Select from the three alternative methods of overhead allocation in the drop down list so that it matches with the provided feature. Items Item #1 Overhead allocation based on one rate. Item #2 Overhead allocation based on two or more rates. Item #3 Overhead allocation using many rates. Activity-based costing Departmental rate Plantwide rate When using the plantwide overhead rate method, the cost object is O unit of product direct labor hours O machine hours O the activity Huffington Company uses a plantwide overhead rate to apply overhead. The predetermined overhead rate is based on machine hours. At the beginning of the year, the company made the following estimates: direct labor hours of 16,000, direct labor cost of $200,000, machine hours of 5,000, and total overhead costs of $25,000. On a per machine hour basis, the company's plantwide overhead rate is: $8. $50. O $5. O $100. Benson, Incorporated manufactures a single product and uses the plantwide overhead rate method. The company's plantwide overhead rate is $25 per machine-hour (MH) used. Their single product uses 10,000 MH, has direct material cost per unit of $10.96 and direct labor cost of $3.84 per unit. The total overhead cost is expected to be: $250,000 $109,600 $38,400 $398,000 Select the correct type of activity from the drop down list. Items Item #1 Performed only on each batch of units Item #2 Performed to sustain facility capacity as a whole Item #3 Performed on each unit Item #4 Performed on each product line Batch-level Facility-level Product-level Unit-level Select the type of activity from the drop down list. Items Item #1 Recycling hazardous waste Item #2 Cleaning factory Item #3 Assembling components Item #4 Controlling inventory Batch-level Facility-level Product-level Unit-level An advantage of ABC costing is: can be used to identify activities that can benefit from process improvement O less effective overhead cost control O increased costing O can be used for external financial reporting Place the following Departmental Overhead Rate Method steps in the correct order. Items Item #1 Assign budgeted overhead cost to departmental cost pools. Item #2 Allocate overhead costs to cost objects. Item #3 Select an allocation base and compute an overhead allocation rate for each department. Step 1 Step 2 Step 3 Direct labor hours Direct labor cost Machine hours Overhead Machining 16,000 $ 20,000 5,000 $ 25,000 Assembly 12,000 $ 15,000 1,000 $ 30,000 Assuming that overhead in the machining department is allocated on the basis of machine hours, the departmental overhead rate per unit of the allocation base in the Machining Department is: $15 $5 O $1.56 $30 Shepherd Company manufactures two types of shoes sneakers and boots. Each sneaker requires 2 direct labor hours and boots require 1.5 direct labor hours. The overhead rate per direct labor hour is $2. Direct materials for sneakers and boots is $15 and $20, respectively. Direct labor for sneakers and boots is $5 and 7, respectively. The total unit cost for each product is: O Sneakers: $24; Boots: $30 O Sneakers: $30; Boots: $24 O Sneakers: $20; Boots: $27 O Sneakers: $23; Boots: $31 If overhead cost does not bear a relation to the allocation base, allocating overhead cost using a single plantwide overhead rate can: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) ? increase the usefulness of the product cost ? distort product cost ? lead to good managerial decisions ? lead to poor managerial decisions The departmental overhead rate method is more refined than the departmental plantwide overhead rate method. The departmental plantwide overhead rate method fails to accurately assign overhead costs that are not driven by production volume. In step in activity-based costing, overhead costs are allocated to cost objects. one two O three An activity cost driver is a factor that causes: O an activity to go up or down. O the cost of an activity to go up or down. O company's overall costs to go up or down. O group of costs that are related to the same activity to go up or down. Step 2 of ABC costing is to: O identify activities and their budgeted overhead cost. O compute activity overhead rate for each activity. O allocate overhead cost to cost objects. In step 3 of ABC, overhead cost is allocated to activities based on the following formula: actual activity usage divided by activity rate O actual activity usage times actual activity rate budgeted activity usage divided by budgeted activity rate actual activity usage times budgeted activity rate The plantwide rate method, compared to activity-based costing can Overcost low-volume complex products O Undercost low-volume complex products O Will always lead to the best product pricing decision Budgeted customer support cost for Liton Company is $100,000 for the year and budgeted technician miles is 1,000 per year. Liton Company's customer support activity rate is $ per mile. Activity rate per mile Service companies classify costs by activity level including unit, batch, service, and facility. An example of a service level activity for a hotel is: checking in a guest preparing food for guests O scheduling personnel O cleaning rooms The first step for a service provider using ABC is: O identify activities and their budgeted overhead cost O compute overhead activity rate for each activity allocate overhead cost to cost objects