Activity Based Costing

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Activity Based Costing Questions and Answers

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What will it cost to carpet a room with indoor/outdoor carpet if the room is 10 feet wide and 12 feet long? The carpets cost 12.51 per square yard.
Perez Company uses activity-based costing. The company is trying to estimate the costs of the processing activity in the factory. The company has developed the following flexible budget formula: Y...
Activity-based costing is likely to be most beneficial to firms with which characteristics? a. has a multi-product range that use resources differently b. has a multi-product range that use similar...
Under both the traditional approach to full costing and activity-based costing, there is no difference in the: a. total costs. b. assignment of overhead costs. c. unit cost. d. a and b are correct.
Randy's Components uses an activity-based costing system for its product costing. For the last quarter, the following data relates to costs, output volume, and cost drivers. If set-up costs are dri...
Beaver Company manufactures coffee tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each coffee-table consists of 30 separate parts totaling $250 in...
How do unit-level costs behave in relation to the product life cycle?
How does target costing differ from traditional costing?
Tent Master produces two lines of tents sold to outdoor enthuslasts. The tents are cut to speclfications Itn department A. In department B the tents are sewn and folded. The activities, costs, and...
The fabrication dept. of Auto Engines, Inc. wants to estimate setup costs for Year 5. The company has determined that its setup costs are batch-related. Relevant data for the past 5 years are: Ann...
Earl LLC produces kayaks. Information is gathered with respect to a computer-driven saw: setups, number of setups, quality control, number of quality control inspections. Total overhead costs for t...
Which of the following product costing methods produces the most precise product costing information? a. Plant-wide overhead rates b. Departmental overhead rate methods c. Activity-based costing d....
The manager of the Personnel Department at City Enterprises has been reading about time-driven ABC and wants to apply it to her department. She has identified four basic activities her employees sp...
Alamo's customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 16,700 calls and incurred costs of $501,000. If 3,580 of...
Fancy Doors, Inc., produces 2 types of doors, interior & exterior. The Company's simple costing system has 2 direct cost categories (materials & labor) and 1 direct cost pool. The simple costing sy...
Fancy Doors, Inc., produces two types of doors, interior and exterior. The company's simple costing system has two direct cost categories (materials and labor) and one indirect cost pool. The simpl...
Gino's Restaurant is a popular restaurant in Boston, Massachusetts. The owner of the restaurant has been trying to better understand costs at the restaurant and has hired a student intern to conduc...
If you plan to open a business, what do you need to consider when compiling your costs?
Pino Publishing identified the following overhead activities, their respective costs, and their cost drivers to produce the three types of textbooks the company publishes. Budgeted Activity of Cos...
Garner Industries manufactures precision tools. The firm uses an activity-based costing system. CEO Deb Garner is very proud of the accuracy of the system in determining product costs. She noticed...
A small owner recently ordered 16 digital cameras that cost $430 each and 5 printers that cost $205 each. What is the total cost for these items, if the small owner also paid a regulatory fee of $...
Sharlene bought 4 CD's at the music store each cost $14.95. She was charged 5% sales tax on her purchase. What was the total cost of her purchase?
Zapato Company produces two types of boots: vaquero and Vaquera. There are four activities associated with the two products. Drivers for the four activities are as follows: Vaquero Vaquera Cutting...
Render Co. CPA is preparing activity-based budgets for 2015. The partners expect the firm to generate billable hours for the year as follows: Data entry 1,010 hours Auditing 2,470 hours Tax 2,220...
Wilmington Company has two manufacturing departments-Assembly and Fabrication. It considers all of its manufacturing overhead costs to be fixed costs. The first set of data that is shown below is b...
Lakeside Inc. manufactures four lines of remote control boats and uses activity-based costing to calculate product cost. Activity Cost Pools Estimated Total Cost Estimated Cost Driver Machining $3...
Abagail Corp. uses an activity-based costing system with three activity cost pools. The following information is provided: Activity Cost Pools
If I worked at a manufacturing company which was machine-intensive and mainly did assemblies, could I separately depreciate those assets based on an activity-based met?
Schedule of Activity Costs Quality Control Activities Activity Cost Process audits $48,000 Training of machine operators $48,600 Processing returned products 20,400 Scrap processing (disposal) 26,...
Maxx Inc. has provided the following data from its activity-based costing system: Activity Cost Pools Total Cost Total activity What is the activity rate for the "designing products" activity cost...
On Saturday morning, you rank your choices for activities in the following order: go to the library, work out at the gym, have breakfast with friends, and sleep late. Suppose you decide to go to th...
Grammer Corporation uses an activity-based costing system with three activity cost pods. The company has provided the following data concerning its costs: Costs: Wages and salaries $240,000 Depre...
Dunby Inc., a law consulting firm, has been using a single plantwide rate with direct labor hours as the allocation base to allocate overhead costs. The direct labor rate is $250 per hour. Chandler...
Ayala Inc. has conducted the following analysis related to its product lines, using a traditional costing system (volume-based) and an activity-based costing system. Both the traditional and the ac...
The law of increasing costs: A. does not apply to guns and butter. B. is the result of resources not being perfectly adaptable between the production of two goods. C. implies that prices will rise...
Using the ABC system, how much total manufacturing overhead cost would be assigned to Product Y? Greenwood Company manufactures two products-14,000 units of Product Y and 6,000 units of Product Z....
Wadsworth Industries manufactures small appliances and uses an activity-based costing system. Information from its system for the year for all products follows: Activity Cost Pool Total Cost Total...
Dursley & Marvolo, Attorneys at Law provide a variety of legal services. The law firm uses an activity-based costing system and has developed the following activity pool cost rates: Activity Cost...
National Bank has several departments that occupy both floors of a two-story building. The departmental accounting system has a single account, Building Occupancy Cost, in its ledger. The types and...
Classify each of the costs below within the ABC costing hierarchy as either unit-level, batch-level, product-level, or facility-level. (a) Factory insurance (b) Direct labor (c) Costs to develo...
What are possible allocation bases for activity based costing of an airline?
After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions....
A manufacturing company produces standard and custom-ordered computer desks. The company currently uses a job-order costing, but the owner of the company recently read an article promoting activity...
An activity-based overhead rate is computed as follows: A. Estimated overhead divided by estimated use of cost drivers. B. Estimated overhead divided by actual use of cost drivers. C. Actual overhe...
The use of a plant-wide rate will be more equitable than the use of departmental rates for allocating manufacturing overhead. True False
Under activity based costing, indirect manufacturing costs are predominantly assigned on the basis of direct machine hours. True False
Activity based costing is considered to be a traditional costing method. True False
Setup cost is an example of a batch-level cost. True False
In activity-based costing, the manufacturing overhead cost per unit will depend partially on the number of units in a batch. True False
If products are uniform and customers are similar in their demands, activity-based costing may not offer a significant advantage over machine hours when assigning overhead. True False
A company produces two products, good and better. The company uses a cost system that includes several cost pools but only one cost driver, machine hours. Based on the information below, determine...
Installing a custom logo on a boat is a a) batch-level activity b) product-level activity c) unit-level activity d) organization sustaining activity
Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses numbe...
Perdon Corporation manufactures safes large mobile safes, and large walk-in stationary bank safes. As part of its annual budgeting process, Perdon is analyzing the profitability of its two products...
Activity-based costing is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect only variable costs. True or False?
Besides finding irregularities, such as the case of the unusual increase in this situation, discuss other ways that ABC cost data can be useful for manufacturing companies.
Discuss the development of an activity-based costing system and how activity based management is used in decision making.
The plant manager's salary is an example of a(n): a) Unit-level activity. b) Batch-level activity. c) Product-level activity. d) Organization-sustaining activity.
Setting up a machine to change from producing one product to another is an example of a(n): a. Unit-level activity. b. Batch-level activity. c. Product-level activity. d. Organization-sustainin...
Which of the following would probably be the most accurate measure of activity to use for allocating the costs associated with a factory's purchasing department? a. Machine-hours b. Direct labor-...
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