Chapter 4 Smartbook - ACCT 2302
Activity-based costing ______.
computes product costs in the same way as traditional costing
AA company incurred the following: Total manufacturing costs of $500,000, total production department costs of $300,000, and total production order costs of $275,000. It used a total of 50,000 direct labour hours and 100,000 machine hours, and 2,750 production orders were placed. Use activity-based costing to calculate the activity rate for production orders.
$100
A company assigns overhead using a plantwide rate. If total estimated manufacturing overhead is $900,000 and the total estimated activity is 30,000 machine-hours, the overhead cost assigned to a product using 12,000 machine-hours is ______.
$360,000
For each unit of a product, the direct material cost is $10, the direct labor cost is $15, and the manufacturing overhead is $16. The total unit product cost using activity-based costing is ______.
$41
A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and total activity of 20,000 development hours. Using activity-based costing, calculate the appropriate activity rate(s).
$8 per customer call and $15 per development hour
Total estimated manufacturing overhead is $900,000 and total estimated activity is 30,000 machine-hours. The plantwide overhead rate is $ _____ per machine hour.
30
Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine set ups. The activity rate is $ _____ per setup.
500
If the activity rate is $65 per order with a total of 120 orders for a product, the overhead cost assigned to the product is $ _____.
7800
The activity rate for the Customer Orders activity pool is $20 per order. If there are 400 customer orders for a product, the total overhead cost assigned to this product for customer orders is $ _____.
8000
In ABC, any event that causes consumption of overhead resources is a(n) _____.
Activity
_____ -level activities consist of tasks that are performed each time a batch of goods is handled or processed, regardless of how many units are in a batch.
Batch
A systematic approach to identifying the activities that need the most improvement is called _____.
benchmarking
_____ - _____ activities relate to specific products and typically must be carried out regardless of how many batches or units of the product are manufactured.
Product level or sustaining
Which of the following are facility-level activities?
Property taxes on plant Paying factory insurance
Which of the following statements are true?
Technology has made more complex costing systems less expensive to develop and maintain. On an economywide basis, direct labor and overhead costs have been moving in opposite directions for a long time.
Setting up machines, billing customers, and performing tests at a lab are all examples of a(n) ______.
activity
_____ - _____ management involves focusing on activities to eliminate waste, decrease processing time, and reduce defects.
activity based
A predetermined overhead rate in an activity-based costing system is called a(n) _____ _____.
activity rate
A cost bucket in which costs related to a particular activity measure are accumulated is called a(n) ______.
activity cost pool
How much of an activity is carried out is expressed by a(n) ______, which is used as the allocation base for applying overhead costs to products and services.
activity measure
Total cost of each activity divided by the total activity is the computation of ______.
activity rates
When a company has extensive product diversity and complex overhead, it is best to assign overhead using ______.
activity-based costing
A predetermined overhead rate in an activity-based costing system is called ______.
an activity rate
In activity-based costing an activity measure is ______.
an allocation base
Setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of _____ -level activities.
batch
Costs at the batch level depend on the number of ______.
batches processed
An activity cost pool accumulates costs for ______ activity measure(s).
exactly one
Organization-sustaining activities is another term for _____ -level activities.
facility
Also called organization-sustaining activities, _____ - _____ activities are activities that are carried out regardless of which products are produced, how many batches are run, or how many units are made.
facility level
Departmental overhead rates correctly assign overhead costs in situations where a company has a range of products and complex overhead costs.
false
Traditional cost systems tend to undercost standard products and overcost specialty products.
false
Using volume-based cost drivers to assign overhead when ABC is appropriate ______.
may lead to overpriced or underpriced goods
Usually, traditional costing ______ high-volume products and ______ low-volume products.
overcosts; undercosts
The basis of benchmarking is comparing ______.
performance within the same industry
When cost systems were developed in the 1800's, most companies ______.
produced a small number of similar products focused on simplicity
Designing and advertising a good are both ______-level activities.
product
Activity-based management is focused on ______.
reducing defects eliminating waste
A plantwide overhead rate based on direct labor hours is ______ appropriate.
sometimes
The activity rate is computed by dividing the ______ by the ______.
total cost in the activity cost pool; activity level in the activity cost pool
An activity that must be done for each item produced is a(n) __ level activity.
unit
An activity that must be done for each item produced is a(n) _____ - _____ activity.
unit level
Using direct-labor hours or another volume based cost driver to assign overhead ______.
may result in selling products at a loss ignores other significant causes of overhead may result in overcharging customers for products
When two variables move together, they are said to be negatively correlated.
false