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Exam 4: Activity-Based Costing and Analysis

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Question 51

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When using the plantwide overhead rate method, total budgeted overhead costs are combined into one overhead cost pool.

A) True
B) False

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Question 52

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Identify each of the following activities as unit level (U), batch level (B), product level (P), or facility level (F)to indicate the way each is incurred with respect to production. _____ (1)Providing electricity _____ (2)Sampling product quality _____ (3)Cutting parts _____ (4)Receiving shipments _____ (5)Organizing production _____ (6)Printing checks _____ (7)Providing personnel support _____ (8)Calibrating machines _____ (9)Cleaning workplace _____ (10)Assembling components

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(1)F, (2)B, (3)U, (4...

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Question 53

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If the direct labor time estimates are met, Kudzu will allocate $10.50 of overhead cost to each unit of Little X.

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

A _____________________ is a collection of costs that are related to the same or similar activity.

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

Superior Products Manufacturing identified the following data in its two production departments. $\begin{array} { | l | c | c | } \hline & \text { Assembly } & \text { Finishing } \\\hline \text { Marufacturing overhead costs } & \$ 225,000 & \$ 420,000 \\\hline \text { Direct labor hours worked } & 6,600 \mathrm { DL } H & 9,000 \mathrm { DLH } \\\hline \text { Machine hours used } & 2,400 \mathrm { MH } & 5,200 \mathrm { MH } \\\hline\end{array}$ Make the following independent calculations (Round to two decimals). a.Compute a plantwide overhead rate using machine hours as the allocation base. b.Compute a plantwide overhead rate using direct labor hours as the allocation base.

Upside Down, Incorporated designs custom storage spaces to eliminate clutter in both residential and business settings.The following data pertain to a recent reporting period: Required a.Use ABC to compute overhead rates for each activity. b.Assign costs to a 3,000 square foot job that requires 70 contact hours, 20 design hours, and 14 days to complete.

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

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

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

The cost object of the plantwide overhead rate method is:

The ________________________ overhead rate method uses multiple volume-based measures to allocate overhead costs to products.

Kudzu's plantwide overhead rate will be $21 per direct labor hour next year.

Kudzu has 34,000 total estimated direct labor hours for next year.

A company estimates that costs for the next year will be $600,000 for indirect labor, $40,000 for factory utilities, and $1,000,000 for the CEO's salary.The company uses machine hours as its overhead allocation base.If 80,000 machine hours are planned for this next year, then the plantwide overhead rate is $8 per machine hour.

A company has two products: AA and BB.It uses a plantwide overhead allocation method based on activity 33 and has prepared the following analysis showing budgeted costs and activities.Use this information to compute the company's plantwide overhead rate. $\begin{array}{r}\text { Budgeted Activity }\quad\quad\quad\\\begin{array} { | l | c | r | r | r | } \hline & & { } \\ { \text { Activity Cost Pool } } & { \begin{array} { c } \text { Budgeted } \\\text { Overhead Cost }\end{array} } & \text { Product AA } & \text { Product BB } & { \text { Total } } \\\hline \text { Activity } 11 & \$ 40,000 & 100 & 400 & 500 \\\hline \text { Activity 22 } & \$ 55,000 & 500 & 250 & 750 \\\hline \text { Activity 33 } & \$ 90,000 & 300 & 1,700 & 2,000 \\\hline & & { } \\\hline \begin{array} { l } \text { Total budgeted } \\\text { overhead }\end{array} & \$ 185,000 & { } \\\hline\end{array}\end{array}$

Consider the following activities that take place in a medical clinic. (a) Cleaning exam rooms. (b) Heating and air conditioning the clinic. (c) Sending blood work to a lab. (d) Dispensing medicine. Which of the following statements is true?

Product pricing, product mix decisions, and cost control are examples of _________________ activities.

Assume New Belgium Brewing Company manufactures and distributes three types of beer and that estimated per unit product costs and related information for the next year are shown in the following table: $\begin{array} { | l | r | r | r | } \hline & \begin{array} { r } \text { Blue } \\\text { Paddle }\end{array} & \text { Somersault } & { \begin{array} { c } \text { Cocoa } \\\text { Mole Ale }\end{array} } \\\hline \text { Cost data per urit: } & & & \\\hline \text { Direct materials } & \$ 100,000 & \$ 500,000 & \$ 750,000 \\\hline \text { Direct labor } & \$ 3,600 & \$ 4,800 & \$ 6,000 \\\hline \text { Overhead } & \$ 12,000 & \$ 16,000 & \$ 20,000 \\\hline \text { Total product cost per urit } & \$ 115,600 & \$ 520,800 & \$ 776,000 \\\hline & & & \\\hline \text { Machine hours per unit } & 30 \mathrm { MH } & 40 \mathrm { MH } & 50 \mathrm { MH } \\\hline \text { Nurnber of urits produced per year } & 30 \text { units } & \mathbf { 2 0 ~ u ni t s } & 10 \text { units } \\\hline\end{array}$ a.If New Belgium Brewing Company uses a plantwide overhead rate based on machine hours, what is the total product cost per unit of Cocoa Mole Ale? b.Blue Paddle is a traditional brew made in large quantities with long production runs.Somersault is a seasonal beer made in small batches.Cocoa Mole Ale is a specialty beer also made in small batches.Which of the overhead allocation methods studied in this chapter would you recommend that New Belgium Brewing Company use and why?