Deck 16: Activity-Based-Costing: a Tool to Aid Decision Making

Question 1

Suppose an action analysis report is prepared for the function mentioned above. What would be the "yellow margin" in the action analysis report? (Round to the nearest whole dollar.)

A)$229
B)$334
C)$279
D)$154

Answer 1

D

Question 2

If a cost object such as a product or customer has a positive green margin, then:

A)its yellow margin will be positive.
B)its yellow margin may be either positive, negative, or zero.
C)its yellow margin will be negative.
D)its yellow margin will be zero.

Answer 2

B

Question 3

Goluski Company, a wholesale distributor, uses activity-based costing for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity based costing system: The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
The amount of activity for the year is as follows: Required:
Compute the activity rates (i.e., cost per unit of activity) for the Filling Orders and Product Support activity cost pools:

Answer 3

First-stage allocation Activity rates (costs divided by activity)

Question 4

What would be the total overhead cost per order according to the activity based costing system? In other words, what would be the overall activity rate for the filling orders activity cost pool? (Round to the nearest whole cent.)

A)$54.00
B)$63.00
C)$58.50
D)$56.50

Question 5

To the nearest whole dollar, how much wages and salaries cost would be allocated to a customer who made 4 orders in a year?

A)$15,756
B)$13,332
C)$10,908
D)$21,816

Question 6

What would be the total overhead cost per customer according to the activity based costing system? In other words, what would be the overall activity rate for the customer support activity cost pool? (Round to the nearest whole dollar.)

A)$16,200
B)$18,900
C)$20,100
D)$21,600

Question 7

Inskeep Draperies makes custom draperies for homes and businesses. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity cost pools. The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
The amount of activity for the year is as follows: Required:
a. Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below: b. Compute the activity rates (i.e., cost per unit of activity) for the Making Drapes and Job Support activity cost pools by filling in the table below: c. Prepare an action analysis report in good form of a job that involves making 70 yards of drapes and has direct materials and direct labor cost of $1,870. The sales revenue from this job is $3,700.
For purposes of this action analysis report, direct materials and direct labor should be classified as a Green cost; production overhead as a Red cost; and office expense as a Yellow cost.

Question 8

If a cost object such as a product or customer has a positive yellow margin, then:

A)its red margin will be positive.
B)its red margin may be either positive, negative, or zero.
C)its red margin will be negative.
D)its red margin will be zero.

Question 9

Hasher Hardwood Floors installs oak and other hardwood floors in homes and businesses. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity based costing system: The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
The amount of activity for the year is as follows: A "square" is a measure of area that is roughly equivalent to 1,000 square feet.
Required:
a. Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below: b. Compute the activity rates (i.e., cost per unit of activity) for the Installing Floors and Job Support activity cost pools by filling in the table below: c. Compute the overhead cost, according to the activity-based costing system, of a job that involves installing 2.8 squares.

Question 10

Suppose an action analysis report is prepared for the function mentioned above. What would be the "red margin" in the action analysis report? (Round to the nearest whole dollar.)

A)$(68)
B)$32
C)$(118)
D)$182

Question 11

Which of the following statements concerning ease of adjustment codes is incorrect?

A)"Green" costs adjust automatically to changes in activity.
B)"Yellow" costs could be adjusted to changes in activity, but such adjustments require management action; the adjustment is not automatic.
C)"Red" costs cannot be adjusted to changes in activity.
D)The costs of idle capacity and organization-sustaining costs are not assigned codes.

Question 12

Jansen Painting paints the interiors and exteriors of homes and commercial buildings. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its activity-based costing system. The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
The company has already finished the first stage of the allocation process in which costs were allocated to the activity cost centers. The results are listed below: Required:
a. Compute the activity rates (i.e., cost per unit of activity) for the Painting and Job Support activity cost pools. Round off all calculations to the nearest whole cent.
b. Prepare an action analysis report in good form of a job that involves painting 97 square meters and has direct materials and direct labor cost of $3,150. The sales revenue from this job is $4,200.
For purposes of this action analysis report, direct materials and direct labor should be classified as a Green cost; production overhead as a Red cost; and office expense as a Yellow cost.

Question 13

An action analysis report provides more detail about costs and how they might adjust to changes in activity than a conventional activity-based costing analysis.

Question 14

If a cost object such as a product or customer has a negative red margin, then:

A)its yellow margin will be positive.
B)its yellow margin may be positive, negative, or zero.
C)its yellow margin will be negative.
D)its yellow margin will be zero.

Question 15

According to the activity-based costing system, what was the total cost (including the costs of raw ingredients) of the function mentioned above? (Round to the nearest whole dollar.)

A)$1,868
B)$2,368
C)$2,568
D)$1,718