Reference no: EM131117055

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