ACC 202 Chapter 4

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

Using an ABC system, a company has estimated overhead of $2,100,000. They expect to use 1,000,000 machine hours and 500,000 labor hours. ABC has identified this as a machine-hour related activity. The activity rate for this activity is ______.

$2.10

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

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

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

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

Which of the following statements are true?

Appraisal costs are also known as inspection costs. Appraisal costs identify defective products before they get to the customer.

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.

Blank 1: 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 $ _____

Blank 1: 2 or two

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,

Blank 1: 30 or thirty

Improving operations and reducing costs is the focus of _____ - _____ management.

Blank 1: activity Blank 2: based

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

Blank 1: activity Blank 2: based Blank 3: costing

Costs incurred to identify defective products before they get to the customer are called _____ costs.

Blank 1: appraisal or inspection

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

Blank 1: cost Blank 2: pool

Indirect costs are also referred to as _____ costs.

Blank 1: overhead

The activity proportion method uses _____ to assign overhead costs to products.

Blank 1: percentages, %, proportions, percent, percents, or percentage

To keep quality problems from happening, companies incur _____ costs.

Blank 1: prevention

The duration of a product from its infancy through its eventual decline is represented by the _____ _____ _____.

Blank 1: product Blank 2: life Blank 3: cycle

Under activity-based costing, a degree program at a university is considered a(n) _____ - level activity.

Blank 1: service or product

The approach to determine what costs should be in order to earn an acceptable profit across a product's life cycle is called _____ _____ or cost planning.

Blank 1: target Blank 2: costing

An approach that aims to improve products by reducing and eliminating errors, streamlining activities, and continuously making production processes better is called _____ _____ management.

Blank 1: total Blank 2: quality

The concept of the _____ _____ begins with the customer and works backward to ensure that activities deliver what matters to customers.

Blank 1: value Blank 2: chain

The linked set of activities required to design, produce, and deliver products and provide aftermarket service to customers is called the _____ _____.

Blank 1: value Blank 2: chain

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

Blank 1: volume

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

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

Which of the following are facility-level activities?

Human resource hiring fairs Paying factory insurance

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

Machine setups

Which of the following statements are true?

Quality training is an example of a prevention cost. Most experts believe that incurring prevention costs is the most effective way to manage quality costs.

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

The formula to apply overhead to products is ______.

activity rate times activity

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

activity-based

Non-volume-based cost drivers ______.

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

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

an activity rate

Indirect costs ______.

are not easily traced to products or services

The final step in activity-based costing is ______.

assigning indirect costs to products or services

Activity-based costing systems typically include ______ cost drivers.

both volume- and non-volume-based

The formula to compute activity proportion is ______.

cost driver for product / cost driver for all products

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

cost pool

Activity-based management focuses on ______.

improving operations increasing efficiency

A just-in-time (JIT) system ______.

is used to help reduce costs is a demand-pull system

A system that pulls materials and products through the manufacturing system based on customer demand is called ______.

just-in-time

In order to make good product introduction decisions in today's digital age, managers need to be able to accurately estimate ______.

life cycle costs

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

manufacturing overhead cost by the number of units produced

Implementing an ABC system ______.

provides information for cost management

A bakery creates a new type of cake for sale. Under activity-based costing, this is an example of a ______-level activity.

service

A proactive approach managers use to determine what costs should be is called ______.

target costing

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

the activity proportion method the activity rate method

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

total activity cost; total cost driver

A management system that focuses on continually improving production processes is called ______.

total quality management