ACC 212 - Chapter 17

The general calculation in determining the rate (based on the plant-wide overhead method) for a company who uses direct labor hours as its allocation basis would be best described by which of the following?

Total budgeted overhead cost / total budgeted direct labor hours.

Which of the following would be an advantage to using a single plant-wide rate?

-Information is generally readily available. -The ease of implementation, when compared to other methods. -It is sufficient to meet external financial reporting needs

Advantages of Activity Based Costing

-More effective overhead cost control -Better production and pricing decisions -Additional uses (allocate selling and admin costs expensed by GAAP to activities) -Determine profitability of various market segments

Overhead costs are more difficult to trace to products because of which of the following reasons?

-Overhead costs are not directly related to production. -They cannot be physically traced to units of product in the same way that direct materials and direct labor can. -Many overhead costs apply to factory-wide activities or costs.

All of the following are examples of batch-level activities EXCEPT: A. Purchase order processing. B. Setting up equipment. C. Clerical activity associated with processing purchase orders to produce an order for a standard product. D. Recreational facilities for employees.

-Recreational facilities for employees

Which of the following is true regarding the use of multiple departmental overhead rates?

-This method uses a different overhead rate for each production department. -The method usually follows a two-stage assignment process, each with its different cost object. -In the first stage, the departments are the cost objects. -In the second stage, the products are the cost objects.

From an ABC perspective, what causes costs to be incurred?

Activities

A company produces two models of ice chests. The total overhead for the company is estimated to be $4,800,000. The total direct labor hours is estimated to be 1,000,000. If a deluxe model of an ice chest uses 4 hours of direct labor in production, how much overhead should be assigned to it using the plant-wide rate method?

Activity Rate = 4,800,000 / 1,000,000 =$4.8 per DLH $4.8 X 4 DLH = $19.20

Which of the following statement(s) is (are) true? A.) Activity-based costing uses a number of activity cost pools, each of which is allocated to products on the basis of direct labor-hours. B.) Activity rates in activity-based costing are computed by dividing costs from the first-stage allocations by the activity measure for each activity cost pool. C.) An activity-based costing system is generally easier to implement and maintain than a traditional costing system. D.) One of the goals of activity-based management is the elimination of waste by allocating costs to products that waste resources.

Activity rates in activity-based costing are computed by dividing costs from the first-stage allocations by the activity measure for each activity cost pool.

All of the following are examples of product level activities EXCEPT: A. Human resource management. B. Advertising a product. C. Testing a prototype of a new product. D. Parts administratio

Human resource management

Which of the following statements is true with regard to the departmental overhead rate method?

It is logical to use this method when overhead resources are consumed by various products in substantially different ways throughout multiple departments