Deck 8: Use Activity-Based Costing Technique to Compute Product Costs for External Reports

Question 1

The predetermined overhead rate (i.e. ,activity rate)for Activity 2 under the activity-based costing system is closest to:

A)$9.15
B)$51.99
C)$86.93
D)$10.23

Answer 1

A
Explanation: Activity rate for Activity 2 = $17,385  1,900 = $9.15

Question 2

Latting Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,T73C and R28K,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $1,526,700 and the company's estimated total direct labor-hours for the year is 30,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
$$\begin{array} { l r r } & { \text { T73C } } & { \text { R28K } } \\\text { Direct materials per unit ......... } & \$ 14.10 & \$ 43.40 \\\text { Direct labor per unit.............. } & \$ 3.20 & \$ 25.60 \\\text { Direct labor-hours per unit...... } & 0.20 & 1.60 \\\text { Annual production.................. } & 30,000 & 15,000\end{array}$$ $\begin{array}{lc}\text { Activities and Activity Measures............. } & \text { Estimated Overhead Cost } \\\text { Assembling products (DLHs)................ } & \$ 720,000 \\\text { Preparing batches (batches)................. } & 362,700 \\\text { Product support (product variations) ...... } & \underline{444,000} \\\text { Total........................................................ } &\underline{ \$ 1,526,700}\end{array}$
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\underline{\text { Expected Activity}}$
$\begin{array}{lrrr}&\text { T73C } & \text { R28K } & \text { Total }\\\text { DLHs.......................... } & 6,000 & 24,000 & 30,000 \\\text { Batches.................. } & 1,380 & 1,410 & 2,790 \\\text { Product variations ...... } & \mathbf{5 7 0} & \mathbf{5 4 0} & 1,110\end{array}$

-The manufacturing overhead that would be applied to a unit of product T73C under the company's traditional costing system is closest to:

A)$18.38
B)$28.56
C)$10.18
D)$4.80

Answer 2

$10.18

Question 3

The overhead cost per unit of Product B under the activity-based costing system is closest to:

A)$50.66
B)$26.09
C)$35.28
D)$38.16

Answer 3

$38.16

Question 4

Kuechle Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,I49L and B26W,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $1,793,790 and the company's estimated total direct labor-hours for the year is 57,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
$$\begin{array} { l r r } & \text { I49L } & \text { B26W } \\\text { Direct materials per unit ......... } & \$ 17.80 & \$ 55.40 \\\text { Direct labor per unit.............. } & \$ 16.10 & \$ 55.20 \\\text { Direct labor-hours per unit..... } & 0.70 & 2.40 \\\text { Annual production.................. } & 30,000 & 15,000\end{array}$$
Required:
a.Determine the unit product cost of each of the company's two products under the traditional costing system.
b.Determine the unit product cost of each of the company's two products under activity-based costing system.
$\begin{array}{c}\begin{array}{lll} \text {Activities and Activity Measures..........}\\ \text {Supporting direct labor (DLHs)............}\\ \text {Setting up machines (setups)................}\\ \text {Parts administration (part types).........}\\ \text {Total....................................................}\end{array}\begin{array}{c}\text {Estimated Overhead Cost}\\\$ 285,000 \\437,190 \\\underline{1,071,600 }\\\underline{\underline{ \$ 1,793,790}} \end{array}\end{array}$
$$\begin{array} { c r r r } \text { Activities } & { \text { I49L } } &{ \text { B26W } } & { \text { Total } } \\\text { Supporting direct labor ...... } & 21,000 & 36,000 & \mathbf { 5 7 , 0 0 0 } \\\text { Setting up machines........... } & 798 & \mathbf { 2 , 5 6 5 } & \mathbf { 3 , 3 6 3 } \\\text { Parts administration......... } & 1,539 & \mathbf { 1 , 1 4 0 } & \mathbf { 2 , 6 7 9 }\end{array}$$

Question 5

Stoughton Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,M31P and M07T,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $2,675,460 and the company's estimated total direct labor-hours for the year is 51,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
Required:
a.Determine the manufacturing overhead cost per unit of each of the company's two products under the traditional costing system.
b.Determine the manufacturing overhead cost per unit of each of the company's two products under activity-based costing system.
$\begin{array}{c}\begin{array}{lll}\\\text {Direct materials per unit......... }\\\text {Direct labor per unit...............}\\\text { Direct labor-hours per unit....}\\\text { Annual production................}\end{array}\begin{array}{lll}\mathrm{M31P} & \mathrm{M07T} \\\$ 27.50 & \$ 64.90 \\\$ 7.80 & \$ 23.40 \\0.60 & 1.80 \\40,000 & 15,000\end{array}\end{array}$
$\begin{array}{lc} \text { Activities and Activity Measures} &\text { Estimated Overhead Cost }\\ \text { Supporting direct labor (DLHs). } &\$1,326,000\\ \text {Setting up machines (setups) } &456,960\\ \text { Parts administration (part types) } &\underline{892,500}\\ \text { Total. } &\underline{\$2,675,460}\\\end{array}$
$$\begin{array} { l r r r } & \text { M31P } & \text { M07T } & \text { Total } \\\text { Supporting direct labor ...... } & 24,000 & 27,000 & 51,000 \\\text { Setting up machines .......... } & 2,346 & 510 & 2,856 \\\text { Parts administration ......... } & 1,122 & 663 & 1,785\end{array}$$

Question 6

Solum Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,V47Q and K41P,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $2,449,440 and the company's estimated total direct labor-hours for the year is 54,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
$\begin{array}{lrr}&\text { V47Q }&\text { K41P }\\\text { Direct materials per unit .......... } & \$ 27.50& \$62.10 \\\text { Direct labor per unit.............. } & \$ 15.60 & \$ 52.00 \\\text { Direct labor-hours per unit...... } & 0.60 & 2.00 \\\text { Annual production................... } & 40,000 & 15,000\end{array}$

$\begin{array}{lc}\text { Activities and Activity Measures............. } & \text { Estimated Overhead Cost } \\\text { Assembling products (DLHs). ................ } & \$918,000 \\\text { Preparing batches (batches)................. } & 397,440\\\text {Product support (product variations) .......... } & \underline{1,134,000} \\\text { Total........................................................ } &\underline{ \$ 2,449,440}\end{array}$

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\underline{\text { Expected Activity}}$
$\begin{array}{lrrr}&\text { V47Q } & \text { K41P } & \text { Total }\\\text { DLHs.......................... } & 24,000 & 30,000 & 54,000 \\\text { Batches.................. } & 1,458 & 1,026 & 2,484 \\\text { Product variations ...... } &2,592& 1,188 & 3,780\end{array}$



-The unit product cost of product K41P under the activity-based costing system is closest to:

A)$204.82
B)$68.70
C)$182.80
D)$114.10

Question 7

Shininger Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,G27U and W21K,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $985,440 and the company's estimated total direct labor-hours for the year is 24,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
$\begin{array} { l r r } & \text { G27U } & \text { W21K } \\\text { Direct materials per unit .......... } & \$ 24.50 & \$ 59.30 \\\text { Direct labor per unit.............. } & \$ 5.00 & \$ 25.00 \\\text { Direct labor-hours per unit...... } & 0.20 & 1.00 \\\text { Annual production.................. } & \mathbf { 4 5 } , \mathbf { 0 0 0 } & \mathbf { 1 5 , 0 0 0 }\end{array}$ $\begin{array}{lc} \text { Activities and Activity Measures } & \text { Estimated Overhead Cost} \\ \text { Supporting direct labor (DLHs)......... } &\$384,000\\ \text {Setting up machines (setups)............. } &255,840\\ \text { Parts administration (part types)..... } &\underline{345,600}\\ \text {Total................................................. } &\underline{985,400}\\\end{array}$
$$\begin{array} { l r r r } & {\quad \text { Expected Activity } } \\ & \text { G27U } & \text { W21K } & \text { Total } \\\text { DLHs............ } & 9,000 & 15,000 & 24,000 \\\text { Setups ........... } & 1,032 & 936 & 1,968 \\\text { Part types...... } & 624 & 240 & 864\end{array}$$

-The manufacturing overhead that would be applied to a unit of product G27U under the company's traditional costing system is closest to:

A)$8.21
B)$3.20
C)$11.73
D)$19.94

Question 8

Scholes Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,L45Y and F91I,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $3,170,400 and the company's estimated total direct labor-hours for the year is 60,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
$\begin{array}{lrr}&\text { L45Y }&\text { F91I }\\\text { Direct materials per unit .......... } & \$ 14.20 & \$ 48.30 \\\text { Direct labor per unit.............. } & \$ 16.80 & \$ 50.40 \\\text { Direct labor-hours per unit...... } & 0.80 & 2.40 \\\text { Annual production................... } & 45,000 & 10,000\end{array}$
$\begin{array}{lc}\text { Activities and Activity Measures............. } & \text { Estimated Overhead Cost } \\\text { Direct labor support (DLHs) ................ } & \$1,740,000 \\\text { Setting up machines (setups)................. } & 422,400\\\text { Part administration (part types) .......... } & \underline{1,008,00} \\\text { Total........................................................ } &\underline{ \$ 3,170,400}\end{array}$

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\underline{\text { Expected Activity}}$
$\begin{array}{lrrr}&\text { L45Y } & \text { F91I } & \text { Total }\\\text { DLHs.......................... } & 36,000 & 24,000 & 60,000 \\\text { Batches.................. } & 1,140 & 1,500 & 2,640 \\\text { Product variations ...... } &900& 2,460 & 3,360\end{array}$



-The unit product cost of product L45Y under the company's traditional costing system is closest to:

A)$54.20
B)$73.27
C)$64.25
D)$31.00

Question 9

The predetermined overhead rate under the traditional costing system is closest to:

A)$9.15
B)$43.48
C)$84.43
D)$19.08

Question 10

The overhead cost per unit of Product B under the traditional costing system is closest to:

A)$50.66
B)$5.49
C)$26.09
D)$11.45

Question 11

Shininger Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,G27U and W21K,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $985,440 and the company's estimated total direct labor-hours for the year is 24,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
$\begin{array} { l r r } & \text { G27U } & \text { W21K } \\\text { Direct materials per unit .......... } & \$ 24.50 & \$ 59.30 \\\text { Direct labor per unit.............. } & \$ 5.00 & \$ 25.00 \\\text { Direct labor-hours per unit...... } & 0.20 & 1.00 \\\text { Annual production.................. } & \mathbf { 4 5 } , \mathbf { 0 0 0 } & \mathbf { 1 5 , 0 0 0 }\end{array}$ $\begin{array}{lc} \text { Activities and Activity Measures } & \text { Estimated Overhead Cost} \\ \text { Supporting direct labor (DLHs)......... } &\$384,000\\ \text {Setting up machines (setups)............. } &255,840\\ \text { Parts administration (part types)..... } &\underline{345,600}\\ \text {Total................................................. } &\underline{985,400}\\\end{array}$
$$\begin{array} { l r r r } & {\quad \text { Expected Activity } } \\ & \text { G27U } & \text { W21K } & \text { Total } \\\text { DLHs............ } & 9,000 & 15,000 & 24,000 \\\text { Setups ........... } & 1,032 & 936 & 1,968 \\\text { Part types...... } & 624 & 240 & 864\end{array}$$

-The manufacturing overhead that would be applied to a unit of product W21K under the activity-based costing system is closest to:

A)$71.57
B)$41.06
C)$8.11
D)$30.51

Question 12

Solum Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,V47Q and K41P,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $2,449,440 and the company's estimated total direct labor-hours for the year is 54,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
$\begin{array}{lrr}&\text { V47Q }&\text { K41P }\\\text { Direct materials per unit .......... } & \$ 27.50& \$62.10 \\\text { Direct labor per unit.............. } & \$ 15.60 & \$ 52.00 \\\text { Direct labor-hours per unit...... } & 0.60 & 2.00 \\\text { Annual production................... } & 40,000 & 15,000\end{array}$

$\begin{array}{lc}\text { Activities and Activity Measures............. } & \text { Estimated Overhead Cost } \\\text { Assembling products (DLHs). ................ } & \$918,000 \\\text { Preparing batches (batches)................. } & 397,440\\\text {Product support (product variations) .......... } & \underline{1,134,000} \\\text { Total........................................................ } &\underline{ \$ 2,449,440}\end{array}$

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\underline{\text { Expected Activity}}$
$\begin{array}{lrrr}&\text { V47Q } & \text { K41P } & \text { Total }\\\text { DLHs.......................... } & 24,000 & 30,000 & 54,000 \\\text { Batches.................. } & 1,458 & 1,026 & 2,484 \\\text { Product variations ...... } &2,592& 1,188 & 3,780\end{array}$



-The unit product cost of product V47Q under the company's traditional costing system is closest to:

A)$53.30
B)$70.32
C)$43.10
D)$78.57

Question 13

Bustle Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,Z68W and K07E,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $1,809,600 and the company's estimated total direct labor-hours for the year is 26,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
$\begin{array}{lrr}&\text { Z68W }&\text { K07E }\\\text { Direct materials per unit.......... } & \$ 14.90 & \$ 44.30 \\\text { Direct labor per unit.............. } & \$ 4.20 & \$ 25.20 \\\text { Direct labor-hours per unit...... } & 0.20 & 1.20 \\\text { Annual production................. } & 40,000 & 15,000\end{array}$
$\begin{array}{lc} \text {Activities and Activity Measures } &\text { Estimated Overhead Cost }\\ \text { Assembling products (DLHs)................. } &\$702,000\\ \text { Preparing batches (batches) ................. } &132,600\\ \text {Milling (MHs)........................................ } &\underline{975,000}\\ \text { Total.................................................... } &\underline{\underline{1,809,600}}\\ \text { } &\\\end{array}$
$\begin{array}{c}\begin{array}{lll} \text {Activities}\\ \text {Assembling products....}\\ \text {Preparing batches.........}\\ \text {Milling.........................}\end{array}\begin{array}{lll}\text { Z68W}&\text { K07E }&\text {Total }\\8,000 & 18,000 & 26,000 \\884 & 442 & 1,326 \\702 & 1.248 & 1.950\end{array}\end{array}$
Required:
a.Determine the unit product cost of each of the company's two products under the traditional costing system.
b.Determine the unit product cost of each of the company's two products under activity-based costing system.

Question 14

Wetz Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,Q30V and S33B,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $1,527,600 and the company's estimated total direct labor-hours for the year is 38,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
Required:
a.Determine the manufacturing overhead cost per unit of each of the company's two products under the traditional costing system.
b.Determine the manufacturing overhead cost per unit of each of the company's two products under activity-based costing system.
$$\begin{array} { l r r } & \text { Q30V } & \text { S33B } \\\text { Direct materials per unit.......... } & \$ 34.10 & \$ 52.70 \\\text { Direct labor per unit .............. } & \$ 16.10 & \$ 39.10 \\\text { Direct labor-hours per unit....... } & 0.70 & 1.70 \\\text { Annual production .................. } & 30,000 & 10,000\end{array}$$ $\begin{array}{lc} \text { Activities and Activity Measures.....} &\text { Estimated Overhead Cost }\\ \text {Assembling products (DLHs)........... } &\$608,000\\ \text {Preparing batches (batches)............ } &197,000\\ \text { Axial milling (MHs)........................ } &\underline{722,000}\\ \text { Total.............................................. } &\underline{\$1,527,600}\\\end{array}$

$\begin{array}{c}\begin{array}{lll}\\\text {Assembling products.....}\\ \text { Preparing batches........}\\ \text {Axial milling.................}\end{array}\begin{array}{lll}\text { Q30V } & \text { S33B } & \text { Total } \\21,000 & 17,000 & 38,000 \\456 & 1,520 & 1,976 \\570 & 874 & 1,444\end{array}\end{array}$

Question 15

Latting Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,T73C and R28K,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $1,526,700 and the company's estimated total direct labor-hours for the year is 30,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
$$\begin{array} { l r r } & { \text { T73C } } & { \text { R28K } } \\\text { Direct materials per unit ......... } & \$ 14.10 & \$ 43.40 \\\text { Direct labor per unit.............. } & \$ 3.20 & \$ 25.60 \\\text { Direct labor-hours per unit...... } & 0.20 & 1.60 \\\text { Annual production.................. } & 30,000 & 15,000\end{array}$$ $\begin{array}{lc}\text { Activities and Activity Measures............. } & \text { Estimated Overhead Cost } \\\text { Assembling products (DLHs)................ } & \$ 720,000 \\\text { Preparing batches (batches)................. } & 362,700 \\\text { Product support (product variations) ...... } & \underline{444,000} \\\text { Total........................................................ } &\underline{ \$ 1,526,700}\end{array}$
$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\underline{\text { Expected Activity}}$
$\begin{array}{lrrr}&\text { T73C } & \text { R28K } & \text { Total }\\\text { DLHs.......................... } & 6,000 & 24,000 & 30,000 \\\text { Batches.................. } & 1,380 & 1,410 & 2,790 \\\text { Product variations ...... } & \mathbf{5 7 0} & \mathbf{5 4 0} & 1,110\end{array}$

-The manufacturing overhead that would be applied to a unit of product R28K under the activity-based costing system is closest to:

A)$81.42
B)$65.02
C)$146.44
D)$12.22

Question 16

Scholes Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,L45Y and F91I,about which it has provided the following data:
The company's estimated total manufacturing overhead for the year is $3,170,400 and the company's estimated total direct labor-hours for the year is 60,000.
The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
$\begin{array}{lrr}&\text { L45Y }&\text { F91I }\\\text { Direct materials per unit .......... } & \$ 14.20 & \$ 48.30 \\\text { Direct labor per unit.............. } & \$ 16.80 & \$ 50.40 \\\text { Direct labor-hours per unit...... } & 0.80 & 2.40 \\\text { Annual production................... } & 45,000 & 10,000\end{array}$
$\begin{array}{lc}\text { Activities and Activity Measures............. } & \text { Estimated Overhead Cost } \\\text { Direct labor support (DLHs) ................ } & \$1,740,000 \\\text { Setting up machines (setups)................. } & 422,400\\\text { Part administration (part types) .......... } & \underline{1,008,00} \\\text { Total........................................................ } &\underline{ \$ 3,170,400}\end{array}$

$\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\underline{\text { Expected Activity}}$
$\begin{array}{lrrr}&\text { L45Y } & \text { F91I } & \text { Total }\\\text { DLHs.......................... } & 36,000 & 24,000 & 60,000 \\\text { Batches.................. } & 1,140 & 1,500 & 2,640 \\\text { Product variations ...... } &900& 2,460 & 3,360\end{array}$



-The unit product cost of product F91I under the activity-based costing system is closest to:

A)$266.10
B)$98.70
C)$167.40
D)$225.52