BUS108 Quiz 7

Auburn, Inc.'s overhead costs of $700,000 consist of machining $400,000; inspecting $200,000; and packaging $100,000. Machining works 4,000 hours a year, 500 inspections occur each year, and 1,000 packing orders occur each year. Information on the company's two products are as follows: Alpha Omega Machining hours 1,000 3,000 Inspections 100 400 Packing orders 350 650 Direct labor hours 1,700 1,800 Determine how much overhead is allocated to Alpha assuming the use of a single overhead rate (based on direct labor hours) and assuming the use of ABC, respectively. Entry field with correct answer $340,000 and $175,000 $340,000 and $360,000 $360,000 and $175,000 $360,000 and $525,000

$340,000 and $175,000

Auburn, Inc.'s overhead costs of $700,000 consist of machining $400,000; inspecting $200,000; and packaging $100,000. Machining works 4,000 hours a year, 500 inspections occur each year, and 1,000 packing order occur each year. Information on the company's two products are as follows: Alpha Omega Machining hours 1,000 3,000 Inspections 100 400 Packing orders 350 650 Direct labor hours 1,700 1,800 Determine how much overhead is allocated to Omega assuming the use of a single overhead rate (based on direct labor hours) and assuming the use of ABC, respectively. Entry field with correct answer $360,000 and $175,000 $360,000 and $525,000 $340,000 and $360,000 $340,000 and $175,000

$360,000 and $525,000

Sampson Company manufactures two products, plain and complex. The company has estimated its overhead in the order-processing department to be $480,000. The company produces 50,000 plain and 80,000 complex each year. Plain production requires 25,000 machine hours, complex production requires 50,000 machine hours. The company places raw materials orders 10 times per month, 2 times for raw materials for plain and the remainder for raw materials for complex. How much of the order processing overhead should be allocated to complex? Entry field with correct answer $384,000 $295,386 $320,000 $240,000

$384,000

Estimated costs for activity cost pools and other item(s) are as follows: Machining $800,000 Assembling 200,000 Advertising 450,000 Inspecting and testing 175,000 Total estimated overhead is Entry field with correct answer $1,450,000. $1,625,000. $1,000,000. $1,175,000.

1,175,000

A&W Manufacturing uses an activity-based costing system for its cutting department. The activity cost totals $148,000. The number of cuts is the cost driver. The cutting department processed a total of 9,000 batches with an average cuts per batch of 6 and total cuts of 46,250. What is the activity rate for the cutting department? Entry field with correct answer $16.45 per batch $1,500 per cut $247 per cut $3.20 per cut

3.2 per cut

Which of the following is formula for calculating the activity rate in an activity-based costing system? Entry field with correct answer Activity driver divided by activity cost pool resources Activity cost pool resources divided by activity driver Activity cost pool resources divided by estimated total cost pool Estimated cost pool divided by activity cost pool resources

Activity cost pool resources divided by activity driver

When using an activity-based costing system, which of the following is the formula for allocating costs to products or services? Entry field with correct answer Activity rate times activity driver consumption Activity rate divided by activity driver consumption Activity cost pool resources divided by activity driver Activity cost pool resources times activity driver

Activity rate times activity driver consumption

Identifying activities performed in the organization is the first step in developing activity-based product costs. Which of the following is a way to identify these activities? Entry field with correct answer Neither asking employees what they do nor observing what employees do Observe what employees do Both asking employees what they do and observing what employees do Asking employees what they do

Both asking employees what they do and observing what employees do

Assigning manufacturing overhead cost to activity pools is referred to as first-stage allocation because Entry field with correct answer Costs are assigned first to the activity pools before being assigned to activity drivers. Costs are assigned first to the activity pools before being assigned to cost drivers. Costs are assigned first to the activity pools before being assigned to activity objects. Costs are assigned first to the activity pools before being assigned to cost objects.

Costs are assigned first to the activity pools before being assigned to cost objects.

With activity-based costing, the goal is to Entry field with correct answer Develop a product cost that captures the amount of each resource consumed by the activities performed to produce a specific product. Develop a product cost that allocates manufacturing overhead to each resource consumed by the activities performed to a group of similar products. Develop a product cost that eliminates all waste such as machine down time and defective products. None of these answer choices are correct.

Develop a product cost that captures the amount of each resource consumed by the activities performed to produce a specific product.

which of the following activities would be classified as non-value-added in the manufacture of dresses? Entry field with correct answer Cutting Sewing Hemming Inspecting

Inspecting

In changing from a traditional costing system to an activity-based costing system, overhead costs tend to shift from high-volume standard products to low-volume premium products because Entry field with correct answer All overhead costs are indirect. Premium products usually consume more activities per unit than standard products. Standard products use more total activities than premium products. None of these answer choices are correct.

Premium products usually consume more activities per unit than standard products.

Indicators that an activity-based costing analysis may be appropriate include all the following except Entry field with correct answer Bids for jobs that require "special" processing are always accepted. Some manufacturing departments run at capacity, while others have minimal operations. Products are similar and consume resources in the same way. High-volume jobs show losses or minimal profits, while low-volume jobs show healthy profi

Products are similar and consume resources in the same way.

A firm produces and sells two products, Standard and Deluxe. The following information relates to setup costs (a part of factory overhead) of $180,000. Standard Deluxe Units Produced 1,600 1,600 Number of setups 100 125 Direct labor hours per unit 9 9 Total direct labor costs $9,000 $9,000 Activity-based costing would allocate which of the following amounts of setup cost to each unit (rounded to the nearest dollar)? Entry field with correct answer Standard: $ 56 & Deluxe: $ 56 Standard: $126 & Deluxe: $101 Standard: $ 50 & Deluxe: $ 63 Standard: $356 & Deluxe: $444

Standard: $ 50 & Deluxe: $ 63

Since a batch-level activity is based on the existence of the batch, a batch consumes resources Entry field with correct answer Proportionately with the number of units in the batch. Inversely with the number of units in the batch. The same amount of resources whether it contains 20 units or 2,000 units. None of these answer choices are correct.

The same amount of resources whether it contains 20 units or 2,000 units.

The main reason for generating new information provided by activity-based costing is Entry field with correct answer To help managers make better decisions. To provide employees in the accounting department with work to do. To calculate variances. None of these answer choices are correct.

To help managers make better decisions.

Which of the following is not a step in implementing an activity-based costing system? Entry field with correct answer Calculating pre-determined overhead rates Developing activity cost pools Calculate the unit product cost Identifying activities

calculating pre-determined overhead rates

In implementing an activity-based costing system, after all the activities have been identified and the appropriate level of detail selected, the activities are combined into activity cost pools based on their Entry field with correct answer Cost levels Function Behavior Cost drivers

cost drivers

Which of the following is not a product- or service-related activity? Entry field with correct answer Batch-level Customer-level Unit-level Product-level

customer level

Processing a sales order is an example of a Entry field with correct answer Product-level activity. Unit-level activity. Customer-level activity. None of these answer choices are correct.

customer level activity

In an activity-based costing system, which of the following is not a category in which activities are classified? Entry field with correct answer Unit-level Batch-level Product-level Delivery-level

delivery level

Which of the following would be considered a unit-level activity? Entry field with correct answer Ordering direct materials Direct labor Preparing the annual budget Performing quality tests

direct labor

Which of the following would be considered a product-level activity? Entry field with correct answer Quality tests Engineering changes made in the assembly line Machine set-up None of these answer choices are correct

engineering changes made in the assembly line

Which of the following is the step in implementing an activity-based costing system that can generate the greatest error? Entry field with correct answer Developing activity cost pools Calculate the unit product cost Calculating activity cost pool rates Identifying activities

identifying activities

Mounce Catering Service uses an activity-based costing system. What would be the most appropriate cost driver for the activity of preparing meals? Entry field with correct answer Number of meals prepared Number of rolls used Rent on building Number of orders taken

number of meals prepared

Which of the following would be the most appropriate cost driver for the purchasing department? Entry field with correct answer Direct labor hours Number of orders placed Machine hours Direct labor cost

number of orders placed

Which of the following would be a likely activity driver for product design? Entry field with correct answer Number of machine hours Number of direct labor hours Number of batches Number of product lines

number of product lines

In an activity-based costing system, which of the following is not a category in which activities are classified? Entry field with correct answer Product-level Operations-level Organization-level Customer-level

operations level