Accounting 1210, Managerial Accounting Ch 16

Which of the following is not typical of traditional costing systems? Use of direct labor hours or direct labor cost to assign overhead. Assumption of correlation between direct labor and incurrence of overhead cost. Use of multiple cost drivers to allocate overhead. Use of a single predetermined overhead rate.

An activity that has a direct cause-effect relationship with the resources consumed is a(n) overhead rate. cost driver. cost pool. product activity.

The costs that are easiest to trace directly to products are direct materials and direct labor. direct labor and overhead. direct materials and overhead. none of the above; all three costs are equally easy to trace to the product.

Advances in computerized systems, technological innovation, global competition, and automation have changed the manufacturing environment drastically by increasing direct labor costs and decreasing overhead costs. decreasing direct labor costs and decreasing overhead costs. decreasing direct labor costs and increasing overhead costs. increasing direct labor costs and increasing overhead costs.

Activity-based costing allocates overhead to activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers. allocates overhead directly to products and services based on activity levels. accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver. assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools.

The first step in activity-based costing is to identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools. identify the cost driver that has a strong correlation to the activity cost pool. compute the activity-based overhead rate per cost driver. assign overhead costs to products, using overhead rates determined for each cost pool.

Which would be an appropriate cost driver for the purchasing activity cost pool? Machine setups Inspections Purchase orders Machine hours

An activity-based overhead rate is computed as follows: estimated overhead divided by actual use of cost drivers. actual overhead divided by estimated use of cost drivers. estimated overhead divided by estimated use of cost drivers. actual overhead divided by actual use of cost drivers.

The primary benefit of ABC is it provides all these are primary benefits of ABC. better management decisions. enhanced control over overhead costs. more accurate product costing.

Which of the following is a limitation of activity-based costing? More cost pools Less control over overhead costs ABC can be expensive to use Poorer management decisions

***Which of the following is a non-value-added activity? Painting Building maintenance Packaging Finishing

Which of the following is a batch-level activity? Assembling Product design Equipment setups Plant management

Which of the following is a unit-level activity? Painting Inspection Material handling Purchase ordering

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100000 for the year. Activity Cost Pool: Ordering and Receiving, Machine Setup, Machining, Assembly, Inspection Cost Driver & Est Overhead Orders $900000 Setups $270000 Machine Hours 1425000 Parts 1140000 Inspections 270000 Cost Driver Activity 500 orders 450 setups 125000 MH 10000000 parts 500 inspections If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is $1 per direct labor hour. $180 per order. $6390 per order. $0 per part.

One of Matheny Company's activity cost pools is inspecting, with estimated overhead of $270000. Matheny produces throw rugs (700 inspections) and area rugs (1300 inspections). How much of the inspecting cost pool should be assigned to throw rugs? $145385. $270000. $135000. $94500.

An "Ordering and Receiving Materials" cost pool would most likely have as a cost driver: machine hours. number of setups. number of purchase orders. number of inspection tests.

Which would be an appropriate cost driver for the machining activity cost pool? Inspections Purchase orders Machine hours Machine setups

***Windsor Co. incurs $846000 of overhead costs each year in its three main departments, machining ($480000), inspections ($240000) and packing ($126000). The machining department works 4000 hours per year, there are 600 inspections per year, and the packing department packs 1000 orders per year. Information about Windsor's two products is as follows: product x Machine hours 1000 Inspections 100 Orders packed 350 Direct labor hours 1700 product y Machine hours 3000 Inspections 500 Orders packed 650 Direct Labor Hours 1800 Using ABC, how much overhead is assigned to Product X this year? not$410914 $292846 $423000 $204100

Value-added activities add cost to a product without affecting selling price. cannot be differentiated from non-value-added activities. should be minimized or eliminated. involve those activities that are essential to a company's operations.

Gant Accounting performs two types of services, Audit and Tax. Gant's overhead costs consist of computer support, $354000; and legal support, $174000. Information on the two services is: Audit, tax Direct labor cost 50000 100000 CPU minutes 40000 10000 Legal hours used 200 800 Gant Accounting performs tax services for Cathy Lane. Direct labor cost is $1200; 600 CPU minutes were used; and 1 legal hour was used. What is the total cost of the Lane job using activity-based costing? $4422 $6048 $5622 $4248