A company incurs $3,600,000 of overhead each year in three departments: Processing, Packaging, and Testing. The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of Oil and 600,000 drums of Sludge. The following data are available: $\begin{array}{crr}\text { Department}&\text {Expected use of Driver }&\text {Cost }\\ \hline \text { Processing } & 800 & \$ 1,500,000 \\ \text { Packaging } & 200,000 & 1,500,000 \\ \text { Testing } & 2,000 & 600,000 \end{array}$ $\text { Production information for the two products is as follows: }$ $\begin{array}{lcc}&\text { Oil }&\text { Sludge }\\ \text { Department }&\text { Expected Use of Driver }&\text { Expected Use of Driver }\\ \text { Processing } & 300 & 500 \\ \text { Packaging } & 120,000 & 80,000 \\ \text { Testing } & 1,600 & 400 \end{array}$ The amount of overhead assigned to Oil using ABC is

A) $1,800,000. B) $1,942,500. C) $1,657,500. D) $1,380,000. A) $1,800,000. B) $1,942,500. C) $1,657,500. D) $1,380,000.

Estimated costs for activity cost pools and other item(s) are as follows: \[\begin{array} { l r } \text { Machining } & \$ 500,000 \\ \text { Assembling } & 200,000 \\ \text { Advertising } & 450,000 \\ \text { Inspecting and testing } & 175,000 \end{array}\] Total estimated overhead is

A) $700,000. B) $875,000. C) $1,150,000. D) $1,325,000. A) $700,000. B) $875,000. C) $1,150,000. D) $1,325,000.

Zimmerman Company manufactures two products, Board 12 and Case 165. Zimmerman's overhead costs consist of setting up machines, $2,400,000; machining, $5,400,000; and inspecting, $1,800,000. Information on the two products is: $\begin{array}{lrr}&\text { Board } 12& \text { Case } 165\\ \text { Direct labor hours } & 15,000 & 25,000 \\ \text { Machine setups } & 600 & 400 \\ \text { Machine hours } & 24,000 & 26,000 \\ \text { Inspections } & 800 & 700 \end{array}$ Overhead applied to Case 165 using activity-based costing is

A) $3,840,000. B) $4,608,000. C) $4,992,000. D) $6,000,000. A) $3,840,000. B) $4,608,000. C) $4,992,000. D) $6,000,000.

A company incurs $3,600,000 of overhead each year in three departments: Processing, Packaging, and Testing. The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of Oil and 600,000 drums of Sludge. The following data are available: $\begin{array}{crr}\text { Department}&\text {Expected use of Driver }&\text {Cost }\\ \hline \text { Processing } & 800 & \$ 1,500,000 \\ \text { Packaging } & 200,000 & 1,500,000 \\ \text { Testing } & 2,000 & 600,000 \end{array}$ $\text { Production information for the two products is as follows: }$ $\begin{array}{lcc}&\text { Oil }&\text { Sludge }\\ \text { Department }&\text { Expected Use of Driver }&\text { Expected Use of Driver }\\ \text { Processing } & 300 & 500 \\ \text { Packaging } & 120,000 & 80,000 \\ \text { Testing } & 1,600 & 400 \end{array}$ The amount of overhead assigned to Sludge using ABC is

A) $1,800,000. B) $1,657,500. C) $1,942,500. D) $1,380,000. A) $1,800,000. B) $1,657,500. C) $1,942,500. D) $1,380,000.

Exam 16: Activity-Based Costing

A company incurs $3,600,000 of overhead each year in three departments: Processing, Packaging, and Testing. The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of Oil and 600,000 drums of Sludge. The following data are available: Department Expected use of Driver Cost Processing 800 \ 1,500,000 Packaging 200,000 1,500,000 Testing 2,000 600,000 $\text { Production information for the two products is as follows: }$ Oil Sludge Department Expected Use of Driver Expected Use of Driver Processing 300 500 Packaging 120,000 80,000 Testing 1,600 400 The amount of overhead assigned to Oil using ABC is

(Multiple Choice)

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Question 81

Which of the following is a batch-level activity?

(Multiple Choice)

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Question 82

The first step in activity-based costing is to assign overhead costs to products, using cost drivers.

(True/False)

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Question 83

As compared to high-volume products, low-volume products

(Multiple Choice)

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Question 84

Each of the following is a limitation of activity-based costing except that

(Multiple Choice)

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Question 85

The first step in activity-based costing is to

(Multiple Choice)

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Question 86

Estimated costs for activity cost pools and other item(s) are as follows: Machining \ 500,000 Assembling 200,000 Advertising 450,000 Inspecting and testing 175,000 Total estimated overhead is

(Multiple Choice)

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Question 87

All of the following are examples of a value-added activity in a service company except

(Multiple Choice)

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Question 88

Which of the following is a non-value-added activity?

(Multiple Choice)

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Question 89

The primary benefit of ABC is it provides

(Multiple Choice)

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Question 90

Activity-based costing has been found to be useful in each of the following service industries except

(Multiple Choice)

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Question 91

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

(Multiple Choice)

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Question 92

Companies that switch to ABC often find they have

(Multiple Choice)

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Question 93

ABC leads to enhanced control over overhead costs.

(True/False)

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Question 94

Which of the following is a non-value-added activity?

(Multiple Choice)

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Question 95

Zimmerman Company manufactures two products, Board 12 and Case 165. Zimmerman's overhead costs consist of setting up machines, $2,400,000; machining, $5,400,000; and inspecting, $1,800,000. Information on the two products is: Board 12 Case 165 Direct labor hours 15,000 25,000 Machine setups 600 400 Machine hours 24,000 26,000 Inspections 800 700 Overhead applied to Case 165 using activity-based costing is

(Multiple Choice)

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Question 96

A company incurs $3,600,000 of overhead each year in three departments: Processing, Packaging, and Testing. The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of Oil and 600,000 drums of Sludge. The following data are available: Department Expected use of Driver Cost Processing 800 \ 1,500,000 Packaging 200,000 1,500,000 Testing 2,000 600,000 $\text { Production information for the two products is as follows: }$ Oil Sludge Department Expected Use of Driver Expected Use of Driver Processing 300 500 Packaging 120,000 80,000 Testing 1,600 400 The amount of overhead assigned to Sludge using ABC is

(Multiple Choice)

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Question 97

Which of the following is a value-added activity?

(Multiple Choice)

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Question 98

Which would be an appropriate cost driver for the purchasing activity cost pool?

(Multiple Choice)

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Question 99

Which of the following is not an example of an activity cost pool?

(Multiple Choice)

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Question 100

Which of the following is a batch-level activity?

The first step in activity-based costing is to assign overhead costs to products, using cost drivers.

As compared to high-volume products, low-volume products

Each of the following is a limitation of activity-based costing except that

The first step in activity-based costing is to

Estimated costs for activity cost pools and other item(s) are as follows: Machining \ 500,000 Assembling 200,000 Advertising 450,000 Inspecting and testing 175,000 Total estimated overhead is

All of the following are examples of a value-added activity in a service company except

Which of the following is a non-value-added activity?

The primary benefit of ABC is it provides

Activity-based costing has been found to be useful in each of the following service industries except

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

Companies that switch to ABC often find they have

ABC leads to enhanced control over overhead costs.

Which of the following is a non-value-added activity?

Which of the following is a value-added activity?

Which would be an appropriate cost driver for the purchasing activity cost pool?

Which of the following is not an example of an activity cost pool?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

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