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Exam 18: Activity-Based Costing

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Question 41

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Using the single plantwide factory overhead rate with an allocation base of direct labor hours,how much factory overhead will Challenger Factory allocate to deluxe widget production if budgeted production for the period is 50,000 units and actual production for the period is 58,000 units?

A) $391,500
B) $225,000
C) $261,000
D) $337,500

E) B) and C)
F) A) and D)

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Question 42

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Shubelik Company is changing to an activity-based costing method.They have determined that they will use three cost pools: setups,inspections,and assembly.Which of the following would not be used as the activity base for any of these three activities?

A) number of units to be produced
B) number of setups
C) number of inspections
D) number of direct labor hours

E) B) and C)
F) A) and C)

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Question 43

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Using a plantwide factory overhead rate distorts product costs when:

A plantwide factory overhead rate is computed by dividing total budgeted factory overhead costs by the plantwide allocation base.

If the budget estimates that a desk lamp will require 1 hours of finishing and 2 hours of production,what is the total amount of factory overhead the Kaumajet Factory will allocate to desk lamps using the multiple production department factory overhead rate method with an allocation base of direct labor hours,if 26,000 units are produced?

Common allocation bases are

Activity rates are computed by dividing the cost budgeted for each activity pool by the estimated activity base for that pool.

If the budgeted factory overhead cost is $460,000,the budgeted direct labor hours is 80,000,and the actual direct labor hours is 6,700 for the month,the amount of factory overhead to be allocated is $38,525 (if the allocation is based on direct labor hours).

Activity-based costing for selling and administrative expenses can also be beneficial in allocating expenses to various products.Which of the following is the best allocation base for help desk costs?

The Camper's Edge Factory produces two products - canopies and tents.It has two separate departments - Cutting and Sewing.The budget is $350,000 for the Cutting Department and $400,000 for the Sewing Department.Each canopy requires 2 hours of cutting and 1 hour of sewing.Each tent requires 1 hour of cutting and 6 hours of sewing.The budget estimates that 20,000 canopies and 10,000 tents will be manufactured during the year.Determine (a)the total number of budgeted direct labor hours for the year in each department,(b)the departmental factory overhead rates for both departments,and (c)the factory overhead allocated per unit of each product using the department factory overhead allocation rates using direct labor hours as the base.

Calculate the overhead per unit to be charged to small lamps.

Use of a plantwide factory overhead rate distorts product costs when there are differences in the factory overhead rates across different production departments and when products require different ratios of allocation-base usage in each production department.

The Pikes Peak Leather Company manufactures leather handbags and moccasins.The company has been using the factory overhead rate method but has decided to evaluate activity based costing to allocate factory overhead.The factory overhead estimated per unit together with direct materials and direct labor will help determine selling prices. ​ Calculate the amount of factory overhead to be allocated to each unit using activity based costing.The factory plans to produce 60,000 handbags and 40,000 moccasins.

If selling and administrative expenses are allocated to different products,they should be reported as a

ABC is used to allocate selling and administrative expenses to each product based on the product's individual differences in consuming these activities.

Multiple production department factory overhead rates are less accurate than are plantwide factory overhead rates.

Using a single plantwide rate,determine the overhead rate per unit for Blue Ridge Marketing Inc.'s Product B.

What is the overhead cost per unit for Rings?

Use of a plantwide factory overhead rate assumes that the activities causing overhead costs are different across different departments and products.

Multiple production department factory overhead rates are most useful when production departments significantly differ in their manufacturing processes.