Deck 9: Activity-Based Costing

Question 1

The basic difference between a first-stage cost allocation and a second-stage cost allocation is that cost pools are not used in first-stage cost allocations.Cost pools are used in both first-stage and second-stage cost allocations.

Answer 1

False

Question 2

The department cost allocation method provides more accurate product cost information for managerial decision-making than the plantwide cost allocation method.The information is more accurate because some of the variations in the product can be captured.

Answer 2

True

Question 3

Traditional product costing systems (e.g. ,job and process costing)are designed primarily to accumulate cost information for financial reporting.This is the primary purpose of accumulating cost information.

Answer 3

True

Question 4

Direct labor cost (DLC)and direct labor hours (DLH)are examples of volume-related cost drivers in the cost hierarchy.Both DLC and DLH change as volume changes.

Question 5

The death spiral concept refers to the process of continually decreasing selling prices to meet foreign competition.The death spiral is continually increasing the prices to match the increased reported costs.

Question 6

The basic difference between the department cost allocation method and activity-based costing (ABC)is the number of stages involved in allocating costs to products.It is not the number of stages,it is the use of activity cost pools and different cost drivers.

Question 7

Predetermined overhead rates are used in first-stage cost allocations but not in second-stage cost allocations.Predetermined overhead rates are used in both first-stage and second-stage cost allocations.

Question 8

The single-stage cost allocation system uses a plantwide rate because the cost pool is the entire plant.In the plantwide allocation method,the cost pool is the entire plant.

Question 9

Using direct labor costs to allocate overhead costs in an activity-based costing (ABC)system will encourage management to reduce labor costs.Allocating overhead on the basis of direct labor sends signals that direct labor is more expensive than it really is.This also creates tremendous incentives to reduce the labor content of products.

Question 10

Before using activity-based costing (ABC),managers must apply the cost-benefit principle to the additional recordkeeping costs associated with ABC.Applying cost-benefit principles is fundamental to choosing any costing system.

Question 11

The number of products produced is an example of a facility-related cost driver in the cost hierarchy.Number of products is a product-related cost driver.

Question 12

In general,variable costs are allocated using a first-stage cost allocation system and fixed costs are allocated using a second-stage cost allocation system.Variable and fixed costs are both involved in the first-stage cost allocation.

Question 13

Activity-based costing (ABC)can be applied to administrative activities (e.g. ,purchasing)but not to marketing activities.ABC can be used in marketing as well as administrative activities.

Question 14

It is possible to apply activity-based costing (ABC)to segments of an organization without applying it to the entire organization.ABC can be applied in a single portion or segment of an organization as well as the entire organization.

Question 15

The plantwide cost allocation method should be used by companies that manufacture products that are similar and use the same resources.Since the products are similar and use the same resources,all of the products should cost roughly the same.

Question 16

In general,traditional product costing methods allocate less cost to low-volume products and more costs to high-volume products than activity-based costing (ABC).Low volume products get less cost under traditional costing since they use less of the volume cost drivers.

Question 17

In general,low-volume products (and services)have a lower degree of complexity associated with them.Low-volume products may have just as much complexity as higher-volume products.Complexity is a function of the product and its design,not its volume.

Question 18

Activity-based costing (ABC)provides more detailed measures of costs than do plantwide or department allocation methods.This is due to ABC using more causal relationships that are not limited to the production floor.

Question 19

Activity-based costing (ABC)is a two-stage cost allocation system that (1)allocates costs to activities and (2)then to products based on their use of the activities.This is a fundamental concept of ABC.

Question 20

When overhead is applied based on the volume of output,high-volume products tend to "subsidize" low-volume products.When overhead is applied based on the volume of output,high-volume products are allocated relatively more overhead than are low-volume products.High-volume products "subsidize" low-volume products.

Question 21

Activity-based costing (ABC)is a costing technique that uses a two stage allocation process.Which of the following statements best describes these two stages?

A)The costs are assigned to activities,and then to the products based upon their use of the activities.
B)The costs are assigned to departments,and then to the products based upon their use of activity resources.
C)Service department costs are allocated to the production departments,and then to the products based upon their use of the activities.
D)Indirect costs are assigned to activities,and then to the products based upon the direct cost resources used by the activities.

Question 22

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: If Smelly changes its overhead allocation to departmental rates,what is the product cost per case for Product J assuming Departments C and D use direct labor hours and machine hours as their respective allocation bases?

A)$169.30.
B)$161.50.
C)$166.00.
D)$182.44.

Question 23

Cost pools are used with:

A)Option a
B)Option b
C)Option c
D)Option d

Question 24

Which of the following statements is (are)false regarding first-stage and second-stage cost allocation methods? (A)The basic difference between a first-stage cost allocation and a second-stage cost allocation is that cost pools are not used in first-stage cost allocations.(B)Predetermined overhead rates are used in first-stage cost allocations but not in second-stage cost allocations.

A)Only A is false.
B)Only B is false.
C)Neither A and B nor false.
D)Both A and B are false.

Question 25

Volume-based costing allocates indirect product costs based on the volume of output,using such allocation bases as direct labor hours,machine hours,or the amount of direct material used in the production process.Activity-based costing (ABC)has consistently shown that Volume-based costing ___________ the cost of high volume products and ______________ the cost of low volume products.

A)Option a
B)Option b
C)Option c
D)Option d

Question 26

The number of services provided by an accounting firm would be classified as a(n):

A)volume-related activity.
B)batch-related activity.
C)product-related activity.
D)facility-related activity.

Question 27

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: If Smelly changes its allocation basis to machine hours,what is the total product cost per case for Product J?

A)$161.50.
B)$169.30.
C)$182.44.
D)$183.36.

Question 28

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: If Smelly changes its allocation basis to machine hours,what is the total product cost per case for Product X?

A)$80.48.
B)$79.50.
C)$74.00.
D)$75.17.

Question 29

Which one of the following accounts is not used in an activity-based costing (ABC)system?

A)Materials Inventory.
B)Work-in-Process Inventory.
C)Finished Goods Inventory.
D)Overhead ApplieD.
E)Allocations Incurred.

Question 30

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: If Smelly changes its overhead allocation to departmental rates,what is the product cost per case for Product X assuming Departments C and D use direct labor hours and machine hours as their respective allocation bases?

A)$79.50.
B)$80.48.
C)$74.00.
D)$78.50.

Question 31

Which of the following measures is used by activity-based costing (ABC)systems as an allocation base for allocating overhead costs to the units produced?

A)Volume-related activities.
B)Batch-related activities.
C)Product-related activities.
D)Facility-related activities.
E)All of these are used by ABC systems.

Question 32

Which of the following should not be used as the allocation base in a company that appropriately uses a single plantwide rate?

A)Sales volume.
B)Machine hours.
C)Material costs.
D)Direct labor cost.

Question 33

Which of the following costs is not related to a batch-related activity?

A)Material handling.
B)Machine setups.
C)Shipping costs.
D)Compliance costs.

Question 34

The electricity used for production machinery would be classified as a:

A)volume-related activity.
B)batch-related activity.
C)product-related activity.
D)facility-related activity.

Question 35

Which of the following statements is true?

A)One of the lessons learned from activity-based costing (ABC)is that all costs are really a function of volume.
B)The primary purpose of the plantwide and department allocation methods is allocating direct costs to specific products.
C)A problem with activity-based costing (ABC)is that it requires more recordkeeping than other methods.
D)Direct cost allocations are required for the plantwide and department allocation methods.

Question 36

Which of the following statements is (are)true? (1)Activity-based costs per unit are always greater than volume-based costs per unit.(2)Volume-based costing has typically resulted in lower gross margins for high volume products and higher gross margins for low volume products.

A)Only 1 is true.
B)Only 2 is true.
C)Both 1 and 2 are true.
D)Neither 1 nor 2 is true.

Question 37

Which of the following would NOT be a batch-related activity?

A)Setting up a machine for a new production run.
B)Performing 100% inspection.
C)Purchasing materials.
D)Processing a customer order.

Question 38

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: If Smelly changes its allocation basis to machine hours,what is the total product cost per case for Product P?

A)$163.50.
B)$144.00.
C)$138.15.
D)$117.15.

Question 39

Which of the following measures is used by traditional costing systems as an allocation base for allocating overhead costs to the units produced?

A)Volume-related activities.
B)Batch-related activities.
C)Product-related activities.
D)Facility-related activities.

Question 40

Which of the following statements is (are)true regarding the potential effects of using reported product costs for decision making? (A)Traditional product costing systems (e.g. ,job and process costing)are designed primarily to accumulate cost information for financial reporting.(B)If a single cost driver is used as the allocation base,applied manufacturing overhead for product costing purposes may lead to inappropriate managerial decisions.

A)Only A is true
B)Only B is true.
C)Both A and B are true.
D)Neither A nor B is true.

Question 41

Zela Company is preparing its annual profit plan.As part of its analysis of the profitability of individual products,the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below.(CMA based) Budgeted material handling costs: $50,000 Under a traditional costing system that allocates overhead on the basis of direct labor hours,the materials handling costs allocated to one unit of specialty windows would be:

A)$1,500.
B)$500.
C)$2,000.
D)$5,000.

Question 42

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: Department D has recently purchased and installed new computerized equipment for Product X.This equipment will increase the overhead costs by $2,700 and decrease labor costs (due to time savings)in Department D by $3.00 per case.Machine hours will not change.If Smelly uses a plantwide rate based on machine hours,what is the revised product cost per case for Product X?

A)$74.00.
B)$82.50.
C)$69.50.
D)$79.50.

Question 43

Zela Company is preparing its annual profit plan.As part of its analysis of the profitability of individual products,the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below.(CMA based) Budgeted material handling costs: $50,000 Under an activity-based costing (ABC)system,the materials handling costs allocated to one unit of specialty windows would be:

A)$1,875.00.
B)$937.50.
C)$312.50.
D)$1,500.00.

Question 44

Zela Company is preparing its annual profit plan.As part of its analysis of the profitability of individual products,the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below.(CMA based) Budgeted material handling costs: $50,000 Under an activity-based costing (ABC)system,the materials handling costs allocated to one unit of wall mirrors would be:

A)$625.00.
B)$312.50.
C)$833.33.
D)$1,000.00.

Question 45

Terri Martin,CPA provides bookkeeping and tax services to her clients.She charges a fee of $60 per hour for bookkeeping and $90 per hour for tax services.Martin estimates the following costs for the upcoming year: Operating profits declined last year and Ms.Martin has decided to use activity-based costing (ABC)procedures to evaluate her hourly fees.She gathered the following information from last year's records: Martin cannot change the hourly fee for the bookkeeping services because of the number of competing firms in the area.If Martin wants to earn $60,000 pre-tax in the upcoming year,how much will she charge per hour for tax services?

A)$74.
B)$90.
C)$95.
D)$106.

Question 46

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: Department D has recently purchased and installed new computerized equipment for Product X.This equipment will increase the overhead costs by $2,700 and decrease labor costs (due to time savings)in Department D by $3.00 per case.Machine hours will not change.If Smelly uses a plantwide rate based on direct labor hours,what is the revised product cost per case for Product J?

A)$175.33.
B)$161.50.
C)$169.30.
D)$183.36.

Question 47

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: Department D has recently purchased and installed new computerized equipment for Product X.This equipment will increase the overhead costs by $2,700 and decrease labor costs (due to time savings)in Department D by $3.00 per case.Machine hours will not change.If Smelly uses a plantwide rate based on direct labor hours,what is the revised product cost per case for Product X?

A)$82.50.
B)$74.00.
C)$79.50.
D)$69.50.

Question 48

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: Department D has recently purchased and installed new computerized equipment for Product X.This equipment will increase the overhead costs by $2,700 and decrease labor costs (due to time savings)in Department D by $3.00 per case.Machine hours will not change.If Smelly uses a plantwide rate based on machine hours,what is the revised product cost per case for Product J?

A)$161.50.
B)$169.30.
C)$172.00.
D)$183.36.

Question 49

RS Company manufactures and distributes two products,R and S.Overhead costs are currently allocated using the number of units produced as the allocation base.The controller has recommended changing to an activity-based costing (ABC)system.She has collected the following information: What is the total overhead allocated to Product S using the current system?

A)$113,600.
B)$100,000.
C)$146,400.
D)$160,000.

Question 50

Terri Martin,CPA provides bookkeeping and tax services to her clients.She charges a fee of $60 per hour for bookkeeping and $90 per hour for tax services.Martin estimates the following costs for the upcoming year: Operating profits declined last year and Ms.Martin has decided to use activity-based costing (ABC)procedures to evaluate her hourly fees.She gathered the following information from last year's records: A major client has requested bookkeeping services.However,Martin is already billing 100% of her capacity (i.e. ,2,000 hours per year)and would need to shift 100 hours from her tax services to meet this client's request.What is the minimum fee per hour that Martin could charge this client for bookkeeping services and be no worse off than last year?

A)$48.75.
B)$60.00.
C)$81.25.
D)$90.00.

Question 51

RS Company manufactures and distributes two products,R and S.Overhead costs are currently allocated using the number of units produced as the allocation base.The controller has recommended changing to an activity-based costing (ABC)system.She has collected the following information: What is the total overhead per unit allocated to Product R using activity-based costing (ABC)?

A)$2.60.
B)$2.27.
C)$2.00.
D)$1.83.

Question 52

Terri Martin,CPA provides bookkeeping and tax services to her clients.She charges a fee of $60 per hour for bookkeeping and $90 per hour for tax services.Martin estimates the following costs for the upcoming year: Operating profits declined last year and Ms.Martin has decided to use activity-based costing (ABC)procedures to evaluate her hourly fees.She gathered the following information from last year's records: What is the total cost allocated to the bookkeeping services using activity-based costing?

A)$24,000.
B)$33,000.
C)$35,000.
D)$44,000.

Question 53

RS Company manufactures and distributes two products,R and S.Overhead costs are currently allocated using the number of units produced as the allocation base.The controller has recommended changing to an activity-based costing (ABC)system.She has collected the following information: What is the total overhead per unit allocated to Product S using activity-based costing (ABC)?

A)$2.60.
B)$2.27.
C)$2.00.
D)$1.83.

Question 54

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: Department D has recently purchased and installed new computerized equipment for Product X.This equipment will increase the overhead costs by $2,700 and decrease labor costs (due to time savings)in Department D by $3.00 per case.Machine hours will not change.If Smelly uses departmental rates,what are the product costs per case for Product J assuming Departments C and D use direct labor hours and machine hours as their respective allocation bases?

A)$161.50.
B)$169.30.
C)$171.45.
D)$183.36.

Question 55

Terri Martin,CPA provides bookkeeping and tax services to her clients.She charges a fee of $60 per hour for bookkeeping and $90 per hour for tax services.Martin estimates the following costs for the upcoming year: Operating profits declined last year and Ms.Martin has decided to use activity-based costing (ABC)procedures to evaluate her hourly fees.She gathered the following information from last year's records: Martin wants her hourly fees for the tax services to be 160% of their activity-based costs.What is the fee per hour for tax services in the upcoming year?

A)$70.40.
B)$88.00.
C)$110.00.
D)$118.40.

Question 56

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: Department D has recently purchased and installed new computerized equipment for Product X.This equipment will increase the overhead costs by $2,700 and decrease labor costs (due to time savings)in Department D by $3.00 per case.Machine hours will not change.If Smelly uses departmental rates,what are the product costs per case for Product X assuming Departments C and D use direct labor hours and machine hours as their respective allocation bases?

A)$80.00.
B)$74.00.
C)$69.50.
D)$79.50.

Question 57

The LMN Company recently switched to activity-based costing (ABC)from the department allocation method.The department method allocated overhead costs at a rate of $60 per machine hour.The cost accountant for Department XZ has gathered the following data: During April,LMN purchased and used $100,000 of direct materials at $20 per ton.There were eight (8)production runs using a total of 12,000 machine hours in April.The manager of Department XZ needed 12 inspections.Actual overhead costs totaled $820,000 for the month.How much overhead costs were applied to the Work-in-Process Inventory during April using activity-based costing?

A)$536,000.
B)$720,000.
C)$736,000.
D)$820,000.

Question 58

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: If Smelly changes its overhead allocation to departmental rates,what is the product cost per case for Product P assuming Departments C and D use direct labor hours and machine hours as their respective allocation bases?

A)$117.15.
B)$163.50.
C)$121.50.
D)$138.15.

Question 59

Zela Company is preparing its annual profit plan.As part of its analysis of the profitability of individual products,the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below.(CMA based) Budgeted material handling costs: $50,000 Under a traditional costing system that allocates overhead on the basis of direct labor hours,the materials handling costs allocated to one unit of wall mirrors would be:

A)$1,000.
B)$500.
C)$2,000.
D)$5,000.

Question 60

RS Company manufactures and distributes two products,R and S.Overhead costs are currently allocated using the number of units produced as the allocation base.The controller has recommended changing to an activity-based costing (ABC)system.She has collected the following information: What is the total overhead allocated to Product R using the current system?

A)$113,600.
B)$130,000.
C)$146,400.
D)$160,000.

Question 61

A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted) Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year: If the company uses traditional costing and allocates overhead using direct labor cost,what is the cost of each unit of Job 102?

A)$340.
B)$392.
C)$440.
D)$520.

Question 62

Scottso Enterprises has identified the following overhead costs and cost drivers for the coming year: Budgeted direct labor cost was $200,000 and budgeted direct material cost was $800,000.The following information was collected on three jobs that were completed during the month: If the company uses activity-based costing (ABC),how much overhead cost should be assigned to Job A-15?

A)$2,120.
B)$11,200.
C)$1,600.
D)$2,050.

Question 63

A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted) Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year: If the company uses traditional costing and allocates overhead using direct labor cost,how much overhead cost should be assigned to Job 101?

A)$1,300.
B)$2,000.
C)$5,000.
D)$5,600.

Question 64

The Muskego National Bank is considering either a bankwide overhead rate or department overhead rates to allocate $250,000 of indirect costs.The bankwide rate could be based on either direct labor hours (DLH)or the number of loans processed.The departmental rates would be based on direct labor hours for Consumer Loans and a dual rate based on direct labor hours and the number of loans processed for Commercial Loans.The following information was gathered for the upcoming period: If Muskego uses a bankwide rate based on direct labor hours,what would be the indirect costs allocated to the Commercial Department?

A)$100,000.
B)$150,000.
C)$250,000.
D)$350,000.

Question 65

What is the typical effect on the numbers of cost pools and cost assignment bases when an activity-based costing (ABC)system replaces a traditional costing system? (CPA adapted)

A)Option a
B)Option b
C)Option c
D)Option d

Question 66

Companies using activity-based costing (ABC)have learned that costs are a function of:

A)volume and activities.
B)time and complexity.
C)volume and time.
D)resources and time.

Question 67

Multiple (departmental)manufacturing overhead rates are considered preferable to a single (plantwide)overhead rate when: (CMA adapted)

A)manufacturing is limited to a single product flowing through identical departments in a fixed sequence.
B)various products are manufactured that do not pass through the same departments or use the same manufacturing techniques.
C)individual cost drivers cannot accurately be determined with respect to cause-and-effect relationships.
D)the single or plantwide rate is related to several identified cost drivers.

Question 68

A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted) Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year: The company prices its products at 140% of cost.If the company uses activity-based costing (ABC),the price of each unit of Job 103 would be

A)$98.
B)$100.
C)$116.
D)$140.

Question 69

The Muskego National Bank is considering either a bankwide overhead rate or department overhead rates to allocate $250,000 of indirect costs.The bankwide rate could be based on either direct labor hours (DLH)or the number of loans processed.The departmental rates would be based on direct labor hours for Consumer Loans and a dual rate based on direct labor hours and the number of loans processed for Commercial Loans.The following information was gathered for the upcoming period: If Muskego uses a bankwide rate based on direct labor hours,what would be the indirect costs allocated to the Consumer Department?

A)$100,000.
B)$150,000.
C)$250,000.
D)$350,000.

Question 70

Management estimates that it costs $500 to analyze and close a commercial loan.This amount has been included in the $250,000 of indirect costs.How much of the $250,000 indirect costs should be allocated to the Consumer Department?

A)$50,000.
B)$90,000.
C)$160,000.
D)$200,000.

Question 71

Scottso Enterprises has identified the following overhead costs and cost drivers for the coming year: Budgeted direct labor cost was $200,000 and budgeted direct material cost was $800,000.The following information was collected on three jobs that were completed during the month: If the company uses activity-based costing (ABC),how much overhead cost should be assigned to Job B-32?

A)$4,200.
B)$2,600.
C)$2,960.
D)$3,480.

Question 72

Management estimates that it costs $500 to analyze and close a commercial loan.This amount has been included in the $250,000 of indirect costs.How much of the $250,000 indirect costs should be allocated to the Commercial Department?

A)$40,000.
B)$50,000.
C)$90,000.
D)$120,000.

Question 73

The Muskego National Bank is considering either a bankwide overhead rate or department overhead rates to allocate $250,000 of indirect costs.The bankwide rate could be based on either direct labor hours (DLH)or the number of loans processed.The departmental rates would be based on direct labor hours for Consumer Loans and a dual rate based on direct labor hours and the number of loans processed for Commercial Loans.The following information was gathered for the upcoming period: If Muskego uses a bankwide rate based on the number of loans processed,what would be the total costs for the Consumer Department?

A)$50,000.
B)$150,000.
C)$200,000.
D)$400,000.

Question 74

A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted) Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year: If the company uses activity-based costing (ABC),how much overhead cost should be assigned to Job 101?

A)$1,300.
B)$2,000.
C)$5,000.
D)$5,600.

Question 75

A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted) Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year: If the company uses activity-based costing (ABC),how much overhead cost should be assigned to Job 103?

A)$1,300.
B)$2,000.
C)$5,000.
D)$5,600.

Question 76

Which of the following would be a reasonable basis for assigning the materials handling costs to the units produced in an activity-based costing (ABC)system?

A)Number of production runs per year.
B)Number of components per completed unit.
C)Amount of time required to produce one unit.
D)Amount of overhead applied to each completed unit.

Question 77

The LMN Company recently switched to activity-based costing (ABC)from the department allocation method.The department method allocated overhead costs at a rate of $60 per machine hour.The cost accountant for Department XZ has gathered the following data: During April,LMN purchased and used $100,000 of direct materials at $20 per ton.There were eight (8)production runs using a total of 12,000 machine hours in April.The manager of Department XZ needed 12 inspections.Actual overhead costs totaled $820,000 for the month.How much overhead costs were applied to the Work-in-Process Inventory during April using traditional costing?

A)$536,000.
B)$720,000.
C)$736,000.
D)$820,000.

Question 78

Management estimates that it costs $400 to analyze and close a commercial loan.What is the overhead rate if Muskego allocates the remaining indirect costs using direct labor hours?

A)$14.00 per hour.
B)$16.67 per hour.
C)$1,000 per loan.
D)$500 per loan.

Question 79

The Muskego National Bank is considering either a bankwide overhead rate or department overhead rates to allocate $250,000 of indirect costs.The bankwide rate could be based on either direct labor hours (DLH)or the number of loans processed.The departmental rates would be based on direct labor hours for Consumer Loans and a dual rate based on direct labor hours and the number of loans processed for Commercial Loans.The following information was gathered for the upcoming period: If Muskego uses a bankwide rate based on the number of loans processed,what would be the total costs for the Commercial Department?

A)$50,000.
B)$150,000.
C)$200,000.
D)$250,000.

Question 80

A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted) Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year: If the company uses activity-based costing (ABC),what is the cost of each unit of Job 102?

A)$340.
B)$392.
C)$440.
D)$520.