Question: 1. Using the single plantwide factory overhead rate may cause product cost distortions due to which of the following?
a. Both of these choices may cause distortions.
b. Differences in production department factory overhead rates
c. Neither these choices may cause distortions.
d. Differences among products in the ratios of allocation base usage within a department and across departments.
2. The total factory overhead for Norton Company is budgeted for the year at $300,000, divided into three activities: assembly, $200,000; setup, $50,000; and materials handling, $150,000. Norton manufactures two products: Product A and Product B. The activity-based usage quantities for each product by each activity are estimated as follows:
Assembly Setup Materials Handing
Product A 5,000 dlh 60 setups 25 moves
Product B 15,000 dlh 110 setups 250 moves
Total activity-base usage 20,000 dlh 170 setups 275 moves
Determine the activity rate for the setup activity (round to nearest dollar).
3. The total factory overhead for Norton Company is budgeted for the year at $300,000, divided into three activities: assembly, $200,000; setup, $50,000; and materials handling, $150,000. Norton manufactures two products: Product A and Product B. The activity-based usage quantities for each product by each activity are estimated as follows:
Assembly Setup Materials Handling
Product A 2,000 dlh 8,000 dlh 5 setups
Product B 10,000 dlh 24,000 dlh 15 setups
Total activity-base usage 12,000 dlh 32,000 dlh 20 setups
Determine the activity rate for the assembly activity.
4. Under the ABC costing method,
a. activity rates are calculated by dividing the budgeted activity cost by the total activity-base usage.
b. departments are identified as activities.
c. All of these choices are correct.
d. the budgetary activity costs are assigned to product using factory overhead rates for each activity.
5. Activity-based costing allocates selling and administrative expenses
a. based on how each product consumes activities.
b. in accordance with GAAP.
c. based on sales volume in dollars.
d. based on sales volume in units.
6. Under activity-based costing, selling and administrative expenses are
a. allocated to all products at the same rate.
b. treated as period expenses.
c. allocated to the top-selling products only.
d. allocated to products based on how each product consumes activities.
7. Selling and administrative expenses include all of the following except:
a. Customer return processing.
b. Factory overhead.
c. Post-sale technical support.
d. Shipping document preparation.
8. Northside Clinic uses activity-based costing to determine the cost of servicing patients. There are three activity pools: patient admissions ($50 per patient), laboratory services ($150 per diagnosis), and x-ray imaging ($400 per image).
Daisy Satar went to the clinic and had blood drawn twice for separate diagnoses and had three separate images read and interpreted by a doctor. What is the total activity-based cost of Satar's visit?
9. The Flowering Desert Hotel uses activity-based costing to determine the cost of servicing customers. There are three activity pools: guest check-in ($8.50 per guest visit), room cleaning ($21.00 per day), and room service ($3.00 per order, not including food).
Martin Hemphill visited the hotel for a two-week stay. He used room service 10 times during his stay. Determine the total activity-based cost for Hemphill's visit.
10. Seaside Clinic uses activity-based costing to determine the cost of servicing patients. There are three activity pools: patient admissions ($75 per patient), laboratory services ($110 per diagnosis), and x-ray imaging ($350 per image).
Harold Reed went to the clinic and had blood drawn regarding 1 separate diagnosis, 4 separate images read and interpreted by a doctor. What is the total activity-based cost of Reed's visit?