1. Activity Levels Determine the appropriate level for each of the following activities or costs. Indicate whether the activity is unit-level (UL), batch-level (BL), product-level (PL), facility-level (FL): A) Equipment setups E) Designing, changing and advertising B) Plant supervision F) Heating, lighting and security C) Prime costs G) Product order processing D) Packaging and shipments 2. Traditional Costing vs. ABC Cadete Company incurs P 800,000 in manufacturing overhead costs. The company has been allocating overhead to individual product lines based on direct labor hours. Cost Driver Amount in Cost Pool Amount of Activity Direct labor hours P 300,000 40,000 Number of batches 300,000 1,000 Number of shipments 200,000 500 Total overhead costs P 800.000 Two products have the following characteristics: Product X Product Y Direct labor hours 2,000 1,000 Number of batches 24 30 Number of shipments 2 150 REQUIRED: Determine the overhead costs to be allocated to each product (X and Y) using: A) Traditional costing (based on direct labor hours) B) Activity-based costing (ABC)3. Application of Overhead Costs 3A) Iraq Company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. Estimated and actual data for direct labor and manufacturing overhead last year are as follows: Estimated Actual Manufacturing overhead P 720,000 P 700,000 Direct labor hours 600,000 hrs. 550,000 hrs. What was the manufacturing overhead for Iraq Company for last year? a. Over-applied by P 20,000 C. Over-applied by P 40,000 b. Under-applied by P 20,000 d. Under-applied by P 40,000 3B) Syria Company uses activity-based costing to compute product costs for external reports. The company has three activity centers and applies overhead using predetermined overhead rates for each activity center. Estimated costs and activities for the current year are presented below: Estimated Overhead Cost Expected Activity Activity 1 P 18,000 1,200 Activity 2 P 57,600 2,400 Activity 3 P 97,200 3,600 Actual costs and activities for the current year were as follows: Actual Overhead Cost Actual Activity Activity 1 P 19,500 1,250 Activity 2 P 65,000 2,500 Activity 3 P 90,000 3,750 What was the amount of overhead applied for Activity 2 during the year? a. P 5,000 over-applied C. P 4,800 over-applied b. P 5,000 under-applied d. P 4,800 under-applied 3C) The most common treatment of under-applied and over-applied overhead costs is to close it out to a. Work in process C. Cost of goods sold b. Retained earnings d. Finished goods4. Multiple-Choice Questions 4A) Activity-based costing (ABC) can be applied to a. Selling overheads C. Manufacturing overheads b. Administrative overheads d. All of the choices 4B) Which of these situations is most likely to use traditional costing rather than ABC? a. High-overhead operations C. Labor-intensive production b. Product-diverse companies d. Capital-intensive production 4C) Which of the following is least likely classified as a unit-level activity? a. Peso sales C. Direct labor hours b. Production volume d. Number of inspections 4D) A major objective of activity-based management (ABM) is to reduce or eliminate a. Value-added activities C. Labor-intensive activities b. Non-value-added activities d. Capital-intensive activities 4E) In activity-based costing, which of the following would be considered as a value added activity? a. Engineering design C. Storage and warehousing b. Repair of machines d. Bookkeeping and accounting 4F) Saudi Company produces two products (A1, B2) in a single factory. The controller has determined total overhead costs to be P 480,000: P 140,000 of which relates to material moves, P 150,000 relates to testing and the remainder is related to labor time. Product A1 Product B2 Production 10,000 2,000 Material moves (total) 100 40 Product tests (total) 250 125 Direct labor hours per unit 1 5 Under activity-based costing (ABC), how much is product Al's overhead cost per unit? a. P 40.00 C. P 24.00 b. P 29.50 d. P 12.00