1. Which of the following activities would be classified as a batch-level activity? Circle One:
· Milling a part required for the final product.
· Setting up equipment.
· Designing a new product.
· Training employees.
2. Which of the following is not a limitation of activity-based costing? Circle One.
· Maintaining an activity-based costing system is more costly than maintaining a traditional direct labor-based costing system.
· In practice, most managers insist on fully allocating all costs to products, customers, and other costing objects in an activity-based costing system. This results in overstated costs.
· More accurate product costs may result in increasing the selling prices of some products.
· Changing from a traditional direct labor-based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers. Such changes are often resisted by managers.
3. Designing a new product is an example of a:
· Unit-level activity.
· Organization-sustaining activity.
· Batch-level activity.
· Product-level activity.
4. Bulmash Corporation uses an activity-based costing system with the following three activity cost pools:
|
Activity Cost Pool
|
Total Activity
|
|
Fabrication
|
40,000 machine-hours
|
|
Order processing
|
500 orders
|
|
Other
|
Not applicable
|
The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:
|
Wages and salaries
|
$420,000
|
|
Depreciation
|
$100,000
|
|
Occupancy
|
$120,000
|
|
Total
|
$640,000
|
The distribution of resource consumption across activity cost pools is given below:
|
|
Activity Cost Pools
|
|
|
|
Fabrication
|
Order Processing
|
Other
|
Total
|
|
Wages and salaries
|
5%
|
80%
|
15%
|
100%
|
|
Depreciation
|
15%
|
45%
|
40%
|
100%
|
|
Occupancy
|
25%
|
50%
|
25%
|
100%
|
The activity rate for the Fabrication activity cost pool is closest to:
· $0.80 per machine-hour
· $2.40 per machine-hour
· $1.65 per machine-hour
· $4.00 per machine-hour
5. Jordan Corporation uses an activity-based costing system with the following three activity cost pools:
|
Activity Cost Pool
|
Total Activity
|
|
Fabrication
|
70,000 machine-hours
|
|
Order processing
|
500 orders
|
|
Other
|
Not applicable
|
The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:
|
Wages and salaries
|
$420,000
|
|
Depreciation
|
$160,000
|
|
Occupancy
|
$200,000
|
|
Total
|
$780,000
|
The distribution of resource consumption across activity cost pools is given below:
|
|
Activity Cost Pools
|
|
|
|
Fabrication
|
Order Processing
|
Other
|
Total
|
|
Wages and salaries
|
60%
|
20%
|
20%
|
100%
|
|
Depreciation
|
5%
|
60%
|
35%
|
100%
|
|
Occupancy
|
25%
|
50%
|
25%
|
100%
|
The activity rate for the Order Processing activity cost pool is closest to:
· $312 per order
· $780 per order
· $676 per order
· $560 per order
6. Wenston Corporation has provided the following data concerning its overhead costs for the coming year:
|
Wages and salaries
|
$440,000
|
|
Depreciation
|
$120,000
|
|
Occupancy
|
$160,000
|
|
Total
|
$720,000
|
The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year:
|
Activity Cost Pool
|
Total Activity
|
|
Assembly
|
40,000 labor-hours
|
|
Order processing
|
600 orders
|
|
Other
|
Not applicable
|
The distribution of resource consumption across activity cost pools is given below:
|
|
Activity Cost Pools
|
|
|
|
Fabrication
|
Order Processing
|
Other
|
Total
|
|
Wages and salaries
|
40%
|
35%
|
25%
|
100%
|
|
Depreciation
|
20%
|
30%
|
50%
|
100%
|
|
Occupancy
|
10%
|
65%
|
25%
|
100%
|
The activity rate for the Order Processing activity cost pool is closest to:
· $520 per order
· $490 per order
· $420 per order
· $780 per order
7. Bullets Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs:
|
Wages and salaries
|
$480,000
|
|
Depreciation
|
$100,000
|
|
Occupancy
|
$180,000
|
|
Total
|
$760,000
|
The distribution of resource consumption across the three activity cost pools is given below:
|
|
Activity Cost Pools
|
|
|
|
Fabrication
|
Order Processing
|
Other
|
Total
|
|
Wages and salaries
|
25%
|
55%
|
20%
|
100%
|
|
Depreciation
|
20%
|
30%
|
50%
|
100%
|
|
Occupancy
|
35%
|
35%
|
30%
|
100%
|
How much cost, in total, would be allocated in the first-stage allocation to the Order Processing activity cost pool?
· $418,000
· $304,000
· $357,000
· $266,000
8. Strasburg Corporation has provided the following data from its activity-based costing system:
|
Activity Cost Pool
|
Total Cost
|
Total Activity
|
|
Assembly
|
$1,114,920
|
57,000 machine-hours
|
|
Processing orders
|
$47,016
|
1,800 orders
|
|
Inspection
|
$107,328
|
1,560 inspection-hours
|
The company makes 430 units of product S78N a year, requiring a total of 1,120 machine-hours, 40 orders, and 30 inspection-hours per year. The product's direct materials cost is $49.81 per unit and its direct labor cost is $12.34 per unit. The product sells for $129.90 per unit.
According to the activity-based costing system, the product margin for product S78N is:
· $6,180.50
· $29,132.50
· $5,161.30
· $4,116.50
9. Wenstein Corporation has its headquarters in Chicago and operates from three branch offices in Portland, Dallas, and Miami. Two of the company's activity cost pools are General Service and Research Service. These costs are allocated to the three branch offices using an activity-based costing system. Information for next year follows:
|
Activity Cost Pool
|
Activity Measure
|
Estimated Cost
|
|
General service
|
% of time devoted to branch
|
$700,000
|
|
Research service
|
Computer time
|
$140,000
|
Estimated branch data for next year is as follows:
|
% of time
|
Computer time
|
|
Portland
|
30%
|
200,000 minutes
|
|
Dallas
|
60%
|
150,000 minutes
|
|
Miami
|
10%
|
50,000 minutes
|
How much of the headquarters cost allocation should Dallas expect to receive next year?
· $409,500
· $280,000
· $472,500
· $504,000
10. Square Corporation has provided the following data from its activity-based costing accounting system:
|
Activity Cost Pool
|
Total Cost
|
Total Activity
|
|
Designing products
|
$582,016
|
4,547 design hours
|
|
Setting up batches
|
$29,760
|
960 batch set-ups
|
|
Assembling products
|
$19,440
|
1,620 assembly hours
|
The activity rate for the "designing products" activity cost pool is closest to:
· $89 per product design hour
· $78 per product design hour
· $128 per product design hour
· $582,016 per product design hour
11. Activity rates from Pleziastic Corporation's activity-based costing system are listed below. The company uses the activity rates to assign overhead costs to products:
|
Activity Cost Pool
|
Activity Rate
|
|
Processing customer orders
|
$92.86 per customer order
|
|
Assembling products
|
$1.78 per assembly hour
|
|
Setting up batches
|
$52.09 per batch
|
Last year, Product F76D involved 2 customer orders, 434 assembly hours, and 20 batches. How much overhead cost would be assigned to Product F76D using the activity-based costing system?
· $146.73
· $2,000.04
· $1,041.80
· $66,908.88
Nets Corporation has provided the following data from its activity-based costing accounting system:
|
Indirect factory wages
|
$520,000
|
|
Factory equipment depreciation
|
$260,000
|
Distribution of Resource Consumption across Activity Cost Pools:
|
|
Customer Orders
|
Product Processing
|
Other
|
Total
|
|
Indirect factory wages
|
40%
|
50%
|
10%
|
100%
|
|
Factory equipment depreciation
|
15%
|
65%
|
20%
|
100%
|
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
12. How much indirect factory wages and factory equipment depreciation cost would be assigned to the Customer Orders activity cost pool?
· $780,000
· $390,000
· $247,000
· $214,500
13. How much indirect factory wages and factory equipment depreciation cost would NOT be assigned to products using the activity-based costing system?
· $260,000
· $520,000
· $0
· $104,000
The following data have been provided by Quintessential Corporation from its activity-based costing accounting system:
|
Factory supervision
|
$360,000
|
|
Indirect factory labor
|
$280,000
|
Distribution of Resource Consumption across Activity Cost Pools:
|
|
Batch Set-Up
|
Expediting
|
Other
|
Total
|
|
Factory supervision
|
5%
|
85%
|
10%
|
100%
|
|
Indirect factory labor
|
30%
|
50%
|
20%
|
100%
|
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
14. How much factory supervision and indirect factory labor cost would be assigned to the Batch Set-Up activity cost pool?
· $640,000
· $112,000
· $102,000
· $320,000
15. How much factory supervision and indirect factory labor cost would NOT be assigned to products using the activity-based costing system?
· $280,000
· $360,000
· $0
· $92,000