Chapter 26(11): Cost Allocation and Activity-Based Costing
59.
Determine the overhead from both production departments allocated to each unit of Product A if Blue
Ridge
Marketing Inc. uses a multiple department rate system.
a.
$396.80 per unit
b.
$425.60 per unit
c.
$320.00 per unit
d.
$214.40 per unit
60.
Determine the overhead from both production departments allocated to each unit of Product B if Blue
Ridge
Marketing Inc. uses a multiple department rate system.
a.
$425.60 per unit
b.
$115.20 per unit
c.
$214.40 per unit
d.
$320.00 per unit
61.
If the budget estimates that a table lamp will require 2 hours of finishing and 1 hours of production, how
much
factory overhead will the Kaumajet Factory allocate to each unit of table lamp using the multiple
production
department factory overhead rate method with an allocation base of direct labor hours?
a. $6.33
b. $4.91
c. $5.00
d. $7.20
62.
If the budget estimates that a desk lamp will require 1 hours of finishing and 2 hours of production, how
much
factory overhead will the Kaumajet Factory allocate to each unit of desk lamps using the multiple
production
department factory overhead rate method with an allocation base of direct labor hours?
a. $11.10
b. $4.91
c. $5.00
d. $7.20
63.
If the budget estimates that a table lamp will require 2 hours of finishing and 1 hours of production, what is the
total
amount of factory overhead the Kaumajet Factory will allocate to table lamps using the multiple production
department factory overhead rate method with an allocation base of direct labor hours, if 75,000 units are
produced?
a. $368,250
b. $540,000
c. $832,500
d. $475,000
64.
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?
a. $540,000
b. $187,200
c. $475,000
d. $288,600
65.
Using multiple department factory overhead rates instead of a single plantwide factory overhead rate:
a.
results in more accurate product costs
b.
results in distorted product costs
c.
is simpler and less expensive to compute than a plantwide rate
d.
applies overhead costs to all departments equally
66.
Scoresby Co. uses 6 machine hours and 2 direct labor hours to produce Product X. It uses 8 machine hours and
16
direct labor hours to produce Product Y. Scoresby’s Assembly and Finishing departments have factory
overhead
rates of $240 per machine hour and $160 per direct labor hour, respectively. How much overhead cost
will be
charged to the two products?
a.
Product X = $3,200; Product Y = $9,600
b.
Product X = $800; Product Y = $800
c.
Product X = $1,760; Product Y = $4,480
d.
Product X = $1,440; Product Y = $2,560
67.
Using a plantwide factory overhead rate distorts product costs when:
a.
products require different ratios of allocation-base usage in each production department
b.
significant differences exist in the factory overhead rates used across different production departments
c.
both A and B are true
d.
neither A nor B are true
Chapter 26(11): Cost Allocation and Activity-Based Costing
The Aleutian Company produces two products, Rings and Dings. They are manufactured in two departments—
Fabrication and Assembly. Data for the products and departments are listed below.
Product
Number of Units
Labor Hours
Per Unit
Machine Hours
Per Unit
Rings
1,000
4
6
Dings
2,000
3
9
All of the machine hours take place in the Fabrication Department, which has an estimated overhead of $90,000.
All of the labor hours take place in the Assembly Department, which has an estimated total overhead of
$105,000.
The Aleutian Company uses departmental overhead rates. The Fabrication Department uses machine hours for an
allocation base, and the Assembly Department uses labor hours.
68.
What is the Assembly Department overhead rate per labor hour?
a. $10.50
b. $19.50
c. $3.75
d. $4.38
69.
What is the overhead cost per unit for Rings?
a. $65.25
b. $23.25
c. $44.10
d. $64.50
70.
What is the overhead cost per unit for Dings?
a. $65.25
b. $56.75
c. $23.25
d. $64.50
71.
What is the Fabrication Department overhead rate per machine hour?
a. $10.50
b. $9.00
c. $8.12
d. $3.75
72.
All of the following can be used as an allocation base for calculating factory overhead rates except:
a.
direct labor dollars
b.
direct labor hours
c.
machine hours
d.
total units produced
73.
Which of the following are the two most common allocation bases for factory overhead?
a.
Total overhead dollars and machine hours
b.
Direct labor hours and machine hours
c.
Direct labor hours and factory expenses
d.
Machine hours and factory expenses
Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives,
and
wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and
activity
base data by product are provided below.
Activity
Cost
Activity Base
Procurement
$ 370,000
Number of purchase orders
Scheduling
250,000
Number of production orders
Materials handling
500,000
Number of moves
Product development
730,000
Number of engineering changes
Production
1,500,000
Machine hours
Number
of
Purchase
Orders
Number
of
Production
Orders
Number
of
Moves
Number of
Engineering
Changes
Machine
Hours
Number
of
Units
Disk drives
4,000
300
1,400
10
2,000
2,000
Tape drives
4,000
150
800
10
8,000
4,000
Wire drives
12,000
800
4,000
25
10,000
2,500
74.
Determine the activity rate for procurement per purchase order.
a. $43.53
b. $18.50
c. $15.42
d. $37.00
75.
Determine the activity rate per production order for scheduling.
a. $200.00
b. $20.00
c. $29.41
d. $10.42
76.
Determine the activity rate for materials handling per move.
a. $58.82
b. $50.00
c. $20.83
d. $80.65
77.
Determine the activity rate for product development per change.
a. $73,000
b. $8,588
c. $30,417
d. $16,222
78.
Determine the activity rate for production per machine hour.
a. $62.50
b. $150.00
c. $75.00
d. $176.47
79.
Determine the activity-based cost for each disk drive unit.
a. $92.25
b. $130.69
c. $394.12
d. $279.57
80.
Determine the activity-based cost for each wire drive unit.
a. $204.13
b. $173.51
c. $744.06
d. $394.12
81.
Determine the activity-based cost for each tape drive unit.
a. $97.73
b. $232.69
c. $394.12
d. $103.84
82.
Which of the following is a cost pool used with the activity-based costing method?
a.
total selling and administrative overheads
b.
direct material dollars
c.
total factory overheads
d.
production setups
83.
Activity rates are determined by
a.
dividing the actual cost for each activity pool by the actual activity base for that pool.
b.
dividing the cost budgeted for each activity pool by the estimated activity base for that pool.
c.
dividing the actual cost for each activity pool by the estimated activity base for that pool.
d.
dividing the cost budgeted for each activity pool by the actual activity base in that pool.
84.
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
85.
Given the following information, determine the activity rate for setups.
Activity Pool
Activity Base
Budgeted Amount
Setups
10,000
$180,000
Inspections
24,000
$120,000
Assembly (DLH)
80,000
$400,000
a. $58.00
b. $18.00
c. $0.75
d. $5.09
Chapter 26(11): Cost Allocation and Activity-Based Costing
The Skagit Company manufactures Hooks and Nooks. The following shows the activities per product and total
activity information:
Setups
Inspections
Assembly (dlh)
Hooks–4,000 units
1
3
1
Nooks–8,000 units
2
2
3
Activity Pool
Activity Base
Budgeted Amount
Setups
20,000
$ 60,000
Inspections
24,000
120,000
Assembly (dlh)
28,000
420,000
86.
Calculate the total factory overhead to be charged to each unit of Hooks.
a. $33
b. $50
c. $11
d. $61
87.
Calculate the total factory overhead to be charged to Nooks.
a. $300,000
b. $400,000
c. $488,000
d. $600,000
Chapter 26(11): Cost Allocation and Activity-Based Costing
The Dawson Company manufactures small lamps and desk lamps. The following shows the activities per
product
and the total overhead information:
Setups
Inspections
Assembly (dlh)
Small Lamps–3,000 units
8,000
9,000
16,000
Desk Lamps–6,000 units
16,000
15,000
12,000
Activity Pool
Activity Base
Budgeted Amount
Setups
24,000
$60,000
Inspections
24,000
$120,000
Assembly (dlh)
28,000
$280,000
88.
Calculate the total factory overhead to be charged to desk lamps.
a. $306,667
b. $235,000
c. $230,000
d. $225,000
89.
Calculate the overhead per unit to be charged to small lamps.
a. $75.00
b. $39.17
c. $38.33
d. $17.50
90.
The Bonnington Company manufactures small lamps and desk lamps. The following shows the activities
per
product:
Setups
Inspections
Assembly
(dlh)
Small Lamps–4,000 units
4,000
15,000
6,000
Desk Lamps–8,000 units
16,000
7,000
20,000
Using the following information prepared by the Bonnington Company, determine the total factory overhead to
be
charged to small lamps.
Activity Pool
Activity Base
Budgeted Amount
Setups
20,000
$80,000
Inspections
22,000
$132,000
Assembly (dlh)
26,000
$416,000
a. $314,000
b. $209,333
c. $202,000
d. $104,000
91.
If selling and administrative expenses are allocated to different products, they should be reported as a
a.
cost of goods manufactured
b.
factory overhead cost
c.
period cost
d.
cost of goods sold
92.
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?
a.
Number of calls
b.
Square footage of the help desk office
c.
Number of products sold
d.
Number of sales employees
93.
Which of the following is not a reason for banks to use activity-based costing?
a.
to determine the amounts charged to customers for services provided
b.
to determine service quality
c.
to determine profitability of services provided
d.
all of the above
The Beauty Beyond Words Salon uses an activity-based costing system in its beauty salon to determine the cost
of
services. The salon has determined the costs of services by activity as follows:
Activity
Activity Rate
Hair washing
$4.00
Conditioning
$3.50
Chemical treatment
$25.00
Styling
$10.00
Hair
Conditioning
Chemical
Treatment
Styling
Haircut
1
1
0
0
Complete style
1
1
0
1
Perm
2
3
1
1
Highlights
3
4
2
1
94.
Calculate the cost of services for a haircut.
a. $4.00
b. $7.50
c. $3.50
d. $11.50
95.
The total factory overhead for Big Light Company is budgeted for the year at $807,500. Big Light manufactures
two different products – night lights and desk lamps. Night lights is budgeted for 60,000 units. Each night light
requires 1/2 hour of direct labor. Desk lamps is budgeted for 80,000 units. Each desk lamp requires 2 hours of
direct labor. Determine (a) the total number of budgeted direct labor hours for year, (b) the single plantwide
factory
overhead rate using direct labor hours as the allocation base, and (c) the factory overhead allocated per
unit for
each product using the single plantwide factory overhead rate calculated in (b).