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Exam 17: Activity-Based Costing and Analysis

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Question 51

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The major advantages of using a single plantwide overhead rate are ____________________ and ____________________.

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Question 52

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Superior Products Manufacturing identified the following data in its two production departments. $\begin{array} { | l | c | c | } \hline & \text { Assembly } & \text { Finishing } \\\hline \text { Manufacturing overhead costs } & \$ 225,000 & \$ 420,000 \\\hline \text { Direct labor hours worked } & 6,600 \mathrm { DLH }& 9,000 \mathrm { DLH } \\\hline \text { Machine hours used } & 2,400 \mathrm { MH } & 5,200 \mathrm { MH } \\\hline\end{array}$ Make the following independent calculations (Round to two decimals). a.Compute a plantwide overhead rate using machine hours as the allocation base. b.Compute a plantwide overhead rate using direct labor hours as the allocation base.

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a.($225,000 +$420,000)/(2,400 ...

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Question 53

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By definition,costs classified as overhead are consumed in basically the same manner regardless of the process involved.

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

Reference: 17_05 Assume that a pet food manufacturer is considering adding two types of pet food to its existing product line. Research had determined that good demand exists for dog food in 40-pound bags and cat food in 1/2pound cans. The company identified the following partial list of activities, costs, and activity drivers expected for the next year: $\begin{array} { | l | c | l | } \hline \text { Activity } & \text { Expected Costs } & { \text { Cost Driver } } \\\hline \text { Handling materials } & \$ 105,000 & \text { Number of batches made } \\\hline \text { Storage costs } & \$ 820,000 & \text { Weight of Finished product } \\\hline\end{array}$ $\begin{array} { | l | c | c | } \hline & \text { Dog Food } & \text { Cat Food } \\\hline \text { Production volume } & 100,000\text { units } & 200,000 \text { units } \\\hline \text { Batches made } & \text { 200 batches } & 150 \text { batches } \\\hline\end{array}$ -Refer to the data above.How much overhead cost will be assigned to each unit of product using activity-based costing (ABC) ?

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)

Examples of volume-related measures include direct labor hours,direct labor cost dollars,and machine hours.

The final step of activity-based costing assigns overhead costs to pools rather than to products.

What are the main advantages of traditional volume-based allocation methods compared to activity-based costing?

Identify each of the following activities as unit level (U), batch level (B), product level (P), or facility level (F) to indicate the way each is incurred with respect to production.

Overhead costs are often affected by many issues and are frequently too complex to be explained by any one factor.

Allocated overhead costs vary depending upon the allocation methods used.

What is the basic principle underlying activity-based costing?

ABC can be used to assign costs to any cost object that is of management interest.

A company estimates that overhead costs for the next year will be $3,600,000 for indirect labor,$200,000 for factory utilities,and $21,500 for depreciation on factory machinery.The company uses machine hours as its overhead allocation base.If 764,300 machine hours are planned for this next year,what is the company's plantwide overhead rate?

When products differ in batch size and complexity,they usually consume different amounts of ____________________________.

A company uses activity-based costing to determine the costs of its three products: A,B,and C.The activity rates and activity levels for each of the company's three activity cost pools are shown below. Compute the company's budgeted cost for each of the three activities under activity-based costing.

K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utilities.The company uses direct labor hours as its overhead allocation base.If 80,000 direct labor hours are planned for this next year,what is the company's plantwide overhead rate?

Which of the following are advantages of using the plantwide overhead rate method?

Kamper Company sells two products Big Z and Little Z.Current direct material and direct labor costs are detailed below.Next year,the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base.Next year's overhead is estimated to be $475,000.The direct labor and direct materials costs are estimated to be consistent with the current year.Direct labor costs $20 per hour and the company expects to manufacture 32,000 units of Big Z and 9,000 units of Little Z next year. $\begin{array} { | l | c | c | } \hline & \begin{array} { c } \text { Direct } \\\text { Material } \\\text { per Unit }\end{array} & \begin{array} { c } \text { Direct } \\\text { Labor Dollars } \\\text { per Unit }\end{array} \\\hline \text { Big Z } & \$ 6 & \$ 17 \\\hline \text { Little Z } & \$ 12 & \$ 8 \\\hline\end{array}$ What are total estimated direct labor hours for this next year?