FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 17: Activity-Based Costing and Analysis

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 91

Multiple Choice

Review LaterAdd Note

Review Later

A company identified the following partial list of activities, costs, and activity drivers expected for the next year. $\begin{array}{l}\begin{array} { | l | c | c | } \hline \text { Activity } & \text { Expected Costs } & \text { Cost Driver } \\\hline \text { Extrusion Costs } & \$ 83,600 & \text { Number batches made } \\\hline \text { Handling Costs } & \$ 8,800 & \text { Number of orders filled } \\\hline \text { Packaging Costs } & \$ 40,500 & \text { Number of units made } \\\hline\\\hline & \text { Product A } & \text { Product B } \\\hline \text { Production volume } & 750,000 \text { units } & 600,000 \text { units } \\\hline \text { Batches made } & 200 \text { batches } & 750 \text { batches } \\\hline \text { Orders filled } & 75 & 200 \\\hline\end{array}\end{array}$ Calculate activity rates for each of the three activities using activity-based costing (ABC) .

A) Extrusion: $304 per batch; Handling: $32 per unit; Packaging: $.03 per unit.
B) Extrusion: $88 per batch; Handling: $32 per order; Packaging: $.03 per unit.
C) Extrusion: $88 per order; Handling: $32 per unit; Packaging: $.03 per batch.
D) Extrusion: $418 per batch; Handling: $117.33 per order; Packaging: $.054 per unit.
E) Extrusion: $118.13 per batch; Handling: $44 per order; Packaging: $.0675 per unit.

F) A) and B)
G) A) and C)

Correct Answer

verified

Show Answer

Question 92

True/False

Review LaterAdd Note

Review Later

Activity-based costing often shifts overhead costs from large volume, standardized products to low-volume, specialty products that consume disproportionate resources.

A) True
B) False

Correct Answer

verified

Show Answer

Question 93

True/False

Review LaterAdd Note

The departmental overhead rate method traces costs to each department and then determines an allocation base for each department.

A company estimates that overhead costs for the next year will be $9,234,000 for indirect labor and $156,800 for factory utilities. The company uses machine hours as its overhead allocation base. If 500,000 machine hours are planned for this next year, what is the company's plantwide overhead rate? (Round to two decimal places)

The departmental overhead rate method allows each department to have its own overhead rate and its own allocation base.

The following data relates to Tier One Company's estimated amounts for next year. $\begin{array}{lcc}\text { Estimated: } & \text { Department 1 } & \text { Department 2 } \\\text { Manufacturing overhead costs } & \$ 50,000 & \$ 40,000 \\\text { Direct labor hours } & 150,000 \mathrm{DLH} & 200,000 \mathrm{DLH} \\\text { Machine hours } & 300,000 \mathrm{MH} & 400,000 \mathrm{MH}\end{array}$ What is the company's plantwide overhead rate if direct-labor hours are the allocation base? (Round to two decimal places.)

Turtle Company produces t-shirts which go through two operations, cutting and sewing, before they are complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for the cutting department based on direct labor hours is $2.69 per direct labor hour (rounded to two decimals). $\begin{array}{ccc} & \text { Cutting } & \text { Sewing } \\\text { Direct labor hours } & 250,000 & 75,000 \mathrm{DLH}\\&\text { DLH }\\\text { Machine hours } & 125,000 & 150,000 \mathrm{MH} \\& \mathrm{MH} & \\\text { Overhead costs } & \$ 500,000 & \$ 375,000\end{array}$

A company estimates that costs for the next year will be $600,000 for indirect labor, $40,000 for factory utilities and $1,000,000 for the CEO's salary. The company uses machine hours as its overhead allocation base. If 80,000 machine hours are planned for this next year, then the plantwide overhead rate is $8 per machine hour.

Which of the following statements is true with regard to the plantwide overhead rate method?

A company estimates total overhead costs for the next year to be $1,500,000 and wishes to use direct labor hours as it overhead allocation base. This company makes two products: (1) Fancy X, which requires 3 direct labor hours per unit; and (2) Plain X, which requires 1 direct labor hour per unit. If the company plans to make 20,000 units of Fancy X and 20,000 units of Plain X then each unit produced will be allocated the same amount of overhead.

In competitive markets, price is established through the forces of _______________ and _______________.

Activities causing overhead cost in an organization are typically separated into four levels: (1) direct activities, (2) indirect activities, (3) batch level activities, and (4) facility level activities.

Explain cost flows for activity-based costing.