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Exam 17: Activity-Based Costing and Analysis

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Question 91

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

A) True
B) False

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Question 92

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Aztec Industries produces bread which goes through two operations, mixing and baking, before it is ready to be packaged. Next year's expected costs and activities are shown below. -Compute Aztec's departmental overhead rate for the mixing department based on direct labor hours.

A) $1.50 per DLH.
B) $5.00 per DLH.
C) $0.75 per DLH.
D) $0.50 per DLH.
E) $2.08 per DLH.

F) None of the above
G) B) and D)

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Question 93

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Activities are the cost objects of the first stage of ABC.

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 above data for Wall Nuts,Inc.to compute the total manufacturing cost per unit of oak paneling assuming the company uses departmental overhead rates based on machine hours in Department A and machine hours in Department B.

West Company estimates that overhead costs for the next year will be $5,240,000 for indirect labor and $550,000 for factory utilities.The company uses machine hours as its overhead allocation base.If 150,000 machine hours are planned for this next year,what is the company's plantwide overhead rate?

Gray Company uses a plantwide overhead rate with machine hours as the allocation base.Use the following information to solve for the amount of machine hours estimated per unit of product Q.

The use of a plantwide overhead rate is not acceptable for external reporting under GAAP.

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

A company produces surgical equipment that goes through three departments,1A1,2B2,and 3C3,before they are complete.Expected costs and activities for the three departments are shown below.All departments have departmental overhead rates based on direct labor hours.Therefore,the overhead rate for each department is $5 per direct labor hour.

A company's total expected overhead costs and related overhead data are shown below. a.Compute estimated manufacturing overhead costs for Department A. b.Compute estimated manufacturing overhead costs for Department B.

Why is overhead allocation under ABC usually more accurate than either the plantwide overhead allocation method or the departmental overhead allocation method?

If the direct labor time estimates are met,Malone will allocate $12.59 of overhead cost to each unit of Little X.

Aurora Corporation produces outdoor security lighting products.All products go through three processes before completion.Use the expected overhead costs and related data shown below to compute departmental overhead rates based on machine hours in Department A1A; based on direct labor hours in Department B2B; and machine hours in Department C3C.

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

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

Explain cost flows for the plantwide overhead rate method.

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

ABC is significantly less costly to implement and maintain than more traditional overhead costing systems.

The plantwide overhead rate is total plantwide allocation base divided by total budgeted plantwide overhead cost.

A company estimates that overhead costs for the next year will be $3,600,000 for indirect labor,$200,000 for factory utilities,and $21,500 for depreciation on factory machinery.The company uses machine hours as its overhead allocation base.If 764,300 machine hours are planned for this next year,what is the company's plantwide overhead rate?