Deck 4: Activity-Based Costing

Question 1

Unit-level product costing assigns

A) direct materials and direct labor directly to products and assigns overhead to departmental pools which are assigned to products using predetermined overhead rates based on unit-level drivers.
B) direct materials, direct labor and overhead to departmental cost pools which as assigned to products using predetermined overhead rates based on unit-level drivers.
C) direct materials and direct labor directly to products and assigns overhead to departmental pools which are assigned to products using predetermined overhead rates based on non-unit level drivers.
D) direct materials, direct labor and overhead to departmental cost pools which are assigned to products using predetermined overhead rates based on non-unit level drivers.

Answer 1

A

Question 2

The overhead rates of the traditional functional-based product costing use

A) non-unit-based activity drivers.
B) unit-based activity drivers.
C) process costing.
D) job order costing.

Answer 2

B

Question 3

Figure 4-2 The following information is provided for the year:


- Refer to Figure 4-2.The actual overhead rate for applying manufacturing overhead is

A) $ 7.14.
B) $ 7.50.
C) $10.00.
D) $10.50.

Answer 3

$10.00.

Question 4

For a labor-intensive manufacturing operation, which of the following would be the most appropriate activity driver?

A) machine hours
B) direct labor hours
C) number of employees
D) units of output

Question 5

Figure 4-2 The following information is provided for the year:


- Refer to Figure 4-2.If normal costing is used, the amount of overhead applied for the year is

A) $299,880.
B) $300,000.
C) $380,000.
D) $360,000.

Question 6

If unit-based product costing is used, which of the following would be traced directly to the product?

A) setup costs
B) direct labor
C) maintenance of machinery
D) inspection costs

Question 7

Product costs can be distorted if a unit-based activity driver is used and

A) non-unit-based overhead costs are a significant proportion of total overhead.
B) the consumption ratios differ between unit-based and non-unit-based input categories.
C) both a and b.
D) neither a nor b.

Question 8

Figure 4 - 3 The following information is provided:


-Refer to Figure 4-3.The company uses a predetermined overhead rate to apply overhead.Manufacturing overhead applied is

A) $750,000.
B) $700,000.
C) $690,000.
D) $648,000.

Question 9

Common measures of production activity include

A) units produced.
B) direct labor hours.
C) machine hours.
D) all of these.

Question 10

All of the following are unit-based activity drivers EXCEPT

A) machine hours.
B) number of setups.
C) number of units.
D) direct labor hours.

Question 11

Figure 4 - 3 The following information is provided:


- Refer to Figure 4-3.The amount of overapplied or underapplied overhead is

A) $65,200 underapplied.
B) $60,000 overapplied.
C) $50,000 overapplied.
D) $10,000 underapplied.

Question 12

Unit-based product costing uses which of the following procedures?

A) Overhead costs are traced to departments, then costs are traced to products.
B) Overhead costs are traced to activities, then costs are traced to products.
C) Overhead costs are traced directly to products.
D) All overhead costs are expensed as incurred.

Question 13

A department that is capital-intensive most likely would use a predetermined departmental overhead rate based on which of the following activity bases?

A) units of direct material used
B) direct labor hours
C) direct labor cost
D) machine hours

Question 14

In a department that is drilling holes in materials, which activity base is likely to be most appropriate for assigning overhead costs?

A) units produced
B) direct labor hours
C) machine hours
D) number of batches

Question 15

A(n) _______________ method first traces costs to a department and then to products.

A) direct costing
B) absorption costing
C) unit-based costing
D) indirect costing

Question 16

A costing system that uses actual costs for direct materials and labor and predetermined overhead rates to apply overhead is called a(n)

A) actual costing system.
B) normal costing system.
C) standard costing system.
D) activity-based costing system.

Question 17

Figure 4-1 Adams Company predicted factory overhead for 2010 and 2011 would be $120,000 for each year.The predicted activity for 2010 and 2011 were 30,000 and 20,000 direct labor hours, respectively.Additional data are as follows:
The company assumes that the long-run normal production level is 20,000 direct labor hours per year.The actual factory overhead cost for the end of 2009 and 2010 was $120,000.Assume that it takes one direct labor hour to make one finished unit.

-
Refer to Figure 4-1.When the normal factory overhead rate is used, the gross profits for 2010 and 2011, respectively, are

A) $80,000 and $80,000.
B) $200,000 and $200,000.
C) $120,000 and $140,000.
D) $100,000 and $100,000.

Question 18

A predetermine overhead rate is calculated using which of the following formulas?

A) Actual annual overhead / budgeted annual driver level
B) Budgeted annual overhead / budgeted annual driver level
C) Budgeted annual overhead / actual annual driver level
D) Actual annual overhead / actual annual driver level

Question 19

Which is NOT a characteristic of a unit-based costing system?

A) It uses traditional product costing definitions.
B) It uses unit-based activity drivers to assign overhead to products.
C) It is cheaper than an activity-based costing system.
D) It offers greater product costing accuracy than an activity-based costing system.

Question 20

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

A) number of setups.
B) number of direct labor hours.
C) number of inspections.
D) number of material moves.

Question 21

The following information pertains to Black Corporation for 2011: What is the predetermined overhead rate for Black Corporation for 2011?

A) 150%
B) 66.7%
C) 160%
D) 62.5%

Question 22

Figure 4-5 The Hampshire Company produces 9 volt batteries and AAA batteries.The Hampshire Company uses a plantwide rate to apply overhead based on direct labor hours.The following data is given:


-Refer to Figure 4-5.How much overhead is applied to each 9 volt batteries and AAA batteries respectively? (round to 2 decimal places)

A) $87,500; $280,000
B) $70,000; $280,00
C) $81,250; $260,000
D) none of these

Question 23

Figure 4-6 Cabrini Company produces two products: toy trucks and toy cars.They use departmental overhead rates for the two production departments: molding and finishing.Molding uses machine hours to assign overhead and Finishing uses direct labor hours.50,000 trucks and 250,000 cars are produced.Please find the following data:


-Refer to Figure 4-6.How much overhead is applied to the trucks?

A) $ 60,000
B) $250,000
C) $219,500
D) $225,000

Question 24

The Holland Company uses a predetermined overhead rate of $12 per direct labor hour to apply overhead.During the year, 30,000 direct labor hours were worked.Actual overhead costs for the year were $320,000.The overhead variance is

A) $36,000 overapplied.
B) $35,560 underapplied.
C) $40,000 underapplied.
D) none of the above.

Question 25

Assume the following: Actual overhead costs equaled estimated overhead.Actual direct labor hours exceeded estimated direct labor hours used to calculate the predetermined overhead rate.If overhead is applied using the predetermined overhead rate, then overhead is

A) overapplied.
B) underapplied.
C) $-0-.
D) indeterminable from the information given.

Question 26

Figure 4-4 Erickson Company made the following predictions for 2011:
Job A2 (which was started and completed in May) used 3,000 direct labor hours, 2,000 machine hours, and $57,000 of prime costs.

-
Refer to Figure 4-4.If factory overhead is applied based on machine hours, the cost of Job A2 for the Erickson Company is

A) $69,000.
B) $75,000.
C) $63,000.
D) $66,000.

Question 27

Long Industries uses a job-order costing system.The Molding Department applies overhead based on machine hours, while the Assembly Department applies overhead based on direct labor hours.The company made the following estimates at the beginning of the current year: The following information was available for Job No.7-29, which was started and completed during July:
The predetermined overhead rate for the molding department is

A) $50.
B) $60.
C) $83.
D) $100.

Question 28

Figure 4-4 Erickson Company made the following predictions for 2011:
Job A2 (which was started and completed in May) used 3,000 direct labor hours, 2,000 machine hours, and $57,000 of prime costs.

-
Refer to Figure 4-4.If factory overhead is applied based on direct labor hours, the cost of Job A2 for the Erickson Company is

A) $60,000.
B) $75,000.
C) $63,000.
D) $66,000.

Question 29

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

A) $568,750.00.
B) $441,031.25.
C) $481,250.00.
D) $525,000.00.

Question 30

Figure 4-5 The Hampshire Company produces 9 volt batteries and AAA batteries.The Hampshire Company uses a plantwide rate to apply overhead based on direct labor hours.The following data is given:


-Refer to Figure 4-5.What is the predetermined overhead rate? (round to 2 decimal places)

A) $0.65
B) $0.70
C) $0.67
D) $0.62

Question 31

Figure 4-5 The Hampshire Company produces 9 volt batteries and AAA batteries.The Hampshire Company uses a plantwide rate to apply overhead based on direct labor hours.The following data is given:


- Refer to Figure 4-5.How much was overhead over/underapplied?

A) $25,000
B) $17,500
C) $42,500
D) none of these

Question 32

Figure 4-6 Cabrini Company produces two products: toy trucks and toy cars.They use departmental overhead rates for the two production departments: molding and finishing.Molding uses machine hours to assign overhead and Finishing uses direct labor hours.50,000 trucks and 250,000 cars are produced.Please find the following data:


- Refer to Figure 4-6.What are the departmental overhead rates for the molding and finishing department respectively?

A) $25; $2.50
B) $8.33; $2
C) $25; $10
D) $12.50; $2.50

Question 33

Carlson Company uses a predetermined rate to apply overhead.At the beginning of the year, Carlson estimated its overhead costs at $240,000, direct labor hours at 40,000, and machine hours at 10,000.Actual overhead costs incurred were $249,280, actual direct labor hours were 41,000, and actual machine hours were 11,000. What is the predetermined overhead rate per machine hour for Carlson?

A) $ 6.08
B) $ 5.85
C) $24.00
D) $22.66

Question 34

Material amounts of underapplied or overapplied overhead should be

A) treated as an adjustment to cost of goods sold.
B) treated as an adjustment to work in process.
C) allocated to direct materials, work in process, and finished goods.
D) allocated to work in process, finished goods, and cost of goods sold.

Question 35

Figure 4-5 The Hampshire Company produces 9 volt batteries and AAA batteries.The Hampshire Company uses a plantwide rate to apply overhead based on direct labor hours.The following data is given:


- Refer to Figure 4-5.If the accounts had the following balances, how much will cost of goods sold be adjusted?

A) debit $12,500
B) debit $21,250
C) credit $26,562.50
D) none of these

Question 36

Figure 4-6 Cabrini Company produces two products: toy trucks and toy cars.They use departmental overhead rates for the two production departments: molding and finishing.Molding uses machine hours to assign overhead and Finishing uses direct labor hours.50,000 trucks and 250,000 cars are produced.Please find the following data:


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

A) $0.50
B) $0.505
C) $0.32
D) $1.40

Question 37

Walter Company uses a job-order costing system to account for product costs.The following information pertains to 2011: Factory overhead rate is $18 per direct labor hour.
What is the amount of under- or overapplied overhead for Walter Company in 2011?

A) $40,000 underapplied
B) $20,000 underapplied
C) $40,000 overapplied
D) $20,000 overapplied

Question 38

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

A) $1,440,000.
B) $ 640,000.
C) $1,040,000.
D) $ 960,000.

Question 39

The following information is provided for the year: If normal costing is used, budgeted overhead used to calculate the predetermined rate would be

A) $443,250.
B) $450,000.
C) $487,500.
D) $536,250.

Question 40

Figure 4-6 Cabrini Company produces two products: toy trucks and toy cars.They use departmental overhead rates for the two production departments: molding and finishing.Molding uses machine hours to assign overhead and Finishing uses direct labor hours.50,000 trucks and 250,000 cars are produced.Please find the following data:


-Refer to Figure 4-6.How much was overhead over or underapplied?

A) $14,250
B) $10,000
C) $ 4,250
D) none of these

Question 41

A possible solution to overcome distortions caused by unit level rates is

A) assign costs by multiplying activity rates times the amount of activity consumed.
B) calculate individual rates for each activity with activity drivers.
C) increase the number of rates used that reflect the diverse activity and nonunit overhead drivers.
D) all of these.

Question 42

Figure 4-9 Winter Manufacturing has four categories of overhead.The four categories and expected overhead costs for each category for next year are listed as follows:
Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours.100,000 direct labor hours are budgeted for next year.
The company has been asked to submit a bid for a proposed job.The plant manager feels that obtaining this job would result in new business in future years.Usually bids are based upon full manufacturing cost plus 10 percent.
Estimates for the proposed job are as follows:
The plant manager has heard of a new way of applying overhead that uses cost pools and activity drivers.Expected activity for the four activity drivers that would be used are:


- Refer to Figure 4-9.What is the total cost of the proposed job if Winter Manufacturing uses direct labor hours as its only activity driver?

A) $72,000
B) $68,200
C) $56,200
D) $53,200

Question 43

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

A) overhead ratio.
B) consumption ratio.
C) quick ratio.
D) fixed ratio.

Question 44

Providence Company uses departmental manufacturing overhead rates to apply overhead.Direct labor cost is used to apply manufacturing overhead in Department A and machine hours are used for Department B. What predetermined overhead rate would be used for departments A and B respectively?

A) 83%; $5
B) 83%; $3
C) 120%; $3
D) $8.40; $5

Question 45

Products might consume overhead in different proportions due to differences in

A) product size.
B) setup times.
C) product complexity.
D) all of these.

Question 46

Figure 4-10 The Emmanuele Company has collected the following data for use in calculating product costs:
Activity Data: (expected and actual)
Departmental Data: (expected and actual)


- Refer to Figure 4-10.Emmanuele Company uses departmental overhead rates: Molding uses machine hours and Assembly uses labor hours.What is the unit product cost for brooms if departmental overhead rates are used?

A) $3.50
B) $8.50
C) $3.00
D) $1.40

Question 47

Kryzski Company has a predetermined overhead rate of $6 per direct labor hour.Last year the company incurred $156,600 of actual manufacturing overhead cost and the account was $12,600 underapplied.How many direct labor hours were worked during the year?

A) 24,000 direct labor hours
B) 25,000 direct labor hours
C) 26,000 direct labor hours
D) 28,200 direct labor hours

Question 48

Figure 4-9 Winter Manufacturing has four categories of overhead.The four categories and expected overhead costs for each category for next year are listed as follows:
Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours.100,000 direct labor hours are budgeted for next year.
The company has been asked to submit a bid for a proposed job.The plant manager feels that obtaining this job would result in new business in future years.Usually bids are based upon full manufacturing cost plus 10 percent.
Estimates for the proposed job are as follows:
The plant manager has heard of a new way of applying overhead that uses cost pools and activity drivers.Expected activity for the four activity drivers that would be used are:


-Refer to Figure 4-9.What is the amount of overhead allocated to the proposed job if Winter Manufacturing uses direct labor hours as its only activity driver?

A) $41,200
B) $30,400
C) $30,000
D) $20,800

Question 49

Figure 4-8 Zipp Company manufactures two products (X and Y).The overhead costs ($84,000) have been divided into three cost pools that use the following activity drivers:


-Refer to Figure 4-8.Using functional-based costing, what is the amount of overhead cost to be assigned to Product X using machine hours as the allocation base?

A) $12,000
B) $60,000
C) $48,000
D) $16,800

Question 50

More accurate product costing information is produced by assigning costs using

A) a volume-based, plantwide rate.
B) volume-based, departmental rates.
C) activity-based pool rates.
D) all of these.

Question 51

Figure 4-10 The Emmanuele Company has collected the following data for use in calculating product costs:
Activity Data: (expected and actual)
Departmental Data: (expected and actual)


-Refer to Figure 4-10.What are the consumption ratios for mops and brooms respectively for the inspection of products activity?

A) .3; .7
B) .2; .8
C) .4; .6
D) .67; .33

Question 52

The use of unit-based activity drivers to assign costs tends to

A) overcost low-volume products.
B) overcost high-volume products.
C) undercost all products.
D) overcost all products.

Question 53

Figure 4-10 The Emmanuele Company has collected the following data for use in calculating product costs:
Activity Data: (expected and actual)
Departmental Data: (expected and actual)


- Refer to Figure 4-10.What is the consumption ratio for the plantwide activity rate?

A) .25; .75
B) .71; .29
C) .2; .8
D) .8; .2

Question 54

Unit-level cost drivers create distortions when

A) products use resources similarly.
B) products are produced using resources homogeneously.
C) different products consume resources differently.
D) all of these.

Question 55

Igor Inc.had a predetermined overhead rate of $2 per direct labor hour.The direct labor hours were estimated to be 25,000.The actual manufacturing overhead incurred was $47,000 and 24,000 actual direct labor hours were worked.How much was overhead over/under applied last year?

A) $1,000 underapplied
B) $2,000 underapplied
C) $1,000 overapplied
D) $3,000 overapplied

Question 56

Figure 4-10 The Emmanuele Company has collected the following data for use in calculating product costs:
Activity Data: (expected and actual)
Departmental Data: (expected and actual)


-Refer to Figure 4-10.What is the unit product cost for mops if a plantwide rate is used?

A) $11.00
B) $ 4.00
C) $ 5.40
D) $ 4.12

Question 57

Figure 4-8 Zipp Company manufactures two products (X and Y).The overhead costs ($84,000) have been divided into three cost pools that use the following activity drivers:


-Refer for Figure 4-8.What is the allocation rate per packing order using activity-based costing?

A) $15,000
B) $ 60
C) $ 7,500
D) $ 200

Question 58

Which of the following is NOT a limitation of a plantwide overhead rate?

A) Predetermined rates using budgeted overhead are usually the best estimate of the amount of overhead.
B) Overhead usage is not strictly linked to the units produced because some products are more complex and diverse than others.
C) Product diversity may consume overhead activities under differing consumption ratios.
D) Overhead costs tend to be underallocated to highly complex products.

Question 59

Figure 4-8 Zipp Company manufactures two products (X and Y).The overhead costs ($84,000) have been divided into three cost pools that use the following activity drivers:


- Refer to Figure 4-8.If the number of machine hours is used to assign machine hour cost, determine the amount of machine hour cost to be assigned to Product X.

A) $12,000
B) $60,000
C) $48,000
D) $16,800

Question 60

Figure 4-8 Zipp Company manufactures two products (X and Y).The overhead costs ($84,000) have been divided into three cost pools that use the following activity drivers:


- Refer to Figure 4-8.What is the allocation rate per setup using activity-based costing?

A) $ 900
B) $ 450
C) $9,000
D) $2,100

Question 61

Figure 4-12 Vaughn, Inc., has identified the following overhead costs and activity drivers for next year:
The following are two of the jobs completed during the year:
The company's normal activity is 2,000 direct labor hours.

-
Refer to Figure 4-12.If kilowatt hours are used to assign power costs, the amount of power costs assigned to Job 10A would be

A) $33.20.
B) $30.00.
C) $102.00.
D) $53.32.

Question 62

Figure 4-11 Yang Manufacturing Company manufactures two products (A and B).The overhead costs ($58,000) have been divided into three cost pools that use the following activity drivers:


-Refer to Figure 4-11.If the number of labor hours is used to assign labor costs from the cost pool, determine the amount of overhead cost to be assigned to Product A.

A) $58,000
B) $ 8,000
C) $ 9,600
D) $32,000

Question 63

_____________ aids management in achieving objectives such as product or customer costing, continuous improvement and environmental management.

A) Activity driver
B) Concatenated key
C) Primary key
D) Activity classification

Question 64

Figure 4-12 Vaughn, Inc., has identified the following overhead costs and activity drivers for next year:
The following are two of the jobs completed during the year:
The company's normal activity is 2,000 direct labor hours.

-
Refer to Figure 4-12.If the four activity drivers are used to allocate overhead costs, total overhead allocated to Job 10A would be

A) $5,533.
B) $4,830.
C) $5,030.
D) $5,630.

Question 65

A(n) _______________ system first traces costs to activities and then to products.

A) direct costing
B) absorption costing
C) functional-based costing
D) activity-based costing

Question 66

An activity-based costing system uses which of the following procedures?

A) Overhead costs are traced to departments, then costs are traced to products.
B) Overhead costs are traced to activities, then costs are traced to products.
C) Overhead costs are traced directly to products.
D) All overhead costs are expensed as incurred.

Question 67

Figure 4-11 Yang Manufacturing Company manufactures two products (A and B).The overhead costs ($58,000) have been divided into three cost pools that use the following activity drivers:


- Refer to Figure 4-11.Using functional-based costing, what is the amount of overhead cost to be assigned to Product B using labor hours as the allocation base?

A) $58,000
B) $43,500
C) $11,600
D) $46,400

Question 68

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

A) Activity inventory
B) Activity dictionary
C) Activity attributes
D) Activity driver

Question 69

Figure 4-10 The Emmanuele Company has collected the following data for use in calculating product costs:
Activity Data: (expected and actual)
Departmental Data: (expected and actual)


- Refer to Figure 4-10.What is the activity rate for moving materials?

A) .2
B) $1000
C) $800
D) $200

Question 70

Figure 4-10 The Emmanuele Company has collected the following data for use in calculating product costs:
Activity Data: (expected and actual)
Departmental Data: (expected and actual)


- Refer to Figure 4-10.What are the consumption ratios for mops for the departments on the basis of the departmental drivers (molding;assembly)?

A) .33; .87
B) .85; .125
C) .33; .25
D) .85; .5

Question 71

Activity-based costing assigns cost to cost objects by first tracing costs to

A) products and then tracing costs to cost objects.
B) departments and then tracing costs to products.
C) activities and then tracing costs to cost objects.
D) customers and then tracing costs to products.

Question 72

Figure 4-13 The Xiang plant has two categories of overhead: maintenance and inspection.
Costs expected for these categories for the coming year are as follows:
The plant currently applies overhead using direct labor hours and expected capacity of 50,000 direct labor hours.The following data have been assembled for use in developing a bid for a proposed job:
Total expected machine hours for all jobs during the year is 25,000, and the total expected number of inspections is 1,500.

-
Refer to Figure 4-13.Using activity-based costing and the appropriate activity drivers, the total cost of the potential job would be

A) $1,200.
B) $1,800.
C) $3,700.
D) $3,875.

Question 73

Figure 4-11 Yang Manufacturing Company manufactures two products (A and B).The overhead costs ($58,000) have been divided into three cost pools that use the following activity drivers:


- Refer to Figure 4-11.What is the allocation rate per order using ABC?

A) $10,000
B) $2,320
C) $400
D) $58,000

Question 74

_____________ are nonfinancial and financial data that describe individual activities.

A) Activity dictionaries
B) Activity attributes
C) Concatenated keys
D) ABC inventories

Question 75

Which of the following quantities is an example of an activity driver in activity-based costing?

A) number of setups
B) number of orders placed
C) number of machine hours
D) all of these

Question 76

If a firm has implemented activity-based procedures for home office expenses, it will

A) allocate all home office expenses on the basis of sales revenues.
B) allocate all home office expenses to homogeneous cost pools.
C) allocate the costs in a pool using a predetermined rate per unit of activity.
D) both a and b.

Question 77

Figure 4-11 Yang Manufacturing Company manufactures two products (A and B).The overhead costs ($58,000) have been divided into three cost pools that use the following activity drivers:


-Refer to Figure 4-11.What is the allocation rate per labor transaction using ABC?

A) $ 8,000
B) $ 16
C) $29,000
D) $ 40

Question 78

A secondary activity is

A) the second activity on the activity list.
B) an activity driver.
C) one that is consumed by the final cost object.
D) one that is consumed by intermediate cost objects.

Question 79

Figure 4-12 Vaughn, Inc., has identified the following overhead costs and activity drivers for next year:
The following are two of the jobs completed during the year:
The company's normal activity is 2,000 direct labor hours.

-
Refer to Figure 4-12.If the number of setups is used to assign setup costs, the amount of setup costs assigned to Job 10A would be

A) $1,600.
B) $1,000.
C) $800.
D) $1,680.

Question 80

Figure 4-10 The Emmanuele Company has collected the following data for use in calculating product costs:
Activity Data: (expected and actual)
Departmental Data: (expected and actual)


- Refer to Figure 4-10.What is the unit product cost for mops?

A) $11.00
B) $ 7.26
C) $ 4.00
D) $ 3.75