Deck 4: Activity-Based Costing

Question 1

Activity-based management involves focusing on activities to eliminate waste, decrease processing time, and reduce defects.

Answer 1

True

Question 2

Unit-level activities are performed each time a new departmental unit such as a regional sales office is created.

Answer 2

False

Question 3

A department's overhead costs are generally caused by a variety of factors including the range of products processed in the department, the number of batch set-ups that are required, and the complexity of the products.

Answer 3

True

Question 4

Companies use three common approaches to assign overhead costs to products-plantwide overhead rate, departmental overhead rates, and activity-based costing.The most accurate of these three approaches is the plantwide overhead rate.

Question 5

Product-level activities relate to specific products and typically must be carried out whenever a batch is run or a unit of the product is made.

Question 6

Departmental overhead rates applied on the basis of a single activity measure will eliminate any distortions in unit costs due to product diversity.

Question 7

A plantwide predetermined overhead rate based on direct labor-hours results in low overhead costs for products with a high direct labor-hour content and high overhead costs for products with a low direct labor-hour content.

Question 8

An activity measure in activity-based costing expresses how much of an activity is carried out and it is used as the allocation base for assigning overhead costs to products and services.

Question 9

Rather than using a single allocation base such as direct labor-hours or machine-hours, in activity-based costing a company uses a number of allocation bases for assigning costs to products.

Question 10

Activity-based costing involves a two-stage allocation process in which overhead costs are first assigned to activity cost pools and then allocated to products using activity measures.

Question 11

The challenge in designing an activity-based costing system is to identify all of the activities that explain the variation in overhead costs.

Question 12

Batch-level activities are performed each time a batch of goods is processed.The cost of a batch-level activity does not depend on the number of units in the batch.

Question 13

In activity-based costing, departmental overhead rates are used to apply overhead to products.

Question 14

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

Question 15

When designing an activity-based costing system, related activities are frequently combined to reduce the amount of detail and record-keeping cost.

Question 16

In activity-based costing, each major activity has its own overhead cost pool, its own activity measure, and its own overhead rate.

Question 17

In general, activities and costs on different levels in the cost hierarchy-such as unit-level and batch-level costs and activities--should be combined in an activity-based costing system if doing so simplifies the costing system.

Question 18

Direct labor is an appropriate allocation base for overhead when overhead costs and direct labor are not highly correlated.

Question 19

An activity cost pool in activity-based costing is a "cost bucket" in which costs related to a particular activity measure are accumulated.

Question 20

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

Question 21

Purchase order processing is an example of a:

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

Question 22

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

A)the use of direct labor hours in allocating overhead costs to products rather than machine time or quantity of materials used.
B)the high correlation between direct labor-hours and the incurrence of overhead costs.
C)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.
D)difficulties associated with identifying cost pools for the first stage of the allocation process.

Question 23

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

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

Question 24

Property taxes are an example of a cost that would be considered to be:

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

Question 25

Assembling a product is an example of a:

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

Question 26

In activity-based costing, unit product costs computed for external financial reports include direct materials, direct labor, and manufacturing overhead costs.

Question 27

Production order processing is an example of a:

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

Question 28

In activity-based costing, a separate activity rate (i.e., predetermined overhead rate)is computed for each activity cost pool by dividing the estimated overhead cost in the activity cost pool by the total expected activity for the activity cost pool.

Question 29

Which of the following would probably be the most accurate measure of activity to use for allocating the costs associated with a factory's purchasing department?

A)Machine-hours
B)Direct labor-hours
C)Number of orders processed
D)Cost of materials purchased

Question 30

Which of the following activities would be classified as a batch-level activity?

A)Setting up equipment.
B)Designing a new product.
C)Training employees.
D)Milling a part required for the final product.

Question 31

The activity rates in activity-based costing are used to determine how quickly a particular task should be done.

Question 32

The activity rates in activity-based costing are computed by dividing the direct labor-hours for an activity cost pool by the measure of activity for the activity cost pool.

Question 33

In activity-based costing, unit product costs computed for external financial reports include manufacturing overhead costs that are computed by multiplying activity rates by the activities required to produce a product.

Question 34

When a company changes from a traditional costing system to an activity-based costing system, costs will ordinarily shift from high-volume products to low-volume products when the activity-based costing system includes batch-level or product-level costs.

Question 35

When a company changes from a traditional costing system to an activity-based costing system, the unit product costs of high-volume products typically change more than the unit product costs of low-volume products.

Question 36

Facility-level costs cannot be traced on a cause-and-effect basis to individual products.

Question 37

When a company implements activity-based costing, overhead cost often shifts from high-volume products to low-volume products, with a higher unit cost resulting for the low-volume products.

Question 38

An activity rated is computed for each product.

Question 39

When a company changes from a traditional costing system to an activity-based costing system, the unit product costs of low-volume products typically increase more than the unit product costs of high-volume products decrease.

Question 40

Parts administration is an example of a:

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

Question 41

Jennifer 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: The activity rate under the activity-based costing system for Supporting customers is closest to:

A)$36.24
B)$38.44
C)$84.56
D)$115.33

Question 42

In activity-based costing, unit product costs computed for external financial reports include:

A)direct materials and manufacturing overhead.
B)direct labor and manufacturing overhead.
C)direct materials, direct labor, and manufacturing overhead.
D)direct materials and direct labor.

Question 43

Porche, Inc., manufactures and sells two products: Product D4 and Product N0.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to:

A)$17.06 per DLH
B)$44.82 per DLH
C)$67.23 per DLH
D)$923.53 per DLH

Question 44

Strama, Inc., manufactures and sells two products: Product A6 and Product I5.The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The activity rate for the General Factory activity cost pool under activity-based costing is closest to:

A)$21.25 per MH
B)$111.96 per MH
C)$45.22 per MH
D)$19.23 per MH

Question 45

Data concerning three of the activity cost pools of Brevo LLC, a legal firm, have been provided below: The activity rate for the Meeting With Clients activity cost pool is closest to:

A)$147 per meeting hour
B)$154,791 per meeting hour
C)$37 per meeting hour
D)$68 per meeting hour

Question 46

Moyle Corporation has provided the following data from its activity-based costing accounting system: The activity rate for the Designing Products activity cost pool is closest to:

A)$396,900 per product design hour
B)$62 per product design hour
C)$162 per product design hour
D)$52 per product design hour

Question 47

Banton, Inc., manufactures and sells two products: Product N0 and Product A8.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $16.50 per DLH.The direct materials cost per unit for each product is given below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The unit product cost of Product N0 under activity-based costing is closest to:

A)$1,034.37 per unit
B)$1,383.20 per unit
C)$842.10 per unit
D)$1,316.79 per unit

Question 48

Lindsey Company uses activity-based costing.The company has two products: A and B.The annual production and sales of Product A is 5,000 units and of Product B is 2,000 units.There are three activity cost pools, with estimated total cost and expected activity as follows: The overhead cost per unit of Product A under activity-based costing is closest to:

A)$14.11
B)$13.77
C)$7.00
D)$17.70

Question 49

Boesenhofer, Inc., manufactures and sells two products: Product N6 and Product N7.The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The activity rate for the Machine Setups activity cost pool is closest to:

A)$73.57 per setup
B)$91.81 per setup
C)$26.24 per setup
D)$28.32 per setup

Question 50

Privott, Inc., manufactures and sells two products: Product Z9 and Product N0.The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to:

A)$91.49 per DLH
B)$934.30 per DLH
C)$114.37 per DLH
D)$34.47 per DLH

Question 51

Chrzan, Inc., manufactures and sells two products: Product E0 and Product N0.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The activity rate for the General Factory activity cost pool under activity-based costing is closest to:

A)$44.16 per MH
B)$59.78 per MH
C)$87.09 per MH
D)$37.05 per MH

Question 52

Aikman, Inc., manufactures and sells two products: Product O6 and Product O7.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $17.50 per DLH.The direct materials cost per unit for each product is given below: The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The unit product cost of Product O6 is closest to:

A)$637.15 per unit
B)$896.71 per unit
C)$721.00 per unit
D)$661.45 per unit

Question 53

Soehl, Inc., manufactures and sells two products: Product T4 and Product F9.The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The total overhead applied to Product T4 under activity-based costing is closest to:

A)$267,138
B)$227,340
C)$224,995
D)$39,231

Question 54

Mahaley, Inc., manufactures and sells two products: Product Q9 and Product F0.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $21.80 per DLH.The direct materials cost per unit for each product is given below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The unit product cost of Product F0 under activity-based costing is closest to:

A)$720.13 per unit
B)$674.82 per unit
C)$449.51 per unit
D)$656.88 per unit

Question 55

Ravelo Corporation has provided the following data from its activity-based costing system: Data concerning the company's product L19B appear below: According to the activity-based costing system, the unit product cost of product L19B is closest to:

A)$48.19 per unit
B)$82.31 per unit
C)$85.56 per unit
D)$77.53 per unit

Question 56

Latiker, Inc., manufactures and sells two products: Product Y9 and Product W0.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $15.40 per DLH.The direct materials cost per unit for each product is given below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The activity rate for the Machine Setups activity cost pool under activity-based costing is closest to:

A)$31.15 per setup
B)$26.27 per setup
C)$29.95 per setup
D)$72.41 per setup

Question 57

Roca, Inc., manufactures and sells two products: Product M6 and Product X7.The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The total overhead applied to Product X7 under activity-based costing is closest to:

A)$360,294
B)$249,264
C)$443,424
D)$369,879

Question 58

Overhead allocation based solely on a measure of volume such as direct labor-hours:

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

Question 59

Foisy, Inc., manufactures and sells two products: Product N0 and Product U8.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The total overhead applied to Product U8 under activity-based costing is closest to:

A)$80,392
B)$111,312
C)$122,496
D)$194,680

Question 60

In activity-based costing, the total activity in an activity cost pool can be computed by:

A)dividing the total overhead cost in the activity cost pool by the activity cost pool's activity rate.
B)multiplying the total overhead cost in the activity cost pool by the activity cost pool's activity rate.
C)dividing the activity cost pool's activity rate by the direct labor-hours required to make a product.
D)multiplying the activity cost pool's activity rate by the direct labor-hours required to make a product.

Question 61

Brizendine, Inc., manufactures and sells two products: Product R0 and Product B6.The production of Product R0 is 900 units and of Product B6 is 700 units.The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The overhead applied to each unit of Product R0 under activity-based costing is closest to:

A)$675.91 per unit
B)$292.61 per unit
C)$761.20 per unit
D)$636.29 per unit

Question 62

Skiver, Inc., manufactures and sells two products: Product K5 and Product J2.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The total overhead applied to Product K5 under activity-based costing is closest to:

A)$613,970
B)$533,088
C)$349,960
D)$631,848

Question 63

Seldomridge, Inc., manufactures and sells two products: Product I5 and Product U0.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $24.40 per DLH.The direct materials cost per unit for each product is given below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The unit product cost of Product U0 under activity-based costing is closest to:

A)$1,672.35 per unit
B)$2,504.73 per unit
C)$2,042.50 per unit
D)$2,885.25 per unit

Question 64

Spates, Inc., manufactures and sells two products: Product H2 and Product E0.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The company's expected total manufacturing overhead is $266,468. If the company allocates all of its overhead based on direct labor-hours, the overhead assigned to each unit of Product H2 would be closest to:

A)$141.00 per unit
B)$123.42 per unit
C)$496.86 per unit
D)$1,453.44 per unit

Question 65

Busto, Inc., manufactures and sells two products: Product P8 and Product Z6.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $20.30 per DLH.The direct materials cost per unit for each product is given below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The unit product cost of Product Z6 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to:

A)$340.55 per unit
B)$647.60 per unit
C)$466.05 per unit
D)$350.40 per unit

Question 66

Activity rates from Mcelderry Corporation's activity-based costing system are listed below.The company uses the activity rates to assign overhead costs to products: Last year, Product Q06J involved 10 customer orders, 580 assembly hours, and 12 batches.How much overhead cost would be assigned to Product Q06J using the activity-based costing system?

A)$71.01
B)$219.12
C)$2,388.22
D)$42,748.02

Question 67

Weiskopf, Inc., manufactures and sells two products: Product E6 and Product J2.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $18.10 per DLH.The direct materials cost per unit for each product is given below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Which of the following statements concerning the unit product cost of Product J2 is true?

A)The unit product cost of Product J2 under traditional costing is less than its unit product cost under activity-based costing by $101.07.
B)The unit product cost of Product J2 under traditional costing is greater than its unit product under activity-based costing by $101.07.
C)The unit product cost of Product J2 under traditional costing is greater than its unit product under activity-based costing by $42.54.
D)The unit product cost of Product J2 under traditional costing is less than its unit product cost under activity-based costing by $42.54.

Question 68

Gelinas, Inc., manufactures and sells two products: Product S5 and Product L3.Expected production of Product S5 is 500 units and of Product L3 is 700 units.The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The overhead applied to each unit of Product L3 under activity-based costing is closest to:

A)$327.04 per unit
B)$615.18 per unit
C)$659.05 per unit
D)$695.28 per unit

Question 69

Salvatori, Inc., manufactures and sells two products: Product A4 and Product Q5.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The overhead applied to each unit of Product A4 under activity-based costing is closest to:

A)$506.26 per unit
B)$654.66 per unit
C)$472.38 per unit
D)$731.28 per unit

Question 70

Lillich, Inc., manufactures and sells two products: Product U6 and Product R5.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $27.10 per DLH.The direct materials cost per unit for each product is given below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Which of the following statements concerning the unit product cost of Product U6 is true?

A)The unit product cost of Product U6 under traditional costing is greater than its unit product under activity-based costing by $389.58.
B)The unit product cost of Product U6 under traditional costing is less than its unit product cost under activity-based costing by $389.58.
C)The unit product cost of Product U6 under traditional costing is greater than its unit product under activity-based costing by $1.33.
D)The unit product cost of Product U6 under traditional costing is less than its unit product cost under activity-based costing by $1.33.

Question 71

Lefave, Inc., manufactures and sells two products: Product Q1 and Product D5.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to:

A)$26.29 per DLH
B)$70.04 per DLH
C)$69.87 per DLH
D)$27.31 per DLH

Question 72

Belsky Corporation has provided the following data from its activity-based costing system: The company makes 490 units of product Q19S a year, requiring a total of 1,080 machine-hours, 60 orders, and 20 inspection-hours per year.The product's direct materials cost is $46.42 per unit and its direct labor cost is $20.22 per unit. According to the activity-based costing system, the unit product cost of product Q19S is closest to:

A)$97.64 per unit
B)$66.64 per unit
C)$93.31 per unit
D)$94.79 per unit

Question 73

Kiever, Inc., manufactures and sells two products: Product O9 and Product Y1.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The company's total manufacturing overhead is $1,121,960.If the company allocates all of its overhead based on direct labor-hours, the predetermined overhead rate would be closest to:

A)$48.00 per DLH
B)$120.64 per DLH
C)$60.08 per DLH
D)$92.34 per DLH

Question 74

Eliezrie, Inc., manufactures and sells two products: Product G8 and Product O0.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $22.10 per DLH.The direct materials cost per unit for each product is given below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Which of the following statements concerning the unit product cost of Product G8 is true?

A)The unit product cost of Product G8 under traditional costing is less than its unit product cost under activity-based costing by $227.80.
B)The unit product cost of Product G8 under traditional costing is less than its unit product cost under activity-based costing by $347.88.
C)The unit product cost of Product G8 under traditional costing is greater than its unit product under activity-based costing by $347.88.
D)The unit product cost of Product G8 under traditional costing is greater than its unit product under activity-based costing by $227.80.

Question 75

Bera Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Data for one of the company's products follow: How much overhead cost would be assigned to Product Q79P using the activity-based costing system?

A)$7,119.92
B)$43,659.54
C)$4,770.99
D)$125.82

Question 76

Howden, Inc., manufactures and sells two products: Product P5 and Product S9.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $25.70 per DLH.The direct materials cost per unit for each product is given below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Which of the following statements concerning the unit product cost of Product S9 is true?

A)The unit product cost of Product S9 under traditional costing is less than its unit product cost under activity-based costing by $70.34.
B)The unit product cost of Product S9 under traditional costing is less than its unit product cost under activity-based costing by $700.00.
C)The unit product cost of Product S9 under traditional costing is greater than its unit product under activity-based costing by $70.34.
D)The unit product cost of Product S9 under traditional costing is greater than its unit product under activity-based costing by $700.00.

Question 77

Crimin, Inc., manufactures and sells two products: Product V7 and Product Y2.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $19.80 per DLH.The direct materials cost per unit for each product is given below: The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The unit product cost of Product V7 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to:

A)$536.45 per unit
B)$430.40 per unit
C)$748.65 per unit
D)$753.55 per unit

Question 78

Manzano, Inc., manufactures and sells two products: Product F1 and Product G2.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The direct labor rate is $18.40 per DLH.The direct materials cost per unit is $248.70 for Product F1 and $266.00 for Product G2.The estimated total manufacturing overhead is $678,146.

The unit product cost of Product G2 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to:

A)$2,893.24 per unit
B)$751.24 per unit
C)$856.03 per unit
D)$674.24 per unit

Question 79

Lazano, Inc., manufactures and sells two products: Product W4 and Product Z2.Data concerning the expected production of each product and the expected total direct labor-hours (DLHs)required to produce that output appear below: The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: The overhead applied to each unit of Product Z2 under activity-based costing is closest to:

A)$473.92 per unit
B)$651.92 per unit
C)$605.56 per unit
D)$505.88 per unit

Question 80

Senff Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Data concerning two products appear below: How much overhead cost would be assigned to Product V91Z using the activity-based costing system?

A)$113,774.55
B)$132.45
C)$3,195.50
D)$14,751.04