Chapter 17

Company identified 2 activities for its Products A and B. For Activity 1: Budgeted cost is $100 and budgeted activity for A and B is 10 and 40, respectively. For Activity 2, budgeted cost is $120 and activity for A and B is 5 and 15, respectively. What overhead cost per unit under ABC for Product B if 17 units were produced? $2 $6 $10 $17

$10 Overhead per unit of Product A: $50/25 = $2

Overhead is $1,200 in Assembly and $600 in Finishing. Direct labor hours are 10 in Assembly and 20 in Finishing. Machine hours are 5 in Assembly and 15 in Finishing. What is the Assembly's departmental overhead rate if Assembly assigns costs based on direct labor hours? $40 $60 $90 $120

$120 Plantwide overhead rate based on direct labor hours = Total overhead cost/Total direct labor hours = $1,800/30 = $60 per DLH Plantwide overhead rate based on machine hours = Total overhead cost/Total machine hours = $1,800/20 = $90 per MH Assembly departmental overhead rate based on direct labor hours = Assembly overhead/Assembly direct labor hours = $1,200/10 = $120 per DLH Finishing departmental overhead rate based on machine hours = Finishing overhead/Finishing machine hours = $600/15 = $40 per MH

Overhead is $1,200 in Assembly and $600 in Finishing. Direct labor hours are 10 in Assembly and 20 in Finishing. Machine hours are 5 in Assembly and 15 in Finishing. What is the Finishing's departmental overhead rate if Finishing assigns costs based on machine hours? $40 $60 $90 $120

$40 Plantwide overhead rate based on direct labor hours = Total overhead cost/Total direct labor hours = $1,800/30 = $60 per DLH Plantwide overhead rate based on machine hours = Total overhead cost/Total machine hours = $1,800/20 = $90 per MH Assembly departmental overhead rate based on direct labor hours = Assembly overhead/Assembly direct labor hours = $1,200/10 = $120 per DLH Finishing departmental overhead rate based on machine hours = Finishing overhead/Finishing machine hours = $600/15 = $40 per MH

What is cost object of activity-based costing (ABC) overhead allocation method? Activities in first stage and product in second stage Department in first stage and product in second stage Product

Activities in first stage and product in second stage Cost objects of activity-based costing are production activities (identifying) in first stage and unit of product (assigning costs) in second stage. Cost objectives of departmental costing are production departments (identifying costs with departments) in first stage and unit of product (assigning costs) in second stage. Cost objective of plantwide costing is unit of product (assigning costs).

What method typically uses the most overhead allocation rates in assigning overhead costs? Activity-based costing Departmental Plantwide

Activity-based costing Plantwide method uses only a single rate, such as direct labor hours or machine hours. Departmental and activity-based costing methods use more than one rate.

What method assigns overhead costs using a single overhead rate? Activity-based costing Departmental Plantwide

Plantwide Plantwide method uses only a single rate, such as direct labor hours or machine hours. Departmental and activity-based costing methods use more than one rate.

Company identified 2 activities for its Products A and B. For Activity 1: Budgeted cost is $100 and budgeted activity for A and B is 10 and 40, respectively. For Activity 2, budgeted cost is $120 and activity for A and B is 5 and 15, respectively. What overhead cost is assigned to Product B under ABC? $20 $30 $50 $80 $90 $170

$170 Total overhead cost assigned to Product B = $80+ $90 = $170

Company identified 2 activities for its Products A and B. For Activity 1: Budgeted cost is $100 and budgeted activity for A and B is 10 and 40, respectively. For Activity 2, budgeted cost is $120 and activity for A and B is 5 and 15, respectively. What overhead cost per unit under ABC for Product A if 25 units were produced? $2 $6 $10 $17

$2 Overhead per unit of Product A: $50/25 = $2

Company identified 2 activities for its Products A and B. For Activity 1: Budgeted cost is $100 and budgeted activity for A and B is 10 and 40, respectively. For Activity 2, budgeted cost is $120 and activity for A and B is 5 and 15, respectively. What is activity rate for Activity 1 under ABC ? $2.00 $2.50 $6.00 $8.00 $10.00 $24.00

$2.00 Activity 1 rate = Budgeted cost for Activity 1/Total budgeted activity for Activity 1 = $100/50 = $2

A company's tech support department expects to have 120 customer calls with a total cost of $360 during the year. This month, there were 3 calls about its Basic model and 9 calls about its Deluxe model. What overhead cost is assigned to the Deluxe model this month if the company uses activity-based costing (ABC). $9 $27 $36 $360

$27 ' ABC overhead rate per call = Expected annual cost/Expected annual calls = $360/120 = $3 per call Cost assigned to Basic model using ABC = ABC overhead rate per call * Number of call about Basic model = $3 * 3 = $9 Cost assigned to Deluxe model using ABC = ABC overhead rate per call * Number of calls about Deluxe model = $3 * 9 = $27

A company's tech support department expects to have 120 customer calls with a total cost of $360 during the year. This month, there were 3 calls about its Basic model and 9 calls about its Deluxe model. What is the overhead rate per call if the company uses activity-based costing (ABC). $3 $30 $40 $120

$3 ABC overhead rate per call = Expected annual cost/Expected annual calls = $360/120 = $3 per call Cost assigned to Basic model using ABC = ABC overhead rate per call * Number of call about Basic model = $3 * 3 = $9 Cost assigned to Deluxe model using ABC = ABC overhead rate per call * Number of calls about Deluxe model = $3 * 9 = $27

Company identified 2 activities for its Products A and B. For Activity 1: Budgeted cost is $100 and budgeted activity for A and B is 10 and 40, respectively. For Activity 2, budgeted cost is $120 and activity for A and B is 5 and 15, respectively. What overhead cost is assigned to Product A under ABC? $20 $30 $50 $80 $90 $170

$50 Total overhead cost assigned to Product A = $20 + $30= $50

Company identified 2 activities for its Products A and B. For Activity 1: Budgeted cost is $100 and budgeted activity for A and B is 10 and 40, respectively. For Activity 2, budgeted cost is $120 and activity for A and B is 5 and 15, respectively. What is activity rate for Activity 2 under ABC ? $2.00 $2.50 $6.00 $8.00 $10.00 $24.00

$6.00 Activity 2 rate = Budgeted cost for Activity 2/Total budgeted activity for Activity 2 = $120/20 = $6

Overhead is $1,200 in Assembly and $600 in Finishing. Direct labor hours are 10 in Assembly and 20 in Finishing. Machine hours are 5 in Assembly and 15 in Finishing. What is single plantwide overhead rate based on direct labor hours? $40 $60 $90 $120

$60 Plantwide overhead rate based on direct labor hours = Total overhead cost/Total direct labor hours = $1,800/30 = $60 per DLH Plantwide overhead rate based on machine hours = Total overhead cost/Total machine hours = $1,800/20 = $90 per MH Assembly departmental overhead rate based on direct labor hours = Assembly overhead/Assembly direct labor hours = $1,200/10 = $120 per DLH Finishing departmental overhead rate based on machine hours = Finishing overhead/Finishing machine hours = $600/15 = $40 per MH

A company's tech support department expects to have 120 customer calls with a total cost of $360 during the year. This month, there were 3 calls about its Basic model and 9 calls about its Deluxe model. What overhead cost is assigned to the Basic model this month if the company uses activity-based costing (ABC). $9 $27 $36 $360

$9 ABC overhead rate per call = Expected annual cost/Expected annual calls = $360/120 = $3 per call Cost assigned to Basic model using ABC = ABC overhead rate per call * Number of call about Basic model = $3 * 3 = $9 Cost assigned to Deluxe model using ABC = ABC overhead rate per call * Number of calls about Deluxe model = $3 * 9 = $27

Overhead is $1,200 in Assembly and $600 in Finishing. Direct labor hours are 10 in Assembly and 20 in Finishing. Machine hours are 5 in Assembly and 15 in Finishing. What is single plantwide overhead rate based on machine hours? $40 $60 $90 $120

$90 Plantwide overhead rate based on direct labor hours = Total overhead cost/Total direct labor hours = $1,800/30 = $60 per DLH Plantwide overhead rate based on machine hours = Total overhead cost/Total machine hours = $1,800/20 = $90 per MH Assembly departmental overhead rate based on direct labor hours = Assembly overhead/Assembly direct labor hours = $1,200/10 = $120 per DLH Finishing departmental overhead rate based on machine hours = Finishing overhead/Finishing machine hours = $600/15 = $40 per MH

What is cost object of departmental overhead allocation method? Activities in first stage and product in second stage Department in first stage and product in second stage Product

Department in first stage and product in second stage Cost objects of activity-based costing are production activities (identifying) in first stage and unit of product (assigning costs) in second stage. Cost objectives of departmental costing are production departments (identifying costs with departments) in first stage and unit of product (assigning costs) in second stage. Cost objective of plantwide costing is unit of product (assigning costs).

What is an advantage of the plantwide and departmental overhead rate methods over activity-based costing (ABC)? Easier to use and less costly More accurate product costing More effective cost control Better focus on relevant factors

Easier to use and less costly Advantages of traditional volume-based plantwide and departmental overhead rate methods over activity-based costing (ABC): Data is readily available Ease of use Only one cost object Less costly to implement Acceptable under GAAP or Consistent with GAAP Can be used for external reporting Disadvantages of traditional plantwide and departmental overhead rate methods include the following: Overhead too complex to be explained by one factor Technology advances often lower direct labor costs as % of total manufacturing costs Advantages of activity-based costing over traditional volume-based allocation methods D. More accurate product costing More effective cost control Better focus on the relevant factors for decision making Disadvantages of activity-based costing: Data is not always readily available Not easy to use More than one cost object More costly to implement Not acceptable under GAAP/No consistent with GAAP Cannot be used for external reporting

What is an advantage of the activity-based costing (ABC) overhead rate method over traditional plantwide and departmental overhead rate methods? Easier to use Less costly to implement More accurate product costing Acceptable under GAAP

More accurate product costing Advantages of traditional volume-based plantwide and departmental overhead allocation methods over the activity-based costing (ABC) method Data is readily available Ease of use Only one cost object Less costly to implement Acceptable under GAAP or Consistent with GAAP Can be used for external reporting Disadvantages of traditional plantwide and departmental overhead allocation methods Overhead too complex to be explained by one factor Technology advances often lower direct labor costs as % of total manufacturing costs Advantages of activity-based costing (ABC) overhead allocation method over traditional volume-based plantwide and departmental allocation methods D. More accurate product costing More effective cost control Better focus on the relevant factors for decision making Disadvantages of activity-based costing: Data is not always readily available Not easy to use More than one cost object More costly to implement Not acceptable under GAAP/No consistent with GAAP Cannot be used for external reporting

What is cost object of plantwide overhead allocation method? Activities in first stage and product in second stage Department in first stage and product in second stage Product

Product Cost objects of activity-based costing are production activities (identifying) in first stage and unit of product (assigning costs) in second stage. Cost objectives of departmental costing are production departments (identifying costs with departments) in first stage and unit of product (assigning costs) in second stage. Cost objective of plantwide costing is unit of product (assigning costs).