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Exam 5: Activitybased Costing: a Tool to Aid Decision Making

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Question 91

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Reck Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Machining, $11,700; Order Filling, $17,800; and Other, $13,500. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: The activity rate for the Order Filling activity cost pool under activity-based costing is closest to:

A) $43.00 per order
B) $7.50 per order
C) $6.00 per order
D) $17.80 per order

E) B) and D)
F) B) and C)

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Question 92

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Which of the following would be an acceptable measure of activity for a material handling activity cost pool?

A) Option A
B) Option B
C) Option C
D) Option D

E) None of the above
F) A) and D)

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Question 93

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Vito Corporation manufactures two products: Product F77I and Product I48D. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products F77I and I48D. Required: a. What is the company's plantwide overhead rate? b. Using the plantwide overhead rate, how much manufacturing overhead cost would be allocated to Product F77I? c. Using the plantwide overhead rate, what percentage of the total overhead cost is allocated to Product I48D?

Desjarlais Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products. Data concerning two products appear below: Required: a. How much overhead cost would be assigned to Product S96U using the company's activity-based costing system? Show your work! b. How much overhead cost would be assigned to Product Q06F using the company's activity-based costing system? Show your work!

Doede Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts--equipment depreciation and supervisory expense--to three activity cost pools--Machining, Order Filling, and Other--based on resource consumption. Data to perform these allocations appear below: Distribution of Resource Consumption Across Activity Cost Pools: In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity: Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins. Sales and Direct Cost Data: What is the product margin for Product W1 under activity-based costing?

Mcnamee Corporation's activity-based costing system has three activity cost pools--Fabricating, Setting Up, and Other. Costs in the Fabricating cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. The activity rate for Fabricating is $0.14 per MH; the activity rate for Setting Up is $3.30 per batch. The following table shows the machine-hours and number of batches associated with each of the company's two products: Required: Determine the amount of overhead cost that would be assigned to each product using activity-based costing.

The controller of Hendershot Corporation estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below: The total materials handling cost for the year is expected to be $6,123.60. If the materials handling cost is allocated on the basis of direct labor-hours, the total materials handling cost allocated to the wall mirrors is closest to: (Do not round your intermediate calculations.)

Houseal Corporation has provided the following data from its activity-based costing system: Data concerning one of the company's products, Product W58B, appear below: According to the activity-based costing system, the product margin for product W58B is:

Cumberland Enterprises makes a variety of products that it sells to other businesses. The company's activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that ABC system are listed below: The cost of serving customers, $2,663.00 per customer, is the cost of serving a customer for one year. Steckman Corporation buys only one of the company's products which Cumberland Enterprises sells for $22.05 per unit. Last year Steckman Corporation ordered a total of 1,200 units of this product in 4 orders. To fill the orders, 8 batches were required. The direct materials cost is $7.65 per unit and the direct labor cost is $5.20 per unit. Each unit requires 0.30 DLHs. According to the ABC system, the customer margin for this customer this past year was closest to:

Unit-level activities are performed each time a batch is handled or processed.

Deemer Corporation has an activity-based costing system with three activity cost pools--Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow: Distribution of Resource Consumption Across Activity Cost Pools: Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company's two products follow: Activity: How much overhead cost is allocated to the Supervising activity cost pool under activity-based costing?

Torello Corporation manufactures two products: Product H95V and Product V93N. The company uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products H95V and V93N. Using the plantwide overhead rate, how much manufacturing overhead cost would be allocated to Product H95V?

Reck Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company's three activity cost pools as follows: Machining, $11,700; Order Filling, $17,800; and Other, $13,500. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below: What is the overhead cost assigned to Product V8 under activity-based costing?

Perl Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs: The distribution of resource consumption across the three activity cost pools is given below: How much cost, in total, would be allocated in the first-stage allocation to the Order Processing activity cost pool?

When a company implements activity-based costing, manufacturing overhead cost is often shifted from low volume products to high volume products, with a higher unit cost resulting for the high volume products.

In activity-based costing, all manufacturing costs must be included in product costs.

Doles Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products. Data concerning two products appear below: Required: How much overhead cost would be assigned to each of the two products using the company's activity-based costing system?

Nourse Enterprises makes a variety of products that it sells to other businesses. The company's activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that ABC system are listed below: The cost of serving customers, $2,026.00 per customer, is the cost of serving a customer for one year. Koerner Corporation buys only one of the company's products. The details of last year's purchases of this product are listed below: According to the ABC system, the customer margin for this customer this past year was closest to:

Angara Corporation uses activity-based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity-based costing system: The total amount of overhead cost allocated to Product X would be closest to:

Larry Enterprises makes a variety of products that it sells to other businesses. The company's activity-based costing system has four activity cost pools for assigning costs to products and customers. Details concerning that ABC system are listed below: The cost of serving customers, $1,913.00 per customer, is the cost of serving a customer for one year. Prosonic Corporation buys only one of the company's products. The details of last year's purchases of this product are listed below: According to the ABC system, the total cost of the activity "Processing batches" for this customer this past year was closest to: