgeted activity cost and activity base data by product are provided below. ​
The activity rate for the scheduling activity cost pool is

A)$200.00 per production order
B)$20.00 per production order
C)$29.41 per production order
D)$10.42 per production order

Question 66

Aleutian Company produces two products: Rings and Dings. They are manufactured in two departments: Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication Department, which has estimated total factory overhead of $90,000. All of the labor hours take place in the Assembly Department, which has estimated total factory overhead of $105,000.Aleutian Company uses the multiple production department factory overhead rate method. The Fabrication Department uses machine hours as an allocation base, and the Assembly Department uses direct labor hours.
The total factory overhead allocated per unit of Rings is

A)$65.25
B)$23.25
C)$44.10
D)$64.50

Question 67

Aleutian Company produces two products: Rings and Dings. They are manufactured in two departments: Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication Department, which has estimated total factory overhead of $90,000. All of the labor hours take place in the Assembly Department, which has estimated total factory overhead of $105,000.Aleutian Company uses the multiple production department factory overhead rate method. The Fabrication Department uses machine hours as an allocation base, and the Assembly Department uses direct labor hours.
The Fabrication Department's factory overhead rate is

A)$10.50 per direct labor hour
B)$9.00 per direct labor hour
C)$8.12 per machine hour
D)$3.75 per machine hour

Question 68

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to five separate activity pools. The budgeted activity cost and activity base data by product are provided below. ​
The activity rate for the procurement activity cost pool is

A)$43.53 per purchase order
B)$18.50 per purchase order
C)$15.42 per purchase order
D)$37.00 per purchase order

Question 69

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to five separate activity pools. The budgeted activity cost and activity base data by product are provided below. ​
The activity rate for the product development cost pool is

A)$73,000 per engineering change
B)$8,588 per engineering change
C)$30,417 per engineering change
D)$16,222 per engineering change

Question 70

Aleutian Company produces two products: Rings and Dings. They are manufactured in two departments: Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication Department, which has estimated total factory overhead of $90,000. All of the labor hours take place in the Assembly Department, which has estimated total factory overhead of $105,000.Aleutian Company uses the multiple production department factory overhead rate method. The Fabrication Department uses machine hours as an allocation base, and the Assembly Department uses direct labor hours.
All of the following can be used as an allocation base for calculating factory overhead rates except

A)direct labor dollars
B)direct labor hours
C)machine hours
D)total units produced

Question 71

Kaumajet Factory produces two products: table lamps and desk lamps. It has two separate departments: Fabrication and Assembly. The factory overhead budget for the Fabrication Department is $550,000, using 500,000 direct labor hours. The factory overhead budget for the Assembly Department is $400,000, using 80,000 direct labor hours.
If a table lamp requires 2 hours of fabrication and 1 hour of assembly, the total amount of factory overhead that Kaumajet Factory will allocate to table lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours if 75,000 units are produced is

A)$368,250
B)$540,000
C)$832,500
D)$475,000

Question 72

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to five separate activity pools. The budgeted activity cost and activity base data by product are provided below. ​
The activity rate for the production cost pool is

A)$62.50 per machine hour
B)$150.00 per machine hour
C)$75.00 per machine hour
D)$176.47 per machine hour

Question 73

Kaumajet Factory produces two products: table lamps and desk lamps. It has two separate departments: Fabrication and Assembly. The factory overhead budget for the Fabrication Department is $550,000, using 500,000 direct labor hours. The factory overhead budget for the Assembly Department is $400,000, using 80,000 direct labor hours.
Scoresby Co. uses 6 machine hours and 2 direct labor hours to produce Product X. It uses 8 machine hours and 16 direct labor hours to produce Product Y. Scoresby's Assembly and Finishing departments have factory overhead rates of $240 per machine hour and $160 per direct labor hour, respectively. How much total factory overhead will be allocated to a unit of each of the two products?

A)Product X, $3,200; Product Y, $9,600
B)Product X, $800; Product Y, $800
C)Product X, $1,760; Product Y, $4,480
D)Product X, $1,440; Product Y, $2,560

Question 74

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to five separate activity pools. The budgeted activity cost and activity base data by product are provided below. ​
The activity rate for the materials handling cost pool is

A)$58.82 per move
B)$50.00 per move
C)$20.83 per move
D)$80.65 per move

Question 75

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to five separate activity pools. The budgeted activity cost and activity base data by product are provided below. ​
Which of the following is a cost pool used with the activity-based costing method?

A)total selling and administrative expenses
B)direct materials dollars
C)total factory overhead
D)production setups

Question 76

Aleutian Company produces two products: Rings and Dings. They are manufactured in two departments: Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication Department, which has estimated total factory overhead of $90,000. All of the labor hours take place in the Assembly Department, which has estimated total factory overhead of $105,000.Aleutian Company uses the multiple production department factory overhead rate method. The Fabrication Department uses machine hours as an allocation base, and the Assembly Department uses direct labor hours.
The Assembly Department's factory overhead rate is

A)$10.50 per direct labor hour
B)$19.50 per direct labor hour
C)$3.75 per machine hour
D)$4.38 per machine hour

Question 77

Kaumajet Factory produces two products: table lamps and desk lamps. It has two separate departments: Fabrication and Assembly. The factory overhead budget for the Fabrication Department is $550,000, using 500,000 direct labor hours. The factory overhead budget for the Assembly Department is $400,000, using 80,000 direct labor hours.
Using multiple department factory overhead rates instead of a single plantwide factory overhead rate

A)results in more accurate product costs
B)results in distorted product costs
C)is simpler and less expensive to compute than a plantwide rate
D)applies overhead costs to all departments equally

Question 78

Aleutian Company produces two products: Rings and Dings. They are manufactured in two departments: Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication Department, which has estimated total factory overhead of $90,000. All of the labor hours take place in the Assembly Department, which has estimated total factory overhead of $105,000.Aleutian Company uses the multiple production department factory overhead rate method. The Fabrication Department uses machine hours as an allocation base, and the Assembly Department uses direct labor hours.
The total factory overhead allocated per unit of Dings is

A)$65.25
B)$56.75
C)$23.25
D)$64.50

Question 79

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to five separate activity pools. The budgeted activity cost and activity base data by product are provided below. ​
The activity-based cost for each wire drive unit is

A)$204.13
B)$173.51
C)$744.06
D)$394.12

Question 80

Kaumajet Factory produces two products: table lamps and desk lamps. It has two separate departments: Fabrication and Assembly. The factory overhead budget for the Fabrication Department is $550,000, using 500,000 direct labor hours. The factory overhead budget for the Assembly Department is $400,000, using 80,000 direct labor hours.
If a desk lamp requires 1 hour of fabrication and 2 hours of assembly, the amount of factory overhead that Kaumajet Factory will allocate to each unit of desk lamp using the multiple production department factory overhead rate method with an allocation base of direct labor hours is

A)$11.10
B)$4.91
C)$5.00
D)$7.20