ACCT 210 Chapter 4

Which of the following is not an important element of just-in-time processing? Dependable suppliers A multi-skilled workforce Multiple product lines A total quality control system

Multiple product lines

The primary objective of just-in-time processing is to accumulate overhead in activity cost pools. eliminate or reduce all manufacturing inventories. identify relevant activity cost drivers. identify value-added activities.

eliminate or reduce all manufacturing inventories.

Bangor Company manufactures two products, Velveeto and Fondant. Bangor has estimated overhead costs as follows: setting up machines ($160,000), machining ($300,000) and inspecting ($100,000). Information on the two products follows: Velveeto and Fondant Direct labor hours Velveeto 60,000 Fondant 100,000 Machine setups Velveeto 2,400 Fondant 1,600 Machine hours Velveeto 96,000 Fondant 104,000 Inspections Velveeto 3,000 Fondant 2,000 If Bangor uses ABC, how much overhead will be applied to Velveeto?

$300,000

Bangor Company manufactures two products, Velveeto and Fondant. Bangor has estimated overhead costs as follows: setting up machines ($160,000), machining ($300,000) and inspecting ($100,000). Information on the two products follows: Velveeto and Fondant Direct labor hours Velveeto 60,000 Fondant 100,000 Machine setups Velveeto 2,400 Fondant 1,600 Machine hours Velveeto 96,000 Fondant 104,000 Inspections Velveeto 3,200 Fondant 2,800 Overhead is applied to Fondant using direct labor hours. What is the total amount of overhead charged to this product line using traditional costing?

$350,000

Bergeron Co. manufactures two printers, Pronto and Speedy. Total overhead of $1,260,000 is incurred by three departments: Setups $80,000; Machining $880,000; and Shipping $300,000. The company also incurs $40,000 of direct labor. Information concerning the two product lines is shown below: Pronto Speedy Machine setups 25 25 Machine hours 6,500 3,500 Orders shipped 225 375 Direct labor costs $100,000 $300,000 Using activity-based costing, how much overhead is assigned to Speedy?

$535,000

Which of the following is the proper classification of the two activities listed? Value-Added Activity Non-Value-Added Activity Assembly Inspection Packaging Storing Testing Storage Receiving Machining

Assembly, Inspection

Activity-based costing A. can be used only in a job order costing system. B. is the initial phase of converting to a just-in-time operating environment. C. is a two-stage overhead cost allocation system that identifies activity cost pools and cost drivers. D. uses direct labor as its primary cost driver.

C. is a two-stage overhead cost allocation system that identifies activity cost pools and cost drivers.

To assign overhead costs to an individual product, the activity-based overhead rate is multiplied by A. the number of direct labor hours used during the period. B. the number of employees who participate in manufacturing the product. C. the number of cost drivers used per product. D. the number of products produced during the period.

C. the number of cost drivers used per product.

The activity-based overhead rate is computed by dividing A. Estimated overhead per activity by actual use of cost drivers per activity. B. Actual overhead per activity by expected use of cost drivers per activity. C. Actual overhead per activity by actual use of cost drivers per activity. D. Estimated overhead per activity by expected use of cost drivers per activity.

D. Estimated overhead per activity by expected use of cost drivers per activity.

To assign overhead costs to an individual product, the activity-based overhead rate is multiplied by A. the number of products produced during the period. B. the number of direct labor hours used during the period. C. the number of employees who participate in manufacturing the product. D. the number of cost drivers used per product.

D. the number of cost drivers used per product.

Swifty Company's overhead rate for machine setups is $112 per setup. A total of 103 setups are estimated for the period. At year-end, it was determined that Products A and B have 60 and 43 setups, respectively. How much is the overhead cost assigned to each product? Not enough information to determine the answer Product A $6720, Product B $4816 Product A $6180, Product B $6180 Product A $11536, Product B $4429

Product A $6720, Product B $4816

If a traditional costing system allocates too much overhead to one product, the firm is likely to experience which of the following problems? The firm may be underpricing the product The product is in danger of becoming obsolete An increase in the number of defective products produced The firm may lose market share to competitors

The firm may lose market share to competitors

In order to achieve the most accurate costing, the cost driver chosen for a given activity must show a ___________ between the cost driver and the actual consumption of overhead costs. low degree of correlation moderate connection reasonable relationship high degree of correlation

high degree of correlation

As the complexity of a product's manufacturing operation increases, the number of activities and cost drivers used in an activity-based cost system will likely decrease. stay about same. vary randomly. increase.

increase.