ACCT 2302 MANAGERIAL ACCOUNTING CH 4

7) In activity-based costing, each major activity has its own overhead cost pool, its own activity measure, and its own overhead rate.

answer: TRUE Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

; FN Measurement 210) Greenspan, Inc., manufactures and sells two products: Product O4 and Product L7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product O4 1,000 5.0 5,000 Product L7 800 3.0 2,400 Total direct labor-hours 7,400 The direct labor rate is $19.60 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product O4 $120.60 Product L7 $221.50 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product O4 Product L7 Total Labor-related DLHs $ 123,506 5,000 2,400 7,400 Machine setups Setups 51,810 500 600 1,100 Order size MHs 796,966 4,000 4,300 8,300 $ 972,282 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. Compute the activity rates under the activity-based costing system. b. Determine how much overhead would be assigned to each product under the activity-based costing system. c. Determine the unit product cost of each product under the activity-based costing method. --answer: a. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 123,506 7,400 DLHs $ 16.69 per DLH Machine setups $ 51,810 1,100 setups $ 47.10 per setup Order size $ 796,966 8,300 MHs $ 96.02 per MH b. Computation of the overhead cost per unit under activity-based costing. Product O4 Product L7 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $16.69 per DLH 5,000 $83,450 2,400 $40,056 Machine setups, at $47.10 per setup 500 23,550 600 28,260 Order size, $96.02 per MH 4,000 384,080 4,300 412,886 Total overhead costs assigned (a) $491,080 $481,202 Number of units produced (b) 1000 800 Overhead cost per unit (a) ÷ (b) $491.08 $601.50 c. Computation of unit product costs under activity-based costing. Product O4 Product L7 Direct materials $120.60 $221.50 Direct labor: Product O4: (5.0 DLHs × $19.60 per DLH) 98.00 Product L7: (3.0 DLHs × $19.60 per DLH) 58.80 Overhead 491.08 601.50 Unit product cost $709.68 $881.80 Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 204) Mattioli, Inc., manufactures and sells two products: Product Z6 and Product Q3. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Z6 200 7.0 1,400 Product Q3 700 5.0 3,500 Total direct labor-hours 4,900 The direct labor rate is $21.00 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product Z6 $148.30 Product Q3 $199.00 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Z6 Product Q3 Total Labor-related DLHs $ 193,648 1,400 3,500 4,900 Product testing Tests 68,624 300 500 800 Order size MHs 579,528 3,500 3,700 7,200 $ 841,800 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. Compute the activity rates under the activity-based costing system. b. Determine how much overhead would be assigned to each product under the activity-based costing system. c. Determine the unit product cost of each product under the activity-based costing method. --answer: a. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 193,648 4,900 DLHs $ 39.52 per DLH Product testing $ 68,624 800 tests $ 85.78 per test Order size $ 579,528 7,200 MHs $ 80.49 per MH b. Computation of the overhead cost per unit under activity-based costing. Product Z6 Product Q3 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $39.52 per DLH 1,400 $55,328 3,500 $138,320 Product testing, at $85.78 per test 300 25,734 500 42,890 Order size, $80.49 per MH 3,500 281,715 3,700 297,813 Total overhead costs assigned (a) $362,777 $479,023 Number of units produced (b) 200 700 Overhead cost per unit (a) ÷ (b) $1,813.89 $684.32 c. Computation of unit product costs under activity-based costing. Product Z6 Product Q3 Direct materials $148.30 $199.00 Direct labor: Product Z6: (7.0 DLHs × $21.00 per DLH) 147.00 Product Q3: (5.0 DLHs × $21.00 per DLH) 105.00 Overhead 1,813.89 684.32 Unit product cost $2,109.19 $988.32 Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 205) Graise, Inc., manufactures and sells two products: Product C2 and Product M5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product C2 600 5.0 3,000 Product M5 800 7.0 5,600 Total direct labor-hours 8,600 The direct labor rate is $22.50 per DLH. The direct materials cost per unit is $124.20 for Product C2 and $144.00 for Product M5. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product C2 Product M5 Total Labor-related DLHs $ 304,956 3,000 5,600 8,600 Machine setups Setups 46,011 400 300 700 Order size MHs 549,927 4,400 4,300 8,700 $ 900,894 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. Compute the activity rates under the activity-based costing system. b. Determine how much overhead would be assigned to each product under the activity-based costing system. c. Determine the unit product cost of each product under the activity-based costing method. --answer: a. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 304,956 8,600 DLHs $ 35.46 per DLH Machine setups $ 46,011 700 setups $ 65.73 per setup Order size $ 549,927 8,700 MHs $ 63.21 per MH b. Computation of the overhead cost per unit under activity-based costing. Product C2 Product M5 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $35.46 per DLH 3,000 $106,380 5,600 $198,576 Machine setups, at $65.73 per setup 400 26,292 300 19,719 Order size, $63.21 per MH 4,400 278,124 4,300 271,803 Total overhead costs assigned (a) $410,796 $490,098 Number of units produced (b) 600 800 Overhead cost per unit (a) ÷ (b) $684.66 $612.62 c. Computation of unit product costs under activity-based costing. Product C2 Product M5 Direct materials $124.20 $144.00 Direct labor: Product C2: (5.0 DLHs × $22.50 per DLH) 112.50 Product M5: (7.0 DLHs × $22.50 per DLH) 157.50 Overhead 684.66 612.62 Unit product cost $921.36 $914.12 Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 211) Fineberg, Inc., manufactures and sells two products: Product U9 and Product S3. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product U9 300 5.0 1,500 Product S3 800 2.0 1,600 Total direct labor-hours 3,100 The direct labor rate is $29.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product U9 $114.30 Product S3 $146.40 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product U9 Product S3 Total Labor-related DLHs $ 54,870 1,500 1,600 3,100 Production orders Orders 105,936 500 700 1,200 Order size MHs 520,502 4,900 4,800 9,700 $ 681,308 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. Compute the activity rates under the activity-based costing system. b. Determine how much overhead would be assigned to each product under the activity-based costing system. c. Determine the unit product cost of each product under the activity-based costing method. --answer: a. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 54,870 3,100 DLHs $ 17.70 per DLH Production orders $ 105,936 1,200 orders $ 88.28 per order Order size $ 520,502 9,700 MHs $ 53.66 per MH b. Computation of the overhead cost per unit under activity-based costing. Product U9 Product S3 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $17.70 per DLH 1,500 $26,550 1,600 $28,320 Production orders, at $88.28 per order 500 44,140 700 61,796 Order size, $53.66 per MH 4,900 262,934 4,800 257,568 Total overhead costs assigned (a) $333,624 $347,684 Number of units produced (b) 300 800 Overhead cost per unit (a) ÷ (b) $1,112.08 $434.61 c. Computation of unit product costs under activity-based costing. Product U9 Product S3 Direct materials $114.30 $146.40 Direct labor: Product U9: (5.0 DLHs × $29.40 per DLH) 147.00 Product S3: (2.0 DLHs × $29.40 per DLH) 58.80 Overhead 1,112.08 434.61 Unit product cost $1,373.38 $639.81 Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 207) Whitenton, Inc., manufactures and sells two products: Product X7 and Product Y3. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product X7 400 9.0 3,600 Product Y3 500 10.0 5,000 Total direct labor-hours 8,600 The direct labor rate is $19.10 per DLH. The direct materials cost per unit is $174.50 for Product X7 and $161.20 for Product Y3. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product X7 Product Y3 Total Labor-related DLHs $ 87,032 3,600 5,000 8,600 Product testing Tests 57,408 500 700 1,200 Order size MHs 356,448 4,000 3,900 7,900 $ 500,888 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. Compute the activity rates under the activity-based costing system. b. Determine how much overhead would be assigned to each product under the activity-based costing system. c. Determine the unit product cost of each product under the activity-based costing method. --answer: a. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 87,032 8,600 DLHs $ 10.12 per DLH Product testing $ 57,408 1,200 tests $ 47.84 per test Order size $ 356,448 7,900 MHs $ 45.12 per MH b. Computation of the overhead cost per unit under activity-based costing. Product X7 Product Y3 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $10.12 per DLH 3,600 $36,432 5,000 $50,600 Product testing, at $47.84 per test 500 23,920 700 33,488 Order size, $45.12 per MH 4,000 180,480 3,900 175,968 Total overhead costs assigned (a) $240,832 $260,056 Number of units produced (b) 400 500 Overhead cost per unit (a) ÷ (b) $602.08 $520.11 c. Computation of unit product costs under activity-based costing. Product X7 Product Y3 Direct materials $174.50 $161.20 Direct labor: Product X7: (9.0 DLHs × $19.10 per DLH) 171.90 Product Y3: (10.0 DLHs × $19.10 per DLH) 191.00 Overhead 602.08 520.11 Unit product cost $948.48 $872.31 Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 217) Rutty, Inc., manufactures and sells two products: Product U6 and Product K9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product U6 200 8.0 1,600 Product K9 500 9.0 4,500 Total direct labor-hours 6,100 The direct labor rate is $28.70 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product U6 $292.50 Product K9 $138.80 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product U6 Product K9 Total Labor-related DLHs $ 149,145 1,600 4,500 6,100 Product testing Tests 106,304 500 600 1,100 Order size MHs 290,580 3,100 2,900 6,000 $ 546,029 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. Determine the unit product cost of each product under the company's traditional costing method. b. Determine the unit product cost of each product under the activity-based costing method. --answer: a. Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $546,029 ÷ 6,100 DLHs = $89.51 per DLH (rounded) Computation of overhead applied to each product: Product U6 Product K9 Manufacturing overhead: Product U6: (8.0 DLHs × $89.51 per DLH) $716.08 Product K9: (9.0 DLHs × $89.51 per DLH) $805.59 Computation of traditional unit product costs: Product U6 Product K9 Direct materials $292.50 $138.80 Direct labor: Product U6: (8.0 DLHs × $28.70 per DLH) 229.60 Product K9: (9.0 DLHs × $28.70 per DLH) 258.30 Manufacturing overhead: Product U6: (8.0 DLHs × $89.51 per DLH) 716.08 Product K9: (9.0 DLHs × $89.51 per DLH) 805.59 Unit product cost $1,238.18 $1,202.69 b. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 149,145 6,100 DLHs $ 24.45 per DLH Product testing $ 106,304 1,100 tests $ 96.64 per test Order size $ 290,580 6,000 MHs $ 48.43 per MH Computation of the overhead cost per unit under activity-based costing. Product U6 Product K9 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $24.45 per DLH 1,600 $39,120 4,500 $110,025 Product testing, at $96.64 per test 500 48,320 600 57,984 Order size, $48.43 per MH 3,100 150,133 2,900 140,447 Total overhead costs assigned (a) $237,573 $308,456 Number of units produced (b) 200 500 Overhead cost per unit (a) ÷ (b) $1,187.87 $616.91 Computation of unit product costs under activity-based costing. Product U6 Product K9 Direct materials $292.50 $138.80 Direct labor: Product U6: (8.0 DLHs × $28.70 per DLH) 229.60 Product K9: (9.0 DLHs × $28.70 per DLH) 258.30 Overhead 1,187.87 616.91 Unit product cost $1,709.97 $1,014.01 Difficulty: 3 Hard Topic: Computing Activity Rates; Computing Product Costs; Shifting of Overhead Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 214) Dooms, Inc., manufactures and sells two products: Product Y7 and Product I5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Y7 800 7.0 5,600 Product I5 100 4.0 400 Total direct labor-hours 6,000 The direct labor rate is $27.50 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product Y7 $159.80 Product I5 $141.20 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Y7 Product I5 Total Labor-related DLHs $ 271,020 5,600 400 6,000 Machine setups Setups 66,027 600 700 1,300 Order size MHs 438,738 4,3000 4,800 8,300 $ 775,785 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. Determine the unit product cost of each product under the company's traditional costing method. b. Determine the unit product cost of each product under the activity-based costing method. --answer: a. Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $775,785 ÷ 6,000 DLHs = $129.30 per DLH (rounded) Computation of overhead applied to each product: Product Y7 Product I5 Manufacturing overhead: Product Y7: (7.0 DLHs × $129.30 per DLH) $905.10 Product I5: (4.0 DLHs × $129.30 per DLH) $517.20 Computation of traditional unit product costs: Product Y7 Product I5 Direct materials $159.80 $141.20 Direct labor: Product Y7: (7.0 DLHs × $27.50 per DLH) 192.50 Product I5: (4.0 DLHs × $27.50 per DLH) 110.00 Manufacturing overhead: Product Y7: (7.0 DLHs × $129.30 per DLH) 905.10 Product I5: (4.0 DLHs × $129.30 per DLH) 517.20 Unit product cost $1,257.40 $768.40 b. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 271,020 6,000 DLHs $ 45.17 per DLH Machine setups $ 66,027 1,300 setups $ 50.79 per setup Order size $ 438,738 8,300 MHs $ 52.86 per MH Computation of the overhead cost per unit under activity-based costing. Product Y7 Product I5 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $45.17 per DLH 5,600 $252,952 400 $18,068 Machine setups, at $50.79 per setup 600 30,474 700 35,553 Order size, $52.86 per MH 4,300 227,298 4,000 211,440 Total overhead costs assigned (a) $510,724 $265,061 Number of units produced (b) 800 100 Overhead cost per unit (a) ÷ (b) $638.41 $2,650.61 Computation of unit product costs under activity-based costing. Product Y7 Product I5 Direct materials $159.80 $141.20 Direct labor: Product Y7: (7.0 DLHs × $27.50 per DLH) 192.50 Product I5: (4.0 DLHs × $27.50 per DLH) 110.00 Overhead 638.41 2,650.61 Unit product cost $990.71 $2,901.81 Difficulty: 3 Hard Topic: Computing Activity Rates; Computing Product Costs; Shifting of Overhead Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 216) Kilby, Inc., manufactures and sells two products: Product H2 and Product C8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product H2 900 8.0 7,200 Product C8 1,000 10.0 10,000 Total direct labor-hours 17,200 The direct labor rate is $28.50 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product H2 $207.50 Product C8 $204.80 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product H2 Product C8 Total Labor-related DLHs $ 719,648 7,200 10,000 77,200 Production orders Orders 47,992 400 300 700 Order size MHs 152,44 3,200 2,900 6,100 $ 920,384 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. Determine the unit product cost of each product under the company's traditional costing method. b. Determine the unit product cost of each product under the activity-based costing method. --answer: a. Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $920,384 ÷ 17,200 DLHs = $53.51 per DLH (rounded) Computation of overhead applied to each product: Product H2 Product C8 Manufacturing overhead: Product H2: (8.0 DLHs × $53.51 per DLH) $428.08 Product C8: (10.0 DLHs × $53.51 per DLH) $535.10 Computation of traditional unit product costs: Product H2 Product C8 Direct materials $207.50 $204.80 Direct labor: Product H2: (8.0 DLHs × $28.50 per DLH) 228.00 Product C8: (10.0 DLHs × $28.50 per DLH) 285.00 Manufacturing overhead: Product H2: (8.0 DLHs × $53.51 per DLH) 428.08 Product C8: (10.0 DLHs × $53.51 per DLH) 535.10 Unit product cost $863.58 $1,024.90 b. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 719,648 17,200 DLHs $ 41.84 per DLH Production orders $ 47,992 700 orders $ 68.56 per order Order size $ 152,744 6,100 MHs $ 25.04 per MH Computation of the overhead cost per unit under activity-based costing. Product H2 Product C8 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $41.84 per DLH 7,200 $301,248 10,000 $418,400 Production orders, at $68.56 per order 400 27,424 300 20,568 Order size, $25.04 per MH 3,200 80,128 2,900 72,616 Total overhead costs assigned (a) $408,800 $511,584 Number of units produced (b) 900 1000 Overhead cost per unit (a) ÷ (b) $454.22 $511.58 Computation of unit product costs under activity-based costing. Product H2 Product C8 Direct materials $207.50 $204.80 Direct labor: Product H2: (8.0 DLHs × $28.50 per DLH) 228.00 Product C8: (10.0 DLHs × $28.50 per DLH) 285.00 Overhead 454.22 511.58 Unit product cost $889.72 $1,001.38 Difficulty: 3 Hard Topic: Computing Activity Rates; Computing Product Costs; Shifting of Overhead Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 218) Kerin, Inc., manufactures and sells two products: Product E6 and Product B6. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product E6 400 8.0 3,200 Product B6 900 10.0 9,000 Total direct labor-hours 12,200 The direct labor rate is $21.50 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product E6 $129.70 Product B6 $157.20 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product E6 Product B6 Total Labor-related DLHs $ 405,528 3,200 9,000 12,200 Machine setups Setups 48,804 400 300 700 Order size MHs 403,275 3,600 3,900 7,500 $ 857,607 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. The company currently uses a traditional costing method in which overhead is applied to products based solely on direct labor-hours. Compute the company's predetermined overhead rate under this costing method. b. How much overhead would be applied to each product under the company's traditional costing method? c. Determine the unit product cost of each product under the company's traditional costing method. d. Compute the activity rates under the activity-based costing system. e. Determine how much overhead would be assigned to each product under the activity-based costing system. f. Determine the unit product cost of each product under the activity-based costing method. --answer: a. Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $857,607 ÷ 12,200 DLHs = $70.30 per DLH (rounded) b. Computation of overhead applied to each product: Product E6 Product B6 Manufacturing overhead: Product E6: (8.0 DLHs × $70.30 per DLH) $562.40 Product B6: (10.0 DLHs × $70.30 per DLH) $703.00 c. Computation of traditional unit product costs: Product E6 Product B6 Direct materials $129.70 $157.20 Direct labor: Product E6: (8.0 DLHs × $21.50 per DLH) 172.00 Product B6: (10.0 DLHs × $21.50 per DLH) 215.00 Manufacturing overhead: Product E6: (8.0 DLHs × $70.30 per DLH) 562.40 Product B6: (10.0 DLHs × $70.30 per DLH) 703.00 Unit product cost $864.10 $1,075.20 d. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 405,528 12,200 DLHs $ 33.24 per DLH Machine setups $ 48,804 700 setups $ 69.72 per setup Order size $ 403,275 7,500 MHs $ 53.77 per MH e. Computation of the overhead cost per unit under activity-based costing. Product E6 Product B6 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $33.24 per DLH 3,200 $106,368 9,000 $299,160 Machine setups, at $69.72 per setup 400 27,888 300 20,916 Order size, $53.77 per MH 3,600 193,572 3,900 209,703 Total overhead costs assigned (a) $327,828 $529,779 Number of units produced (b) 400 900 Overhead cost per unit (a) ÷ (b) $819.57 $588.64 f. Computation of unit product costs under activity-based costing. Product E6 Product B6 Direct materials $129.70 $157.20 Direct labor: Product E6: (8.0 DLHs × $21.50 per DLH) 172.00 Product B6: (10.0 DLHs × $21.50 per DLH) 215.00 Overhead 819.57 588.64 Unit product cost $1,121.27 $960.84 Difficulty: 3 Hard Topic: Computing Activity Rates; Computing Product Costs; Shifting of Overhead Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 219) Gatten, Inc., manufactures and sells two products: Product I9 and Product D2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product I9 800 7.0 5,600 Product D2 700 4.0 2,800 Total direct labor-hours 8,400 The direct labor rate is $19.10 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product I9 $298.60 Product D2 $102.90 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product I9 Product D2 Total Labor-related DLHs $ 151,872 5,600 2,800 8,400 Production orders Orders 41,575 300 200 500 Order size MHs 905,972 4,600 4,800 9,400 $ 1,099,419 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. The company currently uses a traditional costing method in which overhead is applied to products based solely on direct labor-hours. Compute the company's predetermined overhead rate under this costing method. b. How much overhead would be applied to each product under the company's traditional costing method? c. Determine the unit product cost of each product under the company's traditional costing method. d. Compute the activity rates under the activity-based costing system. e. Determine how much overhead would be assigned to each product under the activity-based costing system. f. Determine the unit product cost of each product under the activity-based costing method. --answer: a. Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,099,419 ÷ 8,400 DLHs = $130.88 per DLH (rounded) b. Computation of overhead applied to each product: Product I9 Product D2 Manufacturing overhead: Product I9: (7.0 DLHs × $130.88 per DLH) $916.16 Product D2: (4.0 DLHs × $130.88 per DLH) $523.52 c. Computation of traditional unit product costs: Product I9 Product D2 Direct materials $298.60 $102.90 Direct labor: Product I9: (7.0 DLHs × $19.10 per DLH) 133.70 Product D2: (4.0 DLHs × $19.10 per DLH) 76.40 Manufacturing overhead: Product I9: (7.0 DLHs × $130.88 per DLH) 916.16 Product D2: (4.0 DLHs × $130.88 per DLH) 523.52 Unit product cost $1,348.46 $702.82 d. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 151,872 8,400 DLHs $ 18.08 per DLH Production orders $ 41,575 500 orders $ 83.15 per order Order size $ 905,972 9,400 MHs $ 96.38 per MH e. Computation of the overhead cost per unit under activity-based costing. Product I9 Product D2 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $18.08 per DLH 5,600 $101,248 2,800 $50,624 Production orders, at $83.15 per order 300 24,945 200 16,630 Order size, $96.38 per MH 4,600 443,348 4,800 462,624 Total overhead costs assigned (a) $569,541 $529,878 Number of units produced (b) 800 700 Overhead cost per unit (a) ÷ (b) $711.93 $756.97 f. Computation of unit product costs under activity-based costing. Product I9 Product D2 Direct materials $298.60 $102.90 Direct labor: Product I9: (7.0 DLHs × $19.10 per DLH) 133.70 Product D2: (4.0 DLHs × $19.10 per DLH) 76.40 Overhead 711.93 756.97 Unit product cost $1,144.23 $936.27 Difficulty: 3 Hard Topic: Computing Activity Rates; Computing Product Costs; Shifting of Overhead Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 220) Reitler, Inc., manufactures and sells two products: Product A2 and Product N7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product A2 100 7.0 700 Product N7 800 9.0 7,200 Total direct labor-hours 7,900 The direct labor rate is $26.80 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product A2 $151.60 Product N7 $205.00 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product A2 Product N7 Total Labor-related DLHs $ 361,267 700 7,200 7,900 Product testing Tests 49,777 300 400 700 Order size MHs 263,736 4,500 4,300 8,800 $ 674,780 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. The company currently uses a traditional costing method in which overhead is applied to products based solely on direct labor-hours. Compute the company's predetermined overhead rate under this costing method. b. How much overhead would be applied to each product under the company's traditional costing method? c. Determine the unit product cost of each product under the company's traditional costing method. d. Compute the activity rates under the activity-based costing system. e. Determine how much overhead would be assigned to each product under the activity-based costing system. f. Determine the unit product cost of each product under the activity-based costing method. --answer: a. Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $674,780 ÷ 7,900 DLHs = $85.42 per DLH (rounded) b. Computation of overhead applied to each product: Product A2 Product N7 Manufacturing overhead: Product A2: (7.0 DLHs × $85.42 per DLH) $597.94 Product N7: (9.0 DLHs × $85.42 per DLH) $768.78 c. Computation of traditional unit product costs: Product A2 Product N7 Direct materials $151.60 $205.00 Direct labor: Product A2: (7.0 DLHs × $26.80 per DLH) 187.60 Product N7: (9.0 DLHs × $26.80 per DLH) 241.20 Manufacturing overhead: Product A2: (7.0 DLHs × $85.42 per DLH) 597.94 Product N7: (9.0 DLHs × $85.42 per DLH) 768.78 Unit product cost $937.14 $1,214.98 d. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 361,267 7,900 DLHs $ 45.73 per DLH Product testing $ 49,777 700 tests $ 71.11 per test Order size $ 263,736 8,800 MHs $ 29.97 per MH e. Computation of the overhead cost per unit under activity-based costing. Product A2 Product N7 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $45.73 per DLH 700 $32,011 7,200 $329,256 Product testing, at $71.11 per test 300 21,333 400 28,444 Order size, $29.97 per MH 4,500 134,865 4,300 128,871 Total overhead costs assigned (a) $188,209 $486,571 Number of units produced (b) 100 800 Overhead cost per unit (a) ÷ (b) $1,882.09 $608.21 f. Computation of unit product costs under activity-based costing. Product A2 Product N7 Direct materials $151.60 $205.00 Direct labor: Product A2: (7.0 DLHs × $26.80 per DLH) 187.60 Product N7: (9.0 DLHs × $26.80 per DLH) 241.20 Overhead 1,882.09 608.21 Unit product cost $2,221.29 $1,054.41 Difficulty: 3 Hard Topic: Computing Activity Rates; Computing Product Costs; Shifting of Overhead Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 223) Thingvold, Inc., manufactures and sells two products: Product W8 and Product T0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product W8 500 7.0 3,500 Product T0 800 6.0 4,800 Total direct labor-hours 8,300 The direct labor rate is $24.80 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product W8 $229.40 Product T0 $112.30 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product W8 Product T0 Total Labor-related DLHs $ 337,312 3,500 4,800 8,300 Machine setups Setups 49,850 400 600 1,000 Order size MHs 636,172 4,500 4,400 8,900 $ 1,023,334 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. The company currently uses a traditional costing method in which overhead is applied to products based solely on direct labor-hours. Compute the company's predetermined overhead rate under this costing method. b. How much overhead would be applied to each product under the company's traditional costing method? c. Determine the unit product cost of each product under the company's traditional costing method. d. Compute the activity rates under the activity-based costing system. e. Determine how much overhead would be assigned to each product under the activity-based costing system. f. Determine the unit product cost of each product under the activity-based costing method. g. What is the difference between the overhead per unit under the traditional costing method and the activity-based costing system for each of the two products? h. What is the difference between the unit product costs under the traditional costing method and the activity-based costing system for each of the two products? --answer: a. Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,023,334 ÷ 8,300 DLHs = $123.29 per DLH (rounded) b. Computation of overhead applied to each product: Product W8 Product T0 Manufacturing overhead: Product W8: (7.0 DLHs × $123.29 per DLH) $863.03 Product T0: (6.0 DLHs × $123.29 per DLH) $739.74 c. Computation of traditional unit product costs: Product W8 Product T0 Direct materials $229.40 $112.30 Direct labor: Product W8: (7.0 DLHs × $24.80 per DLH) 173.60 Product T0: (6.0 DLHs × $24.80 per DLH) 148.80 Manufacturing overhead: Product W8: (7.0 DLHs × $123.29 per DLH) 863.03 Product T0: (6.0 DLHs × $123.29 per DLH) 739.74 Unit product cost $1,266.03 $1,000.84 d. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 337,312 8,300 DLHs $ 40.64 per DLH Machine setups $ 49,850 1,000 setups $ 49.85 per setup Order size $ 636,172 8,900 MHs $ 71.48 per MH e. Computation of the overhead cost per unit under activity-based costing. Product W8 Product T0 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $40.64 per DLH 3,500 $142,240 4,800 $195,072 Machine setups, at $49.85 per setup 400 19,940 600 29,910 Order size, $71.48 per MH 4,500 321,660 4,400 314,512 Total overhead costs assigned (a) $483,840 $539,494 Number of units produced (b) 500 800 Overhead cost per unit (a) ÷ (b) $967.68 $674.37 f. Computation of unit product costs under activity-based costing. Product W8 Product T0 Direct materials $229.40 $112.30 Direct labor: Product W8: (7.0 DLHs × $24.80 per DLH) 173.60 Product T0: (6.0 DLHs × $24.80 per DLH) 148.80 Overhead 967.68 674.37 Unit product cost $1,370.68 $935.47 g. The difference in overhead per unit is: Product W8 Product T0 Traditional overhead cost per unit $863.03 $739.74 ABC overhead cost per unit 967.68 674.37 Difference $(104.65) $65.37 h. The difference in unit product costs is: Product W8 Product T0 Traditional unit product cost $1,266.03 $1,000.84 ABC unit product cost 1,370.68 935.47 Difference $(104.65) $65.37 The unit product cost of Product W8 under traditional costing is less than its unit product cost under activity-based costing by $104.65. The unit product cost of Product T0 under traditional costing is greater than its unit product under activity-based costing by $65.37. Note that these differences in unit product costs are entirely explained by the differences in overhead costs between the two methods. Difficulty: 3 Hard Topic: Computing Activity Rates; Computing Product Costs; Shifting of Overhead Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 224) Busche, Inc., manufactures and sells two products: Product G4 and Product I2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product G4 600 7.0 4,200 Product I2 300 4.0 1,200 Total direct labor-hours 5,400 The direct labor rate is $23.70 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product G4 $215.40 Product I2 $259.00 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product G4 Product I2 Total Labor-related DLHs $ 84,618 4,200 1,8200 5,400 Product testing Tests 14,042 400 300 700 Order size MHs 334,907 3,600 3,500 7,100 $ 433,567 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. The company currently uses a traditional costing method in which overhead is applied to products based solely on direct labor-hours. Compute the company's predetermined overhead rate under this costing method. b. How much overhead would be applied to each product under the company's traditional costing method? c. Determine the unit product cost of each product under the company's traditional costing method. d. Compute the activity rates under the activity-based costing system. e. Determine how much overhead would be assigned to each product under the activity-based costing system. f. Determine the unit product cost of each product under the activity-based costing method. g. What is the difference between the overhead per unit under the traditional costing method and the activity-based costing system for each of the two products? h. What is the difference between the unit product costs under the traditional costing method and the activity-based costing system for each of the two products? --answer: a. Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $433,567 ÷ 5,400 DLHs = $80.29 per DLH (rounded) b. Computation of overhead applied to each product: Product G4 Product I2 Manufacturing overhead: Product G4: (7.0 DLHs × $80.29 per DLH) $562.03 Product I2: (4.0 DLHs × $80.29 per DLH) $321.16 c. Computation of traditional unit product costs: Product G4 Product I2 Direct materials $215.40 $259.00 Direct labor: Product G4: (7.0 DLHs × $23.70 per DLH) 165.90 Product I2: (4.0 DLHs × $23.70 per DLH) 94.80 Manufacturing overhead: Product G4: (7.0 DLHs × $80.29 per DLH) 562.03 Product I2: (4.0 DLHs × $80.29 per DLH) 321.16 Unit product cost $943.33 $674.96 d. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 84,618 5,400 DLHs $ 15.67 per DLH Product testing $ 14,042 700 tests $ 20.06 per test Order size $ 334,907 7,100 MHs $ 47.17 per MH e. Computation of the overhead cost per unit under activity-based costing. Product G4 Product I2 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $15.67 per DLH 4,200 $65,814 1,200 $18,804 Product testing, at $20.06 per test 400 8,024 300 6,018 Order size, $47.17 per MH 3,600 169,812 3,500 165,095 Total overhead costs assigned (a) $243,650 $189,917 Number of units produced (b) 600 300 Overhead cost per unit (a) ÷ (b) $406.08 $633.06 f. Computation of unit product costs under activity-based costing. Product G4 Product I2 Direct materials $215.40 $259.00 Direct labor: Product G4: (7.0 DLHs × $23.70 per DLH) 165.90 Product I2: (4.0 DLHs × $23.70 per DLH) 94.80 Overhead 406.08 633.06 Unit product cost $787.38 $986.86 g. The difference in overhead per unit is: Product G4 Product I2 Traditional overhead cost per unit $562.03 $321.16 ABC overhead cost per unit 406.08 633.06 Difference $155.95 $(311.90) h. The difference in unit product costs is: Product G4 Product I2 Traditional unit product cost $943.33 $674.96 ABC unit product cost 787.38 986.86 Difference $155.95 $(311.90) The unit product cost of Product G4 under traditional costing is greater than its unit product under activity-based costing by $155.95. The unit product cost of Product I2 under traditional costing is less than its unit product cost under activity-based costing by $311.90. Note that these differences in unit product costs are entirely explained by the differences in overhead costs between the two methods. Difficulty: 3 Hard Topic: Computing Activity Rates; Computing Product Costs; Shifting of Overhead Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 215) Faiella, Inc., manufactures and sells two products: Product S9 and Product G3. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product S9 1,000 8.0 8,000 Product G3 100 6.0 600 Total direct labor-hours 8,600 The direct labor rate is $21.90 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product S9 $196.40 Product G3 $294.60 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product S9 Product G3 Total Labor-related DLHs $ 265,052 8,000 600 8,600 Production orders Orders 82,570 400 600 1,000 Order size MHs 482,790 4,900 4,600 9,500 $ 830,412 Required: In all computations involving dollars in the following requirements, round off your

answer to the nearest whole cent. a. The company currently uses a traditional costing method in which overhead is applied to products based solely on direct labor-hours. Compute the company's predetermined overhead rate under this costing method. b. How much overhead would be applied to each product under the company's traditional costing method? c. Determine the unit product cost of each product under the company's traditional costing method. d. Compute the activity rates under the activity-based costing system. e. Determine how much overhead would be assigned to each product under the activity-based costing system. f. Determine the unit product cost of each product under the activity-based costing method. g. What is the difference between the overhead per unit under the traditional costing method and the activity-based costing system for each of the two products? h. What is the difference between the unit product costs under the traditional costing method and the activity-based costing system for each of the two products? --answer: a. Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $830,412 ÷ 8,600 DLHs = $96.56 per DLH (rounded) b. Computation of overhead applied to each product: Product S9 Product G3 Manufacturing overhead: Product S9: (8.0 DLHs × $96.56 per DLH) $772.48 Product G3: (6.0 DLHs × $96.56 per DLH) $579.36 c. Computation of traditional unit product costs: Product S9 Product G3 Direct materials $196.40 $294.60 Direct labor: Product S9: (8.0 DLHs × $21.90 per DLH) 175.20 Product G3: (6.0 DLHs × $21.90 per DLH) 131.40 Manufacturing overhead: Product S9: (8.0 DLHs × $96.56 per DLH) 772.48 Product G3: (6.0 DLHs × $96.56 per DLH) 579.36 Unit product cost $1,144.08 $1,005.36 d. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 265,052 8,600 DLHs $ 30.82 per DLH Production orders $ 82,570 1,000 orders $ 82.57 per order Order size $ 482,790 9,500 MHs $ 50.82 per MH e. Computation of the overhead cost per unit under activity-based costing. Product S9 Product G3 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $30.82 per DLH 8,000 $246,560 600 $18,492 Production orders, at $82.57 per order 400 33,028 600 49,542 Order size, $50.82 per MH 4,900 249,018 4,600 233,772 Total overhead costs assigned (a) $528,606 $301,806 Number of units produced (b) 1000 100 Overhead cost per unit (a) ÷ (b) $528.61 $3,018.06 f. Computation of unit product costs under activity-based costing. Product S9 Product G3 Direct materials $196.40 $294.60 Direct labor: Product S9: (8.0 DLHs × $21.90 per DLH) 175.20 Product G3: (6.0 DLHs × $21.90 per DLH) 131.40 Overhead 528.61 3,018.06 Unit product cost $900.21 $3,444.06 g. The difference in overhead per unit is: Product S9 Product G3 Traditional overhead cost per unit $772.48 $579.36 ABC overhead cost per unit 528.61 3,018.06 Difference $243.87 $(2,438.70) h. The difference in unit product costs is: Product S9 Product G3 Traditional unit product cost $1,144.08 $1,005.36 ABC unit product cost 900.21 3,444.06 Difference $243.87 $(2,438.70) The unit product cost of Product S9 under traditional costing is greater than its unit product under activity-based costing by $243.87. The unit product cost of Product G3 under traditional costing is less than its unit product cost under activity-based costing by $2,438.70. Note that these differences in unit product costs are entirely explained by the differences in overhead costs between the two methods. Difficulty: 3 Hard Topic: Computing Activity Rates; Computing Product Costs; Shifting of Overhead Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 200) Data concerning three of Kilmon Corporation's activity cost pools appear below: Activity Cost Pools Estimated Overhead Cost Expected Activity Assembling products $150,300 8,350 assembly hours Designing products $1,177,535 7,597 product design hours Setting up batches $14,400 600 batch set-ups Required: Compute the activity rates for each of the three cost pools. Show your work!

answer: Estimated Overhead Cost Expected Activity Activity Rate Assembling products $150,300 8,350 assembly hours $18 per assembly hour Designing products $1,177,535 7,597 product design hours $155 per product design hour Setting up batches $14,400 600 batch set-ups $24 per batch set-up Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA:

199) Kretlow Corporation has provided the following data from its activity-based costing accounting system: Activity Cost Pools Estimated Overhead Cost Expected Activity Designing products $700,502 3,746 product design hours Setting up batches $12,400 620 batch set-ups Assembling products $125,440 8,960 assembly hours Required: Compute the activity rates for each of the three cost pools. Show your work!

answer: Estimated Overhead Cost Expected Activity Activity Rate Designing products $700,502 3,746 product design hours $187 per product design hour Setting up batches $12,400 620 batch set-ups $20 per batch set-up Assembling products $125,440 8,960 assembly hours $14 per assembly hour Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 229) Archie Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products. Activity Cost Pools Activity Rate Setting up batches $16.68 per batch Processing customer orders $98.60 per customer order Assembling products $7.89 per assembly hour Last year, Product X26X required 18 batches, 4 customer orders, and 103 assembly hours. Required: How much overhead cost would be assigned to Product X26X using the company's activity-based costing system? Show your work!

answer: Setting up batches (18 batches × $16.68 per batch) $300.24 Processing customer orders (4 customer orders × $98.60 per customer order) 394.40 Assembling products (103 assembly hours × $7.89 per assembly hour) 812.67 Total overhead cost $1,507.31 Difficulty: 1 Easy Topic: Computing Product Costs Learning Objective: 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 212) Deveney, Inc., manufactures and sells two products: Product C7 and Product E9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product C7 1,000 6.0 6,000 Product E9 800 7.0 5,600 Total direct labor-hours 11,600 The direct labor rate is $17.20 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product C7 $136.60 Product E9 $297.30 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product C7 Product E9 Total Labor-related DLHs $ 407,044 6,000 5,600 11,600 Product testing Tests 24,673 600 500 1,100 Order size MHs 665,091 3,300 3,600 6,900 $ 1,096,808 Required: Determine the unit product cost of each product under the activity-based costing method.

answer: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 407,044 11,600 DLHs $ 35.09 per DLH Product testing $ 24,673 1,600 tests $ 22.43 per test Order size $ 665,091 6,900 MHs $ 96.39 per MH Computation of the overhead cost per unit under activity-based costing. Product C7 Product E9 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $35.09 per DLH 6,000 $210,540 5,600 $196,504 Product testing, at $22.43 per test 600 13,458 500 11,215 Order size, $96.39 per MH 3,300 318,087 3,600 347,004 Total overhead costs assigned (a) $542,085 $554,723 Number of units produced (b) 1000 800 Overhead cost per unit (a) ÷ (b) $542.09 $693.40 Computation of unit product costs under activity-based costing. Product C7 Product E9 Direct materials $136.60 $297.30 Direct labor: Product C7: (6.0 DLHs × $17.20 per DLH) 103.20 Product E9: (7.0 DLHs × $17.20 per DLH) 120.40 Overhead 542.09 693.40 Unit product cost $781.89 $1,111.10 Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 203) Eberling, Inc., manufactures and sells two products: Product Q9 and Product Z8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Q9 900 8.0 7,200 Product Z8 1,000 7.0 7,000 Total direct labor-hours 14,200 The direct labor rate is $27.70 per DLH. The direct materials cost per unit is $122.40 for Product Q9 and $103.20 for Product Z8. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Q9 Product Z8 Total Labor-related DLHs $ 531,080 7,200 7,000 14,200 Production orders Orders 74,880 600 700 1,300 Order size MHs 541,944 3,800 4,000 7,800 $ 1,147,904 Required: Determine the unit product cost of each product under the activity-based costing method.

answer: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 531,080 14,200 DLHs $ 37.54 per DLH Production orders $ 74,880 1,300 orders $ 57.60 per order Order size $ 541,944 7,800 MHs $ 69.48 per MH Computation of the overhead cost per unit under activity-based costing. Product Q9 Product Z8 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $37.40 per DLH 7,200 $269,280 7,000 $261,800 Production orders, at $57.60 per order 600 34,560 700 40,320 Order size, $69.48 per MH 3,800 264,024 4,000 277,920 Total overhead costs assigned (a) $567,864 $580,040 Number of units produced (b) 900 1000 Overhead cost per unit (a) ÷ (b) $630.96 $580.04 Computation of unit product costs under activity-based costing. Product Q9 Product Z8 Direct materials $122.40 $103.20 Direct labor: Product Q9: (8.0 DLHs × $27.70 per DLH) 221.60 Product Z8: (7.0 DLHs × $27.70 per DLH) 193.90 Overhead 630.96 580.04 Unit product cost $974.96 $877.14 Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 225) Rondeau, Inc., manufactures and sells two products: Product V9 and Product M6. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product V9 500 8.0 4,000 Product M6 800 9.0 7,200 Total direct labor-hours 11,200 The direct labor rate is $25.10 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product V9 $118.00 Product M6 $122.30 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product V9 Product M6 Total Labor-related DLHs $ 386,176 4,000 7,200 11,200 Product testing Tests 82,188 500 400 900 Order size MHs 858,616 4,500 4,300 8,800 $ 858,616 Required: What is the difference between the unit product costs under the traditional costing method and the activity-based costing system for each of the two products?

answer: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,326,980 ÷ 11,200 DLHs = $118.48 per DLH (rounded) Computation of overhead applied to each product: Product V9 Product M6 Manufacturing overhead: Product V9: (8.0 DLHs × $118.48 per DLH) $947.84 Product M6: (9.0 DLHs × $118.48 per DLH) $1,066.32 Computation of traditional unit product costs: Product V9 Product M6 Direct materials $118.00 $122.30 Direct labor: Product V9: (8.0 DLHs × $25.10 per DLH) 200.80 Product M6: (9.0 DLHs × $25.10 per DLH) 225.90 Manufacturing overhead: Product V9: (8.0 DLHs × $118.48 per DLH) 947.84 Product M6: (9.0 DLHs × $118.48 per DLH) 1,066.32 Unit product cost $1,266.64 $1,414.52 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ $386,176 11,200 DLHs $ 34.48 per DLH Product testing $ 82,188 900 tests $ 91.32 per test Order size $ 858,616 8,800 MHs $ $97.57 per MH Computation of the overhead cost per unit under activity-based costing. Product V9 Product M6 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $34.48 per DLH 4,000 $137,920 7,200 $248,256 Product testing, at $91.32 per test 500 45,660 400 36,528 Order size, $97.57 per MH 4,500 439,065 4,300 419,551 Total overhead costs assigned (a) $622,645 $704,335 Number of units produced (b) 500 800 Overhead cost per unit (a) ÷ (b) $1,245.29 $880.42 Computation of unit product costs under activity-based costing. Product V9 Product M6 Direct materials $118.00 $122.30 Direct labor: Product V9: (8.0 DLHs × $25.10 per DLH) 200.80 Product M6: (9.0 DLHs × $25.10 per DLH) 225.90 Overhead 1,245.29 880.42 Unit product cost $1,564.09 $1,228.62 The difference in overhead per unit is: Product V9 Product M6 Traditional overhead cost per unit $947.84 $1,066.32 ABC overhead cost per unit 1,245.29 880.42 Difference $(297.45) $185.90 The difference in unit product costs is: Product V9 Product M6 Traditional unit product cost $1,266.64 $1,414.52 ABC unit product cost 1,564.09 1,228.62 Difference $(297.45) $185.90 The unit product cost of Product V9 under traditional costing is less than its unit product cost under activity-based costing by $297.45. The unit product cost of Product M6 under traditional costing is greater than its unit product under activity-based costing by $185.90. Note that these differences in unit product costs are entirely explained by the differences in overhead costs between the two methods. Difficulty: 3 Hard Topic: Computing Activity Rates; Computing Product Costs; Shifting of Overhead Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 221) Steuart, Inc., manufactures and sells two products: Product T4 and Product H1. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product T4 200 9.0 1,800 Product H1 200 11.0 2,200 Total direct labor-hours 4,000 The direct labor rate is $26.00 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product T4 $120.70 Product H1 $225.80 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product T4 Product H1 Total Labor-related DLHs $ 41,640 1,800 2,200 4,000 Production orders Orders 30,709 300 400 700 Order size MHs 450,138 4,400 4,300 8,700 $ 522,487 Required: What is the difference between the unit product costs under the traditional costing method and the activity-based costing system for each of the two products?

answer: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $522,487 ÷ 4,000 DLHs = $130.62 per DLH (rounded) Computation of overhead applied to each product: Product T4 Product H1 Manufacturing overhead: Product T4: (9.0 DLHs × $130.62 per DLH) $1,175.58 Product H1: (11.0 DLHs × $130.62 per DLH) $1,436.82 Computation of traditional unit product costs: Product T4 Product H1 Direct materials $120.70 $225.80 Direct labor: Product T4: (9.0 DLHs × $26.00 per DLH) 234.00 Product H1: (11.0 DLHs × $26.00 per DLH) 286.00 Manufacturing overhead: Product T4: (9.0 DLHs × $130.62 per DLH) 1,175.58 Product H1: (11.0 DLHs × $130.62 per DLH) 1,436.82 Unit product cost $1,530.28 $1,948.62 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 41,640 4,000 DLHs $ 10.41 per DLH Production orders $ 30,709 700 orders $ 43.87 per order Order size $ 450,138 8,700 MHs $ 51.74 per MH Computation of the overhead cost per unit under activity-based costing. Product T4 Product H1 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $10.41 per DLH 1,800 $18,738 2,200 $22,902 Production orders, at $43.87 per order 300 13,161 400 17,548 Order size, $51.74 per MH 4,400 227,656 4,300 222,482 Total overhead costs assigned (a) $259,555 $262,932 Number of units produced (b) 200 200 Overhead cost per unit (a) ÷ (b) $1,297.78 $1,314.66 Computation of unit product costs under activity-based costing. Product T4 Product H1 Direct materials $120.70 $225.80 Direct labor: Product T4: (9.0 DLHs × $26.00 per DLH) 234.00 Product H1: (11.0 DLHs × $26.00 per DLH) 286.00 Overhead 1,297.78 1,314.66 Unit product cost $1,652.48 $1,826.46 The difference in overhead per unit is: Product T4 Product H1 Traditional overhead cost per unit $1,175.58 $1,436.82 ABC overhead cost per unit 1,297.78 1,314.66 Difference $(122.20) $122.16 The difference in unit product costs is: Product T4 Product H1 Traditional unit product cost $1,530.28 $1,948.62 ABC unit product cost 1,652.48 1,826.46 Difference $(122.20) $122.16 The unit product cost of Product T4 under traditional costing is less than its unit product cost under activity-based costing by $122.20. The unit product cost of Product H1 under traditional costing is greater than its unit product under activity-based costing by $122.16. Note that these differences in unit product costs are entirely explained by the differences in overhead costs between the two methods. Difficulty: 3 Hard Topic: Computing Activity Rates; Computing Product Costs; Shifting of Overhead Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 226) Vescovi, Inc., manufactures and sells two products: Product N4 and Product W6. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product N4 600 7.0 4,200 Product W6 400 5.0 2,000 Total direct labor-hours 6,200 The direct labor rate is $16.20 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product N4 $177.10 Product W6 $215.50 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product N4 Product W6 Total Labor-related DLHs $ 265,298 4,200 2,000 6,200 Machine setups Setups 64,526 500 600 1,100 Order size MHs 440,995 4,400 4,500 8,900 $ 770,819 Required: What is the difference between the unit product costs under the traditional costing method and the activity-based costing system for each of the two products?

answer: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $770,819 ÷ 6,200 DLHs = $124.33 per DLH (rounded) Computation of overhead applied to each product: Product N4 Product W6 Manufacturing overhead: Product N4: (7.0 DLHs × $124.33 per DLH) $870.31 Product W6: (5.0 DLHs × $124.33 per DLH) $621.65 Computation of traditional unit product costs: Product N4 Product W6 Direct materials $177.10 $215.50 Direct labor: Product N4: (7.0 DLHs × $16.20 per DLH) 113.40 Product W6: (5.0 DLHs × $16.20 per DLH) 81.00 Manufacturing overhead: Product N4: (7.0 DLHs × $124.33 per DLH) 870.31 Product W6: (5.0 DLHs × $124.33 per DLH) 621.65 Unit product cost $1,160.81 $918.15 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ $265,298 6,200 DLHs $ $42.79 per DLH Machine setups $ 64,526 1,100 setups $ 58.66 per setup Order size $ 440,995 8,900 MHs $ $49.55 per MH Computation of the overhead cost per unit under activity-based costing. Product N4 Product W6 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $42.79 per DLH 4,200 $179,718 2,000 $85,580 Machine setups, at $58.66 per setup 500 29,330 600 35,196 Order size, $49.55 per MH 4,400 218,020 4,500 222,975 Total overhead costs assigned (a) $427,068 $343,751 Number of units produced (b) 600 400 Overhead cost per unit (a) ÷ (b) $711.78 $859.38 Computation of unit product costs under activity-based costing. Product N4 Product W6 Direct materials $177.10 $215.50 Direct labor: Product N4: (7.0 DLHs × $16.20 per DLH) 113.40 Product W6: (5.0 DLHs × $16.20 per DLH) 81.00 Overhead 711.78 859.38 Unit product cost $1,002.28 $1,155.88 The difference in overhead per unit is: Product N4 Product W6 Traditional overhead cost per unit $870.31 $621.65 ABC overhead cost per unit 711.78 859.38 Difference $158.53 $(237.73) The difference in unit product costs is: Product N4 Product W6 Traditional unit product cost $1,160.81 $918.15 ABC unit product cost 1,002.28 1,155.88 Difference $158.53 $(237.73) The unit product cost of Product N4 under traditional costing is greater than its unit product under activity-based costing by $158.53. The unit product cost of Product W6 under traditional costing is less than its unit product cost under activity-based costing by $237.73. Note that these differences in unit product costs are entirely explained by the differences in overhead costs between the two methods. Difficulty: 3 Hard Topic: Computing Activity Rates; Computing Product Costs; Shifting of Overhead Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 209) Daba Company manufactures two products, Product F and Product G. The company expects to produce and sell 1,400 units of Product F and 1,800 units of Product G during the current year. The company uses activity-based costing to compute unit product costs for external reports. Data relating to the company's three activity cost pools are given below for the current year: Estimated Expected Activity Activity Cost Pools Overhead Costs Product F Product G Total Machine setups $ 10,800 80 setups 100 setups 180 setups Puarchase orders 77,520 510 orders 1,010 orders 1,520 orders Order size 75,920 2,240 hours 3,600 hours 5,840 hours Required: Using the activity-based costing approach, determine the overhead cost per unit for each product.

answer: The activity rates for each activity cost pool are computed as follows: Estimated Overhead Cost Expected Activity Activity Rate Machine setups $10,800 180 setups $60.00 per setup Purchase orders $77,520 1,520 orders $51.00 per order Order size $75,920 5,840 hours $13.00 per hour The overhead cost charged to Product F is: Activity Rate Expected Activity ABC Cost Machine setups $60.00 per setup 80 setups $ 4,800 Purchase orders $51.00 per order 510 orders 26,010 Order size $13.00 per hour 2,240 hours 29,120 Total overhead cost $59,930 The overhead cost charged to Product G is: Activity Rate Expected Activity ABC Cost Machine setups $60.00 per setup 100 setups $ 6,000 Purchase orders $51.00 per order 1,010 orders 51,510 Order size $13.00 per hour 3,600 hours 46,800 Total overhead cost $104,310 Overhead cost per unit: Product F: $59,930 ÷ 1,400 units = $42.81 per unit (rounded) Product G: $104,310 ÷ 1,800 units = $57.95 per unit (rounded) Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 201) Proby, Inc., manufactures and sells two products: Product A7 and Product T0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product A7 200 7.0 1,400 Product T0 100 9.0 900 Total direct labor-hours 2,300 The direct labor rate is $16.90 per DLH. The direct materials cost per unit is $243.90 for Product A7 and $167.60 for Product T0. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product A7 Product T0 Total Labor-related DLHs $ 70,311 1,400 900 2,300 Production orders Orders 39,087 500 400 900 Order size MHs 389,286 4,000 4,100 8,100 $ 498,684 Required: a. Compute the activity rates under the activity-based costing system. b. Determine how much overhead would be assigned to each product under the activity-based costing system. c. Determine the unit product cost of each product under the activity-based costing method.

answer: a. Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 70,311 2,300 DLHs $ 30.57 per DLH Production orders $ 39,087 900 orders $ 43.43 per order Order size $ 389,286 8,100 MHs $ 48.06 per MH b. Computation of the overhead cost per unit under activity-based costing. Product A7 Product T0 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $30.57 per DLH 1,400 $42,798 900 $27,513 Production orders, at $43.43 per order 500 21,715 400 17,372 Order size, $48.06 per MH 4,000 192,240 4,100 197,046 Total overhead costs assigned (a) $256,753 $241,931 Number of units produced (b) 200 100 Overhead cost per unit (a) ÷ (b) $1,283.77 $2,419.31 c. Computation of unit product costs under activity-based costing. Product A7 Product T0 Direct materials $243.90 $167.60 Direct labor: Product A7: (7.0 DLHs × $16.90 per DLH) 118.30 Product T0: (9.0 DLHs × $16.90 per DLH) 152.10 Overhead 1,283.77 2,419.31 Unit product cost $1,645.97 $2,739.01 Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 230) Desjarlais Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products. Activity Cost Pools Activity Rate Setting up batches $32.22 per batch Assembling products $6.13 per assembly hour Processing customer orders $72.75 per customer order Data concerning two products appear below: Product S96U Product Q06F Number of batches 78 24 Number of assembly hours 412 178 Number of customer orders 53 18 Required: a. How much overhead cost would be assigned to Product S96U using the company's activity-based costing system? Show your work! b. How much overhead cost would be assigned to Product Q06F using the company's activity-based costing system? Show your work!

answer: a. Product S96U Setting up batches (78 batches × $32.22 per batch) $2,513.16 Assembling products (412 assembly hours × $6.13 per assembly hour) 2,525.56 Processing customer orders (53 customer orders × $72.75 per customer order) 3,855.75 Total overhead cost $8,894.47 b. Product Q06F Setting up batches (24 batches × $32.22 per batch) $773.28 Assembling products (178 assembly hours × $6.13 per assembly hour) 1,091.14 Processing customer orders (18 customer orders × $72.75 per customer order) 1,309.50 Total overhead cost $3,173.92 Difficulty: 1 Easy Topic: Computing Product Costs Learning Objective: 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 227) Flyer Corporation manufactures two products, Product A and Product B. Product B is of fairly recent origin, having been developed as an attempt to enter a market closely related to that of Product A. Product B is the more complex of the two products, requiring three hours of direct labor time per unit to manufacture compared to one and one-half hours of direct labor time for Product A. Product B is produced on an automated production line. Overhead is currently assigned to the products on the basis of direct-labor-hours. The company estimated it would incur $396,000 in manufacturing overhead costs and produce 5,500 units of Product B and 22,000 units of Product A during the current year. Unit costs for materials and direct labor are: Product A Product B Direct material $9 $20 Direct labor $7 $15 Required: a. Compute the predetermined overhead rate under the current method of allocation and determine the unit product cost of each product for the current year. b. The company's overhead costs can be attributed to four major activities. These activities and the amount of overhead cost attributable to each for the current year are given below: Expected Activity Activity Cost Pools Estimated Overhead Cost Product A Product B Total Machine setups required $170,000 700 1,000 1,700 Purchase orders issued 37,000 300 200 500 Machine-hours required 91,000 4,000 9,000 13,000 Maintenance requests issued 98,000 400 600 1,000 $396,000 Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year.

answer: a. The company expects to work 45,000 direct labor-hours during the current year, computed as follows: Product A: 22,000 units × 1.5 DLHs per unit 33,000 DLHs Product B: 5,500 units × 3.0 DLHs per unit 16,500 DLHs Total direct labor-hours 49,500 DLHs Using these hours as a base, the predetermined overhead using direct labor-hours would be: Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $396,000 ÷ 49,500 DLHs = $8.00 per DLH Using this overhead rate, the unit product cost of each product would be: Product A Product B Direct materials $9 $20 Direct labor 7 15 Manufacturing overhead: Product A: 1.5 DLH × $8 per DLH 12 Product B: 3 DLHs × $8 per DLH 24 Unit product cost $28 $59 b. The overhead rates are computed as follows: Activity Cost Pools Estimated Overhead Cost Expected Activity Activity Rate Machine setups $170,000 1,700 setups $100 per setup Purchase orders $37,000 500 orders $74 per order Machine-hours $91,000 13,000 hours $7 per hour Maintenance requests $98,000 1,000 requests $98 per request The overhead cost charged to each product is: The overhead cost charged to Product A is: Activity Cost Pools Activity Rate Activity ABC Cost Machine setups $100 per setup 700 setups $70,000 Purchase orders $74 per order 300 orders 22,200 Machine-hours $7 per hour 4,000 hours 28,000 Maintenance requests $98 per request 400 requests 39,200 $159,400 Overhead cost per unit of Product A = $159,400 ÷ 22,000 units = $7.25 per unit (rounded) The overhead cost charged to Product B is: Activity Cost Pools Activity Rate Activity ABC Cost Machine setups $100 per setup 1,000 setups $100,000 Purchase orders $74 per order 200 orders 14,800 Machine-hours $7 per hour 9,000 hours 63,000 Maintenance requests $98 per request 600 requests 58,800 $236,600 Overhead cost per unit of Product B = $236,600 ÷ 5,500 units = $43.02 per unit (rounded) Using activity-based costing, the unit product cost of each product would be: Product A Product B Direct materials $9.00 $20.00 Direct labor 7.00 15.00 Manufacturing overhead 7.25 43.02 Unit product cost $23.25 $78.02 Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 222) Cabio Company manufactures two products, Product C and Product D. The company estimated it would incur $119,100 in manufacturing overhead costs during the current period. Overhead currently is applied to the products on the basis of direct labor-hours. Data concerning the current period's operations appear below: Product C Product D Estimated volume 400 units 3,000 units Direct labor-hours per unit 1.20 hours 1.30 hour Direct materials cost per unit $4.00 $22.80 Direct labor cost per unit $12.00 $13.00 Required: a. Compute the predetermined overhead rate under the current method, and determine the unit product cost of each product for the current year. b. The company is considering using an activity-based costing system to compute unit product costs for external financial reports instead of its traditional system based on direct labor-hours. The activity-based costing system would use three activity cost pools. Data relating to these activities for the current period are given below: Estimated Expected Activity Activity Cost Pools Overhead Costs Product C Product D Total Machine setups $ 10,440 60 120 180 Puarchase orders 78,000 820 1,180 2,000 Order size 30,660 480 3,900 4,380 Total $119,100 Determine the unit product cost of each product for the current period using the activity-based costing approach.

answer: a. The expected total direct labor hours during the period are computed as follows: Product C: 400 units × 1.2 hours per unit 480 hours Product D: 3,000 units × 1.3 hours per unit 3,900 hours Total direct labor hours 4,380 hours Using these hours as a base, the predetermined overhead using direct labor hours would be: Predetermined overhead rate = Estimated overhead cost ÷ Expected direct labor hours = $119,100 ÷ 4,380 DLHs = $27.19 per DLH Using this overhead rate, the unit product costs are: Product C Product D Direct materials $4.00 $22.80 Direct labor 12.00 13.00 Manufacturing overhead 32.63 35.35 Total unit product cost $48.63 $71.15 b. The overhead rates for each activity center are as follows: Estimated Overhead Costs Expected Activity Overhead Rate Machine setups $10,440 180 $58.00 Purchase orders $78,000 2,000 $39.00 Order size $30,660 4,380 $7.00 The overhead cost charged to each product is: Product C Product D Activity Amount Activity Amount Machine setups 60 $3,480 120 $6,960 Purchase orders 820 31,980 1,180 46,020 Order size 480 3,360 3,900 27,300 Total overhead cost $38,820 $80,280 Overhead cost per unit: Product C: $38,820 ÷ 400 units = $97.05 per unit Product D: $80,280 ÷ 3,000 units = $26.76 per unit Using activity-based costing, the unit product cost of each product would be: Product C Product D Direct materials $4.00 $22.80 Direct labor 12.00 13.00 Manufacturing overhead 97.05 26.76 Total unit product cost $113.05 $62.56 Difficulty: 3 Hard Topic: Computing Activity Rates; Computing Product Costs; Shifting of Overhead Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA:

65) Brizendine, Inc., manufactures and sells two products: Product R0 and Product B6. The production of Product R0 is 900 units and of Product B6 is 700 units. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product R0 Product B6 Total Labor-related DLHs $ 507,394 7,200 3,500 10,700 Product testing tests 9,464 300 500 800 Order size MHs 501,205 3,100 2,800 5,900 $ 1,018,063 The overhead applied to each unit of Product R0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $675.91 per unit B) $292.61 per unit C) $761.20 per unit D) $636.29 per unit

answer: A Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 507,394 10,700 DLHs $ 47.42 per DLH Product testing $ 9,464 800 tests $ 11.83 per test Order size $ 501,205 5,900 MHs $ 84.95 per MH Computation of the overhead cost per unit under activity-based costing. Product R0 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $47.42 per DLH 7,200 $ 341,424 Product testing, at $11.83 per test 300 3,549 Order size, $84.95 per MH 3,100 263,345 Total overhead costs assigned (a) $ 608,318 Number of units produced (b) 900 Overhead cost per unit (a) ÷ (b) $ 675.91 Difficulty: 1 Easy Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

64) Skiver, Inc., manufactures and sells two products: Product K5 and Product J2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product K5 800 9.0 7,200 Product J2 1,000 12.0 12,000 Total direct labor-hours 19,200 The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product K5 Product J2 Total Labor-related DLHs $ 682,752 7,200 12,000 19,200 Machine setups setups 17,556 500 600 1,100 Order size MHs 721,342 4,900 5,200 10,100 $ 1,421,650 The total overhead applied to Product K5 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $613,970 B) $533,088 C) $349,960 D) $631,848

answer: A Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 682,752 19,200 DLHs $ 35.56 per DLH Machine setups $ 17,556 1,100 setups $ 15.96 per setup Order size $ 721,342 10,100 MHs $ 71.42 per MH Computation of the overhead cost under activity-based costing. Product K5 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $35.56 per DLH 7,200 $ 256,032 Machine setups, at $15.96 per setup 500 7,980 Order size, $71.42 per MH 4,900 349,958 Total overhead costs assigned $ 613,970 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

142) Teehan, Inc., manufactures and sells two products: Product U2 and Product W5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product U2 400 6.0 2,400 Product W5 200 8.0 1,600 Total direct labor-hours 4,000 The direct labor rate is $20.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product U2 $ 249.40 Product W5 $ 164.40 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product U2 Product W5 Total Labor-related DLHs $ 92,120 2,400 1,600 4,000 Machine setups setups 18,468 500 700 1,200 Order size MHs 202,547 3,100 2,800 5,900 $ 313,135 The overhead applied to each unit of Product W5 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $718.73 per unit B) $626.24 per unit C) $521.89 per unit D) $480.62 per unit

answer: A Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 92,120 4,000 DLHs $ 23.03 per DLH Machine setups $ 18,468 1,200 setups $ 15.39 per setup Order size $ 202,547 5,900 MHs $ 34.33 per MH Computation of the overhead cost per unit under activity-based costing. Product W5 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $23.03 per DLH 1,600 $ 36,848 Machine setups, at $15.39 per setup 700 10,773 Order size, $34.33 per MH 2,800 96,124 Total overhead costs assigned (a) $ 143,745 Number of units produced (b) 200 Overhead cost per unit (a) ÷ (b) $ 718.73 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

146) Vattes, Inc., manufactures and sells two products: Product I5 and Product U1. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product I5 700 7.0 4,900 Product U1 200 4.0 800 Total direct labor-hours 5,700 The direct labor rate is $22.00 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product I5 $ 261.60 Product U1 $ 121.60 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product I5 Product U1 Total Labor-related DLHs $ 268,698 4,900 800 5,700 Machine setups setups 37,324 300 400 700 Order size MHs 633,895 4,900 4,800 9,700 $ 939,917 The overhead applied to each unit of Product U1 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $1,863.60 per unit B) $659.60 per unit C) $1,568.40 per unit D) $1,044.35 per unit

answer: A Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 268,698 5,700 DLHs $ 47.14 per DLH Machine setups $ 37,324 700 setups $ 53.32 per setup Order size $ 633,895 9,700 MHs $ 65.35 per MH Computation of the overhead cost per unit under activity-based costing. Product U1 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $47.14 per DLH 800 $ 37,712 Machine setups, at $53.32 per setup 400 21,328 Order size, $65.35 per MH 4,800 313,680 Total overhead costs assigned (a) $ 372,720 Number of units produced (b) 200 Overhead cost per unit (a) ÷ (b) $ 1,863.60 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

100) Bobzien, Inc., manufactures and sells two products: Product B7 and Product Z5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product B7 300 5.0 1,500 Product Z5 800 3.0 2,400 Total direct labor-hours 3,900 The direct labor rate is $15.10 per DLH. The direct materials cost per unit is $136.20 for Product B7 and $204.40 for Product Z5. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product B7 Product Z5 Total Labor-related DLHs $ 39,585 1,500 2,400 3,900 Production orders orders 26,884 500 600 1,100 Order size MHs 462,768 4,600 4,700 9,300 $ 529,237 The unit product cost of Product B7 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $1,066.17 per unit B) $692.82 per unit C) $974.69 per unit D) $890.20 per unit

answer: A Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 39,585 3,900 DLHs $ 10.15 / DLH Production orders $ 26,884 1,100 orders $ 24.44 / order Order size $ 462,768 9,300 MHs $ 49.76 / MH Computation of the overhead cost per unit under activity-based costing. Product B7 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $10.15 per DLH 1,500 $ 15,225 Production orders, at $24.44 per order 500 12,220 Order size, $49.76 per MH 4,600 228,896 Total overhead costs assigned (a) $ 256,341 Number of units produced (b) 300 Overhead cost per unit (a) ÷ (b) $ 854.47 Computation of unit product costs under activity-based costing. Product B7 Direct materials $ 136.20 Direct labor (5.0 DLHs × $15.10 per DLH) 75.50 Overhead 854.47 Unit product cost $ 1,066.17 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

166) Kroll, Inc., manufactures and sells two products: Product A4 and Product T6. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product A4 800 7.0 5,600 Product T6 300 9.0 2,700 Total direct labor-hours 8,300 The direct labor rate is $21.50 per DLH. The direct materials cost per unit is $212.40 for Product A4 and $295.50 for Product T6. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product A4 Product T6 Total Labor-related DLHs $ 402,550 5,600 2,700 8,300 Production orders orders 61,705 400 300 700 Order size MHs 656,110 3,600 3,400 7,000 $ 1,120,365 The unit product cost of Product A4 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $1,168.26 per unit B) $1,381.41 per unit C) $1,307.76 per unit D) $784.69 per unit

answer: A Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 402,550 8,300 DLHs $ 48.50 / DLH Production orders $ 61,705 700 orders $ 88.15 / order Order size $ 656,110 7,000 MHs $ 93.73 / MH Computation of the overhead cost per unit under activity-based costing. Product A4 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $48.50 per DLH 5,600 $ 271,600 Production orders, at $88.15 per order 400 35,260 Order size, $93.73 per MH 3,600 337,428 Total overhead costs assigned (a) $ 644,288 Number of units produced (b) 800 Overhead cost per unit (a) ÷ (b) $ 805.36 Computation of unit product costs under activity-based costing. Product A4 Direct materials $ 212.40 Direct labor (7.0 DLHs × $21.50 per DLH) 150.50 Overhead 805.36 Unit product cost $ 1,168.26 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

101) Bobzien, Inc., manufactures and sells two products: Product B7 and Product Z5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product B7 300 5.0 1,500 Product Z5 800 3.0 2,400 Total direct labor-hours 3,900 The direct labor rate is $15.10 per DLH. The direct materials cost per unit is $136.20 for Product B7 and $204.40 for Product Z5. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product B7 Product Z5 Total Labor-related DLHs $ 39,585 1,500 2,400 3,900 Production orders orders 26,884 500 600 1,100 Order size MHs 462,768 4,600 4,700 9,300 $ 529,237 The unit product cost of Product Z5 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $590.82 per unit B) $730.82 per unit C) $656.80 per unit D) $542.04 per unit

answer: A Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 39,585 3,900 DLHs $ 10.15 / DLH Production orders $ 26,884 1,100 orders $ 24.44 / order Order size $ 462,768 9,300 MHs $ 49.76 / MH Computation of the overhead cost per unit under activity-based costing. Product Z5 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $10.15 per DLH 2,400 $ 24,360 Production orders, at $24.44 per order 600 14,664 Order size, $49.76 per MH 4,700 233,872 Total overhead costs assigned (a) $ 272,896 Number of units produced (b) 800 Overhead cost per unit (a) ÷ (b) $ 341.12 Computation of unit product costs under activity-based costing. Product Z5 Direct materials $ 204.40 Direct labor (3.0 DLHs × $15.10 per DLH) 45.30 Overhead 341.12 Unit product cost $ 590.82 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

125) Barkes, Inc., manufactures and sells two products: Product B0 and Product B5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product B0 400 7.0 2,800 Product B5 500 4.0 2,000 Total direct labor-hours 4,800 The direct labor rate is $22.10 per DLH. The direct materials cost per unit is $288.10 for Product B0 and $118.90 for Product B5. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product B0 Product B5 Total Labor-related DLHs $ 136,944 2,800 2,000 4,800 Production orders orders 64,629 500 400 900 Order size MHs 588,294 3,300 3,000 6,300 $ 789,867 The total overhead applied to Product B0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $423,943 B) $460,768 C) $308,156 D) $351,052

answer: A Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 136,944 4,800 DLHs $ 28.53 per DLH Production orders $ 64,629 900 orders $ 71.81 per order Order size $ 588,294 6,300 MHs $ 93.38 per MH Computation of the overhead cost under activity-based costing. Product B0 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $28.53 per DLH 2,800 $ 79,884 Production orders, at $71.81 per order 500 35,905 Order size, $93.38 per MH 3,300 308,154 Total overhead costs assigned $ 423,943 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

183) Appleby, Inc., manufactures and sells two products: Product Q9 and Product V8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Q9 800 5.0 4,000 Product V8 1,000 3.0 3,000 Total direct labor-hours 7,000 The direct labor rate is $29.30 per DLH. The direct materials cost per unit is $174.80 for Product Q9 and $168.90 for Product V8. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Q9 Product V8 Total Labor-related DLHs $ 214,480 4,000 3,000 7,000 Production orders orders 41,065 300 200 500 Order size MHs 192,700 4,200 4,000 8,200 $ 448,245 The unit product cost of Product Q9 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $628.67 per unit B) $444.68 per unit C) $641.50 per unit D) $570.33 per unit

answer: A Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 214,480 7,000 DLHs $ 30.64 per DLH Production orders $ 41,065 500 orders $ 82.13 per order Order size $ 192,700 8,200 MHs $ 23.50 per MH Computation of the overhead cost per unit under activity-based costing. Product Q9 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $30.64 per DLH 4,000 $ 122,560 Production orders, at $82.13 per order 300 24,639 Order size, $23.50 per MH 4,200 98,700 Total overhead costs assigned (a) $ 245,899 Number of units produced (b) 800 Overhead cost per unit (a) ÷ (b) $ 307.37 Computation of unit product costs under activity-based costing. Product Q9 Direct materials $ 174.80 Direct labor (5.0 DLHs × $29.30 per DLH) 146.50 Overhead 307.37 Unit product cost $ 628.67 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

106) Harring, Inc., manufactures and sells two products: Product P0 and Product W2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product P0 900 6.0 5,400 Product W2 200 7.0 1,400 Total direct labor-hours 6,800 The direct labor rate is $17.90 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product P0 $ 242.20 Product W2 $ 151.30 The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product P0 Product W2 Total Labor-related DLHs $ 303,144 5,400 1,400 6,800 Machine setups setups 52,332 600 800 1,400 Order size MHs 739,125 4,100 4,000 8,100 $ 1,094,601 The overhead applied to each unit of Product P0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $708.09 per unit B) $415.69 per unit C) $965.82 per unit D) $995.09 per unit

answer: A Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 303,144 6,800 DLHs $ 44.58 /DLH Machine setups $ 52,332 1,400 setups $ 37.38 /setup Order size $ 739,125 8,100 MHs $ 91.25 /MH Computation of the overhead cost per unit under activity-based costing. Product P0 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $44.58 per DLH 5,400 $ 240,732 Machine setups, at $37.38 per setup 600 22,428 Order size, $91.25 per MH 4,100 374,125 Total overhead costs assigned (a) $ 637,285 Number of units produced (b) 900 Overhead cost per unit (a) ÷ (b) $ 708.09 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

167) Kroll, Inc., manufactures and sells two products: Product A4 and Product T6. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product A4 800 7.0 5,600 Product T6 300 9.0 2,700 Total direct labor-hours 8,300 The direct labor rate is $21.50 per DLH. The direct materials cost per unit is $212.40 for Product A4 and $295.50 for Product T6. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product A4 Product T6 Total Labor-related DLHs $ 402,550 5,600 2,700 8,300 Production orders orders 61,705 400 300 700 Order size MHs 656,110 3,600 3,400 7,000 $ 1,120,365 The unit product cost of Product T6 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $2,075.92 per unit B) $1,551.27 per unit C) $1,703.82 per unit D) $1,507.51 per unit

answer: A Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 402,550 8,300 DLHs $ 48.50 per DLH Production orders $ 61,705 700 orders $ 88.15 per order Order size $ 656,110 7,000 MHs $ 93.73 per MH Computation of the overhead cost per unit under activity-based costing. Product T6 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $48.50 per DLH 2,700 $ 130,950 Production orders, at $88.15 per order 300 26,445 Order size, $93.73 per MH 3,400 318,682 Total overhead costs assigned (a) $ 476,077 Number of units produced (b) 300 Overhead cost per unit (a) ÷ (b) $ 1,586.92 Computation of unit product costs under activity-based costing. Product T6 Direct materials $ 295.50 Direct labor (9.0 DLHs × $21.50 per DLH) 193.50 Overhead 1,586.92 Unit product cost $ 2,075.92 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

136) Sivak, Inc., manufactures and sells two products: Product X4 and Product C5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product X4 1,000 8.0 8,000 Product C5 800 11.0 8,800 Total direct labor-hours 16,800 The direct labor rate is $25.10 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product X4 $ 283.10 Product C5 $ 109.30 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product X4 Product C5 Total Labor-related DLHs $ 728,112 8,000 8,800 16,800 Machine setups setups 87,800 400 600 1,000 Order size MHs 243,243 3,100 3,200 6,300 $ 1,059,155 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product C5 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $693.44 per unit B) $965.80 per unit C) $424.71 per unit D) $476.74 per unit

answer: A Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,059,155 ÷ 16,800 DLHs = $63.04 per DLH (rounded) Product C5: 11.0 DLHs × $63.04 per DLH = $693.44 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

177) Gradwell, Inc., manufactures and sells two products: Product K8 and Product I4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product K8 300 5.0 1,500 Product I4 900 3.0 2,700 Total direct labor-hours 4,200 The direct labor rate is $17.20 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product K8 $ 150.20 Product I4 $ 243.70 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product K8 Product I4 Total Labor-related DLHs $ 176,064 1,500 2,700 4,200 Machine setups setups 71,290 400 600 1,000 Order size MHs 121,396 4,300 4,600 8,900 $ 368,750 Which of the following statements concerning the unit product cost of Product I4 is true? (Round your intermediate calculations to 2 decimal places.) A) The unit product cost of Product I4 under traditional costing is greater than its unit product cost under activity-based costing by $20.40. B) The unit product cost of Product I4 under traditional costing is greater than its unit product cost under activity-based costing by $257.16. C) The unit product cost of Product I4 under traditional costing is less than its unit product cost under activity-based costing by $257.16. D) The unit product cost of Product I4 under traditional costing is less than its unit product cost under activity-based costing by $20.40.

answer: A Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $368,750 ÷ 4,200 DLHs = $87.80 per DLH (rounded) Computation of traditional unit product cost: Product I4 Direct materials $ 243.70 Direct labor (3.0 DLHs × $17.20 per DLH) 51.60 Manufacturing overhead (3.0 DLHs × $87.80 per DLH) 263.40 Unit product cost $ 558.70 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 176,064 4,200 DLHs $ 41.92 / DLH Machine setups $ 71,290 1,000 setups $ 71.29 / setup Order size $ 121,396 8,900 MHs $ 13.64 / MH Computation of the overhead cost per unit under activity-based costing. Product I4 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $41.92 per DLH 2,700 $ 113,184 Machine setups, at $71.29 per setup 600 42,774 Order size, $13.64 per MH 4,600 62,744 Total overhead costs assigned (a) $ 218,702 Number of units produced (b) 900 Overhead cost per unit (a) ÷ (b) $ 243.00 Computation of unit product cost under activity-based costing. Product I4 Direct materials $ 243.70 Direct labor 51.60 Overhead 243.00 Unit product cost $ 538.30 The difference in unit product costs is: Product I4 Traditional unit product cost $ 558.70 ABC unit product cost 538.30 Difference $ 20.40 The unit product cost of Product I4 under traditional costing is greater than its unit product cost under activity-based costing by $20.40. Difficulty: 3 Hard Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

127) Gesualdo, Inc., manufactures and sells two products: Product Z6 and Product F4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Z6 300 8.0 2,400 Product F4 600 11.0 6,600 Total direct labor-hours 9,000 The direct labor rate is $24.70 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product Z6 $ 101.00 Product F4 $ 217.20 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Z6 Product F4 Total Labor-related DLHs $ 98,640 2,400 6,600 9,000 Machine setups setups 18,711 500 600 1,100 Order size MHs 388,360 3,800 3,500 7,300 $ 505,711 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product Z6 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $449.52 per unit B) $136.08 per unit C) $87.68 per unit D) $425.60 per unit

answer: A Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $505,711 ÷ 9,000 DLHs = $56.19 per DLH (rounded) Product Z6: 8.0 DLHs × $56.19 per DLH = $449.52 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

170) Cracchiolo, Inc., manufactures and sells two products: Product H2 and Product A8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product H2 200 7.0 1,400 Product A8 800 8.0 6,400 Total direct labor-hours 7,800 The direct labor rate is $15.10 per DLH. The direct materials cost per unit is $145.80 for Product H2 and $261.90 for Product A8. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product H2 Product A8 Total Labor-related DLHs $ 83,148 1,400 6,400 7,800 Production orders orders 18,970 400 300 700 Order size MHs 817,191 5,000 5,100 10,100 $ 919,309 Which of the following statements concerning the unit product cost of Product A8 is true? (Round your intermediate calculations to 2 decimal places.) A) The unit product cost of Product A8 under traditional costing is greater than its unit product cost under activity-based costing by $331.64. B) The unit product cost of Product A8 under traditional costing is less than its unit product cost under activity-based costing by $331.64. C) The unit product cost of Product A8 under traditional costing is less than its unit product cost under activity-based costing by $1,540.33. D) The unit product cost of Product A8 under traditional costing is greater than its unit product cost under activity-based costing by $1,540.33.

answer: A Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $919,309 ÷ 7,800 DLHs = $117.86 per DLH (rounded) Computation of traditional unit product cost: Product A8 Direct materials $ 261.90 Direct labor (8.0 DLHs × $15.10 per DLH) 120.80 Manufacturing overhead (8.0 DLHs × $117.86 per DLH) 942.88 Unit product cost $ 1,325.58 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 83,148 7,800 DLHs $ 10.66 / DLH Production orders $ 18,970 700 orders $ 27.10 / order Order size $ 817,191 10,100 MHs $ 80.91 / MH Computation of the overhead cost per unit under activity-based costing. Product A8 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $10.66 per DLH 6,400 $ 68,224 Production orders, at $27.10 per order 300 8,130 Order size, $80.91 per MH 5,100 412,641 Total overhead costs assigned (a) $ 488,995 Number of units produced (b) 800 Overhead cost per unit (a) ÷ (b) $ 611.24 Computation of unit product cost under activity-based costing. Product A8 Direct materials $ 261.90 Direct labor 120.80 Overhead 611.24 Unit product cost $ 993.94 The difference in unit product costs is: Product A8 Traditional unit product cost $ 1,325.58 ABC unit product cost 993.94 Difference $ 331.64 The unit product cost of Product A8 under traditional costing is greater than its unit product cost under activity-based costing by $331.64. Difficulty: 3 Hard Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

147) Vattes, Inc., manufactures and sells two products: Product I5 and Product U1. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product I5 700 7.0 4,900 Product U1 200 4.0 800 Total direct labor-hours 5,700 The direct labor rate is $22.00 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product I5 $ 261.60 Product U1 $ 121.60 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product I5 Product U1 Total Labor-related DLHs $ 268,698 4,900 800 5,700 Machine setups setups 37,324 300 400 700 Order size MHs 633,895 4,900 4,800 9,700 $ 939,917 Which of the following statements concerning the unit product cost of Product I5 is true? (Round your intermediate calculations to 2 decimal places.) A) The unit product cost of Product I5 under traditional costing is greater than its unit product cost under activity-based costing by $344.02. B) The unit product cost of Product I5 under traditional costing is less than its unit product cost under activity-based costing by $494.70. C) The unit product cost of Product I5 under traditional costing is greater than its unit product cost under activity-based costing by $494.70. D) The unit product cost of Product I5 under traditional costing is less than its unit product cost under activity-based costing by $344.02.

answer: A Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $939,917 ÷ 5,700 DLHs = $164.90 per DLH (rounded) Computation of traditional unit product cost: Product I5 Direct materials $ 261.60 Direct labor (7.0 DLHs × $22.00 per DLH) 154.00 Manufacturing overhead (7.0 DLHs × $164.90 per DLH) 1,154.30 Unit product cost $ 1,569.90 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 268,698 5,700 DLHs $ 47.14 per DLH Machine setups $ 37,324 700 setups $ 53.32 per setup Order size $ 633,895 9,700 MHs $ 65.35 per MH Computation of the overhead cost per unit under activity-based costing. Product I5 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $47.14 per DLH 4,900 $ 230,986 Machine setups, at $53.32 per setup 300 15,996 Order size, $65.35 per MH 4,900 320,215 Total overhead costs assigned (a) $ 567,197 Number of units produced (b) 700 Overhead cost per unit (a) ÷ (b) $ 810.28 Computation of unit product cost under activity-based costing. Product I5 Direct materials $ 261.60 Direct labor 154.00 Overhead 810.28 Unit product cost $ 1,225.88 The difference in unit product costs is: Product I5 Traditional unit product cost $ 1,569.90 ABC unit product cost 1,225.88 Difference $ 344.02 The unit product cost of Product I5 under traditional costing is greater than its unit product cost under activity-based costing by $344.02. Difficulty: 3 Hard Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

60) Banton, Inc., manufactures and sells two products: Product N0 and Product A8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product N0 400 6.0 2,400 Product A8 100 4.0 400 Total direct labor-hours 2,800 The direct labor rate is $16.50 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product N0 $288.50 Product A8 $232.70 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product N0 Product A8 Total Labor-related DLHs $ 77,448 2,400 400 2,800 Machine setups setups 28,064 300 500 800 Order size MHs 359,134 4,000 3,900 7,900 $ 464,646 The unit product cost of Product N0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $1,034.37 per unit B) $1,383.20 per unit C) $842.10 per unit D) $1,316.79 per unit

answer: A Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 77,448 2,800 DLHs $ 27.66 per DLH Machine setups $ 28,064 800 setups $ 35.08 per setup Order size $ 359,134 7,900 MHs $ 45.46 per MH Computation of the overhead cost per unit under activity-based costing. Product N0 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $27.66 per DLH 2,400 $ 66,384 Machine setups, at $35.08 per setup 300 10,524 Order size, $45.46 per MH 4,000 181,840 Total overhead costs assigned (a) $ 258,748 Number of units produced (b) 400 Overhead cost per unit (a) ÷ (b) $ 646.87 Computation of unit product costs under activity-based costing. Product N0 Direct materials $ 288.50 Direct labor (6.0 DLHs × $16.50 per DLH) 99.00 Overhead 646.87 Unit product cost $ 1,034.37 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

107) Harring, Inc., manufactures and sells two products: Product P0 and Product W2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product P0 900 6.0 5,400 Product W2 200 7.0 1,400 Total direct labor-hours 6,800 The direct labor rate is $17.90 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product P0 $ 242.20 Product W2 $ 151.30 The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product P0 Product W2 Total Labor-related DLHs $ 303,144 5,400 1,400 6,800 Machine setups setups 52,332 600 800 1,400 Order size MHs 739,125 4,100 4,000 8,100 $ 1,094,601 The overhead applied to each unit of Product W2 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $2,286.58 per unit B) $1,126.79 per unit C) $995.09 per unit D) $1,825.00 per unit

answer: A Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 303,144 6,800 DLHs $ 44.58 /DLH Machine setups $ 52,332 1,400 setups $ 37.38 /setup Order size $ 739,125 8,100 MHs $ 91.25 /MH Computation of the overhead cost per unit under activity-based costing. Product W2 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $44.58 per DLH 1,400 $ 62,412 Machine setups, at $37.38 per setup 800 29,904 Order size, $91.25 per MH 4,000 365,000 Total overhead costs assigned (a) $ 457,316 Number of units produced (b) 200 Overhead cost per unit (a) ÷ (b) $ 2,286.58 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

67) Belsky Corporation has provided the following data from its activity-based costing system: Activity Cost Pools Estimated Overhead Cost Expected Activity Assembly $ 313,490 29,000 machine-hours Processing orders $ 49,476 1,400 orders Inspection $ 73,882 1,060 inspection-hours The company makes 490 units of product Q19S a year, requiring a total of 1,080 machine-hours, 60 orders, and 20 inspection-hours per year. The product's direct materials cost is $46.42 per unit and its direct labor cost is $20.22 per unit. According to the activity-based costing system, the unit product cost of product Q19S is closest to: (Round your intermediate calculations to 2 decimal places.) A) $97.64 per unit B) $66.64 per unit C) $93.31 per unit D) $94.79 per unit

answer: A Explanation: The activity rates for each activity cost pool are computed as follows: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Assembly $ 313,490 29,000 machine-hours $ 10.81 per machine-hour Processing orders $ 49,476 1,400 orders $ 35.34 per order Inspection $ 73,882 1,060 inspection-hours $ 69.70 per inspection-hour The overhead cost charged to Product Q19S is: Activity Cost Pools and Activity Rates Expected Activity Amount Assembly ($10.81 per machine-hour) 1,080 $ 11,674.80 Processing orders ($35.34 per order) 60 2,120.40 Inspection ($69.70 per inspection-hour) 20 1,394.00 Total overhead costs assigned (a) $ 15,189.20 Number of units produced (b) 490 Overhead cost per unit (a) ÷ (b) $ 31.00 Direct materials $ 46.42 Direct labor 20.22 Manufacturing overhead (see above) 31.00 Unit product cost $ 97.64 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

32) Assembling a product is an example of a: A) Unit-level activity. B) Batch-level activity. C) Product-level activity. D) Facility-level activity.

answer: A Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

40) Which of the following activities would be classified as a batch-level activity? A) Setting up equipment. B) Designing a new product. C) Training employees. D) Milling a part required for the final product.

answer: A Difficulty: 2 Medium Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

41) In activity-based costing, the total activity in an activity cost pool can be computed by: A) dividing the total overhead cost in the activity cost pool by the activity cost pool's activity rate. B) multiplying the total overhead cost in the activity cost pool by the activity cost pool's activity rate. C) dividing the activity cost pool's activity rate by the direct labor-hours required to make a product. D) multiplying the activity cost pool's activity rate by the direct labor-hours required to make a product.

answer: A Difficulty: 3 Hard Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

160) The controller of Hendershot Company estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below: Wall Mirrors Specialty Windows Total expected units produced 6,000 3,000 Total expected material moves 500 100 Expected direct labor-hours per unit 6 9 The total materials handling cost for the year is expected to be $6,123.60. If the materials handling cost is allocated on the basis of material moves, the total materials handling cost allocated to the specialty windows is closest to:(Round your intermediate calculations to 3 decimal places.) A) $1,021 B) $3,674 C) $3,062 D) $1,980

answer: A Explanation: Wall Mirrors Specialty Windows Total Total expected material moves 500 100 600 Cost per material move = Total materials handling cost ÷ Total expected material moves = $6,123.60 ÷ 600 material moves = $10.206 per material move Cost allocated to specialty windows = $10.206 per material move × 100 material moves = $1,020.60 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

56) Lindsey Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 5,000 units and of Product B is 2,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows: Estimated Expected Activity Activity Cost Pools Overhead Cost Product A Product B Total Activity 1 $ 24,000 200 800 1,000 Activity 2 $ 36,900 750 150 900 Activity 3 $ 63,000 1,000 800 1,800 The overhead cost per unit of Product A under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $14.11 B) $13.77 C) $7.00 D) $17.70

answer: A Explanation: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Activity 1 $ 24,000 1,000 $ 24.00 Activity 2 $ 36,900 900 $ 41.00 Activity 3 $ 63,000 1,800 $ 35.00 Activity Cost Pools and Activity Rates Expected Activity Amount Activity 1 ($24) 200 $ 4,800 Activity 2 ($41) 750 30,750 Activity 3 ($35) 1,000 35,000 Total overhead costs assigned (a) $ 70,550 Number of units produced (b) 5,000 Overhead cost per unit (a) ÷ (b) $ 14.11 Difficulty: 3 Hard Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

109) Arthur Company has two products: S and D. The company uses activity-based costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools: Activity Cost Pools Estimated Overhead Cost Expected Activity Product S Product D Total Activity 1 $ 20,000 100 400 500 Activity 2 $ 14,600 500 250 750 Activity 3 $ 90,000 300 2,700 3,000 The annual production and sales of Product S is 4,547 units. The annual production and sales of Product D is 7,913. The overhead cost per unit of Product S under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $5.00 B) $1.98 C) $10.00 D) $1.83

answer: A Explanation: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Activity 1 $ 20,000 500 $ 40.00 Activity 2 $ 14,600 750 $ 19.47 Activity 3 $ 90,000 3,000 $ 30.00 Product S Activity Cost Pools Activity Rate Expected Activity Amount Activity 1 $ 40.00 100 $ 4,000 Activity 2 $ 19.47 500 9,735 Activity 3 $ 30.00 300 9,000 Total overhead costs assigned (a) $ 22,735 Number of units produced (b) 4,547 Overhead cost per unit (a) ÷ (b) $ 5.00 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

185) Merone Company allocates materials handling cost to the company's two products using the below data: Modular Homes Prefab Barns Total expected units produced 5,000 8,000 Total expected material moves 500 100 Expected direct labor-hours per unit 700 200 The total materials handling cost for the year is expected to be $218,790. If the materials handling cost is allocated on the basis of material moves, the total materials handling cost allocated to the modular homes is closest to: (Round your intermediate calculations to 2 decimal places.) A) $182,325 B) $170,170 C) $93,552 D) $109,395

answer: A Explanation: Activity rate = $218,790 ÷ (500 material moves + 100 material moves) = $364.65 per material move Materials handling cost allocated to Modular Homes = $364.65 per material move × 500 material moves = $182,325 Difficulty: 1 Easy Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

89) Forner, Inc., manufactures and sells two products: Product Z1 and Product Z8. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Z1 Product Z8 Total Labor-related DLHs $ 112,190 600 2,000 2,600 Machine setups setups 40,440 500 700 1,200 Order size MHs 609,770 3,000 3,200 6,200 $ 762,400 The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to: A) $43.15 per DLH B) $635.33 per DLH C) $57.77 per DLH D) $80.88 per DLH

answer: A Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $112,190 ÷ 2,600 DLHs = $43.15 per DLH Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

123) Barkes, Inc., manufactures and sells two products: Product B0 and Product B5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product B0 400 7.0 2,800 Product B5 500 4.0 2,000 Total direct labor-hours 4,800 The direct labor rate is $22.10 per DLH. The direct materials cost per unit is $288.10 for Product B0 and $118.90 for Product B5. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product B0 Product B5 Total Labor-related DLHs $ 136,944 2,800 2,000 4,800 Production orders orders 64,629 500 400 900 Order size MHs 588,294 3,300 3,000 6,300 $ 789,867 The activity rate for the Production Orders activity cost pool under activity-based costing is closest to: A) $71.81 per order B) $196.10 per order C) $125.38 per order D) $178.27 per order

answer: A Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $64,629 ÷ 900 orders = $71.81 per order Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

52) Data concerning three of the activity cost pools of Brevo LLC, a legal firm, have been provided below: Activity Cost Pools Estimated Overhead Cost Expected Activity Researching legal issues $ 20,900 550 research hours Meeting with clients $ 154,791 1,053 meeting hours Preparing documents $ 90,400 5,650 documents The activity rate for the Meeting with Clients activity cost pool is closest to: A) $147 per meeting hour B) $154,791 per meeting hour C) $37 per meeting hour D) $68 per meeting hour

answer: A Explanation: Meeting with Clients activity rate: $154,791 ÷ 1,053 meeting hours = $147 per meeting hour Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

131) Treaster, Inc., manufactures and sells two products: Product J8 and Product G2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product J8 900 9.0 8,100 Product G2 1,000 12.0 12,000 Total direct labor-hours 20,100 The direct labor rate is $26.90 per DLH. The direct materials cost per unit is $217.20 for Product J8 and $139.60 for Product G2. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product J8 Product G2 Total Labor-related DLHs $ 655,059 8,100 12,000 20,100 Production orders orders 40,086 500 400 900 Order size MHs 711,588 3,900 3,700 7,600 $ 1,406,733 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product G2 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $839.88 per unit B) $534.48 per unit C) $1,123.56 per unit D) $391.08 per unit

answer: A Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,406,733 ÷ 20,100 DLHs = $69.99 per DLH (rounded) Product G2: 12.0 DLHs × $69.99 per DLH = $839.88 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

143) Chhom, Inc., manufactures and sells two products: Product F9 and Product U4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product F9 300 6.0 1,800 Product U4 600 3.0 1,800 Total direct labor-hours 3,600 The direct labor rate is $27.80 per DLH. The direct materials cost per unit is $271.90 for Product F9 and $272.20 for Product U4. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product F9 Product U4 Total Labor-related DLHs $ 38,988 1,800 1,800 3,600 Production orders orders 61,910 400 600 1,000 Order size MHs 126,150 3,800 3,700 7,500 $ 2 27,048 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product U4 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $189.21 per unit B) $50.46 per unit C) $32.49 per unit D) $185.73 per unit

answer: A Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $227,048 ÷ 3,600 DLHs = $63.07 per DLH (rounded) Product U4: 3.0 DLHs × $63.07 per DLH = $189.21 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

178) Appleby, Inc., manufactures and sells two products: Product Q9 and Product V8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Q9 800 5.0 4,000 Product V8 1,000 3.0 3,000 Total direct labor-hours 7,000 The direct labor rate is $29.30 per DLH. The direct materials cost per unit is $174.80 for Product Q9 and $168.90 for Product V8. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Q9 Product V8 Total Labor-related DLHs $ 214,480 4,000 3,000 7,000 Production orders orders 41,065 300 200 500 Order size MHs 192,700 4,200 4,000 8,200 $ 448,245 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to: A) $64.04 per DLH B) $82.13 per DLH C) $30.64 per DLH D) $23.50 per DLH

answer: A Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $448,245 ÷ 7,000 DLHs = $64.04 per DLH (rounded) Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

50) Porche, Inc., manufactures and sells two products: Product D4 and Product N0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product D4 100 5.0 500 Product N0 700 2.0 1,400 Total direct labor-hours 1,900 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product D4 Product N0 Total Labor-related DLHs $ 32,414 500 1,400 1,900 Machine setups setups 13,445 300 200 500 Order size MHs 415,905 4,200 4,300 8,500 $ 461,764 The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to: A) $17.06 per DLH B) $44.82 per DLH C) $67.23 per DLH D) $923.53 per DLH

answer: A Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $32,414 ÷ 1,900 DLHs = $17.06 per DLH Difficulty: 2 Medium Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

133) Treaster, Inc., manufactures and sells two products: Product J8 and Product G2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product J8 900 9.0 8,100 Product G2 1,000 12.0 12,000 Total direct labor-hours 20,100 The direct labor rate is $26.90 per DLH. The direct materials cost per unit is $217.20 for Product J8 and $139.60 for Product G2. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product J8 Product G2 Total Labor-related DLHs $ 655,059 8,100 12,000 20,100 Production orders orders 40,086 500 400 900 Order size MHs 711,588 3,900 3,700 7,600 $ 1,406,733 The activity rate for the Production Orders activity cost pool under activity-based costing is closest to: A) $44.54 per order B) $185.10 per order C) $192.32 per order D) $182.46 per order

answer: A Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $40,086 ÷ 900 orders = $44.54 per order Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

99) Bobzien, Inc., manufactures and sells two products: Product B7 and Product Z5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product B7 300 5.0 1,500 Product Z5 800 3.0 2,400 Total direct labor-hours 3,900 The direct labor rate is $15.10 per DLH. The direct materials cost per unit is $136.20 for Product B7 and $204.40 for Product Z5. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product B7 Product Z5 Total Labor-related DLHs $ 39,585 1,500 2,400 3,900 Production orders orders 26,884 500 600 1,100 Order size MHs 462,768 4,600 4,700 9,300 $ 529,237 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: A) $49.76 per MH B) $37.01 per MH C) $135.70 per MH D) $16.49 per MH

answer: A Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $462,768 ÷ 9,300 MHs = $49.76 per MH Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

80) Manzano, Inc., manufactures and sells two products: Product F1 and Product G2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product F1 100 5.0 500 Product G2 200 7.0 1,400 Total direct labor-hours 1,900 The direct labor rate is $18.40 per DLH. The direct materials cost per unit is $248.70 for Product F1 and $266.00 for Product G2. The estimated total manufacturing overhead is $678,146. The unit product cost of Product G2 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to: (Round your intermediate calculations to 2 decimal places.) A) $2,893.24 per unit B) $751.24 per unit C) $856.03 per unit D) $674.24 per unit

answer: A Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $678,146 ÷ 1,900 DLHs = $356.92 per DLH (rounded) Computation of traditional unit product cost: Product G2 Direct materials $ 266.00 Direct labor (7.0 DLHs × $18.40 per DLH) 128.80 Manufacturing overhead (7.0 DLHs × $356.92 per DLH) 2,498.44 Unit product cost $ 2,893.24 Difficulty: 1 Easy Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

73) Bera Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Activity Cost Pools Activity Rate Assembling products $ 2.36 per assembly hour Processing customer orders $ 47.73 per customer order Setting up batches $ 75.73 per batch Data for one of the company's products follow: Product Q79P Number of assembly hours 247 Number of customer orders 37 Number of batches 63 How much overhead cost would be assigned to Product Q79P using the activity-based costing system? (Round your intermediate calculations to 2 decimal places.) A) $7,119.92 B) $43,659.54 C) $4,770.99 D) $125.82

answer: A Explanation: The overhead cost charged to Product Q79P is: Activity Rate Expected Activity Amount Assembling products $ 2.36 /assembly hour 247 hours $ 582.92 Processing customer orders $ 47.73 /customer order 37 orders 1,766.01 Setting up batches $ 75.73 per batch 63 batches 4,770.99 Total overhead cost $ 7,119.92 Difficulty: 1 Easy Topic: Computing Product Costs Learning Objective: 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

62) Salvatori, Inc., manufactures and sells two products: Product A4 and Product Q5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product A4 500 6.0 3,000 Product Q5 800 3.0 2,400 Total direct labor-hours 5,400 The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product A4 Product Q5 Total Labor-related DLHs $ 158,058 3,000 2,400 5,400 Machine setups setups 5,550 300 200 500 Order size MHs 494,527 3,200 3,500 6,700 $ 658,135 The overhead applied to each unit of Product A4 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $506.26 per unit B) $654.66 per unit C) $472.38 per unit D) $731.28 per unit

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 158,058 5,400 DLHs $ 29.27 per DLH Machine setups $ 5,550 500 setups $ 11.10 per setup Order size $ 494,527 6,700 MHs $ 73.81 per MH Computation of the overhead cost per unit under activity-based costing. Product A4 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $29.27 per DLH 3,000 $ 87,810 Machine setups, at $11.10 per setup 300 3,330 Order size, $73.81 per MH 3,200 236,192 Total overhead costs assigned (a) $ 327,332 Number of units produced (b) 500 Overhead cost per unit (a) ÷ (b) $ 654.66 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

144) Chhom, Inc., manufactures and sells two products: Product F9 and Product U4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product F9 300 6.0 1,800 Product U4 600 3.0 1,800 Total direct labor-hours 3,600 The direct labor rate is $27.80 per DLH. The direct materials cost per unit is $271.90 for Product F9 and $272.20 for Product U4. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product F9 Product U4 Total Labor-related DLHs $ 38,988 1,800 1,800 3,600 Production orders orders 61,910 400 600 1,000 Order size MHs 126,150 3,800 3,700 7,500 $ 227,048 The overhead applied to each unit of Product U4 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $252.28 per unit B) $198.12 per unit C) $189.21 per unit D) $103.72 per unit

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 38,988 3,600 DLHs $ 10.83 per DLH Production orders $ 61,910 1,000 orders $ 61.91 per order Order size $ 126,150 7,500 MHs $ 16.82 per MH Computation of the overhead cost per unit under activity-based costing. Product U4 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $10.83 per DLH 1,800 $ 19,494 Production orders, at $61.91 per order 600 37,146 Order size, $16.82 per MH 3,700 62,234 Total overhead costs assigned (a) $ 118,874 Number of units produced (b) 600 Overhead cost per unit (a) ÷ (b) $ 198.12 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

61) Lazano, Inc., manufactures and sells two products: Product W4 and Product Z2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product W4 500 6.0 3,000 Product Z2 400 4.0 1,600 Total direct labor-hours 4,600 The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product W4 Product Z2 Total Labor-related DLHs $ 89,148 3,000 1,600 4,600 Product testing tests 45,680 400 600 1,000 Order size MHs 410,175 3,800 3,700 7,500 $ 545,003 The overhead applied to each unit of Product Z2 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $473.92 per unit B) $651.92 per unit C) $605.56 per unit D) $505.88 per unit

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 89,148 4,600 DLHs $ 19.38 per DLH Product testing $ 45,680 1,000 tests $ 45.68 per test Order size $ 410,175 7,500 MHs $ 54.69 per MH Computation of the overhead cost per unit under activity-based costing. Product Z2 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $19.38 per DLH 1,600 $ 31,008 Product testing, at $45.68 per test 600 27,408 Order size, $54.69 per MH 3,700 202,353 Total overhead costs assigned (a) $ 260,769 Number of units produced (b) 400 Overhead cost per unit (a) ÷ (b) $ 651.92 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

194) Wardsworth, Inc., manufactures and sells two products: Product I9 and Product Z9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product I9 700 6.0 4,200 Product Z9 900 8.0 7,200 Total direct labor-hours 11,400 The direct labor rate is $26.00 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product I9 $ 226.10 Product Z9 $ 151.20 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product I9 Product Z9 Total Labor-related DLHs $ 463,980 4,200 7,200 11,400 Machine setups setups 9,814 300 400 700 Order size MHs 105,792 4,400 4,300 8,700 $ 579,586 The unit product cost of Product Z9 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $765.92 per unit B) $749.13 per unit C) $721.44 per unit D) $417.30 per unit

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 463,980 11,400 DLHs $ 40.70 / DLH Machine setups $ 9,814 700 setups $ 14.02 / setup Order size $ 105,792 8,700 MHs $ 12.16 / MH Computation of the overhead cost per unit under activity-based costing. Product Z9 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $40.70 per DLH 7,200 $ 293,040 Machine setups, at $14.02 per setup 400 5,608 Order size, $12.16 per MH 4,300 52,288 Total overhead costs assigned (a) $ 350,936 Number of units produced (b) 900 Overhead cost per unit (a) ÷ (b) $ 389.93 Computation of unit product costs under activity-based costing. Product Z9 Direct materials $ 151.20 Direct labor (8.0 DLHs × $26.00 per DLH) 208.00 Overhead 389.93 Unit product cost $ 749.13 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

135) Treaster, Inc., manufactures and sells two products: Product J8 and Product G2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product J8 900 9.0 8,100 Product G2 1,000 12.0 12,000 Total direct labor-hours 20,100 The direct labor rate is $26.90 per DLH. The direct materials cost per unit is $217.20 for Product J8 and $139.60 for Product G2. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product J8 Product G2 Total Labor-related DLHs $ 655,059 8,100 12,000 20,100 Production orders orders 40,086 500 400 900 Order size MHs 711,588 3,900 3,700 7,600 $ 1,406,733 The unit product cost of Product G2 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $1,202.79 per unit B) $1,217.73 per unit C) $808.83 per unit D) $1,302.28 per unit

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 655,059 20,100 DLHs $ 32.59 per DLH Production orders $ 40,086 900 orders $ 44.54 per order Order size $ 711,588 7,600 MHs $ 93.63 per MH Computation of the overhead cost per unit under activity-based costing. Product G2 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $32.59 per DLH 12,000 $ 391,080 Production orders, at $44.54 per order 400 17,816 Order size, $93.63 per MH 3,700 346,431 Total overhead costs assigned (a) $ 755,327 Number of units produced (b) 1000 Overhead cost per unit (a) ÷ (b) $ 755.33 Computation of unit product costs under activity-based costing. Product G2 Direct materials $ 139.60 Direct labor (12.0 DLHs × $26.90 per DLH) 322.80 Overhead 755.33 Unit product cost $ 1,217.73 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

134) Treaster, Inc., manufactures and sells two products: Product J8 and Product G2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product J8 900 9.0 8,100 Product G2 1,000 12.0 12,000 Total direct labor-hours 20,100 The direct labor rate is $26.90 per DLH. The direct materials cost per unit is $217.20 for Product J8 and $139.60 for Product G2. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product J8 Product G2 Total Labor-related DLHs $ 655,059 8,100 12,000 20,100 Production orders orders 40,086 500 400 900 Order size MHs 711,588 3,900 3,700 7,600 $ 1,406,733 The overhead applied to each unit of Product J8 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $629.91 per unit B) $723.78 per unit C) $740.39 per unit D) $405.73 per unit

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 655,059 20,100 DLHs $ 32.59 per DLH Production orders $ 40,086 900 orders $ 44.54 per order Order size $ 711,588 7,600 MHs $ 93.63 per MH Computation of the overhead cost per unit under activity-based costing. Product J8 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $32.59 per DLH 8,100 $ 263,979 Production orders, at $44.54 per order 500 22,270 Order size, $93.63 per MH 3,900 365,157 Total overhead costs assigned (a) $ 651,406 Number of units produced (b) 900 Overhead cost per unit (a) ÷ (b) $ 723.78 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

126) Barkes, Inc., manufactures and sells two products: Product B0 and Product B5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product B0 400 7.0 2,800 Product B5 500 4.0 2,000 Total direct labor-hours 4,800 The direct labor rate is $22.10 per DLH. The direct materials cost per unit is $288.10 for Product B0 and $118.90 for Product B5. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product B0 Product B5 Total Labor-related DLHs $ 136,944 2,800 2,000 4,800 Production orders orders 64,629 500 400 900 Order size MHs 588,294 3,300 3,000 6,300 $ 789,867 The total overhead applied to Product B5 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $280,140 B) $365,924 C) $438,815 D) $329,120

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 136,944 4,800 DLHs $ 28.53 per DLH Production orders $ 64,629 900 orders $ 71.81 per order Order size $ 588,294 6,300 MHs $ 93.38 per MH Computation of the overhead cost under activity-based costing. Product B5 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $28.53 per DLH 2,000 $ 57,060 Production orders, at $71.81 per order 400 28,724 Order size, $93.38 per MH 3,000 280,140 Total overhead costs assigned $ 365,924 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

118) Overturf, Inc., manufactures and sells two products: Product Y1 and Product Y0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Y1 300 6.0 1,800 Product Y0 500 9.0 4,500 Total direct labor-hours 6,300 The direct labor rate is $27.50 per DLH. The direct materials cost per unit is $106.10 for Product Y1 and $168.40 for Product Y0. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Y1 Product Y0 Total Labor-related DLHs $ 151,263 1,800 4,500 6,300 Production orders orders 43,253 300 400 700 Order size MHs 863,478 4,900 5,000 9,900 $ 1,057,994 The overhead applied to each unit of Product Y1 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $1,322.49 per unit B) $1,630.44 per unit C) $1,424.59 per unit D) $1,007.64 per unit

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 151,263 6,300 DLHs $ 24.01 /DLH Production orders $ 43,253 700 orders $ 61.79 /order Order size $ 863,478 9,900 MHs $ 87.22 /MH Computation of the overhead cost per unit under activity-based costing. Product Y1 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $24.01 per DLH 1,800 $ 43,218 Production orders, at $61.79 per order 300 18,537 Order size, $87.22 per MH 4,900 427,378 Total overhead costs assigned (a) $ 489,133 Number of units produced (b) 300 Overhead cost per unit (a) ÷ (b) $ 1,630.44 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

102) Olmo, Inc., manufactures and sells two products: Product K0 and Product H9. The annual production and sales of Product of K0 is 700 units and of Product H9 is 700 units. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product K0 Product H9 Total Labor-related DLHs $ 549,108 5,600 7,000 12,600 Production orders orders 52,119 500 400 900 Order size MHs 834,716 4,200 4,400 8,600 $ 1,435,943 The overhead applied to each unit of Product K0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $911.68 per unit B) $972.36 per unit C) $1,025.67 per unit D) $582.36 per unit

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 549,108 12,600 DLHs $ 43.58 / DLH Production orders $ 52,119 900 orders $ 57.91 / order Order size $ 834,716 8,600 MHs $ 97.06 / MH Computation of the overhead cost per unit under activity-based costing. Product K0 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $43.58 per DLH 5,600 $ 244,048 Production orders, at $57.91 per order 500 28,955 Order size, $97.06 per MH 4,200 407,652 Total overhead costs assigned (a) $ 680,655 Number of units produced (b) 700 Overhead cost per unit (a) ÷ (b) $ 972.36 Difficulty: 1 Easy Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

103) Olmo, Inc., manufactures and sells two products: Product K0 and Product H9. The annual production and sales of Product of K0 is 700 units and of Product H9 is 700 units. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product K0 Product H9 Total Labor-related DLHs $ 549,108 5,600 7,000 12,600 Production orders orders 52,119 500 400 900 Order size MHs 834,716 4,200 4,400 8,600 $ 1,435,943 The overhead applied to each unit of Product H9 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $1,139.60 per unit B) $1,078.98 per unit C) $610.09 per unit D) $1,025.67 per unit

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 549,108 12,600 DLHs $ 43.58 /DLH Production orders $ 52,119 900 orders $ 57.91 /order Order size $ 834,716 8,600 MHs $ 97.06 /MH Computation of the overhead cost per unit under activity-based costing. Product H9 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $43.58 per DLH 7,000 $ 305,060 Production orders, at $57.91 per order 400 23,164 Order size, $97.06 per MH 4,400 427,064 Total overhead costs assigned (a) $ 755,288 Number of units produced (b) 700 Overhead cost per unit (a) ÷ (b) $ 1,078.98 Difficulty: 1 Easy Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

164) Kroll, Inc., manufactures and sells two products: Product A4 and Product T6. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product A4 800 7.0 5,600 Product T6 300 9.0 2,700 Total direct labor-hours 8,300 The direct labor rate is $21.50 per DLH. The direct materials cost per unit is $212.40 for Product A4 and $295.50 for Product T6. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product A4 Product T6 Total Labor-related DLHs $ 402,550 5,600 2,700 8,300 Production orders orders 61,705 400 300 700 Order size MHs 656,110 3,600 3,400 7,000 $ 1,120,365 The unit product cost of Product A4 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to: (Round your intermediate calculations to 2 decimal places.) A) $1,019.01 per unit B) $1,307.76 per unit C) $702.40 per unit D) $979.95 per unit

answer: B Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,120,365 ÷ 8,300 DLHs = $134.98 per DLH (rounded) Computation of traditional unit product cost: Product A4 Direct materials $ 212.40 Direct labor (7.0 DLHs × $21.50 per DLH) 150.50 Manufacturing overhead (7.0 DLHs × $134.98 per DLH) 944.86 Unit product cost $ 1,307.76 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

165) Kroll, Inc., manufactures and sells two products: Product A4 and Product T6. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product A4 800 7.0 5,600 Product T6 300 9.0 2,700 Total direct labor-hours 8,300 The direct labor rate is $21.50 per DLH. The direct materials cost per unit is $212.40 for Product A4 and $295.50 for Product T6. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product A4 Product T6 Total Labor-related DLHs $ 402,550 5,600 2,700 8,300 Production orders orders 61,705 400 300 700 Order size MHs 656,110 3,600 3,400 7,000 $ 1,120,365 The unit product cost of Product T6 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to: (Round your intermediate calculations to 2 decimal places.) A) $1,332.57 per unit B) $1,703.82 per unit C) $1,282.35 per unit D) $925.50 per unit

answer: B Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,120,365 ÷ 8,300 DLHs = $134.98 per DLH (rounded) Computation of traditional unit product cost: Product T6 Direct materials $ 295.50 Direct labor (9.0 DLHs × $21.50 per DLH) 193.50 Manufacturing overhead (9.0 DLHs × $134.98 per DLH) 1,214.82 Unit product cost $ 1,703.82 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

196) Wanger, Inc., manufactures and sells two products: Product G1 and Product F2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product G1 800 9.0 7,200 Product F2 800 11.0 8,800 Total direct labor-hours 16,000 The direct labor rate is $15.30 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product G1 $ 100.50 Product F2 $ 292.00 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product G1 Product F2 Total Labor-related DLHs $ 732,480 7,200 8,800 16,000 Machine setups setups 53,809 400 300 700 Order size MHs 600,525 3,800 3,700 7,500 $ 1,386,814 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product G1 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $412.02 per unit B) $780.12 per unit C) $720.63 per unit D) $691.83 per unit

answer: B Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,386,814 ÷ 16,000 DLHs = $86.68 per DLH (rounded) Product G1: 9.0 DLHs × $86.68 per DLH = $780.12 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

132) Treaster, Inc., manufactures and sells two products: Product J8 and Product G2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product J8 900 9.0 8,100 Product G2 1,000 12.0 12,000 Total direct labor-hours 20,100 The direct labor rate is $26.90 per DLH. The direct materials cost per unit is $217.20 for Product J8 and $139.60 for Product G2. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product J8 Product G2 Total Labor-related DLHs $ 655,059 8,100 12,000 20,100 Production orders orders 40,086 500 400 900 Order size MHs 711,588 3,900 3,700 7,600 $ 1,406,733 The unit product cost of Product J8 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to: (Round your intermediate calculations to 2 decimal places.) A) $752.61 per unit B) $1,089.21 per unit C) $1,301.97 per unit D) $860.16 per unit

answer: B Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,406,733 ÷ 20,100 DLHs = $69.99 per DLH (rounded) Computation of traditional unit product cost: Product J8 Direct materials $ 217.20 Direct labor (9.0 DLHs × $26.90 per DLH) 242.10 Manufacturing overhead (9.0 DLHs × $69.99 per DLH) 629.91 Unit product cost $ 1,089.21 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

140) Teehan, Inc., manufactures and sells two products: Product U2 and Product W5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product U2 400 6.0 2,400 Product W5 200 8.0 1,600 Total direct labor-hours 4,000 The direct labor rate is $20.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product U2 $ 249.40 Product W5 $ 164.40 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product U2 Product W5 Total Labor-related DLHs $ 92,120 2,400 1,600 4,000 Machine setups setups 18,468 500 700 1,200 Order size MHs 202,547 3,100 2,800 5,900 $ 313,135 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product W5 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $274.64 per unit B) $626.24 per unit C) $184.24 per unit D) $123.12 per unit

answer: B Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $313,135 ÷ 4,000 DLHs = $78.28 per DLH (rounded) Product W5: 8.0 DLHs × $78.28 per DLH = $626.24 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

180) Appleby, Inc., manufactures and sells two products: Product Q9 and Product V8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Q9 800 5.0 4,000 Product V8 1,000 3.0 3,000 Total direct labor-hours 7,000 The direct labor rate is $29.30 per DLH. The direct materials cost per unit is $174.80 for Product Q9 and $168.90 for Product V8. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Q9 Product V8 Total Labor-related DLHs $ 214,480 4,000 3,000 7,000 Production orders orders 41,065 300 200 500 Order size MHs 192,700 4,200 4,000 8,200 $ 448,245 The unit product cost of Product V8 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to: (Round your intermediate calculations to 2 decimal places.) A) $503.19 per unit B) $448.92 per unit C) $348.72 per unit D) $327.30 per unit

answer: B Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $448,245 ÷ 7,000 DLHs = $64.04 per DLH (rounded) Computation of traditional unit product cost: Product V8 Direct materials $ 168.90 Direct labor (3.0 DLHs × $29.30 per DLH) 87.90 Manufacturing overhead (3.0 DLHs × $64.04 per DLH) 192.12 Unit product cost $ 448.92 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

71) Weiskopf, Inc., manufactures and sells two products: Product E6 and Product J2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product E6 600 5.0 3,000 Product J2 900 7.0 6,300 Total direct labor-hours 9,300 The direct labor rate is $18.10 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product E6 $176.50 Product J2 $200.00 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product E6 Product J2 Total Labor-related DLHs $ 430,032 3,000 6,300 9,300 Product testing tests 68,368 300 500 800 Order size MHs 478,962 5,000 4,900 9,900 $ 977,362 Which of the following statements concerning the unit product cost of Product J2 is true? (Round your intermediate calculations to 2 decimal places.) A) The unit product cost of Product J2 under traditional costing is less than its unit product cost under activity-based costing by $101.07. B) The unit product cost of Product J2 under traditional costing is greater than its unit product cost under activity-based costing by $101.07. C) The unit product cost of Product J2 under traditional costing is greater than its unit product cost under activity-based costing by $42.54. D) The unit product cost of Product J2 under traditional costing is less than its unit product cost under activity-based costing by $42.54.

answer: B Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $977,362 ÷ 9,300 DLHs = $105.09 per DLH (rounded) Computation of traditional unit product cost: Product J2 Direct materials $ 200.00 Direct labor (7.0 DLHs × $18.10 per DLH) 126.70 Manufacturing overhead (7.0 DLHs × $105.09 per DLH) 735.63 Unit product cost $ 1,062.33 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 430,032 9,300 DLHs $ 46.24 per DLH Product testing $ 68,368 800 tests $ 85.46 per test Order size $ 478,962 9,900 MHs $ 48.38 per MH Computation of the overhead cost per unit under activity-based costing. Product J2 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $46.24 per DLH 6,300 $ 291,312 Product testing, at $85.46 per test 500 42,730 Order size, $48.38 per MH 4,900 237,062 Total overhead costs assigned (a) $ 571,104 Number of units produced (b) 900 Overhead cost per unit (a) ÷ (b) $ 634.56 Computation of unit product cost under activity-based costing. Product J2 Direct materials $ 200.10 Direct labor 126.70 Overhead 634.56 Unit product cost $ 961.26 The difference in unit product costs is: Product J2 Traditional unit product cost $ 1,062.33 ABC unit product cost 961.26 Difference $ 101.07 The unit product cost of Product J2 under traditional costing is greater than its unit product cost under activity-based costing by $101.07. Difficulty: 3 Hard Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

53) Aikman, Inc., manufactures and sells two products: Product O6 and Product O7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product O6 200 9.0 1,800 Product O7 800 10.0 8,000 Total direct labor-hours 9,800 The direct labor rate is $17.50 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product O6 $206.50 Product O7 $162.30 The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product O6 Product O7 Total Labor-related DLHs $ 133,770 1,800 8,000 9,800 Production orders orders 18,501 400 300 700 Order size MHs 145,180 3,000 3,100 6,100 $ 297,451 The unit product cost of Product O6 is closest to: (Round your intermediate calculations to 2 decimal places.) A) $637.15 per unit B) $896.71 per unit C) $721.00 per unit D) $661.45 per unit

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 133,770 9,800 DLHs $ 13.65 per DLH Production orders $ 18,501 700 orders $ 26.43 per order Order size $ 145,180 6,100 MHs $ 23.80 per MH Computation of the overhead cost per unit under activity-based costing. Product O6 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $13.65 per DLH 1,800 $ 24,570 Production orders, at $26.43 per order 400 10,572 Order size, $23.80 per MH 3,000 71,400 Total overhead costs assigned (a) $ 106,542 Number of units produced (b) 200 Overhead cost per unit (a) ÷ (b) $ 532.71 Computation of unit product costs under activity-based costing. Product O6 Direct materials $ 206.50 Direct labor (9.0 DLHs × $17.50 per DLH) 157.50 Overhead 532.71 Unit product cost $ 896.71 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

162) Fleurant, Inc., manufactures and sells two products: Product W2 and Product P8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product W2 400 6.0 2,400 Product P8 600 4.0 2,400 Total direct labor-hours 4,800 The direct labor rate is $29.10 per DLH. The direct materials cost per unit is $195.60 for Product W2 and $132.30 for Product P8. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product W2 Product P8 Total Labor-related DLHs $ 210,576 2,400 2,400 4,800 Production orders orders 17,738 400 300 700 Order size MHs 273,430 3,800 3,600 7,400 $ 501,744 The overhead applied to each unit of Product W2 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $501.74 per unit B) $639.59 per unit C) $627.18 per unit D) $351.03 per unit

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 210,576 4,800 DLHs $ 43.87 per DLH Production orders $ 17,738 700 orders $ 25.34 per order Order size $ 273,430 7,400 MHs $ 36.95 per MH Computation of the overhead cost per unit under activity-based costing. Product W2 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $43.87 per DLH 2,400 $ 105,288 Production orders, at $25.34 per order 400 10,136 Order size, $36.95 per MH 3,800 140,410 Total overhead costs assigned (a) $ 255,834 Number of units produced (b) 400 Overhead cost per unit (a) ÷ (b) $ 639.59 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

66) Gelinas, Inc., manufactures and sells two products: Product S5 and Product L3. Expected production of Product S5 is 500 units and of Product L3 is 700 units. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product S5 Product L3 Total Labor-related DLHs $ 286,741 3,500 5,600 9,100 Production orders orders 40,384 300 500 800 Order size MHs 463,730 4,000 3,900 7,900 $ 790,855 The overhead applied to each unit of Product L3 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $327.04 per unit B) $615.18 per unit C) $659.05 per unit D) $695.28 per unit

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 286,741 9,100 DLHs $ 31.51 per DLH Production orders $ 40,384 800 orders $ 50.48 per order Order size $ 463,730 7,900 MHs $ 58.70 per MH Computation of the overhead cost per unit under activity-based costing. Product L3 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $31.51 per DLH 5,600 $ 176,456 Production orders, at $50.48 per order 500 25,240 Order size, $58.70 per MH 3,900 228,930 Total overhead costs assigned (a) $ 430,626 Number of units produced (b) 700 Overhead cost per unit (a) ÷ (b) $ 615.18 Difficulty: 1 Easy Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

58) Mahaley, Inc., manufactures and sells two products: Product Q9 and Product F0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Q9 800 8.0 6,400 Product F0 800 6.0 4,800 Total direct labor-hours 11,200 The direct labor rate is $21.80 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product Q9 $174.90 Product F0 $146.70 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Q9 Product F0 Total Labor-related DLHs $ 379,680 6,400 4,800 11,200 Machine setups setups 43,830 300 200 500 Order size MHs 284,700 3,100 2,900 6,000 $ 708,210 The unit product cost of Product F0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $720.13 per unit B) $674.82 per unit C) $449.51 per unit D) $656.88 per unit

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 379,680 11,200 DLHs $ 33.90 per DLH Machine setups $ 43,830 500 setups $ 87.66 per setup Order size $ 284,700 6,000 MHs $ 47.45 per MH Computation of the overhead cost per unit under activity-based costing. Product F0 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $33.90 per DLH 4,800 $ 162,720 Machine setups, at $87.66 per setup 200 17,532 Order size, $47.45 per MH 2,900 137,605 Total overhead costs assigned (a) $ 317,857 Number of units produced (b) 800 Overhead cost per unit (a) ÷ (b) $ 397.32 Computation of unit product costs under activity-based costing. Product F0 Direct materials $ 146.70 Direct labor (6.0 DLHs × $21.80 per DLH) 130.80 Overhead 397.32 Unit product cost $ 674.82 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

113) Snavely, Inc., manufactures and sells two products: Product E1 and Product A7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product E1 800 5.0 4,000 Product A7 300 2.0 600 Total direct labor-hours 4,600 The direct labor rate is $18.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product E1 $127.10 Product A7 $299.80 The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product E1 Product A7 Total Labor-related DLHs $ 100,096 4,000 600 4,600 Machine setups setups 47,208 300 400 700 Order size MHs 738,368 4,100 4,200 8,300 $ 885,672 The total overhead applied to Product E1 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $770,160 B) $472,008 C) $644,128 D) $364,736

answer: B Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 100,096 4,600 DLHs $ 21.76 per DLH Machine setups $ 47,208 700 setups $ 67.44 per setup Order size $ 738,368 8,300 MHs $ 88.96 per MH Computation of the overhead cost under activity-based costing. Product E1 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $21.76 per DLH 4,000 $ 87,040 Machine setups, at $67.44 per setup 300 20,232 Order size, $88.96 per MH 4,100 364,736 Total overhead costs assigned $ 472,008 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

75) Busto, Inc., manufactures and sells two products: Product P8 and Product Z6. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product P8 500 7.0 3,500 Product Z6 900 5.0 4,500 Total direct labor-hours 8,000 The direct labor rate is $20.30 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product P8 $236.20 Product Z6 $108.00 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product P8 Product Z6 Total Labor-related DLHs $ 209,680 3,500 4,500 8,000 Product testing tests 14,090 300 200 500 Order size MHs 477,183 4,600 4,700 9,300 $ 700,953 The unit product cost of Product Z6 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to: (Round your intermediate calculations to 2 decimal places.) A) $340.55 per unit B) $647.60 per unit C) $466.05 per unit D) $350.40 per unit

answer: B Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $700,953 ÷ 8,000 DLHs = $87.62 per DLH (rounded) Computation of traditional unit product cost: Product Z6 Direct materials $ 108.00 Direct labor (5.0 DLHs × $20.30 per DLH) 101.50 Manufacturing overhead (5.0 DLHs × $87.62 per DLH) 438.10 Unit product cost $ 647.60 Difficulty: 2 Medium Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

37) Production order processing is an example of a: A) Unit-level activity. B) Batch-level activity. C) Product-level activity. D) Facility-level activity.

answer: B Difficulty: 2 Medium Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

33) The clerical activity associated with processing purchase orders to produce an order for a standard product is an example of a: A) Unit-level activity. B) Batch-level activity. C) Product-level activity. D) Facility-level activity.

answer: B Difficulty: 2 Medium Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

39) Purchase order processing is an example of a: A) Unit-level activity. B) Batch-level activity. C) Product-level activity. D) Facility-level activity.

answer: B Difficulty: 2 Medium Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

43) Overhead allocation based solely on a measure of volume such as direct labor-hours: A) is a key aspect of the activity-based costing model. B) will systematically overcost high-volume products and undercost low-volume products. C) will systematically overcost low-volume products and undercost high-volume products. D) must be used for external financial reporting.

answer: B Difficulty: 2 Medium Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

104) Abbe Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 800 units and of Product B is 600 units. There are three activity cost pools, with estimated costs and expected activity as follows: Activity Cost Pools Estimated Overhead Cost Expected Activity Product A Product B Total Activity 1 $ 17,460 600 600 1,200 Activity 2 $ 19,987 1,700 600 2,300 Activity 3 $ 29,884 400 120 520 The activity rate for Activity 2 is closest to: A) $11.76 B) $8.69 C) $29.27 D) $33.31

answer: B Explanation: Activity rate = Estimated overhead cost ÷ Expected activity = $19,987 ÷ 2,300 = $8.69 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

108) Arthur Company has two products: S and D. The company uses activity-based costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools: Activity Cost Pools Estimated Overhead Cost Expected Activity Product S Product D Total Activity 1 $ 20,000 100 400 500 Activity 2 $ 14,600 500 250 750 Activity 3 $ 90,000 300 2,700 3,000 The annual production and sales of Product S is 4,547 units. The annual production and sales of Product D is 7,913. The activity rate under the activity-based costing system for Activity 3 is closest to: A) $33.33 B) $30.00 C) $29.32 D) $41.53

answer: B Explanation: Activity rate = Estimated overhead cost ÷ Expected activity = $90,000 ÷ 3,000 = $30 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

152) Mckenny, Inc., manufactures and sells two products: Product P9 and Product X2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product P9 200 6.0 1,200 Product X2 100 5.0 500 Total direct labor-hours 1,700 The direct labor rate is $28.20 per DLH. The direct materials cost per unit is $140.60 for Product P9 and $107.50 for Product X2. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product P9 Product X2 Total Labor-related DLHs $ 45,084 1,200 500 1,700 Production orders orders 119,964 600 700 1,300 Order size MHs 459,818 3,200 2,900 6,100 $ 624,866 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product X2 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $132.60 per unit B) $1,837.85 per unit C) $376.90 per unit D) $461.40 per unit

answer: B Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $624,866 ÷ 1,700 DLHs = $367.57 per DLH (rounded) Product X2: 5.0 DLHs × $367.57 per DLH = $1,837.85 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

157) Adelberg Company has two products: A and B. The annual production and sales of Product A is 500 units and of Product B is 1,000 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit. The total estimated overhead for next period is $68,756. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools—Activity 1, Activity 2, and Order Size—with estimated overhead costs and expected activity as follows: Estimated Expected Activity Activity Cost Pools Overhead Costs Product A Product B Total Activity 1 $ 31,031 1,000 300 1,300 Activity 2 22,249 1,600 300 1,900 Order size 15,476 200 200 400 Total $ 68,756 (Note: The Order Size activity cost pool's costs are allocated on the basis of direct labor-hours.) The predetermined overhead rate (i.e., activity rate) for Activity 2 under the activity-based costing system is closest to: A) $13.91 B) $11.71 C) $74.16 D) $36.19

answer: B Explanation: Activity rate = Estimated overhead cost ÷ Expected activity = $22,249 ÷ 1,900 = $11.71 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

45) Jennifer Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: Estimated Expected Activity Activity Cost Pools Overhead Cost Product A Product B Total Product design $ 23,500 400 100 500 Assembling $ 18,000 500 200 700 Supporting customers $ 34,600 600 300 900 The activity rate under the activity-based costing system for Supporting customers is closest to: A) $36.24 B) $38.44 C) $84.56 D) $115.33

answer: B Explanation: Activity rate = Estimated overhead cost ÷ Expected activity = $34,600 ÷ 900 = $38.44 Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

120) Angel Corporation uses activity-based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity-based costing system: Activity Cost Pools (and Activity Measures) Estimated Overhead Cost Machine related (machine-hours) $ 81,600 Batch setup (setups) $ 387,000 Order size (direct labor-hours) $ 274,800 Expected Activity Activity Cost Pools Product X Product Y Total Machine related 3,000 5,000 8,000 Batch setup 2,000 8,000 10,000 Order size 7,000 5,000 12,000 The activity rate for the batch setup activity cost pool is closest to: A) $48.40 per setup B) $38.70 per setup C) $74.30 per setup D) $193.50 per setup

answer: B Explanation: Activity rate = Estimated overhead cost ÷ Expected activity = $387,000 ÷ 10,000 setups = $38.70 per setup Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

116) Overturf, Inc., manufactures and sells two products: Product Y1 and Product Y0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Y1 300 6.0 1,800 Product Y0 500 9.0 4,500 Total direct labor-hours 6,300 The direct labor rate is $27.50 per DLH. The direct materials cost per unit is $106.10 for Product Y1 and $168.40 for Product Y0. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Y1 Product Y0 Total Labor-related DLHs $ 151,263 1,800 4,500 6,300 Production orders orders 43,253 300 400 700 Order size MHs 863,478 4,900 5,000 9,900 $ 1,057,994 The activity rate for the Production Orders activity cost pool under activity-based costing is closest to: A) $176.22 per order B) $61.79 per order C) $172.70 per order D) $106.87 per order

answer: B Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $43,253 ÷ 700 orders = $61.79 per order Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

49) Boesenhofer, Inc., manufactures and sells two products: Product N6 and Product N7. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product N6 Product N7 Total Labor-related DLHs $ 345,060 2,100 5,000 7,100 Machine setups setups 128,534 600 800 1,400 Order size MHs 107,598 4,100 3,800 7,900 $ 581,192 The activity rate for the Machine Setups activity cost pool is closest to: A) $73.57 per setup B) $91.81 per setup C) $26.24 per setup D) $28.32 per setup

answer: B Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $128,534 ÷ 1,400 setups = $91.81 per setup Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

181) Appleby, Inc., manufactures and sells two products: Product Q9 and Product V8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Q9 800 5.0 4,000 Product V8 1,000 3.0 3,000 Total direct labor-hours 7,000 The direct labor rate is $29.30 per DLH. The direct materials cost per unit is $174.80 for Product Q9 and $168.90 for Product V8. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Q9 Product V8 Total Labor-related DLHs $ 214,480 4,000 3,000 7,000 Production orders orders 41,065 300 200 500 Order size MHs 192,700 4,200 4,000 8,200 $ 448,245 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: A) $64.04 per MH B) $23.50 per MH C) $28.55 per MH D) $71.49 per MH

answer: B Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $192,700 ÷ 8,200 MHs = $23.50 per MH Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

98) Bobzien, Inc., manufactures and sells two products: Product B7 and Product Z5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product B7 300 5.0 1,500 Product Z5 800 3.0 2,400 Total direct labor-hours 3,900 The direct labor rate is $15.10 per DLH. The direct materials cost per unit is $136.20 for Product B7 and $204.40 for Product Z5. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product B7 Product Z5 Total Labor-related DLHs $ 39,585 1,500 2,400 3,900 Production orders orders 26,884 500 600 1,100 Order size MHs 462,768 4,600 4,700 9,300 $ 529,237 The activity rate for the Production Orders activity cost pool under activity-based costing is closest to: A) $56.91 per order B) $24.44 per order C) $98.46 per order D) $100.60 per order

answer: B Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $26,884 ÷ 1,100 orders = $24.44 per order Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

47) Chrzan, Inc., manufactures and sells two products: Product E0 and Product N0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product E0 300 9.0 2,700 Product N0 1,000 8.0 8,000 Total direct labor-hours 10,700 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product E0 Product N0 Total Labor-related DLHs $ 296,390 2,700 8,000 10,700 Production orders orders 55,587 300 400 700 Order size MHs 579,866 5,000 4,700 9,700 $ 931,843 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: A) $44.16 per MH B) $59.78 per MH C) $87.09 per MH D) $37.05 per MH

answer: B Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $579,866 ÷ 9,700 MHs = $59.78 per MH Difficulty: 2 Medium Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

112) Snavely, Inc., manufactures and sells two products: Product E1 and Product A7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product E1 800 5.0 4,000 Product A7 300 2.0 600 Total direct labor-hours 4,600 The direct labor rate is $18.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product E1 $127.10 Product A7 $299.80 The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product E1 Product A7 Total Labor-related DLHs $ 100,096 4,000 600 4,600 Machine setups setups 47,208 300 400 700 Order size MHs 738,368 4,100 4,200 8,300 $ 885,672 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: A) $166.83 per MH B) $88.96 per MH C) $65.12 per MH D) $192.54 per MH

answer: B Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $738,368 ÷ 8,300 MHs = $88.96 per MH Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

78) Kiever, Inc., manufactures and sells two products: Product O9 and Product Y1. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product O9 200 8.0 1,600 Product Y1 700 11.0 7,700 Total direct labor-hours 9,300 The company's total manufacturing overhead is $1,121,960. If the company allocates all of its overhead based on direct labor-hours, the predetermined overhead rate would be closest to: A) $48.00 per DLH B) $120.64 per DLH C) $60.08 per DLH D) $92.34 per DLH

answer: B Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,121,960 ÷ 9,300 DLHs = $120.64 per DLH (rounded) Difficulty: 1 Easy Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

77) Lefave, Inc., manufactures and sells two products: Product Q1 and Product D5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Q1 1,000 5.0 5,000 Product D5 400 2.0 800 Total direct labor-hours 5,800 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Q1 Product D5 Total Labor-related DLHs $ 152,482 5,000 800 5,800 Product testing tests 48,909 400 300 700 Order size MHs 204,825 3,800 3,700 7,500 $ 406,216 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to: A) $26.29 per DLH B) $70.04 per DLH C) $69.87 per DLH D) $27.31 per DLH

answer: B Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $406,216 ÷ 5,800 DLHs = $70.04 per DLH (rounded) Difficulty: 2 Medium Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

86) Moistner, Inc., manufactures and sells two products: Product E6 and Product W9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product E6 700 7.0 4,900 Product W9 100 5.0 500 Total direct labor-hours 5,400 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product E6 Product W9 Total Labor-related DLHs $ 233,604 4,900 500 5,400 Machine setups setups 30,942 500 400 900 Order size MHs 712,045 4,200 4,300 8,500 $ 976,591 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product E6 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $586.39 per unit B) $1,265.95 per unit C) $302.82 per unit D) $240.66 per unit

answer: B Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $976,591 ÷ 5,400 DLHs = $180.85 per DLH (rounded) Product E6: 7.0 DLHs × $180.85 per DLH = $1,265.95 Difficulty: 2 Medium Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

128) Gesualdo, Inc., manufactures and sells two products: Product Z6 and Product F4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Z6 300 8.0 2,400 Product F4 600 11.0 6,600 Total direct labor-hours 9,000 The direct labor rate is $24.70 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product Z6 $ 101.00 Product F4 $ 217.20 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Z6 Product F4 Total Labor-related DLHs $ 98,640 2,400 6,600 9,000 Machine setups setups 18,711 500 600 1,100 Order size MHs 388,360 3,800 3,500 7,300 $ 505,711 The overhead applied to each unit of Product Z6 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $673.87 per unit B) $561.90 per unit C) $789.90 per unit D) $449.52 per unit

answer: C Explanation: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 98,640 9,000 DLHs $ 10.96 per DLH Machine setups $ 18,711 1,100 setups $ 17.01 per setup Order size $ 388,360 7,300 MHs $ 53.20 per MH Computation of the overhead cost per unit under activity-based costing. Product Z6 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $10.96 per DLH 2,400 $ 26,304 Machine setups, at $17.01 per setup 500 8,505 Order size, $53.20 per MH 3,800 202,160 Total overhead costs assigned (a) $ 236,969 Number of units produced (b) 300 Overhead cost per unit (a) ÷ (b) $ 789.90 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

121) Angel Corporation uses activity-based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity-based costing system: Activity Cost Pools (and Activity Measures) Estimated Overhead Cost Machine related (machine-hours) $ 81,600 Batch setup (setups) $ 387,000 Order size (direct labor-hours) $ 274,800 Expected Activity Activity Cost Pools Product X Product Y Total Machine related 3,000 5,000 8,000 Batch setup 2,000 8,000 10,000 Order size 7,000 5,000 12,000 Assuming that actual activity turns out to be the same as expected activity, the total amount of overhead cost allocated to Product X would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $371,700 B) $387,000 C) $268,300 D) $149,000

answer: C Explanation: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Machine related $ 81,600 8,000 MHs $ 10.20 per MH Batch setup $ 387,000 10,000 setups $ 38.70 per setup Order size $ 274,800 12,000 DLHs $ 22.90 per DLH Product X Activity Cost Pools and Activity Rates Expected Activity Amount Machine related ($10.20 per MH) 3,000 $ 30,600 Batch setup ($38.70 per setup) 2,000 77,400 Order size ($22.90 per DLH) 7,000 160,300 Total overhead costs assigned $ 268,300 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

149) Faz, Inc., manufactures and sells two products: Product X0 and Product W7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product X0 1,000 5.0 5,000 Product W7 400 2.0 800 Total direct labor-hours 5,800 The direct labor rate is $19.60 per DLH. The direct materials cost per unit is $144.50 for Product X0 and $126.00 for Product W7. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product X0 Product W7 Total Labor-related DLHs $ 272,078 5,000 800 5,800 Production orders orders 18,948 500 700 1,200 Order size MHs 242,514 4,000 4,100 8,100 $ 533,540 The overhead applied to each unit of Product X0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $119.76 per unit B) $381.10 per unit C) $362.21 per unit D) $459.95 per unit

answer: C Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 272,078 5,800 DLHs $ 46.91 per DLH Production orders $ 18,948 1,200 orders $ 15.79 per order Order size $ 242,514 8,100 MHs $ 29.94 per MH Computation of the overhead cost per unit under activity-based costing. Product X0 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $46.91 per DLH 5,000 $ 234,550 Production orders, at $15.79 per order 500 7,895 Order size, $29.94 per MH 4,000 119,760 Total overhead costs assigned (a) $ 362,205 Number of units produced (b) 1,000 Overhead cost per unit (a) ÷ (b) $ 362.21 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

176) Gradwell, Inc., manufactures and sells two products: Product K8 and Product I4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product K8 300 5.0 1,500 Product I4 900 3.0 2,700 Total direct labor-hours 4,200 The direct labor rate is $17.20 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product K8 $ 150.20 Product I4 $ 243.70 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product K8 Product I4 Total Labor-related DLHs $ 176,064 1,500 2,700 4,200 Machine setups setups 71,290 400 600 1,000 Order size MHs 121,396 4,300 4,600 8,900 $ 368,750 The unit product cost of Product K8 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $431.71 per unit B) $675.20 per unit C) $736.36 per unit D) $543.49 per unit

answer: C Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 176,064 4,200 DLHs $ 41.92 per DLH Machine setups $ 71,290 1,000 setups $ 71.29 per setup Order size $ 121,396 8,900 MHs $ 13.64 per MH Computation of the overhead cost per unit under activity-based costing. Product K8 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $41.92 per DLH 1,500 $ 62,880 Machine setups, at $71.29 per setup 400 28,516 Order size, $13.64 per MH 4,300 58,652 Total overhead costs assigned (a) $ 150,048 Number of units produced (b) 300 Overhead cost per unit (a) ÷ (b) $ 500.16 Computation of unit product costs under activity-based costing. Product K8 Direct materials $ 150.20 Direct labor (5.0 DLHs × $17.20 per DLH) 86.00 Overhead 500.16 Unit product cost $ 736.36 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

154) Mckenny, Inc., manufactures and sells two products: Product P9 and Product X2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product P9 200 6.0 1,200 Product X2 100 5.0 500 Total direct labor-hours 1,700 The direct labor rate is $28.20 per DLH. The direct materials cost per unit is $140.60 for Product P9 and $107.50 for Product X2. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product P9 Product X2 Total Labor-related DLHs $ 45,084 1,200 500 1,700 Production orders orders 119,964 600 700 1,300 Order size MHs 459,818 3,200 2,900 6,100 $ 624,866 The overhead applied to each unit of Product X2 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $2,082.89 per unit B) $2,186.02 per unit C) $2,964.58 per unit D) $1,837.85 per unit

answer: C Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 45,084 1,700 DLHs $ 26.52 per DLH Production orders $ 119,964 1,300 orders $ 92.28 per order Order size $ 459,818 6,100 MHs $ 75.38 per MH Computation of the overhead cost per unit under activity-based costing. Product X2 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $26.52 per DLH 500 $ 13,260 Production orders, at $92.28 per order 700 64,596 Order size, $75.38 per MH 2,900 218,602 Total overhead costs assigned (a) $ 296,458 Number of units produced (b) 100 Overhead cost per unit (a) ÷ (b) $ 2,964.58 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

175) Gradwell, Inc., manufactures and sells two products: Product K8 and Product I4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product K8 300 5.0 1,500 Product I4 900 3.0 2,700 Total direct labor-hours 4,200 The direct labor rate is $17.20 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product K8 $ 150.20 Product I4 $ 243.70 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product K8 Product I4 Total Labor-related DLHs $ 176,064 1,500 2,700 4,200 Machine setups setups 71,290 400 600 1,000 Order size MHs 121,396 4,300 4,600 8,900 $ 368,750 The overhead applied to each unit of Product I4 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $263.40 per unit B) $307.29 per unit C) $243.00 per unit D) $69.72 per unit

answer: C Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 176,064 4,200 DLHs $ 41.92 / DLH Machine setups $ 71,290 1,000 setups $ 71.29 / setup Order size $ 121,396 8,900 MHs $ 13.64 / MH Computation of the overhead cost per unit under activity-based costing. Product I4 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $41.92 per DLH 2,700 $ 113,184 Machine setups, at $71.29 per setup 600 42,774 Order size, $13.64 per MH 4,600 62,744 Total overhead costs assigned (a) $ 218,702 Number of units produced (b) 900 Overhead cost per unit (a) ÷ (b) $ 243.00 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

182) Appleby, Inc., manufactures and sells two products: Product Q9 and Product V8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Q9 800 5.0 4,000 Product V8 1,000 3.0 3,000 Total direct labor-hours 7,000 The direct labor rate is $29.30 per DLH. The direct materials cost per unit is $174.80 for Product Q9 and $168.90 for Product V8. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Q9 Product V8 Total Labor-related DLHs $ 214,480 4,000 3,000 7,000 Production orders orders 41,065 300 200 500 Order size MHs 192,700 4,200 4,000 8,200 $ 448,245 The overhead applied to each unit of Product V8 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $249.03 per unit B) $192.12 per unit C) $202.35 per unit D) $94.00 per unit

answer: C Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 214,480 7,000 DLHs $ 30.64 per DLH Production orders $ 41,065 500 orders $ 82.13 per order Order size $ 192,700 8,200 MHs $ 23.50 per MH Computation of the overhead cost per unit under activity-based costing. Product V8 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $30.64 per DLH 3,000 $ 91,920 Production orders, at $82.13 per order 200 16,426 Order size, $23.50 per MH 4,000 94,000 Total overhead costs assigned (a) $ 202,346 Number of units produced (b) 1000 Overhead cost per unit (a) ÷ (b) $ 202.35 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

70) Lillich, Inc., manufactures and sells two products: Product U6 and Product R5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product U6 600 8.0 4,800 Product R5 1,000 5.0 5,000 Total direct labor-hours 9,800 The direct labor rate is $27.10 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product U6 $248.90 Product R5 $166.30 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product U6 Product R5 Total Labor-related DLHs $ 194,138 4,800 5,000 9,800 Production orders orders 65,340 600 500 1,100 Order size MHs 1,013,108 5,000 5,300 10,300 $ 1,272,586 Which of the following statements concerning the unit product cost of Product U6 is true? (Round your intermediate calculations to 2 decimal places.) A) The unit product cost of Product U6 under traditional costing is greater than its unit product cost under activity-based costing by $389.58. B) The unit product cost of Product U6 under traditional costing is less than its unit product cost under activity-based costing by $389.58. C) The unit product cost of Product U6 under traditional costing is greater than its unit product cost under activity-based costing by $1.33. D) The unit product cost of Product U6 under traditional costing is less than its unit product cost under activity-based costing by $1.33.

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,272,586 ÷ 9,800 DLHs = $129.86 per DLH (rounded) Computation of traditional unit product cost: Product U6 Direct materials $ 248.90 Direct labor (8.0 DLHs × $27.10 per DLH) 216.80 Manufacturing overhead (8.0 DLHs × $129.86 per DLH) 1,038.88 Unit product cost $ 1,504.58 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 194,138 9,800 DLHs $ 19.81 per DLH Production orders $ 65,340 1,100 orders $ 59.40 per order Order size $ 1,013,108 10,300 MHs $ 98.36 per MH Computation of the overhead cost per unit under activity-based costing. Product U6 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $19.81 per DLH 4,800 $ 95,088 Production orders, at $59.40 per order 600 35,640 Order size, $98.36 per MH 5,000 491,800 Total overhead costs assigned (a) $ 622,528 Number of units produced (b) 600 Overhead cost per unit (a) ÷ (b) $ 1,037.55 Computation of unit product cost under activity-based costing. Product U6 Direct materials $ 248.90 Direct labor 216.80 Overhead 1,037.55 Unit product cost $ 1,503.25 The difference in unit product costs is: Product U6 Traditional unit product cost $ 1,504.58 ABC unit product cost 1,503.25 Difference $ 1.33 The unit product cost of Product U6 under traditional costing is greater than its unit product cost under activity-based costing by $1.33. Difficulty: 3 Hard Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

187) Nole, Inc., manufactures and sells two products: Product W8 and Product N0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product W8 100 9.0 900 Product N0 1,000 11.0 11,000 Total direct labor-hours 11,900 The direct labor rate is $17.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product W8 $ 176.40 Product N0 $ 280.50 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product W8 Product N0 Total Labor-related DLHs $ 461,720 900 11,000 11,900 Machine setups setups 25,865 300 400 700 Order size MHs 796,220 4,000 4,200 8,200 $ 1,283,805 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product W8 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $349.20 per unit B) $873.90 per unit C) $970.92 per unit D) $332.55 per unit

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,283,805 ÷ 11,900 DLHs = $107.88 per DLH (rounded) Product W8: 9.0 DLHs × $107.88 per DLH = $970.92 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

195) Wanger, Inc., manufactures and sells two products: Product G1 and Product F2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product G1 800 9.0 7,200 Product F2 800 11.0 8,800 Total direct labor-hours 16,000 The direct labor rate is $15.30 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product G1 $ 100.50 Product F2 $ 292.00 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product G1 Product F2 Total Labor-related DLHs $ 732,480 7,200 8,800 16,000 Machine setups setups 53,809 400 300 700 Order size MHs 600,525 3,800 3,700 7,500 $ 1,386,814 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to: A) $45.78 per DLH B) $76.87 per DLH C) $86.68 per DLH D) $80.07 per DLH

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,386,814 ÷ 16,000 DLHs = $86.68 per DLH (rounded) Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

173) Gradwell, Inc., manufactures and sells two products: Product K8 and Product I4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product K8 300 5.0 1,500 Product I4 900 3.0 2,700 Total direct labor-hours 4,200 The direct labor rate is $17.20 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product K8 $ 150.20 Product I4 $ 243.70 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product K8 Product I4 Total Labor-related DLHs $ 176,064 1,500 2,700 4,200 Machine setups setups 71,290 400 600 1,000 Order size MHs 121,396 4,300 4,600 8,900 $ 368,750 The unit product cost of Product I4 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to: (Round your intermediate calculations to 2 decimal places.) A) $421.06 per unit B) $336.22 per unit C) $558.70 per unit D) $509.17 per unit

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $368,750 ÷ 4,200 DLHs = $87.80 per DLH (rounded) Computation of traditional unit product cost: Product I4 Direct materials $ 243.70 Direct labor (3.0 DLHs × $17.20 per DLH) 51.60 Manufacturing overhead (3.0 DLHs × $87.80 per DLH) 263.40 Unit product cost $ 558.70 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

172) Gradwell, Inc., manufactures and sells two products: Product K8 and Product I4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product K8 300 5.0 1,500 Product I4 900 3.0 2,700 Total direct labor-hours 4,200 The direct labor rate is $17.20 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product K8 $ 150.20 Product I4 $ 243.70 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product K8 Product I4 Total Labor-related DLHs $ 176,064 1,500 2,700 4,200 Machine setups setups 71,290 400 600 1,000 Order size MHs 121,396 4,300 4,600 8,900 $ 368,750 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product K8 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $68.20 per unit B) $209.60 per unit C) $439.00 per unit D) $356.45 per unit

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $368,750 ÷ 4,200 DLHs = $87.80 per DLH (rounded) Product K8: 5.0 DLHs × $87.80 per DLH = $439.00 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

171) Gradwell, Inc., manufactures and sells two products: Product K8 and Product I4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product K8 300 5.0 1,500 Product I4 900 3.0 2,700 Total direct labor-hours 4,200 The direct labor rate is $17.20 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product K8 $ 150.20 Product I4 $ 243.70 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product K8 Product I4 Total Labor-related DLHs $ 176,064 1,500 2,700 4,200 Machine setups setups 71,290 400 600 1,000 Order size MHs 121,396 4,300 4,600 8,900 $ 368,750 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to: A) $71.29 per DLH B) $13.64 per DLH C) $87.80 per DLH D) $41.92 per DLH

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $368,750 ÷ 4,200 DLHs = $87.80 per DLH (rounded) Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

129) Gesualdo, Inc., manufactures and sells two products: Product Z6 and Product F4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Z6 300 8.0 2,400 Product F4 600 11.0 6,600 Total direct labor-hours 9,000 The direct labor rate is $24.70 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product Z6 $ 101.00 Product F4 $ 217.20 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Z6 Product F4 Total Labor-related DLHs $ 98,640 2,400 6,600 9,000 Machine setups setups 18,711 500 600 1,100 Order size MHs 388,360 3,800 3,500 7,300 $ 505,711 Which of the following statements concerning the unit product cost of Product F4 is true? (Round your intermediate calculations to 2 decimal places.) A) The unit product cost of Product F4 under traditional costing is less than its unit product cost under activity-based costing by $170.19. B) The unit product cost of Product F4 under traditional costing is greater than its unit product under activity-based costing by $342.00. C) The unit product cost of Product F4 under traditional costing is greater than its unit product under activity-based costing by $170.19. D) The unit product cost of Product F4 under traditional costing is less than its unit product cost under activity-based costing by $342.00.

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $505,711 ÷ 9,000 DLHs = $56.19 per DLH (rounded) Computation of traditional unit product cost: Product F4 Direct materials $ 217.20 Direct labor (11.0 DLHs × $24.70 per DLH) 271.70 Manufacturing overhead (11.0 DLHs × $56.19 per DLH) 618.09 Unit product cost $ 1,106.99 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 98,640 9,000 DLHs $ 10.96 per DLH Machine setups $ 18,711 1,100 setups $ 17.01 per setup Order size $ 388,360 7,300 MHs $ 53.20 per MH Computation of the overhead cost per unit under activity-based costing. Product F4 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $10.96 per DLH 6,600 $ 72,336 Machine setups, at $17.01 per setup 600 10,206 Order size, $53.20 per MH 3,500 186,200 Total overhead costs assigned (a) $ 268,742 Number of units produced (b) 600 Overhead cost per unit (a) ÷ (b) $ 447.90 Computation of unit product cost under activity-based costing. Product F4 Direct materials $ 217.20 Direct labor 271.70 Overhead 447.90 Unit product cost $ 936.80 The difference in unit product costs is: Product F4 Traditional unit product cost $ 1,106.99 ABC unit product cost 936.80 Difference $ 170.19 The unit product cost of Product F4 under traditional costing is greater than its unit product under activity-based costing by $170.19. Difficulty: 3 Hard Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

191) Wardsworth, Inc., manufactures and sells two products: Product I9 and Product Z9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product I9 700 6.0 4,200 Product Z9 900 8.0 7,200 Total direct labor-hours 11,400 The direct labor rate is $26.00 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product I9 $ 226.10 Product Z9 $ 151.20 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product I9 Product Z9 Total Labor-related DLHs $ 463,980 4,200 7,200 11,400 Machine setups setups 9,814 300 400 700 Order size MHs 105,792 4,400 4,300 8,700 $ 579,586 The unit product cost of Product I9 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to: (Round your intermediate calculations to 2 decimal places.) A) $455.06 per unit B) $466.22 per unit C) $687.14 per unit D) $626.30 per unit

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $579,586 ÷ 11,400 DLHs = $50.84 per DLH (rounded) Computation of traditional unit product cost: Product I9 Direct materials $ 226.10 Direct labor (6.0 DLHs × $26.00 per DLH) 156.00 Manufacturing overhead (6.0 DLHs × $50.84 per DLH) 305.04 Unit product cost $ 687.14 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

192) Wardsworth, Inc., manufactures and sells two products: Product I9 and Product Z9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product I9 700 6.0 4,200 Product Z9 900 8.0 7,200 Total direct labor-hours 11,400 The direct labor rate is $26.00 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product I9 $ 226.10 Product Z9 $ 151.20 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product I9 Product Z9 Total Labor-related DLHs $ 463,980 4,200 7,200 11,400 Machine setups setups 9,814 300 400 700 Order size MHs 105,792 4,400 4,300 8,700 $ 579,586 The unit product cost of Product Z9 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to: (Round your intermediate calculations to 2 decimal places.) A) $456.48 per unit B) $684.80 per unit C) $765.92 per unit D) $471.36 per unit

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $579,586 ÷ 11,400 DLHs = $50.84 per DLH (rounded) Computation of traditional unit product cost: Product Z9 Direct materials $ 151.20 Direct labor (8.0 DLHs × $26.00 per DLH) 208.00 Manufacturing overhead (8.0 DLHs × $50.84 per DLH) 406.72 Unit product cost $ 765.92 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

87) Arntson, Inc., manufactures and sells two products: Product R3 and Product N0. The annual production and sales of Product of R3 is 200 units and of Product N0 is 100 units. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product R3 200 8.0 1,600 Product N0 100 11.0 1,100 Total direct labor-hours 2,700 The direct labor rate is $15.80 per DLH. The direct materials cost per unit is $287.80 for Product R3 and $104.80 for Product N0. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product R3 Product N0 Total Labor-related DLHs $ 39,636 1,600 1,100 2,700 Production orders orders 57,421 600 700 1,300 Order size MHs 432,075 3,600 3,900 7,500 $ 529,132 The unit product cost of Product R3 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $2,177.97 per unit B) $1,451.18 per unit C) $1,701.13 per unit D) $1,981.96 per unit

answer: C Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 39,636 2,700 DLHs $ 14.68 per DLH Production orders $ 57,421 1,300 orders $ 44.17 per order Order size $ 432,075 7,500 MHs $ 57.61 per MH Computation of the overhead cost per unit under activity-based costing. Product R3 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $14.68 per DLH 1,600 $ 23,488 Production orders, at $44.17 per order 600 26,502 Order size, $57.61 per MH 3,600 207,396 Total overhead costs assigned (a) $ 257,386 Number of units produced (b) 200 Overhead cost per unit (a) ÷ (b) $ 1,286.93 Computation of unit product costs under activity-based costing. Product R3 Direct materials $ 287.80 Direct labor (8.0 DLHs × $15.80 per DLH) 126.40 Overhead 1,286.93 Unit product cost $ 1,701.13 Difficulty: 2 Medium Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

198) Wanger, Inc., manufactures and sells two products: Product G1 and Product F2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product G1 800 9.0 7,200 Product F2 800 11.0 8,800 Total direct labor-hours 16,000 The direct labor rate is $15.30 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product G1 $ 100.50 Product F2 $ 292.00 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product G1 Product F2 Total Labor-related DLHs $ 732,480 7,200 8,800 16,000 Machine setups setups 53,809 400 300 700 Order size MHs 600,525 3,800 3,700 7,500 $ 1,386,814 The overhead applied to each unit of Product G1 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $780.12 per unit B) $866.76 per unit C) $830.79 per unit D) $380.33 per unit

answer: C Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 732,480 16,000 DLHs $ 45.78 / DLH Machine setups $ 53,809 700 setups $ 76.87 / setup Order size $ 600,525 7,500 MHs $ 80.07 / MH Computation of the overhead cost per unit under activity-based costing. Product G1 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $45.78 per DLH 7,200 $ 329,616 Machine setups, at $76.87 per setup 400 30,748 Order size, $80.07 per MH 3,800 304,266 Total overhead costs assigned (a) $ 664,630 Number of units produced (b) 800 Overhead cost per unit (a) ÷ (b) $ 830.79 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

69) Howden, Inc., manufactures and sells two products: Product P5 and Product S9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product P5 300 7.0 2,100 Product S9 900 4.0 3,600 Total direct labor-hours 5,700 The direct labor rate is $25.70 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product P5 $248.50 Product S9 $294.80 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product P5 Product S9 Total Labor-related DLHs $ 247,152 2,100 3,600 5,700 Machine setups setups 28,990 600 700 1,300 Order size MHs 519,241 4,900 5,200 10,100 $ 795,383 Which of the following statements concerning the unit product cost of Product S9 is true? (Round your intermediate calculations to 2 decimal places.) A) The unit product cost of Product S9 under traditional costing is less than its unit product cost under activity-based costing by $70.34. B) The unit product cost of Product S9 under traditional costing is less than its unit product cost under activity-based costing by $700.00. C) The unit product cost of Product S9 under traditional costing is greater than its unit product cost under activity-based costing by $70.34. D) The unit product cost of Product S9 under traditional costing is greater than its unit product cost under activity-based costing by $700.00.

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $795,383 ÷ 5,700 DLHs = $139.54 per DLH (rounded) Computation of traditional unit product cost: Product S9 Direct materials $ 294.80 Direct labor (4.0 DLHs × $25.70 per DLH) 102.80 Manufacturing overhead (4.0 DLHs × $139.54 per DLH) 558.16 Unit product cost $ 955.76 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 247,152 5,700 DLHs $ 43.36 per DLH Machine setups $ 28,990 1,300 setups $ 22.30 per setup Order size $ 519,241 10,100 MHs $ 51.41 per MH Computation of the overhead cost per unit under activity-based costing. Product S9 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $43.36 per DLH 3,600 $ 156,096 Machine setups, at $22.30 per setup 700 15,610 Order size, $51.41 per MH 5,200 267,332 Total overhead costs assigned (a) $ 439,038 Number of units produced (b) 900 Overhead cost per unit (a) ÷ (b) $ 487.82 Computation of unit product cost under activity-based costing. Product S9 Direct materials $ 294.80 Direct labor 102.80 Overhead 487.82 Unit product cost $ 885.42 The difference in unit product costs is: Product S9 Traditional unit product cost $ 955.76 ABC unit product cost 885.42 Difference $ 70.34 The unit product cost of Product S9 under traditional costing is greater than its unit product cost under activity-based costing by $70.34. Difficulty: 3 Hard Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

55) Ravelo Corporation has provided the following data from its activity-based costing system: Activity Cost Pools Estimated Overhead Cost Expected Activity Assembly $ 498,520 44,000 machine-hours Processing orders $ 54,263 1,100 orders Inspection $ 77,589 1,110 inspection-hours Data concerning the company's product L19B appear below: Annual unit production and sales 430 Annual machine-hours 990 Annual number of orders 70 Annual inspection hours 20 Direct materials cost $ 37.74 per unit Direct labor cost $ 10.45 per unit According to the activity-based costing system, the unit product cost of product L19B is closest to: (Round your intermediate calculations to 2 decimal places.) A) $48.19 per unit B) $82.31 per unit C) $85.56 per unit D) $77.53 per unit

answer: C Explanation: The activity rates for each activity cost pool are computed as follows: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Assembly $ 498,520 44,000 machine-hours $ 11.33 per machine-hour Processing orders $ 54,263 1,100 orders $ 49.33 per order Inspection $ 77,589 1,110 inspection-hours $ 69.90 per inspection-hour The overhead cost charged to Product L19B is: Activity Cost Pools Activity Rates Expected Activity Amount Assembly $ 11.33 per machine-hour 990 machine-hours $ 11,216.70 Processing orders $ 49.33 per order 70 orders 3,453.10 Inspection $ 69.90 /inspection-hour 20 inspection-hours 1,398.00 Total overhead cost $ 16,067.80 Direct materials (430 units × $37.74 per unit) $ 16,228.20 Direct labor (430 units × $10.45 per unit) 4,493.50 Overhead 16,067.80 Total cost $ 36,789.50 Unit product cost = $36,789.50 ÷ 430 units = $85.56 per unit Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

42) In activity-based costing, unit product costs computed for external financial reports include: A) direct materials and manufacturing overhead. B) direct labor and manufacturing overhead. C) direct materials, direct labor, and manufacturing overhead. D) direct materials and direct labor.

answer: C Difficulty: 1 Easy Topic: Computing Product Costs Learning Objective: 04-03 Compute product costs using activity-based costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

35) Parts administration is an example of a: A) Unit-level activity. B) Batch-level activity. C) Product-level activity. D) Facility-level activity.

answer: C Difficulty: 2 Medium Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

36) Which of the following would probably be the most accurate measure of activity to use for allocating the costs associated with a factory's purchasing department? A) Machine-hours B) Direct labor-hours C) Number of orders processed D) Cost of materials purchased

answer: C Difficulty: 2 Medium Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

38) Departmental overhead rates may not correctly assign overhead costs due to: A) the use of direct labor hours in allocating overhead costs to products rather than machine time or quantity of materials used. B) the high correlation between direct labor-hours and the incurrence of overhead costs. C) overreliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced, lot size, or complexity of production. D) difficulties associated with identifying cost pools for the first stage of the allocation process.

answer: C Difficulty: 3 Hard Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

159) The controller of Hendershot Company estimates the amount of materials handling overhead cost that should be allocated to the company's two products using the data that are given below: Wall Mirrors Specialty Windows Total expected units produced 6,000 3,000 Total expected material moves 500 100 Expected direct labor-hours per unit 6 9 The total materials handling cost for the year is expected to be $6,123.60. If the materials handling cost is allocated on the basis of direct labor-hours, the total materials handling cost allocated to the wall mirrors is closest to:(Round your intermediate calculations to 4 decimal places.) A) $2,449 B) $4,144 C) $3,499 D) $3,062

answer: C Explanation: Wall Mirrors Specialty Windows Total Total expected units produced (a) 6,000 3,000 Expected direct labor-hours per unit (b) 6 9 Total direct labor-hours (a) × (b) 36,000 27,000 63,000 Cost per direct labor-hour = Total materials handling cost ÷ Total direct labor-hours = $6,123.60 ÷ 63,000 direct labor-hours = $0.0972 per direct labor-hour Cost allocated to wall mirrors = $0.0972 per direct labor-hour × 36,000 direct labor-hours = $3,499.20 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

105) Abbe Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 800 units and of Product B is 600 units. There are three activity cost pools, with estimated costs and expected activity as follows: Activity Cost Pools Estimated Overhead Cost Expected Activity Product A Product B Total Activity 1 $ 17,460 600 600 1,200 Activity 2 $ 19,987 1,700 600 2,300 Activity 3 $ 29,884 400 120 520 The overhead cost per unit of Product B is closest to: (Round your intermediate calculations to 2 decimal places.) A) $25.90 B) $11.49 C) $34.73 D) $48.09

answer: C Explanation: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Activity 1 $ 17,460 1,200 $ 14.55 Activity 2 $ 19,987 2,300 $ 8.69 Activity 3 $ 29,884 520 $ 57.47 Product B Activity Cost Pools and Activity Rates Expected Activity Amount Activity 1 ($14.55) 600 $ 8,730.00 Activity 2 ($8.69) 600 5,214.00 Activity 3 ($57.47) 120 6,896.40 Total overhead costs assigned (a) $ 20,840.40 Number of units produced (b) 600 Overhead cost per unit (a) ÷ (b) $ 34.73 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

130) Treaster, Inc., manufactures and sells two products: Product J8 and Product G2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product J8 900 9.0 8,100 Product G2 1,000 12.0 12,000 Total direct labor-hours 20,100 The direct labor rate is $26.90 per DLH. The direct materials cost per unit is $217.20 for Product J8 and $139.60 for Product G2. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product J8 Product G2 Total Labor-related DLHs $ 655,059 8,100 12,000 20,100 Production orders orders 40,086 500 400 900 Order size MHs 711,588 3,900 3,700 7,600 $ 1,406,733 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to: A) $32.59 per DLH B) $44.54 per DLH C) $69.99 per DLH D) $93.63 per DLH

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,406,733 ÷ 20,100 DLHs = $69.99 per DLH (rounded) Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

161) Fleurant, Inc., manufactures and sells two products: Product W2 and Product P8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product W2 400 6.0 2,400 Product P8 600 4.0 2,400 Total direct labor-hours 4,800 The direct labor rate is $29.10 per DLH. The direct materials cost per unit is $195.60 for Product W2 and $132.30 for Product P8. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product W2 Product P8 Total Labor-related DLHs $ 210,576 2,400 2,400 4,800 Production orders orders 17,738 400 300 700 Order size MHs 273,430 3,800 3,600 7,400 $ 501,744 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product W2 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $263.22 per unit B) $152.04 per unit C) $627.18 per unit D) $221.70 per unit

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $501,744 ÷ 4,800 DLHs = $104.53 per DLH (rounded) Product W2: 6.0 DLHs × $104.53 per DLH = $627.18 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

148) Faz, Inc., manufactures and sells two products: Product X0 and Product W7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product X0 1,000 5.0 5,000 Product W7 400 2.0 800 Total direct labor-hours 5,800 The direct labor rate is $19.60 per DLH. The direct materials cost per unit is $144.50 for Product X0 and $126.00 for Product W7. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product X0 Product W7 Total Labor-related DLHs $ 272,078 5,000 800 5,800 Production orders orders 18,948 500 700 1,200 Order size MHs 242,514 4,000 4,100 8,100 $ 533,540 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product X0 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $234.55 per unit B) $149.70 per unit C) $459.95 per unit D) $78.95 per unit

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $533,540 ÷ 5,800 DLHs = $91.99 per DLH (rounded) Product X0: 5.0 DLHs × $91.99 per DLH = $459.95 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

168) Cracchiolo, Inc., manufactures and sells two products: Product H2 and Product A8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product H2 200 7.0 1,400 Product A8 800 8.0 6,400 Total direct labor-hours 7,800 The direct labor rate is $15.10 per DLH. The direct materials cost per unit is $145.80 for Product H2 and $261.90 for Product A8. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product H2 Product A8 Total Labor-related DLHs $ 83,148 1,400 6,400 7,800 Production orders orders 18,970 400 300 700 Order size MHs 817,191 5,000 5,100 10,100 $ 919,309 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product A8 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $216.80 per unit B) $85.28 per unit C) $942.88 per unit D) $647.28 per unit

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $919,309 ÷ 7,800 DLHs = $117.86 per DLH (rounded) Product A8: 8.0 DLHs × $117.86 per DLH = $942.88 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

92) Vanvalkenburg, Inc., manufactures and sells two products: Product Q5 and Product J0. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Q5 Product J0 Total Labor-related DLHs $ 191,748 3,000 2,800 5,800 Production orders orders 70,536 300 500 800 Order size MHs 295,592 4,300 4,500 8,800 $ 557,876 The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to: A) $141.07 per DLH B) $235.12 per DLH C) $33.06 per DLH D) $697.35 per DLH

answer: C Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $191,748 ÷ 5,800 DLHs = $33.06 per DLH Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

97) Bobzien, Inc., manufactures and sells two products: Product B7 and Product Z5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product B7 300 5.0 1,500 Product Z5 800 3.0 2,400 Total direct labor-hours 3,900 The direct labor rate is $15.10 per DLH. The direct materials cost per unit is $136.20 for Product B7 and $204.40 for Product Z5. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product B7 Product Z5 Total Labor-related DLHs $ 39,585 1,500 2,400 3,900 Production orders orders 26,884 500 600 1,100 Order size MHs 462,768 4,600 4,700 9,300 $ 529,237 The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to: A) $53.77 per DLH B) $44.81 per DLH C) $10.15 per DLH D) $481.12 per DLH

answer: C Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $39,585 ÷ 3,900 DLHs = $10.15 per DLH Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

93) Vanvalkenburg, Inc., manufactures and sells two products: Product Q5 and Product J0. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Q5 Product J0 Total Labor-related DLHs $ 191,748 3,000 2,800 5,800 Production orders orders 70,536 300 500 800 Order size MHs 295,592 4,300 4,500 8,800 $ 557,876 The activity rate for the Production Orders activity cost pool under activity-based costing is closest to: A) $63.40 per order B) $68.74 per order C) $88.17 per order D) $65.69 per order

answer: C Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $70,536 ÷ 800 orders = $88.17 per order Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

59) Soehl, Inc., manufactures and sells two products: Product T4 and Product F9. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product T4 Product F9 Total Labor-related DLHs $ 326,650 4,500 4,900 9,400 Product testing tests 68,572 600 800 1,400 Order size MHs 79,690 3,200 3,300 6,500 $ 474,912 The total overhead applied to Product T4 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $267,138 B) $227,340 C) $224,995 D) $39,231

answer: C Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 326,650 9,400 DLHs $ 34.75 per DLH Product testing $ 68,572 1,400 tests $ 48.98 per test Order size $ 79,690 6,500 MHs $ 12.26 per MH Computation of the overhead cost under activity-based costing. Product T4 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $34.75 per DLH 4,500 $ 156,375 Product testing, at $48.98 per test 600 29,388 Order size, $12.26 per MH 3,200 39,232 Total overhead costs assigned $ 224,995 Difficulty: 1 Easy Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

96) Weirick, Inc., manufactures and sells two products: Product T8 and Product P4. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product T8 Product P4 Total Labor-related DLHs $ 132,464 1,400 5,400 6,800 Production orders orders 32,604 500 700 1,200 Order size MHs 762,106 4,300 4,000 8,300 $ 927,174 The total overhead applied to Product P4 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $736,290 B) $367,281 C) $491,491 D) $758,601

answer: C Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 132,464 6,800 DLHs $ 19.48 per DLH Production orders $ 32,604 1,200 orders $ 27.17 per order Order size $ 762,106 8,300 MHs $ 91.82 per MH Computation of the overhead cost under activity-based costing. Product P4 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $19.48 per DLH 5,400 $ 105,192 Production orders, at $27.17 per order 700 19,019 Order size, $91.82 per MH 4,000 367,280 Total overhead costs assigned $ 491,491 Difficulty: 1 Easy Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

51) Moyle Corporation has provided the following data from its activity-based costing accounting system: Activity Cost Pools Estimated Overhead Cost Expected Activity Designing products $ 396,900 2,450 product design hours Setting up batches $ 8,580 390 batch set-ups Assembling products $ 115,520 7,220 assembly hours The activity rate for the Designing Products activity cost pool is closest to: A) $396,900 per product design hour B) $62 per product design hour C) $162 per product design hour D) $52 per product design hour

answer: C Explanation: Designing products activity rate: $396,900 ÷ 2,450 product design hours = $162 per product design hour Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

155) Adelberg Company has two products: A and B. The annual production and sales of Product A is 500 units and of Product B is 1,000 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit. The total estimated overhead for next period is $68,756. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools—Activity 1, Activity 2, and Order Size—with estimated overhead costs and expected activity as follows: Estimated Expected Activity Activity Cost Pools Overhead Costs Product A Product B Total Activity 1 $ 31,031 1,000 300 1,300 Activity 2 22,249 1,600 300 1,900 Order size 15,476 200 200 400 Total $ 68,756 (Note: The Order Size activity cost pool's costs are allocated on the basis of direct labor-hours.) The predetermined overhead rate under the traditional costing system is closest to: A) $11.71 per DLH B) $38.69 per DLH C) $171.89 per DLH D) $23.87 per DLH

answer: C Explanation: Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $68,756 ÷ 400 DLHs = $171.89 per DLH Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

85) Matamoros, Inc., manufactures and sells two products: Product D7 and Product J3. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product D7 600 5.0 3,000 Product J3 100 7.0 700 Total direct labor-hours 3,700 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product D7 Product J3 Total Labor-related DLHs $ 66,193 3,000 700 3,700 Machine setups setups 65,772 400 500 900 Order size MHs 153,932 3,000 2,800 5,800 $ 285,897 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product J3 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $185.78 per unit B) $511.56 per unit C) $540.89 per unit D) $125.23 per unit

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $285,897 ÷ 3,700 DLHs = $77.27 per DLH (rounded) Product J3: 7.0 DLHs × $77.27 per DLH = $540.89 Difficulty: 2 Medium Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

84) Dunagin, Inc., manufactures and sells two products: Product U2 and Product H9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product U2 500 7.0 3,500 Product H9 500 6.0 3,000 Total direct labor-hours 6,500 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product U2 Product H9 Total Labor-related DLHs $ 231,725 3,500 3,000 6,500 Production orders orders 24,295 300 200 500 Order size MHs 320,970 3,800 4,000 7,800 $ 576,990 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to: A) $35.65 per DLH B) $41.15 per DLH C) $88.77 per DLH D) $48.59 per DLH

answer: C Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $576,990 ÷ 6,500 DLHs = $88.77 per DLH (rounded) Difficulty: 2 Medium Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

72) Activity rates from Mcelderry Corporation's activity-based costing system are listed below. The company uses the activity rates to assign overhead costs to products: Activity Cost Pools Activity Rate Processing customer orders $ 49.87 per customer order Assembling products $ 2.88 per assembly hour Setting up batches $ 18.26 per batch Last year, Product Q06J involved 10 customer orders, 580 assembly hours, and 12 batches. How much overhead cost would be assigned to Product Q06J using the activity-based costing system? (Round your intermediate calculations to 2 decimal places.) A) $71.01 B) $219.12 C) $2,388.22 D) $42,748.02

answer: C Explanation: The overhead cost charged to Product Q06J is: Activity Rate Expected Activity Amount Processing customer orders $ 49.87 /customer order 10 orders $ 498.70 Assembling products $ 2.88 /assembly hr 580 hours 1,670.40 Setting up batches $ 18.26 per batch 12 batches 219.12 Total overhead cost $ 2,388.22 Difficulty: 1 Easy Topic: Computing Product Costs Learning Objective: 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

; FN Measurement 213) Brayman, Inc., manufactures and sells two products: Product F1 and Product K2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product F1 400 6.0 2,400 Product K2 600 3.0 1,800 Total direct labor-hours 4,200 The direct labor rate is $28.30 per DLH. The direct materials cost per unit is $148.60 for Product F1 and $192.70 for Product K2. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product F1 Product K2 Total Labor-related DLHs $ 149,940 2,400 1,800 4,200 Machine setups Setups 45,067 600 500 1,100 Order size MHs 730,835 4,700 4,800 9,500 $ 925,842 Required: Determine the unit product cost of each product under the activity-based costing method.

answer: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 149,940 4,200 DLHs $ 35.70 per DLH Machine setups $ 45,067 1,100 setups $ 40.97 per setup Order size $ 730,835 9,500 MHs $ 76.93 per MH Computation of the overhead cost per unit under activity-based costing. Product F1 Product K2 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $35.70 per DLH 2,400 $85,680 1,800 $64,260 Machine setups, at $40.97 per setup 600 24,582 500 20,485 Order size, $76.93 per MH 4,700 361,571 4,800 369,264 Total overhead costs assigned (a) $471,833 $454,009 Number of units produced (b) 400 600 Overhead cost per unit (a) ÷ (b) $1,179.58 $756.68 Computation of unit product costs under activity-based costing. Product F1 Product K2 Direct materials $148.60 $192.70 Direct labor: Product F1: (6.0 DLHs × $28.30 per DLH) 169.80 Product K2: (3.0 DLHs × $28.30 per DLH) 84.90 Overhead 1,179.58 756.68 Unit product cost $1,497.98 $1,034.28 Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 206) Upwall, Inc., manufactures and sells two products: Product S0 and Product F7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product S0 900 5.0 4,500 Product F7 200 2.0 400 Total direct labor-hours 4,900 The direct labor rate is $15.60 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product S0 $160.80 Product F7 $161.30 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product S0 Product F7 Total Labor-related DLHs $ 211,043 4,500 400 4,900 Machine setups Setups 10,682 400 300 700 Order size MHs 280,968 4,700 4,500 9,200 $ 502,693 Required: Determine the unit product cost of each product under the activity-based costing method.

answer: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 211,043 4,900 DLHs $ 43.07 per DLH Machine setups $ 10,682 700 setups $ 15.26 per setup Order size $ 280,968 9,200 MHs $ 30.54 per MH Computation of the overhead cost per unit under activity-based costing. Product S0 Product F7 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $43.07 per DLH 4,500 $193,815 400 $17,228 Machine setups, at $15.26 per setup 400 6,104 300 4,578 Order size, $30.54 per MH 4,700 143,538 4,500 137,430 Total overhead costs assigned (a) $343,457 $159,236 Number of units produced (b) 900 200 Overhead cost per unit (a) ÷ (b) $381.62 $796.18 Computation of unit product costs under activity-based costing. Product S0 Product F7 Direct materials $160.80 $161.30 Direct labor: Product S0: (5.0 DLHs × $15.60 per DLH) 78.00 Product F7: (2.0 DLHs × $15.60 per DLH) 31.20 Overhead 381.62 796.18 Unit product cost $620.42 $988.68 Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 208) Macfarlane, Inc., manufactures and sells two products: Product F4 and Product A0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product F4 1,000 7.0 7,000 Product A0 100 8.0 800 Total direct labor-hours 7,800 The direct labor rate is $27.60 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product F4 $259.40 Product A0 $228.00 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product F4 Product A0 Total Labor-related DLHs $ 247,026 7,000 800 7,800 Production orders Orders 55,773 500 400 900 Order size MHs 710,918 3,800 3,600 7,400 $ 1,013,717 Required: Determine the unit product cost of each product under the activity-based costing method.

answer: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 247,026 7,800 DLHs $ 31.67 per DLH Production orders $ 55,773 900 orders $ 61.97 per order Order size $ 710,918 7,400 MHs $ 96.07 per MH Computation of the overhead cost per unit under activity-based costing. Product F4 Product A0 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $31.67 per DLH 7,000 $221,690 800 $25,336 Production orders, at $61.97 per order 500 30,985 400 24,788 Order size, $96.07 per MH 3,800 365,066 3,600 345,852 Total overhead costs assigned (a) $617,741 $395,976 Number of units produced (b) 1000 100 Overhead cost per unit (a) ÷ (b) $617.74 $3,959.76 Computation of unit product costs under activity-based costing. Product F4 Product A0 Direct materials $259.40 $228.00 Direct labor: Product F4: (7.0 DLHs × $27.60 per DLH) 193.20 Product A0: (8.0 DLHs × $27.60 per DLH) 220.80 Overhead 617.74 3,959.76 Unit product cost $1,070.34 $4,408.56 Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

; FN Measurement 202) Cazier, Inc., manufactures and sells two products: Product F8 and Product M3. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product F8 500 8.0 4,000 Product M3 200 7.0 1,400 Total direct labor-hours 5,400 The direct labor rate is $19.30 per DLH. The direct materials cost per unit is $204.50 for Product F8 and $199.90 for Product M3. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product F8 Product M3 Total Labor-related DLHs $ 59,400 4,000 1,400 5,400 Product testing Tests 52,189 300 500 800 Order size MHs 613,248 4,900 4,700 9,600 $ 724,840 Required: Determine the unit product cost of each product under the activity-based costing method.

answer: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 59,400 5,400 DLHs $ 11.00 per DLH Product testing $ 52,192 800 tests $ 65.24 per test Order size $ 613,248 9,600 MHs $ 63.88 per MH Computation of the overhead cost per unit under activity-based costing. Product F8 Product M3 Activity Cost Pools and Activity Rates Expected Activity Amount Expected Activity Amount Labor-related, at $11.00 per DLH 4,000 $44,000 1,400 $15,400 Product testing, at $65.24 per test 300 19,572 500 32,620 Order size, $63.88 per MH 4,900 313,012 4,700 300,236 Total overhead costs assigned (a) $376,584 $348,256 Number of units produced (b) 500 200 Overhead cost per unit (a) ÷ (b) $753.17 $1,741.28 Computation of unit product costs under activity-based costing. Product F8 Product M3 Direct materials $204.50 $199.90 Direct labor: Product F8: (8.0 DLHs × $19.30 per DLH) 154.40 Product M3: (7.0 DLHs × $19.30 per DLH) 135.10 Overhead 753.17 1,741.28 Unit product cost $1,112.07 $2,076.28 Difficulty: 2 Medium Topic: Computing Activity Rates; Computing Product Costs Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA:

186) Nole, Inc., manufactures and sells two products: Product W8 and Product N0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product W8 100 9.0 900 Product N0 1,000 11.0 11,000 Total direct labor-hours 11,900 The direct labor rate is $17.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product W8 $ 176.40 Product N0 $ 280.50 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product W8 Product N0 Total Labor-related DLHs $ 461,720 900 11,000 11,900 Machine setups setups 25,865 300 400 700 Order size MHs 796,220 4,000 4,200 8,200 $ 1,283,805 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to: A) $38.80 per DLH B) $36.95 per DLH C) $97.10 per DLH D) $107.88 per DLH

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,283,805 ÷ 11,900 DLHs = $107.88 per DLH (rounded) Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

158) Adelberg Company has two products: A and B. The annual production and sales of Product A is 500 units and of Product B is 1,000 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit. The total estimated overhead for next period is $68,756. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools—Activity 1, Activity 2, and Order Size—with estimated overhead costs and expected activity as follows: Estimated Expected Activity Activity Cost Pools Overhead Costs Product A Product B Total Activity 1 $ 31,031 1,000 300 1,300 Activity 2 22,249 1,600 300 1,900 Order size 15,476 200 200 400 Total $ 68,756 (Note: The Order Size activity cost pool's costs are allocated on the basis of direct labor-hours.) The overhead cost per unit of Product B under the activity-based costing system is closest to: (Round your intermediate calculations to 2 decimal places.) A) $45.84 B) $7.74 C) $34.38 D) $18.41

answer: D Explanation: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Activity 1 $ 31,031 1,300 $ 23.87 Activity 2 $ 22,249 1,900 $ 11.71 Order size $ 15,476 400 $ 38.69 Product B Activity Cost Pools and Activity Rates Expected Activity Amount Activity 1 ($23.87) 300 $ 7,161 Activity 2 ($11.71) 300 3,513 Order size ($38.69) 200 7,738 Total overhead costs assigned (a) $ 18,412 Number of units produced (b) 1,000 Overhead cost per unit (a) ÷ (b) $ 18.41 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

57) Foisy, Inc., manufactures and sells two products: Product N0 and Product U8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product N0 1,000 6.0 6,000 Product U8 200 9.0 1,800 Total direct labor-hours 7,800 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product N0 Product U8 Total Labor-related DLHs $ 170,664 6,000 1,800 7,800 Machine setups setups 59,040 400 500 900 Order size MHs 252,648 3,400 3,200 6,600 $ 482,352 The total overhead applied to Product U8 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $80,392 B) $111,312 C) $122,496 D) $194,680

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 170,664 7,800 DLHs $ 21.88 per DLH Machine setups $ 59,040 900 setups $ 65.60 per setup Order size $ 252,648 6,600 MHs $ 38.28 per MH Computation of the overhead cost under activity-based costing. Product U8 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $21.88 per DLH 1,800 $ 39,384 Machine setups, at $65.60 per setup 500 32,800 Order size, $38.28 per MH 3,200 122,496 Total overhead costs assigned $ 194,680 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

63) Seldomridge, Inc., manufactures and sells two products: Product I5 and Product U0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product I5 700 7.0 4,900 Product U0 200 10.0 2,000 Total direct labor-hours 6,900 The direct labor rate is $24.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product I5 $116.10 Product U0 $212.10 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product I5 Product U0 Total Labor-related DLHs $ 246,468 4,900 2,000 6,900 Product testing tests 10,494 500 400 900 Order size MHs 837,660 4,700 4,500 9,200 $ 1,094,622 The unit product cost of Product U0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $1,672.35 per unit B) $2,504.73 per unit C) $2,042.50 per unit D) $2,885.25 per unit

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 246,468 6,900 DLHs $ 35.72 per DLH Product testing $ 10,494 900 tests $ 11.66 per test Order size $ 837,660 9,200 MHs $ 91.05 per MH Computation of the overhead cost per unit under activity-based costing. Product U0 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $35.72 per DLH 2,000 $ 71,440 Product testing, at $11.66 per test 400 4,664 Order size, $91.05 per MH 4,500 409,725 Total overhead costs assigned (a) $ 485,829 Number of units produced (b) 200 Overhead cost per unit (a) ÷ (b) $ 2,429.15 Computation of unit product costs under activity-based costing. Product U0 Direct materials $ 212.10 Direct labor (10.0 DLHs × $24.40 per DLH) 244.00 Overhead 2,429.15 Unit product cost $ 2,885.25 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

137) Sivak, Inc., manufactures and sells two products: Product X4 and Product C5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product X4 1,000 8.0 8,000 Product C5 800 11.0 8,800 Total direct labor-hours 16,800 The direct labor rate is $25.10 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product X4 $ 283.10 Product C5 $ 109.30 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product X4 Product C5 Total Labor-related DLHs $ 728,112 8,000 8,800 16,800 Machine setups setups 87,800 400 600 1,000 Order size MHs 243,243 3,100 3,200 6,300 $ 1,059,155 The overhead applied to each unit of Product C5 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $154.44 per unit B) $588.42 per unit C) $693.44 per unit D) $697.03 per unit

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 728,112 16,800 DLHs $ 43.34 per DLH Machine setups $ 87,800 1,000 setups $ 87.80 per setup Order size $ 243,243 6,300 MHs $ 38.61 per MH Computation of the overhead cost per unit under activity-based costing. Product C5 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $43.34 per DLH 8,800 $ 381,392 Machine setups, at $87.80 per setup 600 52,680 Order size, $38.61 per MH 3,200 123,552 Total overhead costs assigned (a) $ 557,624 Number of units produced (b) 800 Overhead cost per unit (a) ÷ (b) $ 697.03 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

119) Overturf, Inc., manufactures and sells two products: Product Y1 and Product Y0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Y1 300 6.0 1,800 Product Y0 500 9.0 4,500 Total direct labor-hours 6,300 The direct labor rate is $27.50 per DLH. The direct materials cost per unit is $106.10 for Product Y1 and $168.40 for Product Y0. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Y1 Product Y0 Total Labor-related DLHs $ 151,263 1,800 4,500 6,300 Production orders orders 43,253 300 400 700 Order size MHs 863,478 4,900 5,000 9,900 $ 1,057,994 The overhead applied to each unit of Product Y0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $872.20 per unit B) $1,322.49 per unit C) $1,511.46 per unit D) $1,137.72 per unit

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 151,263 6,300 DLHs $ 24.01 /DLH Production orders $ 43,253 700 orders $ 61.79 /order Order size $ 863,478 9,900 MHs $ 87.22 /MH Computation of the overhead cost per unit under activity-based costing. Product Y0 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $24.01 per DLH 4,500 $ 108,045 Production orders, at $61.79 per order 400 24,716 Order size, $87.22 per MH 5,000 436,100 Total overhead costs assigned (a) $ 568,861 Number of units produced (b) 500 Overhead cost per unit (a) ÷ (b) $ 1,137.72 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

193) Wardsworth, Inc., manufactures and sells two products: Product I9 and Product Z9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product I9 700 6.0 4,200 Product Z9 900 8.0 7,200 Total direct labor-hours 11,400 The direct labor rate is $26.00 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product I9 $ 226.10 Product Z9 $ 151.20 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product I9 Product Z9 Total Labor-related DLHs $ 463,980 4,200 7,200 11,400 Machine setups setups 9,814 300 400 700 Order size MHs 105,792 4,400 4,300 8,700 $ 579,586 The unit product cost of Product I9 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $458.53 per unit B) $744.34 per unit C) $687.14 per unit D) $708.74 per unit

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 463,980 11,400 DLHs $ 40.70 / DLH Machine setups $ 9,814 700 setups $ 14.02 / setup Order size $ 105,792 8,700 MHs $ 12.16 / MH Computation of the overhead cost per unit under activity-based costing. Product I9 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $40.70 per DLH 4,200 $ 170,940 Machine setups, at $14.02 per setup 300 4,206 Order size, $12.16 per MH 4,400 53,504 Total overhead costs assigned (a) $ 228,650 Number of units produced (b) 700 Overhead cost per unit (a) ÷ (b) $ 326.64 Computation of unit product costs under activity-based costing. Product I9 Direct materials $ 226.10 Direct labor (6.0 DLHs × $26.00 per DLH) 156.00 Overhead 326.64 Unit product cost $ 708.74 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

153) Mckenny, Inc., manufactures and sells two products: Product P9 and Product X2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product P9 200 6.0 1,200 Product X2 100 5.0 500 Total direct labor-hours 1,700 The direct labor rate is $28.20 per DLH. The direct materials cost per unit is $140.60 for Product P9 and $107.50 for Product X2. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product P9 Product X2 Total Labor-related DLHs $ 45,084 1,200 500 1,700 Production orders orders 119,964 600 700 1,300 Order size MHs 459,818 3,200 2,900 6,100 $ 624,866 The overhead applied to each unit of Product P9 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $2,205.42 per unit B) $2,082.89 per unit C) $1,206.08 per unit D) $1,642.04 per unit

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 45,084 1,700 DLHs $ 26.52 per DLH Production orders $ 119,964 1,300 orders $ 92.28 per order Order size $ 459,818 6,100 MHs $ 75.38 per MH Computation of the overhead cost per unit under activity-based costing. Product P9 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $26.52 per DLH 1,200 $ 31,824 Production orders, at $92.28 per order 600 55,368 Order size, $75.38 per MH 3,200 241,216 Total overhead costs assigned (a) $ 328,408 Number of units produced (b) 200 Overhead cost per unit (a) ÷ (b) $ 1,642.04 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

169) Cracchiolo, Inc., manufactures and sells two products: Product H2 and Product A8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product H2 200 7.0 1,400 Product A8 800 8.0 6,400 Total direct labor-hours 7,800 The direct labor rate is $15.10 per DLH. The direct materials cost per unit is $145.80 for Product H2 and $261.90 for Product A8. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product H2 Product A8 Total Labor-related DLHs $ 83,148 1,400 6,400 7,800 Production orders orders 18,970 400 300 700 Order size MHs 817,191 5,000 5,100 10,100 $ 919,309 The overhead applied to each unit of Product A8 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $515.80 per unit B) $942.88 per unit C) $919.31 per unit D) $611.24 per unit

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 83,148 7,800 DLHs $ 10.66 / DLH Production orders $ 18,970 700 orders $ 27.10 / order Order size $ 817,191 10,100 MHs $ 80.91 / MH Computation of the overhead cost per unit under activity-based costing. Product A8 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $10.66 per DLH 6,400 $ 68,224 Production orders, at $27.10 per order 300 8,130 Order size, $80.91 per MH 5,100 412,641 Total overhead costs assigned (a) $ 488,995 Number of units produced (b) 800 Overhead cost per unit (a) ÷ (b) $ 611.24 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

138) Sivak, Inc., manufactures and sells two products: Product X4 and Product C5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product X4 1,000 8.0 8,000 Product C5 800 11.0 8,800 Total direct labor-hours 16,800 The direct labor rate is $25.10 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product X4 $ 283.10 Product C5 $ 109.30 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product X4 Product C5 Total Labor-related DLHs $ 728,112 8,000 8,800 16,800 Machine setups setups 87,800 400 600 1,000 Order size MHs 243,243 3,100 3,200 6,300 $ 1,059,155 Which of the following statements concerning the unit product cost of Product X4 is true? (Round your intermediate calculations to 2 decimal places.) A) The unit product cost of Product X4 under traditional costing is less than its unit product cost under activity-based costing by $189.12. B) The unit product cost of Product X4 under traditional costing is less than its unit product cost under activity-based costing by $2.79. C) The unit product cost of Product X4 under traditional costing is greater than its unit product cost under activity-based costing by $189.12. D) The unit product cost of Product X4 under traditional costing is greater than its unit product cost under activity-based costing by $2.79.

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,059,155 ÷ 16,800 DLHs = $63.04 per DLH (rounded) Computation of traditional unit product cost: Product X4 Direct materials $ 283.10 Direct labor (8.0 DLHs × $25.10 per DLH) 200.80 Manufacturing overhead (8.0 DLHs × $63.04 per DLH) 504.32 Unit product cost $ 988.22 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 728,112 16,800 DLHs $ 43.34 per DLH Machine setups $ 87,800 1,000 setups $ 87.80 per setup Order size $ 243,243 6,300 MHs $ 38.61 per MH Computation of the overhead cost per unit under activity-based costing. Product X4 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $43.34 per DLH 8,000 $ 346,720 Machine setups, at $87.80 per setup 400 35,120 Order size, $38.61 per MH 3,100 119,691 Total overhead costs assigned (a) $ 501,531 Number of units produced (b) 1,000 Overhead cost per unit (a) ÷ (b) $ 501.53 Computation of unit product cost under activity-based costing. Product X4 Direct materials $ 283.10 Direct labor 200.80 Overhead 501.53 Unit product cost $ 985.43 The difference in unit product costs is: Product X4 Traditional unit product cost $ 988.22 ABC unit product cost 985.43 Difference $ 2.79 The unit product cost of Product X4 under traditional costing is greater than its unit product cost under activity-based costing by $2.79. Difficulty: 3 Hard Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

190) Nole, Inc., manufactures and sells two products: Product W8 and Product N0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product W8 100 9.0 900 Product N0 1,000 11.0 11,000 Total direct labor-hours 11,900 The direct labor rate is $17.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product W8 $ 176.40 Product N0 $ 280.50 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product W8 Product N0 Total Labor-related DLHs $ 461,720 900 11,000 11,900 Machine setups setups 25,865 300 400 700 Order size MHs 796,220 4,000 4,200 8,200 $ 1,283,805 Which of the following statements concerning the unit product cost of Product N0 is true? (Round your intermediate calculations to 2 decimal places.) A) The unit product cost of Product N0 under traditional costing is less than its unit product cost under activity-based costing by $3,494.65. B) The unit product cost of Product N0 under traditional costing is greater than its unit product cost under activity-based costing by $3,494.65. C) The unit product cost of Product N0 under traditional costing is less than its unit product cost under activity-based costing by $337.28. D) The unit product cost of Product N0 under traditional costing is greater than its unit product cost under activity-based costing by $337.28.

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $1,283,805 ÷ 11,900 DLHs = $107.88 per DLH (rounded) Computation of traditional unit product cost: Product N0 Direct materials $ 280.50 Direct labor (11.0 DLHs × $17.40 per DLH) 191.40 Manufacturing overhead (11.0 DLHs × $107.88 per DLH) 1,186.68 Unit product cost $ 1,658.58 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 461,720 11,900 DLHs $ 38.80 per DLH Machine setups $ 25,865 700 setups $ 36.95 per setup Order size $ 796,220 8,200 MHs $ 97.10 per MH Computation of the overhead cost per unit under activity-based costing. Product N0 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $38.80 per DLH 11,000 $ 426,800 Machine setups, at $36.95 per setup 400 14,780 Order size, $97.10 per MH 4,200 407,820 Total overhead costs assigned (a) $ 849,400 Number of units produced (b) 1000 Overhead cost per unit (a) ÷ (b) $ 849.40 Computation of unit product cost under activity-based costing. Product N0 Direct materials $ 280.50 Direct labor 191.40 Overhead 849.40 Unit product cost $ 1,321.30 The difference in unit product costs is: Product N0 Traditional unit product cost $ 1,658.58 ABC unit product cost 1,321.30 Difference $ 337.28 The unit product cost of Product N0 under traditional costing is greater than its unit product cost under activity-based costing by $337.28. Difficulty: 3 Hard Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

139) Teehan, Inc., manufactures and sells two products: Product U2 and Product W5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product U2 400 6.0 2,400 Product W5 200 8.0 1,600 Total direct labor-hours 4,000 The direct labor rate is $20.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product U2 $ 249.40 Product W5 $ 164.40 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product U2 Product W5 Total Labor-related DLHs $ 92,120 2,400 1,600 4,000 Machine setups setups 18,468 500 700 1,200 Order size MHs 202,547 3,100 2,800 5,900 $ 313,135 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to: A) $34.33 per DLH B) $15.39 per DLH C) $23.03 per DLH D) $78.28 per DLH

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $313,135 ÷ 4,000 DLHs = $78.28 per DLH (rounded) Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

68) Eliezrie, Inc., manufactures and sells two products: Product G8 and Product O0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product G8 700 5.0 3,500 Product O0 300 2.0 600 Total direct labor-hours 4,100 The direct labor rate is $22.10 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product G8 $113.10 Product O0 $113.50 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product G8 Product O0 Total Labor-related DLHs $ 55,555 3,500 600 4,100 Machine setups setups 54,390 400 600 1,000 Order size MHs 365,508 4,800 5,100 9,900 $ 475,453 Which of the following statements concerning the unit product cost of Product G8 is true? (Round your intermediate calculations to 2 decimal places.) A) The unit product cost of Product G8 under traditional costing is less than its unit product cost under activity-based costing by $227.80. B) The unit product cost of Product G8 under traditional costing is less than its unit product cost under activity-based costing by $347.88. C) The unit product cost of Product G8 under traditional costing is greater than its unit product cost under activity-based costing by $347.88. D) The unit product cost of Product G8 under traditional costing is greater than its unit product cost under activity-based costing by $227.80.

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $475,453 ÷ 4,100 DLHs = $115.96 per DLH (rounded) Computation of traditional unit product cost: Product G8 Direct materials $ 113.10 Direct labor (5.0 DLHs × $22.10 per DLH) 110.50 Manufacturing overhead (5.0 DLHs × $115.96 per DLH) 579.80 Unit product cost $ 803.40 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 55,555 4,100 DLHs $ 13.55 per DLH Machine setups $ 54,390 1,000 setups $ 54.39 per setup Order size $ 365,508 9,900 MHs $ 36.92 per MH Computation of the overhead cost per unit under activity-based costing. Product G8 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $13.55 per DLH 3,500 $ 47,425 Machine setups, at $54.39 per setup 400 21,756 Order size, $36.92 per MH 4,800 177,216 Total overhead costs assigned (a) $ 246,397 Number of units produced (b) 700 Overhead cost per unit (a) ÷ (b) $ 352.00 Computation of unit product cost under activity-based costing. Product G8 Direct materials $ 113.10 Direct labor 110.50 Overhead 352.00 Unit product cost $ 575.60 The difference in unit product costs is: Product G8 Traditional unit product cost $ 803.40 ABC unit product cost 575.60 Difference $ 227.80 The unit product cost of Product G8 under traditional costing is greater than its unit product cost under activity-based costing by $227.80. Difficulty: 3 Hard Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

163) Fleurant, Inc., manufactures and sells two products: Product W2 and Product P8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product W2 400 6.0 2,400 Product P8 600 4.0 2,400 Total direct labor-hours 4,800 The direct labor rate is $29.10 per DLH. The direct materials cost per unit is $195.60 for Product W2 and $132.30 for Product P8. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product W2 Product P8 Total Labor-related DLHs $ 210,576 2,400 2,400 4,800 Production orders orders 17,738 400 300 700 Order size MHs 273,430 3,800 3,600 7,400 $ 501,744 Which of the following statements concerning the unit product cost of Product W2 is true? (Round your intermediate calculations to 2 decimal places.) A) The unit product cost of Product W2 under traditional costing is less than its unit product cost under activity-based costing by $209.06. B) The unit product cost of Product W2 under traditional costing is greater than its unit product cost under activity-based costing by $12.41. C) The unit product cost of Product W2 under traditional costing is greater than its unit product cost under activity-based costing by $209.06. D) The unit product cost of Product W2 under traditional costing is less than its unit product cost under activity-based costing by $12.41.

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $501,744 ÷ 4,800 DLHs = $104.53 per DLH (rounded) Computation of traditional unit product cost: Product W2 Direct materials $ 195.60 Direct labor (6.0 DLHs × $29.10 per DLH) 174.60 Manufacturing overhead (6.0 DLHs × $104.53 per DLH) 627.18 Unit product cost $ 997.38 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 210,576 4,800 DLHs $ 43.87 per DLH Production orders $ 17,738 700 orders $ 25.34 per order Order size $ 273,430 7,400 MHs $ 36.95 per MM Computation of the overhead cost per unit under activity-based costing. Product W2 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $43.87 per DLH 2,400 $ 105,288 Production orders, at $25.34 per order 400 10,136 Order size, $36.95 per MH 3,800 140,410 Total overhead costs assigned (a) $ 255,834 Number of units produced (b) 400 Overhead cost per unit (a) ÷ (b) $ 639.59 Computation of unit product cost under activity-based costing. Product W2 Direct materials $ 195.60 Direct labor 174.60 Overhead 639.59 Unit product cost $ 1,009.79 The difference in unit product costs is: Product W2 Traditional unit product cost $ 997.38 ABC unit product cost 1,009.79 Difference $ ( 12.41 ) The unit product cost of Product W2 under traditional costing is less than its unit product cost under activity-based costing by $12.41. Difficulty: 3 Hard Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

150) Faz, Inc., manufactures and sells two products: Product X0 and Product W7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product X0 1,000 5.0 5,000 Product W7 400 2.0 800 Total direct labor-hours 5,800 The direct labor rate is $19.60 per DLH. The direct materials cost per unit is $144.50 for Product X0 and $126.00 for Product W7. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product X0 Product W7 Total Labor-related DLHs $ 272,078 5,000 800 5,800 Production orders orders 18,948 500 700 1,200 Order size MHs 242,514 4,000 4,100 8,100 $ 533,540 Which of the following statements concerning the unit product cost of Product W7 is true? (Round your intermediate calculations to 2 decimal places.) A) The unit product cost of Product W7 under traditional costing is greater than its unit product cost under activity-based costing by $244.36. B) The unit product cost of Product W7 under traditional costing is less than its unit product cost under activity-based costing by $66.13. C) The unit product cost of Product W7 under traditional costing is greater than its unit product cost under activity-based costing by $66.13. D) The unit product cost of Product W7 under traditional costing is less than its unit product cost under activity-based costing by $244.36.

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $533,540 ÷ 5,800 DLHs = $91.99 per DLH (rounded) Computation of traditional unit product cost: Product W7 Direct materials $ 126.00 Direct labor (2.0 DLHs × $19.60 per DLH) 39.20 Manufacturing overhead (2.0 DLHs × $91.99 per DLH) 183.98 Unit product cost $ 349.18 Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 272,078 5,800 DLHs $ 46.91 per DLH Production orders $ 18,948 1,200 orders $ 15.79 per order Order size $ 242,514 8,100 MHs $ 29.94 per MH Computation of the overhead cost per unit under activity-based costing. Product W7 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $46.91 per DLH 800 $ 37,528 Production orders, at $15.79 per order 700 11,053 Order size, $29.94 per MH 4,100 122,754 Total overhead costs assigned (a) $ 171,335 Number of units produced (b) 400 Overhead cost per unit (a) ÷ (b) $ 428.34 Computation of unit product cost under activity-based costing. Product W7 Direct materials $ 126.00 Direct labor 39.20 Overhead 428.34 Unit product cost $ 593.54 The difference in unit product costs is: Product W7 Traditional unit product cost $ 349.18 ABC unit product cost 593.54 Difference $ (244.36 ) The unit product cost of Product W7 under traditional costing is less than its unit product cost under activity-based costing by $244.36. Difficulty: 3 Hard Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

145) Vattes, Inc., manufactures and sells two products: Product I5 and Product U1. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product I5 700 7.0 4,900 Product U1 200 4.0 800 Total direct labor-hours 5,700 The direct labor rate is $22.00 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product I5 $ 261.60 Product U1 $ 121.60 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product I5 Product U1 Total Labor-related DLHs $ 268,698 4,900 800 5,700 Machine setups setups 37,324 300 400 700 Order size MHs 633,895 4,900 4,800 9,700 $ 939,917 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product U1 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $261.40 per unit B) $188.56 per unit C) $213.28 per unit D) $659.60 per unit

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $939,917 ÷ 5,700 DLHs = $164.90 per DLH (rounded) Product U1: 4.0 DLHs × $164.90 per DLH = $659.60 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

88) Arntson, Inc., manufactures and sells two products: Product R3 and Product N0. The annual production and sales of Product of R3 is 200 units and of Product N0 is 100 units. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product R3 200 8.0 1,600 Product N0 100 11.0 1,100 Total direct labor-hours 2,700 The direct labor rate is $15.80 per DLH. The direct materials cost per unit is $287.80 for Product R3 and $104.80 for Product N0. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product R3 Product N0 Total Labor-related DLHs $ 39,636 1,600 1,100 2,700 Production orders orders 57,421 600 700 1,300 Order size MHs 432,075 3,600 3,900 7,500 $ 529,132 The unit product cost of Product N0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $2,525.39 per unit B) $2,434.27 per unit C) $2,042.37 per unit D) $2,996.06 per unit

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 39,636 2,700 DLHs $ 14.68 per DLH Production orders $ 57,421 1,300 orders $ 44.17 per order Order size $ 432,075 7,500 MHs $ 57.61 per MH Computation of the overhead cost per unit under activity-based costing. Product N0 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $14.68 per DLH 1,100 $ 16,148 Production orders, at $44.17 per order 700 30,919 Order size, $57.61 per MH 3,900 224,679 Total overhead costs assigned (a) $ 271,746 Number of units produced (b) 100 Overhead cost per unit (a) ÷ (b) $ 2,717.46 Computation of unit product costs under activity-based costing. Product N0 Direct materials $ 104.80 Direct labor (11.0 DLHs × $15.80 per DLH) 173.80 Overhead 2,717.46 Unit product cost $ 2,996.06 Difficulty: 2 Medium Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

111) Hesson, Inc., manufactures and sells two products: Product F3 and Product F0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product F3 300 6.0 1,800 Product F0 200 5.0 1,000 Total direct labor-hours 2,800 The direct labor rate is $16.30 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product F3 $ 261.40 Product F0 $ 187.50 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product F3 Product F0 Total Labor-related DLHs $ 110,964 1,800 1,000 2,800 Machine setups setups 33,005 300 200 500 Order size MHs 486,720 3,100 2,900 6,000 $ 630,689 The unit product cost of Product F0 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $1,395.25 per unit B) $1,530.38 per unit C) $1,445.24 per unit D) $1,709.40 per unit

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 110,964 2,800 DLHs $ 39.63 per DLH Machine setups $ 33,005 500 setups $ 66.01 per setup Order size $ 486,720 6,000 MHs $ 81.12 per MH Computation of the overhead cost per unit under activity-based costing. Product F0 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $39.63 per DLH 1,000 $ 39,630 Machine setups, at $66.01 per setup 200 13,202 Order size, $81.12 per MH 2,900 235,248 Total overhead costs assigned (a) $ 288,080 Number of units produced (b) 200 Overhead cost per unit (a) ÷ (b) $ 1,440.40 Computation of unit product costs under activity-based costing. Product F0 Direct materials $ 187.50 Direct labor (5.0 DLHs × $16.30 per DLH) 81.50 Overhead 1,440.40 Unit product cost $ 1,709.40 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

110) Hesson, Inc., manufactures and sells two products: Product F3 and Product F0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product F3 300 6.0 1,800 Product F0 200 5.0 1,000 Total direct labor-hours 2,800 The direct labor rate is $16.30 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product F3 $ 261.40 Product F0 $ 187.50 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product F3 Product F0 Total Labor-related DLHs $ 110,964 1,800 1,000 2,800 Machine setups setups 33,005 300 200 500 Order size MHs 486,720 3,100 2,900 6,000 $ 630,689 The unit product cost of Product F3 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $1,710.70 per unit B) $1,197.44 per unit C) $1,620.58 per unit D) $1,501.23 per unit

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 110,964 2,800 DLHs $ 39.63 per DLH Machine setups $ 33,005 500 setups $ 66.01 per setup Order size $ 486,720 6,000 MHs $ 81.12 per MH Computation of the overhead cost per unit under activity-based costing. Product F3 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $39.63 per DLH 1,800 $ 71,334 Machine setups, at $66.01 per setup 300 19,803 Order size, $81.12 per MH 3,100 251,472 Total overhead costs assigned (a) $ 342,609 Number of units produced (b) 300 Overhead cost per unit (a) ÷ (b) $ 1,142.03 Computation of unit product costs under activity-based costing. Product F3 Direct materials $ 261.40 Direct labor (6.0 DLHs × $16.30 per DLH) 97.80 Overhead 1,142.03 Unit product cost $ 1,501.23 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

189) Nole, Inc., manufactures and sells two products: Product W8 and Product N0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product W8 100 9.0 900 Product N0 1,000 11.0 11,000 Total direct labor-hours 11,900 The direct labor rate is $17.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product W8 $ 176.40 Product N0 $ 280.50 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product W8 Product N0 Total Labor-related DLHs $ 461,720 900 11,000 11,900 Machine setups setups 25,865 300 400 700 Order size MHs 796,220 4,000 4,200 8,200 $ 1,283,805 The overhead applied to each unit of Product W8 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $3,884.00 per unit B) $1,167.10 per unit C) $970.92 per unit D) $4,344.05 per unit

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 461,720 11,900 DLHs $ 38.80 / DLH Machine setups $ 25,865 700 setups $ 36.95 / setup Order size $ 796,220 8,200 MHs $ 97.10 / MH Computation of the overhead cost per unit under activity-based costing. Product W8 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $38.80 per DLH 900 $ 34,920 Machine setups, at $36.95 per setup 300 11,085 Order size, $97.10 per MH 4,000 388,400 Total overhead costs assigned (a) $ 434,405 Number of units produced (b) 100 Overhead cost per unit (a) ÷ (b) $ 4,344.05 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

114) Snavely, Inc., manufactures and sells two products: Product E1 and Product A7. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product E1 800 5.0 4,000 Product A7 300 2.0 600 Total direct labor-hours 4,600 The direct labor rate is $18.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product E1 $127.10 Product A7 $299.80 The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product E1 Product A7 Total Labor-related DLHs $ 100,096 4,000 600 4,600 Machine setups setups 47,208 300 400 700 Order size MHs 738,368 4,100 4,200 8,300 $ 885,672 The total overhead applied to Product A7 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $373,632 B) $115,524 C) $241,548 D) $413,664

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 100,096 4,600 DLHs $ 21.76 per DLH Machine setups $ 47,208 700 setups $ 67.44 per setup Order size $ 738,368 8,300 MHs $ 88.96 per MH Computation of the overhead cost under activity-based costing. Product A7 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $21.76 per DLH 600 $ 13,056 Machine setups, at $67.44 per setup 400 26,976 Order size, $88.96 per MH 4,200 373,632 Total overhead costs assigned $ 413,664 Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

76) Crimin, Inc., manufactures and sells two products: Product V7 and Product Y2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product V7 700 5.0 3,500 Product Y2 700 4.0 2,800 Total direct labor-hours 6,300 The direct labor rate is $19.80 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product V7 $208.90 Product Y2 $297.60 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product V7 Product Y2 Total Labor-related DLHs $ 154,350 3,500 2,800 6,300 Machine setups setups 114,595 600 700 1,300 Order size MHs 292,544 3,100 3,300 6,400 $ 561,489 The unit product cost of Product V7 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to: (Round your intermediate calculations to 2 decimal places.) A) $536.45 per unit B) $430.40 per unit C) $748.65 per unit D) $753.55 per unit

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $561,489 ÷ 6,300 DLHs = $89.13 per DLH (rounded) Computation of traditional unit product cost: Product V7 Direct materials $ 208.90 Direct labor (5.0 DLHs × $19.80 per DLH) 99.00 Manufacturing overhead (5.0 DLHs × $89.13 per DLH) 445.65 Unit product cost $ 753.55 Difficulty: 2 Medium Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

34) Property taxes are an example of a cost that would be considered to be: A) Unit-level. B) Batch-level. C) Product-level. D) Facility-level.

answer: D Difficulty: 2 Medium Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

115) Overturf, Inc., manufactures and sells two products: Product Y1 and Product Y0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Y1 300 6.0 1,800 Product Y0 500 9.0 4,500 Total direct labor-hours 6,300 The direct labor rate is $27.50 per DLH. The direct materials cost per unit is $106.10 for Product Y1 and $168.40 for Product Y0. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Y1 Product Y0 Total Labor-related DLHs $ 151,263 1,800 4,500 6,300 Production orders orders 43,253 300 400 700 Order size MHs 863,478 4,900 5,000 9,900 $ 1,057,994 The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to: A) $108.13 per DLH B) $144.18 per DLH C) $1,511.42 per DLH D) $24.01 per DLH

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $151,263 ÷ 6,300 DLHs = $24.01 per DLH Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

124) Barkes, Inc., manufactures and sells two products: Product B0 and Product B5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product B0 400 7.0 2,800 Product B5 500 4.0 2,000 Total direct labor-hours 4,800 The direct labor rate is $22.10 per DLH. The direct materials cost per unit is $288.10 for Product B0 and $118.90 for Product B5. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product B0 Product B5 Total Labor-related DLHs $ 136,944 2,800 2,000 4,800 Production orders orders 64,629 500 400 900 Order size MHs 588,294 3,300 3,000 6,300 $ 789,867 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: A) $164.56 per MH B) $68.47 per MH C) $65.82 per MH D) $93.38 per MH

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $588,294 ÷ 6,300 MHs = $93.38 per MH Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

122) Barkes, Inc., manufactures and sells two products: Product B0 and Product B5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product B0 400 7.0 2,800 Product B5 500 4.0 2,000 Total direct labor-hours 4,800 The direct labor rate is $22.10 per DLH. The direct materials cost per unit is $288.10 for Product B0 and $118.90 for Product B5. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product B0 Product B5 Total Labor-related DLHs $ 136,944 2,800 2,000 4,800 Production orders orders 64,629 500 400 900 Order size MHs 588,294 3,300 3,000 6,300 $ 789,867 The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to: A) $129.26 per DLH B) $161.57 per DLH C) $877.63 per DLH D) $28.53 per DLH

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $136,944 ÷ 4,800 DLHs = $28.53 per DLH Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

94) Vanvalkenburg, Inc., manufactures and sells two products: Product Q5 and Product J0. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Q5 Product J0 Total Labor-related DLHs $ 191,748 3,000 2,800 5,800 Production orders orders 70,536 300 500 800 Order size MHs 295,592 4,300 4,500 8,800 $ 557,876 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: A) $36.23 per MH B) $68.48 per MH C) $96.19 per MH D) $33.59 per MH

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $295,592 ÷ 8,800 MHs = $33.59 per MH Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

90) Forner, Inc., manufactures and sells two products: Product Z1 and Product Z8. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Z1 Product Z8 Total Labor-related DLHs $ 112,190 600 2,000 2,600 Machine setups setups 40,440 500 700 1,200 Order size MHs 609,770 3,000 3,200 6,200 $ 762,400 The activity rate for the Machine Setups activity cost pool under activity-based costing is closest to: A) $203.26 per setup B) $190.55 per setup C) $122.97 per setup D) $33.70 per setup

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $40,440 ÷ 1,200 setups = $33.70 per setup Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

79) Spates, Inc., manufactures and sells two products: Product H2 and Product E0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product H2 100 6.0 600 Product E0 100 5.0 500 Total direct labor-hours 1,100 The company's expected total manufacturing overhead is $266,468. If the company allocates all of its overhead based on direct labor-hours, the overhead assigned to each unit of Product H2 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $141.00 per unit B) $123.42 per unit C) $496.86 per unit D) $1,453.44 per unit

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $266,468 ÷ 1,100 DLHs = $242.24 per DLH (rounded) Product H2: 6.0 DLHs × $242.24 per DLH = $1,453.44 Difficulty: 1 Easy Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

179) Appleby, Inc., manufactures and sells two products: Product Q9 and Product V8. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Q9 800 5.0 4,000 Product V8 1,000 3.0 3,000 Total direct labor-hours 7,000 The direct labor rate is $29.30 per DLH. The direct materials cost per unit is $174.80 for Product Q9 and $168.90 for Product V8. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Q9 Product V8 Total Labor-related DLHs $ 214,480 4,000 3,000 7,000 Production orders orders 41,065 300 200 500 Order size MHs 192,700 4,200 4,000 8,200 $ 448,245 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product Q9 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $153.20 per unit B) $410.65 per unit C) $117.50 per unit D) $320.20 per unit

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $448,245 ÷ 7,000 DLHs = $64.04 per DLH (rounded) Product Q9: 5.0 DLHs × $64.04 per DLH = $320.20 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

83) Trone, Inc., manufactures and sells two products: Product R8 and Product K9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product R8 200 9.0 1,800 Product K9 1,000 10.0 10,000 Total direct labor-hours 11,800 The direct labor rate is $17.60 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product R8 $124.40 Product K9 $221.20 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product R8 Product K9 Total Labor-related DLHs $ 258,302 1,800 10,000 11,800 Machine setups setups 98,098 600 700 1,300 Order size MHs 147,552 4,900 4,700 9,600 $ 503,952 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the predetermined overhead rate would be closest to: A) $21.89 per DLH B) $75.46 per DLH C) $15.37 per DLH D) $42.71 per DLH

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $503,952 ÷ 11,800 DLHs = $42.71 per DLH (rounded) Difficulty: 2 Medium Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

151) Mckenny, Inc., manufactures and sells two products: Product P9 and Product X2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product P9 200 6.0 1,200 Product X2 100 5.0 500 Total direct labor-hours 1,700 The direct labor rate is $28.20 per DLH. The direct materials cost per unit is $140.60 for Product P9 and $107.50 for Product X2. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product P9 Product X2 Total Labor-related DLHs $ 45,084 1,200 500 1,700 Production orders orders 119,964 600 700 1,300 Order size MHs 459,818 3,200 2,900 6,100 $ 624,866 If the company allocates all of its overhead based on direct labor-hours using its traditional costing method, the overhead assigned to each unit of Product P9 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $159.12 per unit B) $553.68 per unit C) $452.28 per unit D) $2,205.42 per unit

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $624,866 ÷ 1,700 DLHs = $367.57 per DLH (rounded) Product P9: 6.0 DLHs × $367.57 per DLH = $2,205.42 Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

117) Overturf, Inc., manufactures and sells two products: Product Y1 and Product Y0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Y1 300 6.0 1,800 Product Y0 500 9.0 4,500 Total direct labor-hours 6,300 The direct labor rate is $27.50 per DLH. The direct materials cost per unit is $106.10 for Product Y1 and $168.40 for Product Y0. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product Y1 Product Y0 Total Labor-related DLHs $ 151,263 1,800 4,500 6,300 Production orders orders 43,253 300 400 700 Order size MHs 863,478 4,900 5,000 9,900 $ 1,057,994 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: A) $62.60 per MH B) $33.61 per MH C) $167.94 per MH D) $87.22 per MH

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $863,478 ÷ 9,900 MHs = $87.22 per MH Difficulty: 2 Medium Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

48) Strama, Inc., manufactures and sells two products: Product A6 and Product I5. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product A6 Product I5 Total Labor-related DLHs $ 179,138 7,000 1,600 8,600 Production orders orders 38,624 300 500 800 Order size MHs 171,147 4,400 4,500 8,900 $ 388,909 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: A) $21.25 per MH B) $111.96 per MH C) $45.22 per MH D) $19.23 per MH

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $171,147 ÷ 8,900 MHs = $19.23 per MH Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

174) Gradwell, Inc., manufactures and sells two products: Product K8 and Product I4. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product K8 300 5.0 1,500 Product I4 900 3.0 2,700 Total direct labor-hours 4,200 The direct labor rate is $17.20 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product K8 $ 150.20 Product I4 $ 243.70 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product K8 Product I4 Total Labor-related DLHs $ 176,064 1,500 2,700 4,200 Machine setups setups 71,290 400 600 1,000 Order size MHs 121,396 4,300 4,600 8,900 $ 368,750 The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to: A) $118.82 per DLH B) $368.75 per DLH C) $178.23 per DLH D) $41.92 per DLH

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $176,064 ÷ 4,200 DLHs = $41.92 per DLH Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

141) Teehan, Inc., manufactures and sells two products: Product U2 and Product W5. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product U2 400 6.0 2,400 Product W5 200 8.0 1,600 Total direct labor-hours 4,000 The direct labor rate is $20.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product U2 $ 249.40 Product W5 $ 164.40 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product U2 Product W5 Total Labor-related DLHs $ 92,120 2,400 1,600 4,000 Machine setups setups 18,468 500 700 1,200 Order size MHs 202,547 3,100 2,800 5,900 $ 313,135 The activity rate for the Machine Setups activity cost pool under activity-based costing is closest to: A) $65.34 per setup B) $53.07 per setup C) $72.34 per setup D) $15.39 per setup

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $18,468 ÷ 1,200 setups = $15.39 per setup Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

188) Nole, Inc., manufactures and sells two products: Product W8 and Product N0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product W8 100 9.0 900 Product N0 1,000 11.0 11,000 Total direct labor-hours 11,900 The direct labor rate is $17.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product W8 $ 176.40 Product N0 $ 280.50 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product W8 Product N0 Total Labor-related DLHs $ 461,720 900 11,000 11,900 Machine setups setups 25,865 300 400 700 Order size MHs 796,220 4,000 4,200 8,200 $ 1,283,805 The activity rate for the Machine Setups activity cost pool under activity-based costing is closest to: A) $156.56 per setup B) $199.06 per setup C) $189.58 per setup D) $36.95 per setup

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $25,865 ÷ 700 setups = $36.95 per setup Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

44) Privott, Inc., manufactures and sells two products: Product Z9 and Product N0. The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Z9 Product N0 Total Labor-related DLHs $ 324,018 6,400 3,000 9,400 Product testing tests 45,747 400 500 900 Order size MHs 471,108 4,000 4,300 8,300 $ 840,873 The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to: A) $91.49 per DLH B) $934.30 per DLH C) $114.37 per DLH D) $34.47 per DLH

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $324,018 ÷ 9,400 DLHs = $34.47 per DLH Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

46) Latiker, Inc., manufactures and sells two products: Product Y9 and Product W0. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product Y9 100 8.0 800 Product W0 100 10.0 1,000 Total direct labor-hours 1,800 The direct labor rate is $15.40 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product Y9 $253.00 Product W0 $278.80 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Y9 Product W0 Total Labor-related DLHs $ 61,488 800 1,000 1,800 Machine setups setups 50,687 400 300 700 Order size MHs 155,754 5,000 5,200 10,200 $ 267,929 The activity rate for the Machine Setups activity cost pool under activity-based costing is closest to: A) $31.15 per setup B) $26.27 per setup C) $29.95 per setup D) $72.41 per setup

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $50,687 ÷ 700 setups = $72.41 per setup Difficulty: 2 Medium Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

91) Forner, Inc., manufactures and sells two products: Product Z1 and Product Z8. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product Z1 Product Z8 Total Labor-related DLHs $ 112,190 600 2,000 2,600 Machine setups setups 40,440 500 700 1,200 Order size MHs 609,770 3,000 3,200 6,200 $ 762,400 The activity rate for the Order Size activity cost pool under activity-based costing is closest to: A) $56.10 per MH B) $293.23 per MH C) $76.24 per MH D) $98.35 per MH

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $609,770 ÷ 6,200 MHs = $98.35 per MH Difficulty: 1 Easy Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

197) Wanger, Inc., manufactures and sells two products: Product G1 and Product F2. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product G1 800 9.0 7,200 Product F2 800 11.0 8,800 Total direct labor-hours 16,000 The direct labor rate is $15.30 per DLH. The direct materials cost per unit for each product is given below: Direct Materials Cost per Unit Product G1 $ 100.50 Product F2 $ 292.00 The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Activity Cost Pools Activity Measures Estimated Overhead Cost Expected Activity Product G1 Product F2 Total Labor-related DLHs $ 732,480 7,200 8,800 16,000 Machine setups setups 53,809 400 300 700 Order size MHs 600,525 3,800 3,700 7,500 $ 1,386,814 The activity rate for the Labor-Related activity cost pool under activity-based costing is closest to: A) $179.36 per DLH B) $1,981.16 per DLH C) $134.52 per DLH D) $45.78 per DLH

answer: D Explanation: Activity rate = Estimated overhead cost ÷ Total expected activity = $732,480 ÷ 16,000 DLHs = $45.78 per DLH Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

54) Roca, Inc., manufactures and sells two products: Product M6 and Product X7. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product M6 Product X7 Total Labor-related DLHs $ 152,100 3,000 4,800 7,800 Production orders orders 63,035 400 300 700 Order size MHs 505,452 3,700 3,600 7,300 $ 720,587 The total overhead applied to Product X7 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $360,294 B) $249,264 C) $443,424 D) $369,879

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 152,100 7,800 DLHs $ 19.50 per DLH Production orders $ 63,035 700 orders $ 90.05 per order Order size $ 505,452 7,300 MHs $ 69.24 per MH Computation of the overhead cost under activity-based costing. Product X7 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $19.50 per DLH 4,800 $ 93,600 Production orders, at $90.05 per order 300 27,015 Order size, $69.24 per MH 3,600 249,264 Total overhead costs assigned $ 369,879 Difficulty: 1 Easy Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

95) Weirick, Inc., manufactures and sells two products: Product T8 and Product P4. The company has an activity-based costing system with the following activity cost pools, activity measures, and expected activity: Estimated Expected Activity Activity Cost Pools Activity Measures Overhead Cost Product T8 Product P4 Total Labor-related DLHs $ 132,464 1,400 5,400 6,800 Production orders orders 32,604 500 700 1,200 Order size MHs 762,106 4,300 4,000 8,300 $ 927,174 The total overhead applied to Product T8 under activity-based costing is closest to: (Round your intermediate calculations to 2 decimal places.) A) $190,890 B) $168,578 C) $394,826 D) $435,683

answer: D Explanation: Computation of activity rates: Activity Cost Pools (a) Estimated Overhead Cost (b) Total Expected Activity (a) ÷ (b) Activity Rate Labor-related $ 132,464 6,800 DLHs $ 19.48 per DLH Production orders $ 32,604 1,200 orders $ 27.17 per order Order size $ 762,106 8,300 MHs $ 91.82 per MH Computation of the overhead cost under activity-based costing. Product T8 Activity Cost Pools and Activity Rates Expected Activity Amount Labor-related, at $19.48 per DLH 1,400 $ 27,272 Production orders, at $27.17 per order 500 13,585 Order size, $91.82 per MH 4,300 394,826 Total overhead costs assigned $ 435,683 Difficulty: 1 Easy Topic: Computing Product Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

184) Merone Company allocates materials handling cost to the company's two products using the below data: Modular Homes Prefab Barns Total expected units produced 5,000 8,000 Total expected material moves 500 100 Expected direct labor-hours per unit 700 200 The total materials handling cost for the year is expected to be $218,790. If the materials handling cost is allocated on the basis of direct labor-hours, the total materials handling cost allocated to the prefab barns is closest to: (Round your intermediate calculations to 2 decimal places.) A) $109,395 B) $48,620 C) $125,238 D) $68,640

answer: D Explanation: Predetermined overhead rate = $218,790 ÷ [(700 DLHs per unit × 5,000 units) + (200 DLHs per unit × 8,000 units)] = $218,790 ÷ 5,100,000 DLHs $42.90 per 1,000 DLHs Materials handling cost allocated to Prefab Barns = $42.90 per 1,000 DLHs × 200 DLHs per unit × 8,000 units = $68,640 Difficulty: 1 Easy Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

156) Adelberg Company has two products: A and B. The annual production and sales of Product A is 500 units and of Product B is 1,000 units. The company has traditionally used direct labor-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.4 direct labor-hours per unit and Product B requires 0.2 direct labor-hours per unit. The total estimated overhead for next period is $68,756. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools—Activity 1, Activity 2, and Order Size—with estimated overhead costs and expected activity as follows: Estimated Expected Activity Activity Cost Pools Overhead Costs Product A Product B Total Activity 1 $ 31,031 1,000 300 1,300 Activity 2 22,249 1,600 300 1,900 Order size 15,476 200 200 400 Total $ 68,756 (Note: The Order Size activity cost pool's costs are allocated on the basis of direct labor-hours.) The overhead cost per unit of Product B under the traditional costing system is closest to: (Round your intermediate calculations to 2 decimal places.) A) $2.34 B) $7.74 C) $4.77 D) $34.38

answer: D Explanation: Predetermined overhead rate = Estimated total manufacturing overhead ÷ Estimated total amount of the allocation base = $68,756 ÷ 400 DLHs = $171.89 per DLH Overhead cost per unit of Product B = ($171.89 per DLH × 200 DLHs) ÷ 1,000 units = $34.38 per unit Difficulty: 2 Medium Topic: Computing Product Costs; Shifting of Overhead Costs; Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system.; 04-03 Compute product costs using activity-based costing.; 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

82) Decenzo, Inc., manufactures and sells two products: Product L4 and Product O1. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product L4 600 7.0 4,200 Product O1 400 5.0 2,000 Total direct labor-hours 6,200 The direct labor rate is $18.20 per DLH. The direct materials cost per unit is $267.20 for Product L4 and $292.20 for Product O1. The estimated total manufacturing overhead is $774,120. The unit product cost of Product L4 under the company's traditional costing method in which all overhead is allocated on the basis of direct labor-hours is closest to: (Round your intermediate calculations to 2 decimal places.) A) $921.14 per unit B) $672.08 per unit C) $805.36 per unit D) $1,268.62 per unit

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $774,120 ÷ 6,200 DLHs = $124.86 per DLH (rounded) Computation of traditional unit product cost: Product L4 Direct materials $ 267.20 Direct labor (7.0 DLHs × $18.20 per DLH) 127.40 Manufacturing overhead (7.0 DLHs × $124.86 per DLH) 874.02 Unit product cost $ 1,268.62 Difficulty: 1 Easy Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

81) Herd, Inc., manufactures and sells two products: Product J5 and Product A9. Data concerning the expected production of each product and the expected total direct labor-hours (DLHs) required to produce that output appear below: Expected Production Direct Labor-Hours Per Unit Total Direct Labor-Hours Product J5 1,000 7.0 7,000 Product A9 700 8.0 5,600 Total direct labor-hours 12,600 The company's expected total manufacturing overhead is $848,432. If the company allocates all of its overhead based on direct labor-hours, the overhead assigned to each unit of Product A9 would be closest to: (Round your intermediate calculations to 2 decimal places.) A) $202.24 per unit B) $536.96 per unit C) $222.72 per unit D) $538.72 per unit

answer: D Explanation: Predetermined overhead rate = Estimated total overhead ÷ Total direct labor-hours = $848,432 ÷ 12,600 DLHs = $67.34 per DLH (rounded) Product A9: 8.0 DLHs × $67.34 per DLH = $538.72 Difficulty: 1 Easy Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

74) Senff Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Activity Cost Pools Activity Rate Setting up batches $ 38.50 per batch Processing customer orders $ 86.62 per customer order Assembling products $ 7.33 per assembly hour Data concerning two products appear below: Product V91Z Product V21I Number of batches 83 27 Number of customer orders 74 7 Number of assembly hours 702 321 How much overhead cost would be assigned to Product V91Z using the activity-based costing system? (Round your intermediate calculations to 2 decimal places.) A) $113,774.55 B) $132.45 C) $3,195.50 D) $14,751.04

answer: D Explanation: The overhead cost charged to Product V91Z is: Activity Rate Expected Activity Amount Setting up batches $ 38.50 /batch 83 batches $ 3,195.50 Processing customer orders $ 86.62 /customer order 74 orders 6,409.88 Assembling products $ 7.33 /assembly hour 702 hours 5,145.66 Total overhead cost $ 14,751.04 Difficulty: 1 Easy Topic: Computing Product Costs Learning Objective: 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: FN Measurement;

17) Activity-based costing uses a number of activity cost pools, each of which is allocated to products on the basis of direct labor-hours.

answer: FALSE Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

8) In activity-based costing, departmental overhead rates are used to apply overhead to products.

answer: FALSE Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

11) Direct labor is an appropriate allocation base for overhead when overhead costs and direct labor are not highly correlated.

answer: FALSE Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

4) A plantwide predetermined overhead rate based on direct labor-hours results in low overhead costs for products with a high direct labor-hour content and high overhead costs for products with a low direct labor-hour content.

answer: FALSE Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

2) Unit-level activities are performed each time a new departmental unit such as a regional sales office is created.

answer: FALSE Difficulty: 2 Medium Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

13) Product-level activities relate to specific products and typically must be carried out whenever a batch is run or a unit of the product is made.

answer: FALSE Difficulty: 2 Medium Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

14) Departmental overhead rates applied on the basis of a single activity measure will eliminate any distortions in unit costs due to product diversity.

answer: FALSE Difficulty: 2 Medium Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

15) Companies use three common approaches to assign overhead costs to products—plantwide overhead rate, departmental overhead rates, and activity-based costing. The most accurate of these three approaches is the plantwide overhead rate.

answer: FALSE Difficulty: 2 Medium Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

24) An activity rate is computed for each product.

answer: FALSE Difficulty: 2 Medium Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

25) The activity rates in activity-based costing are computed by dividing the direct labor-hours for an activity cost pool by the measure of activity for the activity cost pool.

answer: FALSE Difficulty: 2 Medium Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

3) The challenge in designing an activity-based costing system is to identify all of the activities that explain the variation in overhead costs.

answer: FALSE Difficulty: 3 Hard Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

5) In general, activities and costs on different levels in the cost hierarchy—such as unit-level and batch-level costs and activities—should be combined in an activity-based costing system if doing so simplifies the costing system.

answer: FALSE Difficulty: 3 Hard Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

22) The activity rates in activity-based costing are used to determine how quickly a particular task should be done.

answer: FALSE Difficulty: 3 Hard Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

29) When a company changes from a traditional costing system to an activity-based costing system, the unit product costs of high-volume products typically change more than the unit product costs of low-volume products.

answer: FALSE Difficulty: 3 Hard Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

10) Activity-based management involves focusing on activities to eliminate waste, decrease processing time, and reduce defects.

answer: TRUE Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

12) An activity-based costing system is generally more difficult to set up and run than a traditional cost system.

answer: TRUE Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

16) Batch-level activities are performed each time a batch of goods is processed. The cost of a batch-level activity does not depend on the number of units in the batch.

answer: TRUE Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

18) Activity-based costing involves a two-stage allocation process in which overhead costs are first assigned to activity cost pools and then allocated to products using activity measures.

answer: TRUE Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

19) A department's overhead costs are generally caused by a variety of factors including the range of products processed in the department, the number of batch set-ups that are required, and the complexity of the products.

answer: TRUE Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

20) Rather than using a single allocation base such as direct labor-hours or machine-hours, in activity-based costing a company uses a number of allocation bases for assigning costs to products.

answer: TRUE Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

6) An activity cost pool in activity-based costing is a "cost bucket" in which costs related to a particular activity measure are accumulated.

answer: TRUE Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

9) An activity measure in activity-based costing expresses how much of an activity is carried out and it is used as the allocation base for assigning overhead costs to products and services.

answer: TRUE Difficulty: 1 Easy Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

26) In activity-based costing, unit product costs computed for external financial reports include direct materials, direct labor, and manufacturing overhead costs.

answer: TRUE Difficulty: 1 Easy Topic: Computing Product Costs Learning Objective: 04-03 Compute product costs using activity-based costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

1) When designing an activity-based costing system, related activities are frequently combined to reduce the amount of detail and record-keeping cost.

answer: TRUE Difficulty: 2 Medium Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

21) Facility-level costs cannot be traced on a cause-and-effect basis to individual products.

answer: TRUE Difficulty: 2 Medium Topic: Assigning Overhead Costs to Products Learning Objective: 04-01 Understand the basic approach in activity-based costing and how it differs from conventional costing. Bloom's: Remember AACSB: Reflective Thinking AICPA: FN Measurement;

23) In activity-based costing, a separate activity rate (i.e., predetermined overhead rate) is computed for each activity cost pool by dividing the estimated overhead cost in the activity cost pool by the total expected activity for the activity cost pool.

answer: TRUE Difficulty: 2 Medium Topic: Computing Activity Rates Learning Objective: 04-02 Compute activity rates for an activity-based costing system. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

27) In activity-based costing, unit product costs computed for external financial reports include manufacturing overhead costs that are computed by multiplying activity rates by the activities required to produce a product.

answer: TRUE Difficulty: 2 Medium Topic: Computing Product Costs Learning Objective: 04-03 Compute product costs using activity-based costing. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

28) When a company changes from a traditional costing system to an activity-based costing system, the unit product costs of low-volume products typically increase more than the unit product costs of high-volume products decrease.

answer: TRUE Difficulty: 2 Medium Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

31) When a company implements activity-based costing, overhead cost often shifts from high-volume products to low-volume products, with a higher unit cost resulting for the low-volume products.

answer: TRUE Difficulty: 2 Medium Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

30) When a company changes from a traditional costing system to an activity-based costing system, costs will ordinarily shift from high-volume products to low-volume products when the activity-based costing system includes batch-level or product-level costs.

answer: TRUE Difficulty: 3 Hard Topic: Shifting of Overhead Costs Learning Objective: 04-04 Contrast the product costs computed under activity-based costing and conventional costing methods. Bloom's: Understand AACSB: Reflective Thinking AICPA: FN Measurement;

; FN Measurement 228) Doles Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products. Activity Cost Pools Activity Rate Setting up batches $98.54 per batch Processing customer orders $42.00 per customer order Assembling products $3.53 per assembly hour Data concerning two products appear below: Product K52W Product X94T Number of batches 55 73 Number of customer orders 9 17 Number of assembly hours 697 402 Required: How much overhead cost would be assigned to each of the two products using the company's activity-based costing system?

answer: The overhead cost charged to Product K52W is: Activity Rate Activity ABC Cost Setting up batches $98.54 /batch 55 batch $5,419.70 Processing customer orders $42.00 /customer order 9 customer orders 378.00 Assembling products $3.53 /assembly hour 697 assembly hour 2,460.41 Total overhead cost $8,258.11 The overhead cost charged to Product X94T is: Activity Rate Activity ABC Cost Setting up batches $98.54 per batch 73 batch $7,193.42 Processing customer orders $42.00 /customer order 17 customer orders 714.00 Assembling products $3.53 /assembly hour 402 assembly hour 1,419.06 Total overhead cost $9,326.48 Difficulty: 1 Easy Topic: Computing Product Costs Learning Objective: 04-03 Compute product costs using activity-based costing. Bloom's: Apply AACSB: Analytical Thinking AICPA: