Chapter 6

Active Frame, Inc., manufactures clear and tinted sport glasses. The manufacturing of clear glasses takes 45,000 direct labor hours and involves 1,700 parts and 115 inspections. The manufacturing of tinted glasses takes 115,000 direct labor hours and involves 1,400 parts and 450 inspections. The traditional method applies $560,000 of overhead on the basis of direct labor hours. What is the amount of overhead per direct labor hour applied to the clear glass products?

$157,500

When the number of units in ending inventory increases through the year, which of the following is true?

Net income is higher for absorption costing than for variable costing.

Which of the following is a reason a company would implement activity-based costing?

They want to improve the data on which decisions are made.

Which is not a task typically associated with ABC systems?

applying a single cost rate

Which is not a step in activity-based costing?

compute a cost rate per production

Under absorption costing, a unit of product includes which costs?

direct material, direct labor, and manufacturing overhead

A company anticipates the cost to heat the building will be $21,000. Product A takes up 500 square feet of space, while Product B takes up 200 square feet. The activity rate per product using activity-based costing would be which of the following?

$30/square foot

Activity-based costing systems:

frequently increase the overhead allocation to at least one product while decreasing the overhead allocation to at least one other product

Absorption costing is also referred to as:

full costing

Which is not a step in analyzing the cost driver for manufacturing overhead?

identify non-value-added costs