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Exam 4: Activity Based Costing

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Question 41

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The Aleutian Company produces two products, Rings and Dings. They are manufactured in two departments-Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication Department, which has an estimated overhead of $90,000. All of the labor hours take place in the Assembly Department, which has an estimated total overhead of $105,000. The Aleutian Company uses departmental overhead rates. The Fabrication Department uses machine hours for an allocation base, and the Assembly Department uses labor hours. What is the overhead cost per unit for Dings?

A) $65.25
B) $56.75
C) $23.25
D) $64.50

E) B) and C)
F) None of the above

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Question 42

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If the budgeted factory overhead cost is $460,000, the budgeted direct labor hours is 80,000, and the actual direct labor hours is 6,700 for the month, the amount of factory overhead to be allocated is $38,525 (if the allocation is based on direct labor hours).

A) True
B) False

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Question 43

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Activity rates are computed by dividing the cost budgeted for each activity pool by the estimated activity base for that pool.

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Determine the activity rate for production per machine hour.

Common allocation bases are

Service companies can effectively use multiple department overhead rate costing to compute product (service) costs.

Service organizations can use activity-based costing to allocate selling and administrative costs to services provided.

If selling and administrative expenses are allocated to different products, they should be reported as a

The Aleutian Company produces two products, Rings and Dings. They are manufactured in two departments-Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication Department, which has an estimated overhead of $90,000. All of the labor hours take place in the Assembly Department, which has an estimated total overhead of $105,000. The Aleutian Company uses departmental overhead rates. The Fabrication Department uses machine hours for an allocation base, and the Assembly Department uses labor hours. What is the overhead cost per unit for Rings?

Pinacle Corp. budgeted $700,000 of overhead cost for the current year. Actual overhead costs for the year were $650,000. Pinacle's plantwide allocation base, machine hours, was budgeted at 100,000 hours. Actual machine hours were 80,000. A total of 100,000 units was budgeted to be produced and 98,000 units were actually produced. Pinacle's plantwide factory overhead rate for the current year is:

Use of a plantwide factory overhead rate does not distort product costs when products require different ratios of allocation-base usage in each production department.

Explain why it is imperative that proper factory overhead be allocated in factories that produce multiple products.

Use of a plantwide factory overhead rate does not distort product costs when there are differences in the factory overhead rates across different production departments.

The Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication department, which has an estimated overhead of $84,000. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $72,000. The Ramapo Company uses a single overhead rate to apply all overhead costs based on labor hours. What is the overhead cost per unit for Blinks?

Bob's Biscuit Corporation budgeted $1,200,000 of factory overhead cost for the coming year. Its plantwide allocation base, machine hours, is budgeted at 100,000 hours. Budgeted units to be produced are 200,000 units. Bob's plantwide factory overhead rate is $12.00 per machine hour.

The Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication department, which has an estimated overhead of $84,000. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $72,000. The Ramapo Company uses a single overhead rate to apply all overhead costs based on labor hours. What is the overhead cost per unit for Dinks?

Service companies can effectively use activity-based costing to compute product (service) costs.

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Determine the activity rate for materials handling per move.

Shubelik Company is changing to an activity-based costing method. They have determined that they will use three cost pools: setups, inspections, and assembly. Which of the following would not be used as the activity base for any of these three activities?

Product costing consists of only direct materials and direct labor.