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Exam 17: Activity-Based Costing and Analysis

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Question 51

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Which of the following are advantages of using the plantwide overhead rate method?

A) The use of cost pools is considerably more accurate than other overhead allocations.
B) The necessary information is readily available.
C) It is more accurate than traditional overhead allocations.
D) Each department has its own overhead rate and its own allocation base.
E) It takes into account that when products differ in batch size and complexity,they usually consume different amounts of overhead resources.

F) B) and D)
G) C) and D)

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Question 52

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Kamper Company sells two products Big Z and Little Z.Current direct material and direct labor costs are detailed below.Next year,the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base.Next year's overhead is estimated to be $475,000.The direct labor and direct materials costs are estimated to be consistent with the current year.Direct labor costs $20 per hour and the company expects to manufacture 32,000 units of Big Z and 9,000 units of Little Z next year. What are total estimated direct labor hours for this next year?

A) 30,800 total DLH.
B) 616,000 total DLH.
C) 300,000 total DLH.
D) 1,025,000 total DLH.
E) 916,000 total DLH.

F) A) and B)
G) A) and C)

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Question 53

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The use of departmental overhead rates will generally result in:

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

What are the major advantages of using a plantwide overhead rate?

The activity-based costing method uses volume-based measures to allocate overhead costs.

ABC costing might lead to:

Superior Products Manufacturing identified the following data in its two production departments. 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.

The premise of ABC is that it takes ________ to make products and provide services.

Overhead costs are not directly related to production and cannot be traced to units of product like direct materials and direct labor can.

K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utilities.The company uses direct labor hours as its overhead allocation base.If 80,000 direct labor hours are planned for this next year,what is the company's plantwide overhead rate?

The departmental overhead rate method allows each department to have its own overhead rate and its own ________.

The departmental overhead rate method uses the same overhead rate for each production department.

Western Company allocates $10 overhead to products based on the number of machine hours used.The company uses a plantwide overhead rate with machine hours as the allocation base.Given the amounts below,how many machine hours does the company expect in department 2?

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: -How much overhead will be assigned to Product B using activity-based costing?

A company estimates that costs for the next year will be $500,000 for indirect labor,$50,000 for factory utilities,and $1,000,000 for the CEO's salary.The company uses machine hours as its overhead allocation base.If 25,000 machine hours are planned for this next year,then the plantwide overhead rate is $22 per machine hour.

Assume that the Assembly Department allocates overhead based on machine hours,and the Finishing Department allocates overhead based on direct labor hours.How much total overhead will be assigned to a product that requires 1 direct labor hour and 2.5 machine hours in the Assembly Department,and 3.5 direct labor hours and 0.5 machine hours in the Finishing Department?

Tarnish Industries produces miniature models of farm equipment. These collectibles are in great demand. It takes two operations, molding and finishing, to complete the miniatures. Next year's expected activities are shown in the following table: -Tarnish Industries uses departmental overhead rates and is planning on a $4.10 per machine hour overhead rate for the finishing department.Compute the estimated manufacturing overhead cost for the finishing department given the information shown in the table.

How much overhead cost will be assigned to the dessert bar product line using activity-based costing (ABC) ?

A company allocates $7.50 overhead to products based on the number of direct labor hours worked.The company uses a plantwide overhead rate with direct labor hours as the allocation base.Given the amounts below,how many direct labor hours does the company expect in department 2?