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Title: Activity Based Costing
Description: Weygandt, Financial & Managerial Accounting, 1 edition Chapter 18 Activity-Based Costing
Description: Weygandt, Financial & Managerial Accounting, 1 edition Chapter 18 Activity-Based Costing
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Ch 18:
Port Accounting performs two types of services, Audit and Tax
...
Information on the
two services is:
Audit
Tax
Direct labor cost
$50,000
$100,000
CPU minutes
40,000
10,000
Legal hours used
200
800
Overhead applied to tax services using activity-based costing is $144,000
Austin Accounting Services estimates for next year revenues of $2,000,000, direct labor
of $400,000, and overhead of $700,000
...
produces 3 products: P1, Q2, and R3
...
Teller has
identified an ordering and receiving activity cost pool with allocated overhead of
$180,000 for which the cost driver is purchase orders
...
How much ordering and
receiving overhead is assigned to each product? P1: $36,000 P2: $54,000 P3:
$90,000
Low-volume products often require more special handling than high-volume products
...
Not all activities labeled non-value-added are totally wasteful, nor can they be totally
eliminated
...
F
Sitwell Corporation manufactures titanium and aluminum tennis racquets
...
The following
information is available:
Cost
Titanium
Aluminum
Total Cos
Assembly
500 mach
...
hours
$45,000
Inspections
350
150
$75,000
2,100 labor hours
1,900 labor hours
Sitwell is considering switching from one overhead rate based on labor hours to
activity-based costing
...
Johnstone's
overhead costs consist of setting up machines, $1,600,000; machining, $3,600,000; and
inspecting, $1,200,000
...
manufactures 2 products, wheels and seats
...
The company
produces 300,000 wheels and 600,000 seats each year
...
How much of the assembly overhead should be allocated to
wheels? $82,500
A value-added activity in a service enterprise is performing landscaping services
Wallace Computer Company produces three products: Earth, Wind, and Fire
...
Wallace has identified an activity cost pool with allocated overhead of $720,000 for
which the cost driver is machine setups
...
Overhead
A well-designed activity-based costing system starts with analyzing the activities
performed to manufacture a product
...
Port's overhead costs
consist of computer support, $240,000; and legal support, $120,000
...
Direct labor cost is $1,200; 600
CPU minutes were used; and 1 legal hour was used
...
Port's overhead costs
consist of computer support, $240,000; and legal support, $120,000
...
Port's overhead costs
consist of computer support, $240,000; and legal support, $120,000
...
Berg Company incurs $320,000 overhead costs each year in its three main departments,
setup ($20,000), machining ($220,000), and packing ($80,000)
...
Information about Berg's two
products is as follows:
Product A1
Product B1
Number of setups
20
20
Machining hours
1,000
4,000
Orders packed
150
350
Number of products manufactured
600
400
If machining hours are used as a base, how much overhead is assigned to Product A1
each year? 64,000
Which of the following is not an example of an activity cost pool? Machine hours
Just-in-time processing eliminates the push approach
...
T
Which of the following is a limitation of activity-based costing? Some arbitrary
allocations continue
For its inspecting cost pool, Davidson, Inc
...
The actual overhead cost for that cost pool was $360,000 for 5,000
inspections
...
Non-value-added activities should be minimized or eliminated
...
Addison's
overhead costs consist of machining, $2,500,000; and assembling, $1,250,000
...
Which of the following is true about activity-based costing? More costly to use
An activity that has a direct cause-effect relationship with the resources consumed is
a(n) cost driver
Which of the following statements is false? ABC can weaken control over overhead
costs
...
Addison Company manufactures two products, Regular and Supreme
...
Information on the two products is:
Regular
Supreme
Direct labor hours
10,000
15,000
Machine hours
10,000
30,000
Number of parts
90,000
160,000
Overhead applied to Supreme using traditional costing using direct labor hours is
2,250,000
Companies that switch to ABC often find they have been sacrificing profitability by
underpricing some products, possibly losing market share to competitors, been
overpricing some products
...
Port's overhead costs
consist of computer support, $240,000; and legal support, $120,000
Title: Activity Based Costing
Description: Weygandt, Financial & Managerial Accounting, 1 edition Chapter 18 Activity-Based Costing
Description: Weygandt, Financial & Managerial Accounting, 1 edition Chapter 18 Activity-Based Costing