Chapter 17. Activity - Based costing and analysis

Jackson Company uses activity-based costing to allocate their overhead costs. Setup costs of $850,000 are based on number of batches. Design modification costs of $155,000 are based on number of design changes. Jackson Company has identified 40,000 batches and has 5,000 design changes in their factory. What is the activity rate for setup.- $25.13- $31.00- $3.88- $21.25

$21.25 ($850,000/40,000)

The basic principle of activity based costing is a(n)

Activity

During step 3 of activity-based costing, activity rates are used to assign overhead to products. Proper determination of activity rates depends on all of the following:

Proper determination of factors which drive cost, Proper measurement of activities.

When using activity- based costing , its is very important that the activities in each cost pool are

Similar

What is the second step in activity-based costing.

Assigning activities and their overhead cost to cost pool

One of the characteristics of activity-based costing is that it allows ____________production and pricing decisions.

Better

A disadvantage of using activity-based costing is that

Collecting and analyzing cost data is expensive

An activity cost pool is

Collection of costs that are related to an activity

(Identifying, assigning, tracing) activities is the first step in applying activity- based costing.

Identifying

Johnson company has the following overhead costs: machine setup $25,000; factory maintenance $10,000; heating and lighting $15,000; and assembly line power $5,000. What is the total indirect labor using activity- based costing?

Only machine and factory maintenance are part of indirect labor. $25,000+$10,000=$35,000

In activity-based costing, an activity cost _________ (drive, pool) is the factor which causes costs in the pools to be incurred.

driver

In the _____________ (third, fourth) step of activity-based costing, overhead allocation rate is determined for each activity.

third