Exam 9: Activity-Based Costing

A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted) Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year: The company prices its products at 140% of cost.If the company uses activity-based costing (ABC),the price of each unit of Job 103 would be

Before using activity-based costing (ABC),managers must apply the cost-benefit principle to the additional recordkeeping costs associated with ABC.Applying cost-benefit principles is fundamental to choosing any costing system.

Which of the following would be a reasonable basis for assigning the materials handling costs to the units produced in an activity-based costing (ABC)system?

A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted) Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year: If the company uses activity-based costing (ABC),what is the cost of each unit of Job 102?

The number of services provided by an accounting firm would be classified as a(n):

The Muskego National Bank is considering either a bankwide overhead rate or department overhead rates to allocate $250,000 of indirect costs.The bankwide rate could be based on either direct labor hours (DLH)or the number of loans processed.The departmental rates would be based on direct labor hours for Consumer Loans and a dual rate based on direct labor hours and the number of loans processed for Commercial Loans.The following information was gathered for the upcoming period: If Muskego uses a bankwide rate based on direct labor hours,what would be the indirect costs allocated to the Commercial Department?

Which one of the following accounts is not used in an activity-based costing (ABC)system?

Which of the following costs is not related to a batch-related activity?

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows: Department D has recently purchased and installed new computerized equipment for Product X.This equipment will increase the overhead costs by $2,700 and decrease labor costs (due to time savings)in Department D by $3.00 per case.Machine hours will not change.If Smelly uses a plantwide rate based on machine hours,what is the revised product cost per case for Product J?

The Muskego National Bank is considering either a bankwide overhead rate or department overhead rates to allocate $250,000 of indirect costs.The bankwide rate could be based on either direct labor hours (DLH)or the number of loans processed.The departmental rates would be based on direct labor hours for Consumer Loans and a dual rate based on direct labor hours and the number of loans processed for Commercial Loans.The following information was gathered for the upcoming period: If Muskego uses a bankwide rate based on the number of loans processed,what would be the total costs for the Commercial Department?

Zela Company is preparing its annual profit plan.As part of its analysis of the profitability of individual products,the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below.(CMA based) Budgeted material handling costs: $50,000 Under an activity-based costing (ABC)system,the materials handling costs allocated to one unit of wall mirrors would be:

The number of products produced is an example of a facility-related cost driver in the cost hierarchy.Number of products is a product-related cost driver.

Scottso Enterprises has identified the following overhead costs and cost drivers for the coming year: Budgeted direct labor cost was $200,000 and budgeted direct material cost was $800,000.The following information was collected on three jobs that were completed during the month: If the company uses traditional costing and allocates overhead using direct materials cost,how much overhead cost should be assigned to Job A-15?

Terri Martin,CPA provides bookkeeping and tax services to her clients.She charges a fee of $60 per hour for bookkeeping and $90 per hour for tax services.Martin estimates the following costs for the upcoming year: Operating profits declined last year and Ms.Martin has decided to use activity-based costing (ABC)procedures to evaluate her hourly fees.She gathered the following information from last year's records: Martin cannot change the hourly fee for the bookkeeping services because of the number of competing firms in the area.If Martin wants to earn $60,000 pre-tax in the upcoming year,how much will she charge per hour for tax services?

The Muskego National Bank is considering either a bankwide overhead rate or department overhead rates to allocate $250,000 of indirect costs.The bankwide rate could be based on either direct labor hours (DLH)or the number of loans processed.The departmental rates would be based on direct labor hours for Consumer Loans and a dual rate based on direct labor hours and the number of loans processed for Commercial Loans.The following information was gathered for the upcoming period: If Muskego uses a bankwide rate based on direct labor hours,what would be the indirect costs allocated to the Consumer Department?

The department cost allocation method provides more accurate product cost information for managerial decision-making than the plantwide cost allocation method.The information is more accurate because some of the variations in the product can be captured.

In general,traditional product costing methods allocate less cost to low-volume products and more costs to high-volume products than activity-based costing (ABC).Low volume products get less cost under traditional costing since they use less of the volume cost drivers.

Zela Company is preparing its annual profit plan.As part of its analysis of the profitability of individual products,the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below.(CMA based) Budgeted material handling costs: $50,000 Under a traditional costing system that allocates overhead on the basis of direct labor hours,the materials handling costs allocated to one unit of wall mirrors would be:

Zela Company is preparing its annual profit plan.As part of its analysis of the profitability of individual products,the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below.(CMA based) Budgeted material handling costs: $50,000 Under a traditional costing system that allocates overhead on the basis of direct labor hours,the materials handling costs allocated to one unit of specialty windows would be:

The basic difference between the department cost allocation method and activity-based costing (ABC)is the number of stages involved in allocating costs to products.It is not the number of stages,it is the use of activity cost pools and different cost drivers.