Exam 4: Activity-Based Costing

Just-in-time processing

The last step in activity-based costing is to

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

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

Use of activity-based costing will result in the development of

ABC is particularly useful when overhead costs are an insignificant portion of total costs.

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

For its inspecting cost pool, Ellsworth, Inc. expected overhead cost of $400,000 and 4,000 inspections. The actual overhead cost for that cost pool was $480,000 for 5,000 inspections. The activity-based overhead rate used to assign the costs of the inspecting cost pool to products is

An example of an activity cost pool is

Activity-based costing

In traditional costing systems, overhead is generally applied based on

Which of the following is not a benefit of just-in-time processing?

Traditional costing systems use multiple predetermined overhead rates.

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

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 \multicolumn 1 c Tax \cline 2-3 Direct labor cost \ 50,000 \ 100,000 CPU minutes 40,000 10,000 Legal hours used 200 800 Overhead applied to tax services using activity-based costing is

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

Predetermined overhead rates in traditional costing are often based on

The first step in activity-based costing is to

Engineering design is a value-added activity.

One of Matheny Company's activity cost pools is inspecting, with estimated overhead of $200,000. Matheny produces throw rugs (700 inspections) and area rugs (1,300 inspections). How much of the inspecting cost pool should be assigned to throw rugs?