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Exam 17: Activity-Based Costing and Analysis

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Question 21

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How does ABC differ from using multiple departmental rates?

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ABC differs from using multiple departme...

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Question 22

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Compared to the plantwide overhead rate method,the departmental overhead rate method usually results in more accurate overhead allocations.

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Question 23

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A company has two products: Big and Little.It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools: Annual production and sales level of big product is 62,525 units,and the annual production and sales level of little product is 251,900 units. a.Compute the approximate overhead cost per unit of big product under activity-based costing. b.Compute the approximate overhead cost per unit of little product under activity-based costing.

Direct labor,direct materials,and manufacturing overhead are all product costs.Why is overhead more difficult to account for than either direct labor or direct materials?

Data concerning volume-related measures are readily available in most manufacturing settings.

The following data relates to Patterson Company's estimated amounts for next year. What is the company's plantwide overhead rate if direct labor hours are the allocation base? $\bold{\text{(Round your answer to two decimal places.) }}$

A company uses activity-based costing to determine the costs of its three products: A,B,and C.The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table: Compute the company's activity rates under activity-based costing for each of the three activities.

Which of the following statements is true with regard to the departmental overhead rate method?

A company estimates that overhead costs for the next year will be $7,200,000 for indirect labor,$400,000 for factory utilities,and $43,000 for depreciation on factory machinery.The company uses direct labor hours as its overhead allocation base.If 955,375 direct labor hours are planned for this next year,what is the company's plantwide overhead rate?

Departments are the cost objects when the plantwide overhead rate method is used.

________ is considered while choosing a cost allocation base for activity costs in ABC costing.

Freeze Frame,Inc.produces cameras that require three processes,A,B,and C,to complete.Digital camera model #789 is the best-selling of all the many types of cameras produced.Information related to the 550,000 units of digital camera model #789 produced annually is shown below. Freeze Frame's total expected overhead costs and related overhead data are shown below: -a.Compute a departmental overhead rate for department A based on direct labor hours. b.How much overhead is associated with model 789 from department A? c.Compute a departmental overhead rate for department B based on direct labor hours. d.How much overhead is associated with model 789 from department B? e.Compute a departmental overhead rate for department C based on direct labor hours. f.How much overhead is associated with model 789 from department C? g.What is the per unit cost of the 550,000 units of model 789?

Product costs consist of direct labor,direct materials,and overhead (indirect)costs.

Which of the following costing systems is more accurate for overhead cost allocation and most likely to allow managers the ability to make better pricing decisions?

Examples of volume-related measures include direct labor hours and machine hours.

________ costs support the company as a whole.

Name and briefly describe three overhead rate methods.

Wall Nuts, Inc. produces paneling that requires two processes, A and B, to complete. Oak is the best-selling of all the many types of paneling produced. Information related to the 40,000 units of oak paneling produced annually is shown in the following table: Wall Nuts' total expected overhead costs and related overhead data are shown below. -Use the data for Wall Nuts,Inc.to compute departmental overhead rates based on machine hours in Department A and machine hours in Department B.

The departmental overhead rate method traces costs to each department and then determines an allocation base for each department.

ABC can be used to assign costs to any cost object that is of management interest.