Exam 4: Accrual Accounting Concepts

ABC eliminates all arbitrary cost allocations.

The primary benefit of ABC is it provides

Gant Accounting performs two types of services, Audit and Tax.Gant's overhead costs consist of computer support, $300,000; and legal support, $150,000.Information on the two services is: Audit Tax Direct labor cost \ 50,000 \ 100,000 CPU minutes 40,000 10,000 Legal hours used 200 800 Overhead applied to audit services using traditional costing is

Which account is not used in just-in-time processing?

An example of an activity cost pool is

Direct labor is sometimes the appropriate basis for assigning overhead cost to products.It is appropriate to use direct labor when which of the following is true? (1) Direct labor constitutes a significant part of total product cost. (2) A high correlation exists between direct labor and changes in the amount of overhead costs.

Activity-based costing uses

A company incurs $4,050,000 of overhead each year in three departments: Ordering and Receiving, Mixing, and Testing.The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs 1,500 tests per year in producing 200,000 drums of Goo and 600,000 drums of Slime.The following data are available: Department Expected use of Driver Cost Ordering and Receiving 2,000 \ 1,200,000 Mixing 50,000 1,500,000 Testing 1,500 1,350,000 $\text { Production information for Slime is as follows: }$ Department Expected use of Driver Ordering and Receiving 1,600 Mixing 30,000 Testing 1,000 Compute the amount of overhead assigned to Slime.

An activity that has a direct cause-effect relationship with the resources consumed is a(n)

ABC leads to enhanced control over overhead costs.

Which would be an appropriate cost driver for the ordering and receiving activity cost pool?

Not all activities labeled non-value-added are totally wasteful, nor can they be totally eliminated.

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

Traditional costing systems use multiple predetermined overhead rates.

Windsor Co.incurs $1,050,000 of overhead costs each year in its three main departments, machining ($600,000), inspections ($300,000) and packing ($150,000).The machining department works 4,000 hours per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year.Information about Windsor's two products is as follows: Product ProductY Machining hours 1,000 3,000 Inspections 100 500 Orders packed 350 650 Direct labor hours 1,700 1,800 If traditional costing based on direct labor hours is used, how much overhead is assigned to Product X this year?

Which of the following is a facility-level activity?

Windsor Co.incurs $1,050,000 of overhead costs each year in its three main departments, machining ($600,000), inspections ($300,000) and packing ($150,000).The machining department works 4,000 hours per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year.Information about Windsor's two products is as follows: Product ProductY Machining hours 1,000 3,000 Inspections 100 500 Orders packed 350 650 Direct labor hours 1,700 1,800 Using ABC, how much overhead is assigned to Product X this year?

Which account is used in just-in-time processing?

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

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 Using ABC, how much overhead is assigned to Product A1 each year?