CH 7

Which of the following statements is true? A batch-level activity cost will decrease as the number of units in the batch increases. A batch-level activity cost will increase as the number of units in the batch increases. A batch-level activity cost is unaffected by the number of units in the batch. Batch-level activity costs are often used in traditional absorption costing systems to allocate batch-level costs.

A batch-level activity cost is unaffected by the number of units in the batch.

Assume a company manufactures only two products—14,000 units of Product A and 6,000 units of Product B. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to three cost pools. The following additional information is available for the company as a whole and for Products A and B: Activity Cost Pool--Activity Measure--Estimated Overhead Cost--Expected Machining Machine-hours $ 300,000 15,000MH Machine setups Number of setups n $ 150,000 200Setups Product design Number of products $ 78,000 2Products Activity Measure Product A Product B Machine-hours 9,000 6,000 Number of setups 50 150 Number of products 1 1 Using the ABC system, how much total overhead cost would be assigned from all of the activities to Product A?

256500

Which of the following does not describe a difference between activity-based costing (ABC) and traditional absorption costing? ABC usually excludes manufacturing overhead from its calculations whereas traditional absorption costing includes it. ABC may assign nonmanufacturing and manufacturing costs to products whereas traditional absorption costing does not assign nonmanufacturing costs to products. ABC may exclude some manufacturing costs from its product costs whereas traditional absorption costing includes all manufacturing costs in its product cost calculations. ABC uses numerous cost pools to allocate costs to products whereas traditional absorption costing usually uses fewer cost pools

ABC usually excludes manufacturing overhead from its calculations whereas traditional absorption costing includes it.

Assume a company manufactures only two products—14,000 units of Product A and 6,000 units of Product B. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to three cost pools. The following additional information is available for the company as a whole and for Products A and B: Activity Cost Pool--Activity Measure--Estimated Overhead Cost--Expected Machining Machine-hours $ 300,000 15,000MH Machine setups Number of setups n $ 150,000 200Setups Product design Number of products $ 78,000 2Products Activity Measure Product A Product B Machine-hours 9,000 6,000 Number of setups 50 150 Number of products 1 1 Using the company's plantwide approach, the total overhead cost allocated to Product A is closest to:

344400

Assume a company is conducting a time-driven activity-based costing study in its Purchasing Department. To aid the study, the company provided the following data regarding its Purchasing Department and three of its many jobs: Number of employees 14 Average annual salary per employee $ 30,000 Weeks of employment per year 52 Hours worked per week 40 Practical capacity percentage 90% What is the total cost of the resources supplied?

420000

Assume a company incurs $200,000 of customer service salaries. The employees in the Customer Service Department spend their time performing four activities as follows: 40% of their time is spent in "Problem Resolution," 25% of their time is spent in "New Account Setup," 20% of their time is spent in "Payment Processing," and 15% is spent in "Other" activities. In the company's activity-based costing system, how much of the customer service salaries would be allocated to the "New Account Setup" activity?

50000

Assume a company's activity-based costing system included three expenses: Vehicle operating expenses, $300,000; Vehicle depreciation, $140,000; and Customer service salaries, $180,000. These costs were consumed by four activities as follows: TravelDeliveriesCustomer-ServiceOther Vehicle operating expenses 45% 40% 10% 5% Vehicle depreciation 40% 50% 0% 10% Customer service salaries 20% 30% 35% 15% How much of the company's total costs should not be allocated to customers when analyzing customer profitability?

56000

Assume a company's activity-based costing system includes three activities with the following activity rates: Activity Cost Pool Activity Rate Travel $ 2per mile driven Deliveries $ 50per delivery Customer service $ 22per phone call Two of the company's many customers include Customer A and Customer B. These two customers consumed the company's activities as follows: Total Expected Activity Customer A Customer B Travel (number of miles driven) 300 250 Deliveries (number of deliveries) 15 5 Customer service (number of phone calls)20 12\ How much cost would be assigned from the Travel activity to Customer A?

600

Assume a company's activity-based costing system contains an activity called Engineering Change Orders (ECOs). This activity cost pool includes a total of $150,000 in its numerator. One of the company's products was charged $400 from this activity because it required two ECOs during the year. How many ECOs were used to calculate the ECO activity rate?

750

Assume a service company has implemented an activity-based costing system with five activities as shown below: Activity Cost Pool (Activity Measure) Total Cost Total Activity Customer deliveries (deliveries) $ 400,000 8,000deliveries Manual order processing (manual orders)$ 280,000 5,000manual Electronic order processing (electronic orders)$ 150,000 15,000electronic Line item picking (line items picked) $ 450,000 375,000line Other organization-sustaining costs (None)$ 300,000 The company serves numerous customers, two of which include Hospital A and Hospital B. The activity demands pertaining to these two customers are as follows: Activity Activity Measure Hospital A Hospital B Number of deliveries 10 25 Number of manual orders 0 30 Number of electronic orders 15 0 Number of line items picked 120 250 How much total activity cost should be assigned to Hospital A for internal management purposes?

794

Assume a company has a plantwide overhead rate of $20 per machine hour. Recently, the company experimented with an ABC system that broke down its total overhead of $400,000 into various cost pools including one titled "Machining" that was assigned to products using machine hours. One product called the "widget" consumed two machine hours and was assigned a total of $10 of overhead from the "Machining" cost pool. What is the total amount of overhead cost included in the Machining activity-based cost pool?

100000

Assume a company's activity-based costing system includes three activities with the following activity rates: Activity Cost Pool Activity Rate Travel $ 2per mile driven Deliveries $ 50per delivery Customer service $ 22per phone call Two of the company's many customers include Customer A and Customer B. These two customers consumed the company's activities as follows: Total Expected Activity Customer A Customer B Travel (number of miles driven) 300 250 Deliveries (number of deliveries) 15 5 Customer service (number of phone calls)20 12 If the company earned $1,150 in revenue serving Customer B, then what is the customer margin for this customer?

136

Assume a company's activity-based costing system included three expenses: Vehicle operating expenses, $300,000; Vehicle depreciation, $140,000; and Customer service salaries, $180,000. These costs were consumed by four activities as follows: TravelDeliveriesCustomer-ServiceOther Vehicle operating expenses 45% 40% 10% 5% Vehicle depreciation 40% 50% 0% 10% Customer service salaries 20% 30% 35% 15% How much total cost (including all three expenses) would be allocated to the Travel activity?

227000

Which of the following is an example of a product-level activity? Assembling products Setting up machines Advertising products Heating a manufacturing facility

Advertising products

Which of the following is an example of a unit-level activity? Assembling products Setting up machines Advertising products Heating a manufacturing facility

Assembling products

Which of the following is an example of a duration driver? Number of machine-setups. Quantity of customer orders received. Direct labor-hours. Dollars spent on advertising.

Direct labor-hours.

Which of the following is an example of an organization-sustaining activity? Assembling products Setting up machines Advertising products Heating a manufacturing facility

Heating a manufacturing facility

Relying exclusively on unit-level overhead allocation is most likely to:

Overcost high-volume products.

Which of the following is an example of a batch-level activity? Assembling products Setting up machines Advertising products Heating a manufacturing facility

Setting up machines

Which of the following statements is true? Traditional cost systems usually allocate too much nonmanufacturing costs to products whereas activity-based costing systems usually do not allocate enough nonmanufacturing costs to products. Traditional cost systems usually overcost high volume products and undercost low volume products when compared to activity-based costing systems. Traditional cost systems usually undercost high volume products and overcost low volume products when compared to activity-based costing systems. Traditional cost systems may use different allocation bases than activity-based costing systems, but ultimately both approaches result in the same amount of total cost being allocated to each product.

Traditional cost systems usually overcost high volume products and undercost low volume products when compared to activity-based costing systems.

Activity-based costing (ABC) is a costing method that provides managers with cost information for preparing financial reports for external parties. strategic and other decisions that potentially affect capacity and therefore "fixed" as well as variable costs. identifying relevant costs when choosing between alternatives. identifying the net present value of future cash flows associated with investment opportunities.

strategic and other decisions that potentially affect capacity and therefore "fixed" as well as variable costs.