SB 4

Indirect costs can be assigned to products or services using ______.

the activity rate method the activity proportion method

To calculate manufacturing overhead cost per unit using ABC, divide the total ______.

manufacturing overhead cost by the number of units produced

Once Stage 2 allocation has been completed it is possible to compute total ______.

manufacturing overhead per product

A company's activity rate for the general factory is $2.00 per machine hour. Product A used 3,000 machine hours and 1,000 labor hours. General factory overhead assigned to Product A is ______.

$6,000 Rationale: $2 × 3,000 = $6,000

Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 27,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned ___% of the total setup cost.

30

A group of similar activities that have been combined together is called an activity

cost pool

Activity-based costing systems typically include ______ cost drivers.

both volume- and non-volume-based

Implementing an ABC system ______.

provides information for cost management

What types of activities are carried out regardless of which products are produced, how many batches are run, or how many units are produced?

Facility-level

The formula to apply overhead to products is ______.

activity rate times activity

Which of the following are facility-level activities?

Human resource hiring fairs Paying factory insurance

A predetermined overhead rate in an activity-based costing system is called ______.

an activity rate

Costs at the batch level depend on the number of ______.

batches processed

A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. The activity rates are ______.

$8 per customer call and $15 per development hour Rationale: $200,000/25,000 = $8 per customer call and $300,000/20,000 = $15 per development hour.

A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned $ ___ in total overhead.

1200

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $

2

Gross profit margin calculates gross margin as a percentage of

sales

A predetermined overhead rate in an activity-based costing system is called a(n)

activity rate

Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour.

$19.53 Rationale: $625,000/(8,000 × 4) = $19.53

Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours?

$280 Rationale: Predetermined overhead rate = $35,000/5,000 or $7 per direct labor hour × 40 hours = $280.

Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product.

$73,160 to Model XLT and $44,840 to Model TXT Rationale: 620/1000 = 62% to Model XLT and 380/1000 = 38% to TXT

The activity proportion method uses ___ to assign overhead costs to products

%

Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $ ___ per setup.

500

In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver?

Activity rate

A technique that attempts to assign overhead costs to products based on the actions they require is called

activity based costing

A method that attempts to assign overhead costs based on what is required to produce products is ______ costing.

activity-based

Indirect costs ______.

are not easily traced to products or services

Non-volume-based cost drivers ______.

are used in ABC systems allow more indirect costs to be allocated to products

The final step in activity-based costing is ______.

assigning indirect costs to products or services

At a minimum, an ABC system should have ______.

at least one non-unit-level activity cost pool

The formula to compute activity proportion is ______.

cost driver for product / cost driver for all products

Activities that occur regardless of how many products are produced or how many batches are run or units made are ___ - ___ activities

facility Level

True or false: The best reason to implement an ABC system is to obtain more accurate information about the cost of products and services.

false

Sales price per unit - manufacturing cost per unit = ______ per unit.

gross profit per unit

Indirect costs are also referred to as ___ costs

overhead

Total manufacturing overhead under activity-based costing consists of all ______.

overhead assigned during Stage 2 allocations

Activities performed to design a new type of service to be offered are ______-level activities.

product

Activities incurred for each product produced and not dependent on the number of units or batches are

product level activities

Research and development is a(n)

product-level activity

The activity rate is computed by dividing the ______ by the ______.

total activity cost; total cost driver

True or false: When computing unit costs, the direct materials and direct labor costs are the same, regardless of whether ABC or a volume-based costing system is used.

true

Direct labor hours and machine hours are both examples of ___ -based cost drivers.

volume

Setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of ___-level activities.

batch

A group of similar activities that have been combined together is an activity ______.

cost pool

Which of the following is NOT a volume-based cost driver?

Machine setups

What types of activities are performed each time a group of units is processed, regardless of how many units are in the group?

batch