Chapt 16

Which of the following is not typical of traditional costing systems? Use of a single predetermined overhead rate. 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 multiple cost drivers to allocate overhead.

Foxx Company incurs $480,000 overhead costs each year in its three main departments, setup ($30,000), machining ($330,000), and packing ($120,000). The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year. Information about Foxx's two products is as follows: Product A1 Product B1 number of setups 20 20 machining hours 1000 4000 orders packed 150 350 # of prod manftrd 600 400 Using ABC how much overhead is assigned to Prod A1? $240,000 $363,000 $ 96,000 $117,000

117000

Gant Accounting performs two types of services, Audit and Tax. Gant's overhead costs consist of computer support, $300,000; and legal support, $150,000. Information on the two services is: Audit Tax Direct labor cost 50000 100000 CPU minutes 40000 10000 Legal hours used 200 800 Overhead applied to audit services using activity-based costing is $150,000. $180,000. $270,000. $300,000.

270000

Which of the following is not a unit-level activity Drilling Cutting Sanding Inspecting

Inspecting

Which of the following is not a facility-level activity Plant management Product design Personnel administration Training

Product design

Use of activity-based costing will result in the development of one overhead rate based on direct labor hours. one plantwide activity-based overhead rate. multiple activity-based overhead rates. no overhead rates; overhead rates are not used in activity-based costing.

multiple activity-based overhead rates.

The first step in activity-based costing is to assign overhead costs to products, using overhead rates determined for each cost pool. compute the activity-based overhead rate per cost driver. 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.

identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools.

Each of the following is a limitation of activity-based costing except that it can be expensive to use. it is more complex than traditional costing. more cost pools are used. some arbitrary allocations continue.

more cost pools are used

Ordering materials, setting up machines, assembling products, and inspecting products are examples of cost drivers. overhead cost pools. direct labor costs. nonmanufacturing activities.

overhead cost pools.

The presence of any of the following factors would suggest a switch to ABC except when product lines differ greatly in volume. overhead costs constitute a minor portion of total costs. the manufacturing process has changed significantly. production managers are ignoring data provided by the existing system.

overhead costs constitute a minor portion of total costs.

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

ABC can be expensive to use

Which of the following is a facility-level activity? Engineering changes Product design Property taxes Inspection

Property taxes

Which of the following is a batch-level activity Assembling Product design Engineering changes Purchase ordering

Purchase ordering

Which would be a cost driver for a facility-level activity? Number of setups Number of product designs Square footage Number of purchase orders

Square footage