ABC

Blanchard, Inc., is considering introducing a new product and wants to earn a 15% return on sales. If the market price is estimated to be $200, the most the company can spend and still achieve the goal (the target cost) is $___ TO CALCULATE: 200-(200*15%)

$170

Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour. TO CALCULATE: 625000/(8000x4)

$19.53

Using an ABC system, a company has estimated overhead of $2,100,000. They expect to use 1,000,000 machine hours and 500,000 labor hours. ABC has identified this as a machine-hour related activity. The activity rate for this activity is ___. TO CALCULATE: 2100000/1000000

$2.10

Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours? TO CALCULATE: 1.35000/5000=Per direct labor hour 2. PDLH*40

$280

Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $___ per setup.

$500

A company wants to offer a new product, but only if it can earn a 20% return on sales. If the marketing department estimates that the new product will sell for $850, what is the most the company can spend on one unit and still achieve the goal (the target cost)? TO CALCULATE 850-(850*20%)

$680

Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product. TO CALCULATE: 1. 620/1000=x & 380/1000=y 2. x*118000 & y*118000

$73160 to Model XLT & $44840 to Model TXT

Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 7,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned ___% of the total setup cost.

30%

The formula to apply overhead to products is

Activity Rate x Activity

Total manufacturing costs includes

Direct materials and direct labor

True or false: When a manufacturing overhead cost relates to multiple activities, the cost should be allocated to the activity that has the highest total overhead cost.

False

Total manufacturing overhead under activity-based costing consists of all ___

Overhead assigned during Stage 2 allocations

Which costing system assigns overhead using volume-based cost drivers?

Traditional

When an activity must be performed for each individual unit, an appropriate cost driver is ___

Volume-Based

The first step in implementing an ABC system is to identify the organization's major ___

activities

Activity-based costing systems typically include ___ cost drivers

both volume and non-volume based

When a company implements activity-based costing, overhead cost often shifts from ______-volume products to ______-volume products.

high;low

To compute the per-unit manufacturing cost, add ___ ___to direct materials and direct labor.

manufacturing overhead

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

volume

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $___ TO CALCULATE: 500000/250000

$2

Non-Volume based cost drivers ___ -are used in traditional costing systems -are related to the number of units products or customers served -are used in ABC systems -allow more indirect costs to be allocated to products

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

All of the following are non-volume-based cost drivers except number of ___. -inspections -machine hours -design changes -setups

Machine Hours

Which of the following is NOT a volume-based cost driver? -Machine setups -Sales Revenue -Direct Material Costs -Direct Labor Dollars

Machine Setups

Which of the following is an ABC cost driver? -Direct Material Costs -Sales Revenue -Direct Labor Dollars -Machine Setups

Machine Setups

Non-volume-based cost drivers may be more appropriate for activities ___ -that are performed for each unit -that are performed for each batch -related to individual products -related to the entire facility

-that are performed for each batch -related to individual products

Indirect costs can be assigned to products or services using ______. -activity-based management -total quality management -the activity rate method -the activity proportion method -target costing

-the activity rate method -the activity proportion method

The final step in ABC is ___. -Assigning indirect costs to products or services -Selecting cost drivers for each activity cost pool -Identifying and classifying activities -Assigning indirect costs to each activity pool

Assigning indirect costs to products or services