Exam 16: Activity-Based Costing

Which of the following is a unit-level activity?

Identifying and classifying activities is the

Foxx Company incurs $480,000 overhead costs each year in its three main departments, setup ($30,000), machining ($330,000), and packing ($120,000). The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year. Information about Foxx's two products is as follows: Product A1 Product B1 Number of setups 20 20 Machining hours 1,000 4,000 Orders packed 150 350 Number of products manufactured 600 400 If machining hours are used as a base under traditional costing, how much overhead is assigned to Product A1 each year?

Non-value-added activities increase the cost of a product but not its perceived value.

Boswell Company manufactures two products, Regular and Supreme. Boswell's overhead costs consist of machining, $3,000,000; and assembling, $1,500,000. Information on the two products is: Regular Supreme Direct labor hours 10,000 15,000 Machine hours 10,000 30,000 Number of parts 90,000 160,000 Overhead applied to Supreme using activity-based costing is

Activity-based costing uses

A well-designed activity-based costing system starts with

Value-added activities

Reynoso Corporation manufactures titanium and aluminum tennis racquets. Reynoso's total overhead costs consist of assembly costs and inspection costs. The following information is available: Cost Titanium Aluminum total Cost Assembly 500 mach. hours 500 mach. hours \ 60,000 Inspections 350 150 \ 100,000 2,100 labor hours 1,900 labor hours Reynoso is considering switching from one overhead rate based on labor hours to activity-based costing. Total overhead costs assigned to titanium racquets, using a single overhead rate, are

Current trends in manufacturing include less direct labor and more overhead.

The use of activity-based costing in service industries

Which of the following is a product-level activity?

ABC eliminates all arbitrary cost allocations.

Any activity that increases the cost of producing a product is a value-added activity.

A cost driver does not generally have a direct cause-effect relationship with the resources consumed.

Baxter Accounting Services estimates for next year revenues of $3,000,000, direct labor of $600,000, and overhead of $1,050,000. Under traditional costing, overhead is applied to audit jobs using the rate of

Which of the following is not a unit-level activity?

Which of the following is not a facility-level activity?

Hartley Company produces two products, Flower and Planter. Flower is a high-volume item totaling 20,000 units annually. Planter is a low-volume item totaling only 6,000 units per year. Flower requires one hour of direct labor for completion, while each unit of Planter requires 2 hours. Therefore, total annual direct labor hours are 32,000 (20,000 + 12,000). Expected annual manufacturing overhead costs are $960,000. Hartley uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of Planter would be assigned overhead of

As compared to a high-volume product, a low-volume product