Exam 11: Pricing Decisions and Profitability Analysis

Basing overhead allocation solely on volume

Which of the following items would be classified as committed resources (long-term)?

More accurate product costing information is produced by assigning costs using

Figure 11-4 The Overdale plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows: The plant currently applies overhead using direct labour hours and expected capacity of 80,000 direct labour hours. The following data has been assembled for use in developing a bid for a proposed job: Total expected machine hours for all jobs during the year are 40,000, and the total expected number of inspections is 2,500. -Refer to Figure 11-4. Using direct labour hours to assign overhead, the total cost of the potential job would be

Which of the following items would be classified as flexible resources?

Resources that are only purchased precisely at the time the resource is needed are called

All of the following are nonunit-based activity drivers EXCEPT

Figure 11-2 Owens Ltd. produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. In addition, there is a sustaining process with two activities: providing utilities (plantwide) and providing space. Costs have been assigned to each activity using direct tracing and resource drivers: Activity drivers for each activity have been identified and their practical capacities listed: The costs of facility-level activities are assigned using machine hours. -Refer to Figure 11-2. What is the cost pool rate for the product-level activities?

The overhead rates of the traditional-based approach to product costing use

Figure 11-5 Granite, SA., has identified the following overhead costs and cost drivers for next year: The following are two of the jobs completed during the year: The company's normal activity is 4,000 direct labour hours. -Refer to Figure 11-5. If Granite, SA., used activity-based cost drivers to allocate overhead costs, the total cost of Job 500 would be

Figure 12-3 The Lee Company must choose between two mutually exclusive alternatives. With alternative 1 an inferior product will be marketed that is best suited to low levels of demand whereas alternative 2 is a superior product that is best suited to high levels of demand. There are only two possible levels of demand - high and low and the probabilities of each event occurring is 0.5. The predicted profits for each alterative are: -If activity-based costing is used, insurance on the plant would be classified as a

In an activity-based cost system, what types of drivers are used to describe cost behaviour?

Explain how the activity resource usage model is used in assessing relevancy.

Figure 11-4 The Overdale plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows: The plant currently applies overhead using direct labour hours and expected capacity of 80,000 direct labour hours. The following data has been assembled for use in developing a bid for a proposed job: Total expected machine hours for all jobs during the year are 40,000, and the total expected number of inspections is 2,500. -Refer to Figure 11-4 above. Using activity-based costing and the appropriate cost drivers, the total cost of the potential job would be

If activity-based costing is used, electricity usage would be an example of a

Activity-based costing assigns costs to cost object by first

An example of a nonunit-level driver is

Flanigan Manufacturing uses an activity-based cost system. The company produces Product R and Product X. Information concerning the two products is as follows: The following costs are reported: Required:

Which of the following quantities is an example of an activity driver in activity-based costing?

Hunter Company manufactures two products (XX and YY). The overhead costs have been divided into four cost pools that use the following activity drivers: Required: a. Compute the allocation rates for each of the activity drivers listed. b. Allocate the overhead costs to Products XX and YY using activity-based costing. c. Compute the overhead rate using labour hours under the traditional functional-based costing system. d. Allocate the overhead costs to Products XX and YY using the traditional functional-based costing system overhead rate calculated in part (c).