14.Simplex Company has the following estimated costs for next year:

Direct materials

$15,000

Direct labour

55,000

Sales commissions

75,000

Salary of production supervisor

65,000

Indirect materials

41,080

Advertising expenses

11,000

Rent on factory equipment

16,000

Simplex estimates that 10,000 direct labour and 16,000 machine hours will be worked during the year. If overhead is applied on the basis of machine hours, what will be the overhead rate per hour?

a.$6.94.

b.$8.56.

c.$3.50.

d.$7.63.

_______

15.Which of the following statements refers to management accounting information?

a.It primarily measures and records business transactions

b.The reports are generally delayed and historical

c.There are no regulations governing the reports

d.The reports are audited so they can be used in confidence by potential investors

_______

16.Which one of the following is a variable cost for an insurance company?

a.rent

b.sales commissions

c.property taxes

d.amortization of office equipment

_______

17.Costs incurred at which of the following activity levels should NOT be allocated to products for decision-making purposes?

a.Organization-sustaining activities.

b.Batch-level activities.

c.Product-level activities.

d.Unit-level activities.

_______

18.Arranging for a shipment of a number of different products to a customer is an example of an activity at which of the following levels?

a.Customer-level activity.

b.Unit-level activity.

c.Batch-level activity.

d.Organization-sustaining activity.

_______

19.Which of the following is NOT a limitation of activity-based costing?

a.In practice, most managers insist on fully allocating all costs to products, customers, and other costing objects in an activity-based costing system. This results in overstated costs.

b.Maintaining an activity-based costing system is more costly than maintaining a traditional direct labour-based costing system.

c.More accurate product costs may result in increasing the selling prices of some products.

d.Changing from a traditional direct labour-based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers. Such changes are often resisted by managers.

_______

20.Paul Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows:

Activity Cost Pool

Est. Cost

Product A

Product B

Total

Activity 1

$22,000

400

100

500

Activity 2

40,861

380

200

580

Activity 3

14,600

500

250

750

The activity rate under the activity-based costing system for Activity 2 is closest to which of the following?

a.$70.45.

b.$58.40.

c.$19.47.

d.$28.87.