Managerial Accounting Chapter 4

Which would be the most favorable basis for allocating manufacturing overhead for a factory with automated equipment and a significant variation of services by its indirect labor?

ABC

In ABC the assumption is that ______________ use resources or cause costs:

Activities

Activity-based costing adheres to GAAP:

False

Activity-based costing is considered to be a traditional costing method?

False

The cost to set up production equipment is best allocated directly to products via machine hours:

False

Under ABC, indirect manufacturing costs are predominantly assigned on the basis of direct machine hours:

False

Which of the following would not be included in a product's cost for inventory valuation for the financial statements?

Interest Expense

It is more beneficial for a company with a _______ amount of manufacturing overhead and a __________ product line to use activity-based costing

Large/Diverse

When using machine hours for allocating manufacturing overhead (instead of activity-based costing), a low-volume item requiring a significant amount of special handling will be assigned to __________ manufacturing overhead:

Little

Activity-based costing will provide greater accuracy when allocating costs than a manufacturer's machine hours when its products and customer are __________ diverse :

More

C & W Corporation manufactures travel clocks and watches. Overhead costs are currently allocated using direct labor-hours, but the controller has recommended using an activity-based costing system based on the following data: CALCULATE TOTAL ACTIVITY & ACTVITY RATE ALLOCATE OVERHEAD TO EACH PRODUCT & CALCULATE TOTAL OVERHEAD

TOTAL ACTIVITY: A: 50 B: 60 C: 200,000 ACTIVTY RATE: D:2,000 E: 500 F: .30 TRAVEL CLOCKS: G: (Production Setup) 40,000 H: (Material Handling) 12,000 I: (Packaging and Shipping) 24,000 J: (Total OH) 76,000 WATCHES: K: (Production Setup) 60,000 L: (Material Handling) 18,000 M: (Packaging and Shipping) 36,000 N: (Total OH) 114,000

A product with a high gross profit could be an unprofitable product:

True

Activity-based costing can be used to allocate SG&A expenses in order to assist management with pricing and other marketing decisions:

True

Activity-based costing is used to allocate manufacturing overhead:

True

If products are uniform and customers are similar in their demands, activity-based costing may not offer a significant advantage over machine hours when assigning overhead:

True

In activity-based costing, the manufacturing overhead cost per unit will depend partially on the number of units in a batch:

True

Manufacturing costs are often organized in the general ledger by function and department. When applying activity-based costing, these manufacturing costs will be sorted by activities:

True

Setup cost is an example of a batch-level cost:

True