Question 1

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?

Accepted Answer

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

Question 2

Figure 4-20 Owens Corporation produces specially machined parts.The parts are produced in batches in one continuous manufacturing process.Each part is custom produced and requires special engineering design activity (based on customer specifications).Once the design is completed, the equipment can be set up for batch production.Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed.Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting.Costs have been assigned to each activity using direct tracing and resource drivers:
 Owens produces two models: Model X and Model Y.The following table shows how the two products consume activity.

- Refer to Figure 4-20.How much overhead is assigned to Model X using the 4 activity drivers?

Accepted Answer

A)  $560,000 
B)  $2,060,000 
C)  $2,640,000 
D)  $2,820,000

Question 3

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?

Accepted Answer

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

Question 4

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

Accepted Answer

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

Question 5

Figure 4-21 Jones Manufacturing uses an activity-based costing system.The company produces Model X and Model Y.Information relating to the two products is as follows:
 The following overhead costs are reported for the following activities of the production process:
 Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table below:
 Jones Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
-
Refer to Figure 4-21.Under this new approach, what cost would be assigned to materials handling?

Accepted Answer

A)  0 
B)  $40,000 
C)  $140,000 
D)  $290,000

Question 6

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

Accepted Answer

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 7

Figure 4-21 Jones Manufacturing uses an activity-based costing system.The company produces Model X and Model Y.Information relating to the two products is as follows:
 The following overhead costs are reported for the following activities of the production process:
 Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table below:
 Jones Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
-
Refer to Figure 4-21.Under this new approach, what is the new pool rate for labor related costs?

Accepted Answer

A)  0 
B)  $6 
C)  $8.225 
D)  $12.75

Question 8

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

Accepted Answer

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

Question 9

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

Accepted Answer

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

Question 10

Figure 4 - 3 The following information is provided:

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

Accepted Answer

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

Question 11

Figure 4-16 Newman Company recently installed an activity-based relational database.Using the information contained in the activity relational table, the following pool rates were computed:
$400 per purchase order
$24 per machine hour, Process 1
$30 per machine hour, Process 2
$80 per engineering hour
Two products are produced by Special Products: X and Y.The plant has two manufacturing processes, Process 1 and Process 2.Other processes include engineering, product handling, and procurement.Product X goes through Process 1 while Product Y goes through Process 2.The product relational table for Special Products is as follows:

- Refer to Figure 4-16.What is the unit cost of Product X?

Accepted Answer

A)  $9.42 
B)  $504.00 
C)  $10.60 
D)  $7.52

Question 12

Figure 4-17 Moss Corporation has the following activities: creating bills of materials (BOM), studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tooling.The general ledger accounts reveal the following expenditures for manufacturing engineering:
 The equipment is used for two activities: improving processes and designing tooling.Thirty-five percent of the equipment's time is used for improving processes and 65 percent is used for designing tools.The salaries are for two engineers.One is paid $50,000, while the other earns $25,000.The $50,000 engineer spends 40 percent of his time training employees in new processes and 60 percent of his time on improving processes.The remaining engineer spends equal time on all activities.Supplies are consumed in the following proportions:
 
-Refer to Figure 4-17.What is the cost assigned to the improving processes activity?

Accepted Answer

A)  $250,000 
B)  $25,000 
C)  $43,750 
D)  $51,000

Question 13

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?

Accepted Answer

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

Question 14

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

Accepted Answer

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 15

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?

Accepted Answer

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

Question 16

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

Accepted Answer

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

Question 17

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

Accepted Answer

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

Question 18

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

Accepted Answer

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

Question 19

Figure 4-16 Newman Company recently installed an activity-based relational database.Using the information contained in the activity relational table, the following pool rates were computed:
$400 per purchase order
$24 per machine hour, Process 1
$30 per machine hour, Process 2
$80 per engineering hour
Two products are produced by Special Products: X and Y.The plant has two manufacturing processes, Process 1 and Process 2.Other processes include engineering, product handling, and procurement.Product X goes through Process 1 while Product Y goes through Process 2.The product relational table for Special Products is as follows:

- Refer to Figure 4-16.How much purchasing overhead cost will be assigned to Product X using the number of purchase orders?

Accepted Answer

A)  $ 100,000 
B)  $ 50,000 
C)  $80,000,000 
D)  $ 133,500

Question 20

Riley, 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 4,000 direct labor hours.
If the activity drivers are used to allocate overhead costs, the unit cost (rounded to two decimal places) for Job BB would be

Accepted Answer

A)  $21.40. 
B)  $26.56. 
C)  $26.95. 
D)  $27.03.

Exam 4: Activity-Based Costing

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?

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 possible solution to overcome distortions caused by unit level rates is

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

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

Figure 4 - 3 The following information is provided: - Refer to Figure 4-3.The amount of overapplied or underapplied overhead is

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?

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

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?

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

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

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