Chapter 18- Accounting 121

Which of the following is a disadvantage to using a single plantwide factory overhead rate?

The rate assumes that factory overhead costs are consumed in the same way by all products.

Using ABC product cost information when considering reducing cost, which of the following would be recommended?

Using an activity-based approach with multiple overhead allocation rates

Which of the following is a scenario in which multiple production department overhead rates should be used?

When one department relies more heavily on direct labor hours as an overhead driver than the other department

A(n) __________ consists of changing tooling in machines in preparation for making a new product.

setup

Activity-based costing allocates selling and administrative expenses

based on how each product consumes activities.

Activity rates for a service business are

calculated the same as for a manufacturer.

The total factory overhead for Norton Company is budgeted for the year at $300,000, divided into three activities: assembly, $200,000; setup, $50,000; and materials handling, $150,000. Norton manufactures two products: Product A and Product B. The activity-based usage quantities for each product by each activity are estimated as follows: SOLVED ON PAPER

$16.67

The total factory overhead for Martin Company is budgeted for the year at $375,000. Martin manufactures two garden products: a leaf blower and a garden wagon. These products each require 4 direct labor hours (dlh) to manufacture. Each product is budgeted for 2,500 units of production for the year. What would the single plantwide factory overhead rate be?

$18.75 per dlh

The Lazy Pelican Resort uses activity-based costing to determine the cost of servicing customers. There are three activity pools: guest check-in ($9.00 per guest visit), room cleaning ($21.75 per day), and room service ($3.25 per order, not including food). Gregory Petricoff visited the hotel for a 9-day stay. He used room service 2 times during his stay. What is the total activity-based cost for Gregory's visit?

$211.25

Sebastian Company manufactures and sells sportswear products. Sebastian uses activity-based costing to determine the cost of the customer return processing and shipping activities. The customer return processing activity has an activity rate of $60 per return, and the shipping activity has an activity rate of $20 per shipment. Sebastian shipped 4,000 units of Product 1 in 800 shipments (some shipments are more than one unit). There were 90 returns. What is the per-unit customer cost for the combined shipping and return activities of Product 1?

$5.35 per unit

The total factory overhead for Martin Company is budgeted for the year at $375,000. Martin manufactures two garden products: a leaf blower and a garden wagon. These products each require 4 direct labor hours (dlh) to manufacture. Each product is budgeted for 2,500 units of production for the year. What would the total number of budgeted direct labor hours for the year be?

20,000 dlh

The total factory overhead for Rowland Company is budgeted for the year at $652,000 and divided into two departments: Fabrication, $460,000 and Assembly, $192,000. Rowland manufactures two products: treadmills and weight machines. Each treadmill requires 3 direct labor hours in Fabrication and 1 direct labor hour in Assembly. Each weight machine requires 2 direct labor hours in Fabrication and 5 direct labor hours in Assembly. Each product is budgeted for 4,000 units of production for the year. What would the total number of budgeted direct labor hours for the year in the Assembly Department be?

24,000 dlh

Which of the following statements regarding quality-control inspections is true?

Inspection requires both product tear down and product reassembly.

Which of the following is an important feature when considering the use of a single plantwide factory overhead rate?

It is easy to use.

When production departments differ significantly in their manufacturing processes, factory overhead costs may be more accurately allocated using which of the following?

Multiple production department overhead rates

Which of the following is not one of the steps for applying activity-based costing in a service business?

Pay the vendor for raw materials.

Using ABC product cost information when considering reducing cost, which of the following would not be a way to reduce activity costs?

Switch to a plantwide allocation rate.

Under activity-based costing, selling and administrative expenses may be allocated to

both products and customers.

Product costs consist of all of the following except

dividends.

Factory overhead includes

indirect costs that must be allocated to the product.

Common allocation bases under the single plantwide factory overhead rate method include all of the following except

planned production in units of product.