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Exam 4: Activity Based Costing and Analysis

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Question 51

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In activity-based costing, an activity can involve several related tasks.

A) True
B) False

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Question 52

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Activity-based costing first assigns costs to products and then uses these product costs to assign costs to manufacturing activities.

A) True
B) False

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Question 53

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Explain cost flows for the plantwide overhead rate method.

ABC allocates overhead costs to products based on input measures rather than output measures.

Which types of overhead allocation methods result in the use of more than one overhead rate during the same time period?

The cost object(s) of the departmental overhead rate method is:

Over recent decades, overhead costs have steadily decreased while direct labor costs have increased as a percentage of total manufacturing costs.

A company estimates total overhead costs for the next year to be $1,200,000 and wishes to use direct labor hours as its overhead allocation base. This company makes two products: (1) Fancy X, which requires three direct labor hours per unit, and (2) Plain X, which requires one direct labor hour per unit. If the company plans to make 10,000 units of Fancy X and 10,000 units of Plain X, then each unit produced will be allocated the same amount of overhead.

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?

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

A ________ overhead rate is a single overhead rate determined by using volume-related measures.

Name and briefly describe three overhead rate methods.

The major advantages of using a single plantwide overhead rate are ________ and ________.

The cost object(s) of the activity-based costing method is(are) :

Allocated overhead ________ vary depending upon the allocation method used.

Compute Tasty's departmental overhead rate for the mixing department based on machine hours.

Batch-level costs vary with the number of units produced.

A company produces heating elements that go through two operations, casting and assembling, before they are complete. Expected costs and activities for the two departments are shown below. Given this information, the departmental overhead rate for the assembling department based on direct labor hours is $5 per direct labor hour.

Compute Tasty's departmental overhead rate for the mixing department based on direct labor hours.

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