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Exam 18: Activity-Based Costing

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Question 1

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Activity rates are determined by

A) dividing the actual cost for each activity pool by the actual activity base for that pool.
B) dividing the cost budgeted for each activity pool by the estimated activity base for that pool.
C) dividing the actual cost for each activity pool by the estimated activity base for that pool.
D) dividing the cost budgeted for each activity pool by the actual activity base in that pool.

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Question 2

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All of the following can be used as an allocation base for calculating factory overhead rates except:

A) direct labor dollars
B) direct labor hours
C) machine hours
D) total units produced

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D

Question 3

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Service organizations can use activity-based costing to allocate selling and administrative costs to services provided.

Service companies can effectively use multiple department overhead rate costing to compute product (service)costs.

Activity-based costing can only be used to allocate manufacturing factory overhead.

Managers depend on accurate factory overhead allocation to make decisions regarding product mix and product price.

What is the Fabrication Department overhead rate per machine hour?

Which of the following is not a factory overhead allocation method?

In an effort to simplify the multiple production department factory overhead rate method,the same rate can be used for all departments.

Activity-based costing is much easier to apply than single plantwide factory overhead allocation.

The Botosan Factory has determined that its budgeted factory overhead budget for the year is $13,500,000 and budgeted direct labor hours are 10,000,000.If the actual direct labor hours for the period are 350,000,how much overhead would be allocated to the period?

The Anazi Leather Company manufactures leather handbags and moccasins.The company has been using the factory overhead rate method but has decided to evaluate the multiple production department factory overhead rate to allocate factory overhead.The factory overhead estimated per unit together with direct materials and direct labor will help determine selling prices. ​ Handbags = 60,000 units,3 hours of direct labor ​ Moccasins= 40,000 units,2 hours of direct labor ​ Total budgeted factory overhead cost = $360,000 ​ The company has two different production departments: Cutting and Sewing.The Cutting Department has a factory overhead budget of $80,000.Each unit will require 1 direct labor hour or a total of 100,000 direct labor hours. ​ The Sewing Department estimates factory overhead in the amount of $280,000.Handbags require 2 hours of sewing time and Moccasins require 1 hour for a total of 160,000 labor hours. ​ Calculate the total factory overhead to be allocated to each product using direct labor hours.

In a service organization,the multiple department overhead rate method is the most effective in providing information about the cost of services.

The Ramapo Company uses a single overhead rate to apply all overhead costs based on labor hours.What is the overhead cost per unit for Dinks?

A plantwide factory overhead rate assumes that all overhead is directly related to one activity representing the entire plant.

Calculate the plantwide factory overhead rate for Adirondack Marketing Inc.

Calculate the overhead rate per unit for Product A in the painting department of Adirondack Marketing Inc.

Ratchford Clocks manufactures alarm clocks and wall clocks and allocates overhead based on direct labor hours.The production process is set up in three departments: Assembly,Finishing,and Calibrating.The following is information regarding the direct labor used to produce one unit of the two clocks: The budget includes the following factory overhead by department: Ratchford Clocks is planning to manufacture 50,000 alarm clocks and 10,000 wall clocks.

Using the single plantwide factory overhead rate with an allocation base of direct labor hours,how much factory overhead will Blackwelder Factory allocate to desk lamp production if actual direct hours for the period is 118,000?

Product costing consists of only direct materials and direct labor.