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Assume a company manufactures only two products-14,000 units of Product A and 6,000 units of Product 3. It is considering implementing an activity based costing
Assume a company manufactures only two products-14,000 units of Product A and 6,000 units of Product 3. 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 Machining Machine setupa Product design Activity Measure Machine-hours Number of setups Number of products Estimated Overhead Cost Expected Activity $ 300,000 30,000 MH $ 150,000 200 Setups $ 78,000 2 Products Activity Measure Machine-hours Number of setupa Number of products Product A 9,000 50 1 Product B 6,000 150 1 Using the ABC system, how much overhead cost would be assigned from the Machining cost pool to Product A? Multiple Choice $70,000 Using the ABC system, how much overhead cost would be assigned from the Machining cost pool to Chole 570.000 $150,000 $45.000 $90,000 Which of the following statements is true? Multiple Choice Conventional cost systems usually allocate too much nonmanufacturing costs to high volume products whereas activity based costing systems usually do not allocate enough nonmanufacturing costs to high volume products. Conventional cost systems usually overcost high-volume products and undercost low-volume products when compared to activity-based costing systems. Conventional cost systems usually undercost high-volume products and overcost low-volume products when compared to activity based costing systems. Conventional cost systems usually do not allocate enough nonmanufacturing costs to high-volume products whereas activity based costing systems usually allocate too much nonmanufacturing costs to high-volume products, Which of the following statements is true? When designing an actity-based costing system, related activities are frequently combined to reduce the amount of detail and record- Keeping cost Activity based costing uses a number of activity cost pools, each of which is allocated to products on the basis of direct labor hours. Activity-based costing involves a two stage allocation process in which overhead costs are first assigned to activity cost pools and then allocated to products using activity measures The challenge in designing an activity-based costing system is to identify all of the activities that explain the variation in overhead costs Multiple Choice Statements and ill are true Statements and are true Statements, and all are true Statements I and I are true. Statements Il and Ill are true. Statements I, II, and Ill are true. All of the statements are true
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