Filters
Question type
Study Flashcards

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

A) True
B) False

Correct Answer

verifed

verified

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.

A) True
B) False

Correct Answer

verifed

verified

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.  Direct Labor Hours  Machine Hours  Operating Dept. 1 9809,200 Operating Dept. 2 2,1006,000 Totals 3,08015,200 Factory overhead costs  Rent and utilities $21,700 Indirect labor 17,300 Depreciation - Equipment 14,000 Total factory overhead $53,000\begin{array} { l c c } & \text { Direct Labor Hours } & \text { Machine Hours } \\\text { Operating Dept. 1 } & 980 & 9,200 \\\text { Operating Dept. 2 } & 2,100 & 6,000 \\\text { Totals } & 3,080 & 15,200 \\ & & \\\text { Factory overhead costs } & & \\\text { Rent and utilities } & &\$ 21,700 \\ \text { Indirect labor } & & 17,300\\\text { Depreciation - Equipment } & & 14,000 \\\text { Total factory overhead } & &\$ 53,000\end{array}


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

F) All of the above
G) C) and D)

Correct Answer

verifed

verified

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, utilities, and depreciation allocated to Dept. 1 using activity-based costing.  Direct Labor Hours  Machine Hours  Operating Dept. 1 9809,200 Operating Dept. 2 2,1006,000 Totals 3,08015,200 Factory overhead costs  Rent and utilities $21,700 Indirect labor 17,300 Depreciation - Equipment 14,000\begin{array} { l c r } & \text { Direct Labor Hours } & \text { Machine Hours } \\\text { Operating Dept. 1 } & 980 & 9,200 \\\text { Operating Dept. 2 } & 2,100 & 6,000 \\\text { Totals } & 3,080 & 15,200 \\\\\text { Factory overhead costs } & & \\\text { Rent and utilities } & & \$ 21,700 \\\text { Indirect labor } & & 17,300 \\\text { Depreciation - Equipment } & & 14,000\end{array} Total factory overhead $ 53,000


A) $21,608.
B) $11,795.
C) $13,134.
D) $14,092.
E) $5,505.

F) A) and E)
G) C) and E)

Correct Answer

verifed

verified

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:  Overhead Costs:  Indirect labor $260,000 Depreciation 220,000 Utilities 140,000‾ Total $620,000‾\begin{array}{l}\text { Overhead Costs: }\\\begin{array} { l r } \text { Indirect labor } & \$ 260,000 \\\text { Depreciation } & 220,000 \\\text { Utilities } & \underline{140,000} \\\text { Total }& \underline{\$ 620,000} \\\end{array}\end{array} Distribution of resource consumption: Activity Cost Pools  Assembly  Setting up  Other  Total  Indirect labor 50%25%25%100% Depreciation 20%30%50%100% Utilities 25%45%30%100%\begin{array} { l r c c c } & \text { Assembly } & \text { Setting up } & \text { Other } & \text { Total } \\ \text { Indirect labor } & 50 \% & 25 \% & 25 \% & 100 \% \\ \text { Depreciation } & 20 \% & 30 \% & 50 \% & 100 \% \\ \text { Utilities } & 25 \% & 45 \% & 30 \% & 100 \% \end{array} How much overhead cost, in total, would be allocated to the Setting Up activity cost pool?


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

F) C) and E)
G) D) and E)

Correct Answer

verifed

verified

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


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

F) A) and E)
G) A) and B)

Correct Answer

verifed

verified

In traditional 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.

A) True
B) False

Correct Answer

verifed

verified

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 overhead cost allocated to Dept. 1 using activity-based costing.  Direct Labor Hours  Machine Hours  Operating Dept. 1 9809,200 Operating Dept. 2 2,1006,000 Totals 3,08015,200 Factory overhead costs  Rent and utilities $21,700 Indirect labor 17,300 Depreciation - Equipment 14,000 Total factory overhead $53,000\begin{array} { l c c } & \text { Direct Labor Hours } & \text { Machine Hours } \\\text { Operating Dept. 1 } & 980 & 9,200 \\\text { Operating Dept. 2 } & 2,100 & 6,000 \\\text { Totals } & 3,080 & 15,200 \\& & \\\text { Factory overhead costs } & &\\ \text { Rent and utilities } & & \$ 21,700 \\\text { Indirect labor } & & 17,300\\\text { Depreciation - Equipment } & & 14,000 \\\text { Total factory overhead } & & \$ 53,000\end{array}


A) $25,888.
B) $27,113.
C) $14,092.
D) $21,608.
E) $5,505.

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

Correct Answer

verifed

verified

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. 2 using activity-based costing.  Direct Labor Hours  Machine Hours  Operating Dept. 1 9809,200 Operating Dept. 2 2,1006,000 Totals 3,08015,200 Factory overhead costs  Rent and utilities $21,700 Indirect labor 17,300 Depreciation - Equipment 14,000 Total factory overhead $53,000\begin{array} { l c r } & \text { Direct Labor Hours } & \text { Machine Hours } \\\text { Operating Dept. 1 } & 980 & 9,200 \\\text { Operating Dept. 2 } & 2,100 & 6,000 \\\text { Totals } & 3,080 & 15,200 \\& & \\\text { Factory overhead costs } & &\\\text { Rent and utilities } & & \$ 21,700 \\ \text { Indirect labor } & & 17,300\\\text { Depreciation - Equipment } & &14,000\\\text { Total factory overhead }&& \$ 53,000\end{array}


A) $13,134.
B) $8,566.
C) $5,505.
D) $11,795.
E) $8,474.

F) C) and E)
G) B) and E)

Correct Answer

verifed

verified

Stormer Corporation has provided the following data from its activity-based costing accounting system: Indirect factory wages $27,000 Factory equipment depreciation $243,000 Distribution of resource consumption across Activity Cost Pools:  Customer  Product  Orders  Processing  Other  Total  Indirect factor wages 27%68%5%100% Factory equipment depreciation 20%67%13%100%\begin{array} { l l l l l } & \text { Customer } & \text { Product } & \\& \text { Orders } & \text { Processing } & \text { Other } & \text { Total } \\\hline \text { Indirect factor wages } & 27 \% & 68 \% & 5 \% & 100 \% \\\text { Factory equipment depreciation } & 20 \% & 67 \% & 13 \% & 100 \%\end{array} The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products. Required: a. Determine the total amount of indirect factory wages and factory equipment depreciation costs that would be allocated to the Product Processing activity cost pool. Show your work! b. Determine the total amount of indirect factory wages and factory equipment depreciation costs that would NOT be assigned to products. Show your work!

Correct Answer

verifed

verified

a. Allocations to the Product Processing...

View Answer

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:  Activity Cost Pool  Activity Measure  Estimated Cost  Adminstrative service % of time devoted to branch $700,000 Development service  Computer time $140,000\begin{array} { l l l } \text { Activity Cost Pool } & \text { Activity Measure } & \text { Estimated Cost } \\\text { Adminstrative service } & \% \text { of time devoted to branch } & \$ 700,000 \\\text { Development service } & \text { Computer time } & \$ 140,000\end{array} Estimated branch data for next year is as follows:  Time to branch  Computer time  Nashville 60%150,000 minutes  Atlanta 30%200,000 minutes  Louisville 10%50,000 minutes  Total 100%400,000 minutes \begin{array} { l c r } & \text { Time to branch } & \text { Computer time } \\\text { Nashville } & 60 \% & 150,000 \text { minutes } \\\text { Atlanta } & 30 \% & 200,000 \text { minutes } \\\text { Louisville } & 10 \% & 50,000 \text { minutes } \\\text { Total } & 100 \% & 400,000 \text { minutes }\end{array} - How much of the headquarters cost allocation should Atlanta expect to receive next year?


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

F) A) and C)
G) A) and D)

Correct Answer

verifed

verified

Zephyr Corporation has provided the following data from its activity-based costing system:  Activity Cost Pool  Overhead Cost  Total Activity  Assembly $383,18023,000 machine hours  Processing orders $50,7981,100 orders  Inspection $106,1101,620 inspection hours \begin{array} { l l l } \text { Activity Cost Pool } & \text { Overhead Cost } & \text { Total Activity } \\\text { Assembly } & \$ 383,180 & 23,000 \text { machine hours } \\\text { Processing orders } & \$ 50,798 & 1,100 \text { orders } \\\text { Inspection } & \$ 106,110 & 1,620 \text { inspection hours }\end{array} Data concerning one of the company's products, Product LM41, appear below.  Selling price per unit $124.60 Direct materials cost per unit$22.08 Direct labor cost per unit $45.77Annual unit production and sales 210Orders processed 80 Annual machine hours 320Annual inspection hours 10\begin{array}{llr} \text { Selling price per unit } &\$124.60\\ \text { Direct materials cost per unit} &\$22.08\\ \text { Direct labor cost per unit } &\$45.77\\ \text {Annual unit production and sales } &210\\ \text {Orders processed } &80\\ \text { Annual machine hours } &320\\ \text {Annual inspection hours } &10\\\end{array} According to the activity-based costing system, the product margin for product LM41 is:


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

F) B) and E)
G) A) and E)

Correct Answer

verifed

verified

Kozlov Corporation has provided the following data from its activity-based costing system:  Activity Cost Pool  Total Cost  Total Activity  Assembly $942,48066,000 machine hours  Processing orders $85,0501,800 orders  Inspection $126,8541,820 inspection hours \begin{array} { l l l } \text { Activity Cost Pool } & \text { Total Cost } & \text { Total Activity } \\\text { Assembly } & \$ 942,480 & 66,000 \text { machine hours } \\\text { Processing orders } & \$ 85,050 & 1,800 \text { orders } \\\text { Inspection } & \$ 126,854 & 1,820 \text { inspection hours }\end{array} 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 430 units of A21W is:


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

F) A) and E)
G) A) and D)

Correct Answer

verifed

verified

Briefly describe the process of activity-based costing.

Correct Answer

verifed

verified

Costs are traced to individual activitie...

View Answer

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.  Flat  Round  Total  Direct materials $12,000$24,000$36,000 Direct labor 6,00018,00024,000 Overhead (250% of direct labor cost) 15,000‾45,000‾60,000‾ Total cost $33,000‾$87,000‾$120,000‾ Units produced 10,00015,000 Average cost per unit $3.30$5.80\begin{array}{|l|l|l|l|}\hline & \text { Flat } & \text { Round } & \text { Total } \\\hline \text { Direct materials } & \$ 12,000 & \$ 24,000 & \$ 36,000 \\\hline \text { Direct labor } & 6,000 & 18,000 & 24,000 \\\hline \text { Overhead }(250 \% \text { of direct labor cost) } & \underline{15,000} & \underline{45,000} & \underline{60,000} \\\hline \text { Total cost } & \underline{\$ 33,000} & \underline{\$ 87,000} & \underline{\$ 120,000} \\\hline \text { Units produced } & 10,000 & 15,000 & \\\hline \text { Average cost per unit } & \$ 3.30 & \$ 5.80 & \\\hline\end{array} 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.  Overhead Cost Category (Activity Cost Pool)  Cost  Supervision $12,600 Depreciation of machinery 30,600 Assembly line preparation 16,800 Total overhead $60,000\begin{array}{|l|l|l}\hline\text { Overhead Cost Category (Activity Cost Pool) }&\text { Cost }\\\hline \text { Supervision } & \$ 12,600 \\\hline \text { Depreciation of machinery } & 30,600 \\\hline \text { Assembly line preparation } & 16,800 \\\hline \text { Total overhead } & \$ 60,000\\\hline\end{array} 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. 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. \begin{array}{|l|l|l|l|} \hline & \text { Flat } & \text { Round } & \text { Total } \\ \hline \text { Direct materials } & \$ 12,000 & \$ 24,000 & \$ 36,000 \\ \hline \text { Direct labor } & 6,000 & 18,000 & 24,000 \\ \hline \text { Overhead }(250 \% \text { of direct labor cost) } & \underline{15,000} & \underline{45,000} & \underline{60,000} \\ \hline \text { Total cost } & \underline{\$ 33,000} & \underline{\$ 87,000} & \underline{\$ 120,000} \\ \hline \text { Units produced } & 10,000 & 15,000 & \\ \hline \text { Average cost per unit } & \$ 3.30 & \$ 5.80 & \\ \hline \end{array} 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. \begin{array}{|l|l|l} \hline\text { Overhead Cost Category (Activity Cost Pool) }&\text { Cost }\\ \hline \text { Supervision } & \$ 12,600 \\ \hline \text { Depreciation of machinery } & 30,600 \\ \hline \text { Assembly line preparation } & 16,800 \\ \hline \text { Total overhead } & \$ 60,000\\ \hline \end{array} 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. 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.

Correct Answer

verifed

verified

\[\begin{array} { | l | l | l | l | }
\...

View Answer

An activity-based cost allocation system:


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

F) A) and B)
G) All of the above

Correct Answer

verifed

verified

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: Activity Cost PoolsActivity Rate Processing customer orders $92.86 per customer order  Assembling products $1.78 per assembly hour  Setting up batches $52.09 per batch \begin{array}{llr}\text {Activity Cost Pools}&\text {Activity Rate}\\\text { Processing customer orders } & \$ 92.86 \text { per customer order } \\\text { Assembling products } & \$ 1.78 \text { per assembly hour } \\\text { Setting up batches } & \$ 52.09 \text { per batch }\end{array} 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) $772.52
C) $2,000.04
D) $66,908.88
E) $146.73

F) All of the above
G) A) and E)

Correct Answer

verifed

verified

Dover Company manufactures two products, Product J-9 and Product M-6. Product M-6 is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product J-9. Product M-6 is the more complex of the two products, requiring 2.0 hours of direct labor time per unit to manufacture compared to 1.0 hour of direct labor time for Product J-9. Product M-6 is produced on an automated production line. Overhead currently is applied to the products on the basis of direct labor-hours. The company estimated it would incur $510,000 in manufacturing overhead costs and produce 10,000 units of Product M-6 and 40,000 units of Product J-9 during the current year. Unit costs for materials and labor are:  Product J-9  Product M-6  Direct material $11$24 Direct labor $6$12\begin{array} { l l l } & \text { Product J-9 } & \text { Product M-6 } \\\text { Direct material } & \$ 11 & \$ 24 \\\text { Direct labor } & \$ 6 & \$ 12\end{array} Required: a. Compute the predetermined overhead rate under the current method, and determine the unit product cost of each product for the current year. b. The company is considering the use of activity-based costing as an alternative to its traditional costing method for manufacturing overhead. Data relating to the company's activity cost pools for the current year are given below:  Activity cost pool  Total cost  Product J-9  Product M-6  Total  Machine setups required $204,0008001,6002,400 Purchase orders issued 43,500500100600 Machine-hours required 105,0007,00010,50017,500 Maintenance requests issued 157,500‾6508501,500 Total $510,000‾\begin{array} { l l l l l } \text { Activity cost pool } & \text { Total cost } & \text { Product J-9 } & \text { Product M-6 } & \text { Total } \\\text { Machine setups required } & \$ 204,000 & 800 & 1,600 & 2,400 \\\text { Purchase orders issued } & 43,500 & 500 & 100 & 600 \\\text { Machine-hours required } & 105,000 & 7,000 & 10,500 & 17,500 \\\text { Maintenance requests issued } & \underline { 1 5 7 , 5 0 0 } & 650 & 8 5 0 & 1,500 \\\text { Total } & \underline { \$ 5 1 0 , 0 0 0 } & & &\end{array} Using the data above, determine the unit product cost of each product for the current year. c. What items of overhead cost make Product M-6 so costly to produce according to the activity-based costing system? What influence might the activity-based costing data have on management's opinions regarding the profitability of Product M-6?

Correct Answer

verifed

verified

a. The company expects to work 60,000 di...

View Answer

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


A) More accurate product costs may result in increasing the selling prices of some products.
B) Complex products are assigned a larger portion of overhead.
C) 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.
D) Maintaining an activity-based costing system is more costly than maintaining a traditional direct labor-based costing system.
E) 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.

F) B) and D)
G) C) and D)

Correct Answer

verifed

verified

Portofino Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products:  Activity Cost Pools Activity Rate  Setting up batches$ 79.50 per batchProcessing customer orders  $ 71.31 per customer order Assembling products $7.06 per assembly hour\begin{array}{llr}\text { Activity Cost Pools } & \text {Activity Rate }\\ \text { Setting up batches} & \text {\$ 79.50 per batch}\\ \text {Processing customer orders } & \text { \$ 71.31 per customer order}\\ \text { Assembling products } & \text {\( \$ 7.06 \) per assembly hour}\\\end{array}  Data concerning two products appear below: \text { Data concerning two products appear below: }  Product KJ22 Product KL 37 Number of batches 6912 Number of customer orders 209 Number of assembly orders 492697\begin{array}{lrr}&\text { Product KJ22}&\text { Product KL 37}\\\text { Number of batches } & 69 & 12 \\\text { Number of customer orders } & 20 & 9 \\\text { Number of assembly orders } & 492 & 697\end{array} -How much overhead cost would be assigned to Product KJ22 using the activity-based costing System?


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

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

Correct Answer

verifed

verified

Showing 21 - 40 of 70

Related Exams

Exam 1

Accounting in Business

298 Questions

Exam 2

Analyzing and Recording Transactions

253 Questions

Exam 3

Adjusting Accounts and Preparing Financial Statements

247 Questions

Exam 4

Completing the Accounting Cycle

186 Questions

Exam 5

Accounting for Merchandising Operations

258 Questions

Exam 6

Inventories and Cost of Sales

232 Questions

Exam 7

Accounting Information Systems

177 Questions

Exam 8

Cash and Internal Controls

220 Questions

Exam 9

Accounting for Receivables

217 Questions

Exam 10

Plant Assets Natural Resoures and Intangibles

245 Questions

Exam 11

Current Liabilities and Payroll Accounting

210 Questions

Exam 12

Accounting for Partnerships

172 Questions

Exam 13

Accounting for Corporations

228 Questions

Exam 14

Long-Term Liabilities

234 Questions

Exam 15

Investments

220 Questions

Exam 16

Reporting the Statement of Cash Flows

237 Questions

Exam 17

Analysis of Financial Statements

235 Questions

Exam 18

Managerial Accounting Concepts and Principles

246 Questions

Exam 19

Job Order Costing

213 Questions

Exam 20

Process Costing

230 Questions

Exam 21

Cost-Volume-Profit Analysis

244 Questions

Exam 22

Master Budgets and Planning

216 Questions

Exam 23

Flexible Budgets and Standard Costs

223 Questions

Exam 24

Performance Measurement and Responsibility Accounting

208 Questions

Exam 25

Capital Budgeting and Managerial Decisions

190 Questions

Exam 26

Present and Future Values in Accounting

84 Questions

Show Answer