________ is considered while choosing a cost allocation base for activity costs in ABC costing.

Multiple Choice

• The marketing strategy of the products being produced
• The product sales price
• The availability of reliable data and metrics
• The number of employees in direct labor
• The number of departments

What are the main advantages of volume-based allocation methods compared to activity-based costing?

Multiple Choice

• Volume-based methods are easier to use and less costly to implement and maintain.
• Volume-based methods are more accurate and allowed by GAAP.
• Volume-based methods are less accurate and easier to use.
• Volume-based methods are harder to use and more costly to implement and maintain.
• There are no advantages to using volume-based methods.

_____________ costs support the company as a whole.

Multiple Choice

• Batch-level
• Product-level
• Unit-level
• Facility-level
• Activity

ABC costing might lead to:

Multiple Choice

• increasing the sales price of low-volume products.
• increasing the sales price of high-volume products.
• increasing low-volume products that appear to be profitable.
• decreasing high-volume products that appear to be unprofitable.
• increasing materials cost.

A company uses activity-based costing to determine the costs of its three products: A, B, and C. The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table:

				Budgeted Activity
Activity Cost Pool	Budgeted Cost			Product A		Product B		Product C
Activity 1	$	70,000		6,000		9,000		20,000
Activity 2	$	45,000		7,000		15,000		8,000
Activity 3	$	82,000		2,500		1,000		1,625

What are the activity rates for the three activities under activity-based costing?

Multiple Choice

• (1) $2.00; (2) $3.00; (3) $3.50.
• (1) $3.50; (2) $1.50; (3) $32,80.
• (1) $3.50; (2) $3.00; (3) $16.00.
• (1) $2.00; (2) $1.50; (3) $16.00.
• (1) $2.00; (2) $1.50; (3) $32.80.

Cleveland Choppers manufactures two types of motorcycles, a Base and a Loaded model. The following activity and costs have been gathered:

Product	Number of Components			Number of Setups			Number of Direct Labor Hrs
Base		15			20			700
Loaded		25			40			600
Overhead costs	$	27,000		$	22,500

The number of components and number of setups are chosen as activity-cost drivers for overhead. Assuming an ABC costing system is being used, what is the total overhead cost assigned to the Base model?

Multiple Choice

• $15,450.
• $21,375.
• $13,500.
• $17,625.
• $15,625.

Which of the following statements is true with regard to the plantwide overhead rate method?

Multiple Choice

• The rate is determined using volume-related measures.
• It is logical to use this method when overhead costs are not closely tied to volume-related measures.
• This method uses multiple overhead rates.
• The rate is determined using measures that are not closely related to volume.
• The method provides the most accurate means of allocating overhead costs.

A company has two products: A and B. It uses activity-based costing and has prepared the following analysis showing budgeted cost and activity for each of its three activity cost pools:

				Budgeted Activity
Activity Cost Pool	Budgeted Cost			Product A		Product B
Activity 1	$	87,000		3,000		2,800
Activity 2	$	62,000		4,500		5,500
Activity 3	$	93,000		2,500		5,250

Annual production and sales level of Product A is 34,300 units, and the annual production and sales level of Product B is 69,550 units. What is the approximate overhead cost per unit of Product A under activity-based costing?

Multiple Choice

• $3.00
• $2.00
• $10.28
• $15.00
• $2.33

What are three advantages of activity-based costing over traditional volume-based allocation methods?

Multiple Choice

• Ease of use, more accurate product costing, and more effective cost control.
• Fewer allocation bases, ease of use, and a direct correlation to production volume.
• More accurate product costing, more effective cost control, and better focus on the relevant factors for decision making.
• More accurate product costing, fewer cost objects, and a direct correlation to production volume.
• More accurate product costing, ease of use, less costly to implement.

A company uses activity-based costing to determine the costs of its three products: A, B, and C. The budgeted cost and activity for each of the company's three activity cost pools are shown in the following table:

				Budgeted Activity
Activity Cost Pool	Budgeted Cost			Product A		Product B		Product C
Activity 1	$	70,000		6,000		9,000		20,000
Activity 2	$	45,000		7,000		15,000		8,000
Activity 3	$	82,000		2,500		1,000		1,625

How much overhead will be assigned to Product B using activity-based costing?

Multiple Choice

• $56,500
• $78,000
• $62,500
• $197,000
• $70,000

K Company estimates that overhead costs for the next year will be $2,900,000 for indirect labor and $800,000 for factory utilities. The company uses direct labor hours as its overhead allocation base. If 80,000 direct labor hours are planned for this next year, what is the company's plantwide overhead rate?

Multiple Choice

• $0.02 per direct labor hour.
• $46.25 per direct labor hour.
• $36.25 per direct labor hour.
• $10 per direct labor hour.
• $0.10 per direct labor hour.

The following data relates to Black-Out Company's estimated amounts for next year.

Estimated:	Department 1			Department 2
Manufacturing overhead costs	$	300,000		$	400,000
Direct labor hours		60,000	DLH		80,000	DLH
Machine hours		1,000	MH		2,000	MH

What is the company's plantwide overhead rate if machine hours are the allocation base? (Round your answer to two decimal places.)

Multiple Choice

• $233.33 per MH
• $150.00 per MH
• $100.00 per MH
• $4.90 per MH
• $5.00 per MH

The cost object of the plantwide overhead rate method is:

Multiple Choice

• The unit of product.
• The production departments of the company.
• The production activities of the company.
• Manufacturing cost pools.
• The time period.

Kamper Company sells two products Big Z and Little Z. Current direct material and direct labor costs are detailed below. Next year, the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year's overhead is estimated to be $475,000. The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $20 per hour and the company expects to manufacture 32,000 units of Big Z and 9,000 units of Little Z next year.

	Direct Material per Unit			Direct Labor Dollars per Unit
Big Z	$	6		$	17
Little Z	$	12		$	8

What are total estimated direct labor hours for this next year?

Multiple Choice

• 30,800 total DLH.
• 616,000 total DLH.
• 300,000 total DLH.
• 1,025,000 total DLH.
• 916,000 total DLH.

Crinkle Cut Clothes Company manufactures two products CC1 and CC2. Current direct material and direct labor costs are detailed below. Next year the company wishes to use a plantwide overhead rate with direct labor hours as its allocation base. Next year's overhead is estimated to be $338,250. The direct labor and direct materials costs are estimated to be consistent with the current year. Direct labor costs $28 per hour and the company expects to manufacture 22,000 units of CC1 and 91,000 units of CC2 next year.

	Direct Material per Unit			Direct Labor Dollars per Unit
CC1	$	37.10		$	22.40
CC2	$	25.20		$	15.40

Compute the plantwide overhead rate for next year.

Multiple Choice

• $28.00 per DLH.
• $37.80 per DLH.
• $1.35 per DLH.
• $5.00 per DLH.
• $0.20 per DLH.

The cost object(s) of the activity-based costing method is(are):

Multiple Choice

• The time period.
• The production departments of the company.
• The production activities of the company.
• The production activities in the first stage and the unit of product in the second stage.
• The unit of product in the first stage and the production activities in the second stage.

The following data relates to Mangini Company's estimated amounts for next year.

Estimated:	Department 1			Department 2
Manufacturing overhead costs	$320,000			$400,000
Direct labor hours	65,000	DLH		75,000	DLH
Machine hours	2,000	MH		2,500	MH

What is the company's plantwide overhead rate if machine hours are the allocation base? (Round your answer to two decimal places.)

Multiple Choice

• $200.00 per MH
• $150.00 per MH
• $160.00 per MH
• $31.11 per MH
• $5.14 per MH

Which of the following is a disadvantage of the departmental overhead rate method?

Multiple Choice

• It may fail to accurately assign many overhead costs that are not driven by production volume.
• Allows each department to have its own overhead rate.
• Allows each department to have its own allocation base.
• The departmental overhead rate is usually more accurate in overhead allocations than the plantwide overhead rate.
• The departmental overhead rate is consistent with GAAP and can be used for external reporting.

Which of the following companies would be best served by a plantwide overhead rate?

Multiple Choice

• A company that manufactures many different products and whose operations are an equal mix of labor and mechanized work.
• A company that manufactures few products and whose operations are labor intensive.
• A company that manufactures many different products and whose operations are highly mechanized.
• A company whose products use overhead resources in very different ways.
• A company whose products differ in batch size and complexity and consume different amounts of overhead resources.

West Company estimates that overhead costs for the next year will be $5,240,000 for indirect labor and $550,000 for factory utilities. The company uses machine hours as its overhead allocation base. If 150,000 machine hours are planned for this next year, what is the company's plantwide overhead rate?

Multiple Choice

• $0.0259 per machine hour.
• $34.93 per machine hour.
• $38.60 per machine hour.
• $3.67 per machine hour.
• $0.2727 per machine hour.

Would the following activities at a manufacturer of shampoo be best classified as unit-level, batch-level, product-level, or facility level activities?

Researching new formulas

Shipping orders to stores

Multiple Choice

Batch

Batch

Unit

Unit

Product

Batch

Product

Unit

Facility

Product

Red Raider Company uses a plantwide overhead rate with direct labor hours as the allocation base. Each unit requires 0.9 direct labor hours to produce. How much overhead will be assigned to each unit produced given the following estimated amounts?

Estimated:	Department 1			Department 2
Manufacturing overhead costs	$	2,530,000		$	2,752,000
Direct labor hours		168,000	DLH		110,000	DLH
Machine hours		30,000	MH		8,000	MH

rev: 09_21_2021_QC_CS-277169

Multiple Choice

• $19.00 per unit
• $17.10 per unit
• $139.00 per unit
• $125.10 per unit
• $12.51 per unit

Which of the following is not true?

Multiple Choice

• The departmental overhead method assigns overhead on the basis of volume-related measures.
• The departmental overhead rate method is more refined than the plantwide overhead rate method.
• Overhead costing accuracy is improved by the use of multiple departmental rates rather than a single overhead rate.
• The departmental overhead rate method does not assign overhead on the basis of volume-related measures.
• The departmental overhead rate method is more costly to implement than the plantwide overhead rate method.

The following data relates to Patterson Company's estimated amounts for next year.

Estimated:	Department 1			Department 2
Manufacturing overhead costs	$	50,000		$	60,000
Direct labor hours		180,000	DLH		200,000	DLH
Machine hours		200,000	MH		400,000	MH

What is the company's plantwide overhead rate if direct labor hours are the allocation base? (Round your answer to two decimal places.)

Multiple Choice

• $3.45 per DLH
• $5.45 per DLH
• $0.29 per DLH
• $0.26 per DLH
• $0.20 per DLH

Cleveland Choppers manufactures two types of motorcycles, a Base and a Loaded model. The following activity and costs have been gathered:

Product	Number of Components			Number of Setups			Number of Direct Labor Hrs
Base		15			20			700
Loaded		25			40			600
Overhead costs	$	27,000		$	22,500

The number of components and number of setups are chosen as activity-cost drivers for overhead. Assuming an ABC costing system is being used, what is the total overhead cost assigned to the Loaded model?

Multiple Choice

• $31,875.
• $36,000.
• $28,125.
• $34,050.
• $31,125.