Deck 27: Appendix C: Activity-Based Costing

Question 1

In activity-based costing,all overhead is lumped together and a predetermined overhead rate per unit of an allocation base is computed and used to assign overhead to jobs and processes.

Answer 1

False

Question 2

A plantwide overhead rate method is adequate when a company produces only one product or has multiple products that use about the same amount of indirect resources.

Answer 2

True

Question 3

In activity-based costing,there are a number of activity cost pools,which consist of activities that belong to the same process and/or are caused by the same cost driver.

Answer 3

True

Question 4

Unit costs can be significantly different when using activity-based costing compared to traditional cost allocation methods.

Question 5

Activity-based costing can be especially effective in situations where many different types of products are manufactured in the same department or departments.

Question 6

In activity-based costing,low-volume complex products are usually undercosted and high volume simpler products are overcosted,because the method fails to reflect the different uses of indirect resources.

Question 7

An activity-based cost allocation system:

A)Is one form of a direct or variable costing system.
B)Does not provide total unit cost data.
C)Traces costs to products on the basis of activities performed on them.
D)Does not provide for the allocation of any cost to products that cannot be directly traced to those products.
E)Does not involve the level of detail and the number of allocations that companies make with traditional allocation methods.

Question 8

If a firm uses activity-based costing to allocate costs,it does all but which of the following?

A)Combine homogenous costs in appropriate pools.
B)Select appropriate cost drivers.
C)Calculate an appropriate rate for each pool.
D)Allocate costs based on predetermined rates for cost pools.
E)Apply a volume-related measure per unit of product.

Question 9

Activity-based costing uses pre-determined overhead rates to allocate costs.

Question 10

After all activity costs are accumulated in an activity cost pool account,overhead rates are computed and costs are allocated to cost objects based on:

A)Direct factors.
B)Indirect factors.
C)Cost drivers.
D)Joint cost principles.
E)Opportunity cost principles.

Question 11

In activity-based costing,costs are traced to individual activities and then allocated to cost objects.

Question 12

An activity-based costing system usually involves a fewer number of allocation bases compared with a traditional cost allocation system.

Question 13

When using a plantwide overhead rate method to assign overhead costs,the cost object is always the unit of product.

Question 14

Activity cost pools are not a necessary part of the allocation of overhead costs using activity-based costing.

Question 15

Activity based costing can improve costing activity for:

A)Manufacturing companies only.
B)Service companies only.
C)Merchandising companies only.
D)Any company in any industry.
E)Government entities only.

Question 16

A system of assigning costs to departments and products on the basis of a variety of activities instead of only one allocation base is called:

A)Plantwide overhead costing.
B)A cost center accounting system.
C)Controllable costing.
D)Activity-based costing.
E)Performance costing.

Question 17

With activity-based costing,complex products are assigned a larger portion of overhead.

Question 18

Activity-based costing attempts to better allocate costs to the proper users of overhead by focusing on activities.

Question 19

A factor that causes the cost of an activity to go up or down is a(n):

A)Direct factor.
B)Indirect factor.
C)Cost driver.
D)Product cost.
E)Contribution factor.

Question 20

Activity-based costing generally requires less effort to implement and maintain than a traditional cost system.

Question 21

The following is taken from Clausen Company's internal records of its factory with two operating departments.The cost driver for indirect labor is direct labor hours,and the cost driver for the remaining items is number of hours of machine use.Compute the total amount of rent and utilities allocated to Dept.2 using activity-based costing.

A)$6,000.
B)$13,134.
C)$8,566.
D)$14,092.
E)$14,152.

Question 22

Quantum Corporation has provided the following data from its activity-based costing system: The company makes 430 units of product R32E a year,requiring a total of 1,120 machine-hours,40 orders,and 30 inspection-hours per year.The product's direct materials cost is $49.81 per unit and its direct labor cost is $12.34 per unit.The product sells for $129.90 per unit.According to the activity-based costing system,the product margin for product R32E is:

A)$4,116.50
B)$29,132.50
C)$6,180.50
D)$5,161.30
E)$4,981.00

Question 23

The following is taken from Jeffers Company's internal records of its factory with two operating departments.The cost driver for indirect labor is direct labor costs,and the cost driver for the remaining items is number of hours of machine use.Compute the total amount of overhead allocated to Dept.1 using activity-based costing.

A)$22,069.
B)$19,877.
C)$47,512.
D)$22,243.
E)$18,703.

Question 24

Kozlov Corporation has provided the following data from its activity-based costing system: The company makes 430 units of product A21W a year,requiring a total of 690 machine-hours,40 orders,and 10 inspection-hours per year.The product's direct materials cost is $35.72 per unit and its direct labor cost is $29.46 per unit.According to the activity-based costing system,the total overhead cost of producing 420 units of A21W is:

A)$11,121.40
B)$13,338.20
C)$32,370.00
D)$12,440.20
E)$12,215.70

Question 25

Portofino Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Data concerning two products appear below: How much overhead cost would be assigned to Product KL37 using the activity-based costing system?

A)$1,595.79
B)$5,874.82
C)$10,385.22
D)$5,562.61
E)$6,516.61

Question 26

Borden Corporation uses an activity-based costing system with three activity cost pools.The company has provided the following data concerning its costs and its activity based costing system: Distribution of resource consumption: How much cost,in total,would be allocated in the first-stage allocation to the Setting Up activity cost pool?

A)$155,000
B)$279,000
C)$206,000
D)$217,000
E)$194,000

Question 27

Mirkle Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Data for one of the company's products follow: The company produced 4,000 units of product during the period.Direct materials cost $7.30 per unit and direct labor cost $5.45 per unit.How much overhead cost would be assigned to Product P59G using the activity-based costing system?

A)$54,482.56
B)$3,138.24
C)$10,014.40
D)$154.78
E)$5,301.76

Question 28

The following is taken from Jeffers Company's internal records of its factory with two operating departments.The cost driver for indirect labor is direct labor costs,and the cost driver for the remaining items is number of hours of machine use.Compute the total amount of overhead allocated to Dept.2 using activity-based costing.

A)$16,392.
B)$19,877.
C)$28,830.
D)$22,243.
E)$73,600.

Question 29

Borden Corporation uses an activity-based costing system with three activity cost pools.The company has provided the following data concerning its costs and its activity based costing system: Distribution of resource consumption: How much cost,in total,would be allocated in the first-stage allocation to the Assembly activity cost pool?

A)$196,333
B)$209,000
C)$310,000
D)$155,000
E)$200,000

Question 30

Mirkle Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Data for one of the company's products follow: The company produced 4,000 units of product during the period.Direct materials cost $7.30 per unit and direct labor cost $5.45 per unit.How much total cost would be assigned to the 4,000 units of Product P59G using the activity-based costing system?

A)$61,014.40
B)$39,214.40
C)$10,014.40
D)$51,000.00
E)$31,814.40

Question 31

Kozlov Corporation has provided the following data from its activity-based costing system: The company makes 430 units of product A21W a year,requiring a total of 690 machine-hours,40 orders,and 10 inspection-hours per year.The product's direct materials cost is $35.72 per unit and its direct labor cost is $29.46 per unit.According to the activity-based costing system,the average cost of product A21W is closest to:

A)$94.11 per unit
B)$89.72 per unit
C)$65.18 per unit
D)$92.49 per unit
E)$64.99 per unit

Question 32

Mirkle Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Data for one of the company's products follow: The company produced 4,000 units of product during the period.Direct materials cost $7.30 per unit and direct labor cost $5.45 per unit.What is the cost per unit of Product P59G using the activity-based costing system?

A)$167.53
B)$12.75
C)$2.50
D)$15.25
E)$9.80

Question 33

Which of the following is not a limitation of activity-based costing?

A)Maintaining an activity-based costing system is more costly than maintaining a traditional direct labor-based costing system.
B)Changing from a traditional direct labor-based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers.Such changes are often resisted by managers.
C)In practice,most managers insist on fully allocating all costs to products,customers,and other costing objects in an activity-based costing system.This results in overstated costs.
D)More accurate product costs may result in increasing the selling prices of some products.
E)Complex products are assigned a larger portion of overheaD.An activity-based costing system is more costly to maintain than a traditional costing system.Activity-based costing produces numbers,such as product margins,that are at odds with the numbers produced by traditional costing systems.Assigning more overhead to complex products is an advantage because it more accurately reflects use of the cost driver.

Question 34

Zephyr Corporation has provided the following data from its activity-based costing system: Data concerning one of the company's products,Product LM41,appear below: According to the activity-based costing system,the product margin for product LM41 is:

A)$2,891.90
B)$5,931.30
C)$11,917.50
D)$2,236.90
E)$3,178.20

Question 35

The following is taken from Clausen Company's internal records of its factory with two operating departments.The cost driver for indirect labor is direct labor hours,and the cost driver for the remaining items is number of hours of machine use.Compute the total amount of indirect labor allocated to Dept.1 using activity-based costing.

A)$5,505.
B)$54,371.
C)$16,864.
D)$10,471.
E)$8,073.

Question 36

Founder Consulting Corporation has its headquarters in Memphis and operates from three branch offices in Nashville,Atlanta,and Louisville.Two of the company's activity cost pools are Administrative Service and Development Service.These costs are allocated to the three branch offices using an activity-based costing system.Information for next year follows: Estimated branch data for next year is as follows: How much of the headquarters cost allocation should Nashville expect to receive next year?

A)$280,000
B)$409,500
C)$472,500
D)$504,000
E)$560,000

Question 37

Quantum Corporation has provided the following data from its activity-based costing system: The company makes 340 units of product J71B a year,requiring a total of 980 machine-hours,36 orders,and 22 inspection-hours per year.The product's direct materials cost is $27.50 per unit and its direct labor cost is $18.10 per unit.According to the activity-based costing system,the total overhead cost for producing the 340 units of the J71B product is:

A)$15,504.00
B)$30,972.72
C)$37,126.72
D)$21,622.72
E)$17,957.92

Question 38

Portofino Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Data concerning two products appear below: How much overhead cost would be assigned to Product KJ22 using the activity-based costing system?

A)$157.87
B)$91,722.47
C)$10,385.22
D)$5,485.50
E)$16,640.87

Question 39

Quantum Corporation has provided the following data from its activity-based costing system: The company makes 340 units of product J71B a year,requiring a total of 980 machine-hours,36 orders,and 22 inspection-hours per year.The product's direct materials cost is $27.50 per unit and its direct labor cost is $18.10 per unit.According to the activity-based costing system,the total cost for producing the 340 units of the J71B product is:

A)$15,504.00
B)$30,972.72
C)$37,126.72
D)$21,622.72
E)$17,957.92

Question 40

Founder Consulting Corporation has its headquarters in Memphis and operates from three branch offices in Nashville,Atlanta,and Louisville.Two of the company's activity cost pools are Administrative Service and Development Service.These costs are allocated to the three branch offices using an activity-based costing system.Information for next year follows: Estimated branch data for next year is as follows: How much of the headquarters cost allocation should Atlanta expect to receive next year?

A)$280,000
B)$409,500
C)$472,500
D)$504,000
E)$560,000

Question 41

Traditional costing:
Total overhead costs/Total DLH = $4,500,000/(150,000 + 250,000)labor hours = $11.25 per DLH

Question 42

Winterland, Inc., produces two types of skis, downhill skis and cross country skis. Product and production information about the two items is shown below:

Required:

1. If Winterland uses the traditional two-stage method of allocating overhead costs based on direct labor hours, what is the amount of indirect costs per set of skis for each of the two types of skis?
2. If Winterland uses activity based costing, what is the total amount of indirect costs per set of skis for each of the two types of skis? Assume that depreciation is allocated based on machine hours, setup costs based on the number of setups, and miscellaneous costs based on the number of direct labor hours.

Question 43

Naples Corporation has provided the following data from its activity-based costing accounting system: Distribution of resource consumption across activity cost pools: The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.How much indirect factory wages and factory equipment depreciation cost would be assigned to the Customer Orders activity cost pool?

A)$247,000
B)$390,000
C)$214,500
D)$780,000
E)$208,000

Question 44

Under traditional cost allocation methods,low-volume complex products are often ________________ and high-volume simpler products are likely to be ________________.
Answers must appear in this order.

Question 45

Rockaway Company produces two types of product,flat and round,on the same production line.For the current period,the company reports the following data. Rockaway's controller wishes to apply activity-based costing (ABC)to allocate the $60,000 of overhead costs incurred by the two product lines to see whether cost per unit would change markedly from that reported above.She has collected the following information. She has also collected the following information about the cost drivers for each category (cost pool)and the amount of each driver used by the two product lines. Assign these three overhead cost pools to flat using ABC and determine average cost per unit for the product.(Round your answer to 2 decimal places. )

Question 46

Activity rates from Hilliard Corporation's activity-based costing system are listed below.The company uses the activity rates to assign overhead costs to products: Last year,Product XL91 involved 2 customer orders,434 assembly hours,and 20 batches.How much overhead cost would be assigned to Product XL91 using the activity-based costing system?

A)$1,041.80
B)$2,000.04
C)$66,908.88
D)$146.73
E)$772.52

Question 47

Naples Corporation has provided the following data from its activity-based costing accounting system: Distribution of resource consumption across activity cost pools: The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.How much indirect factory wages and factory equipment depreciation cost would be assigned to the Product Processing activity cost pool?

A)$260,000
B)$429,000
C)$169,000
D)$780,000
E)$351,000

Question 48

Rockaway Company produces two types of product,flat and round,on the same production line.For the current period,the company reports the following data. Rockaway's controller wishes to apply activity-based costing (ABC)to allocate the $60,000 of overhead costs incurred by the two product lines to see whether cost per unit would change markedly from that reported above.She has collected the following information. She has also collected the following information about the cost drivers for each category (cost pool)and the amount of each driver used by the two product lines. Assign these three overhead cost pools to each of the two products using ABC.Show each overhead cost allocation by product and the total overhead allocated to each product.Determine average cost per unit for each of the two products using ABC.(Round your answer to 2 decimal places. )Which overhead cost allocation method would you recommend to the controller?

Question 49

An activity __________________ is a temporary account accumulating the costs a company incurs to support an identified set of activities.

Question 50

A _________________ is a factor that causes the cost of an activity to go up and down.