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Exam 5: Activity-Based Costing

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Question 51

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Which of the following would not be considered categories of quality costs

A) Direct material costs.
B) Prevention costs.
C) Appraisal costs.
D) External failure costs.

E) B) and C)
F) None of the above

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Question 52

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Which of the following would not be considered as an internal failure cost

A) Quality training.
B) Scrap costs.
C) Investigation of cause of failure.
D) Rework costs.

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

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Question 53

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Reference: 05-01 Acton Company has two products: A and B. The annual production and sales of Product A are 800 units and of Product B are 500 units. The company has traditionally used direct labour-hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labour-hours per unit and Product B requires 0.2 direct labour-hours per unit. The total estimated overhead for next period is $92,023. The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory-with estimated overhead costs and expected activity as follows: $\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & { \text { Expected Activity } } \\\hline \text { Cost Pool } & \begin{array} { l } \text { Estimated } \\\text { Overhead } \\\text { Costs }\end{array} & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 14,487 & 500 & 600 & 1,100 \\\hline \text { Activity 2 } & \$ 64,800 & 2,500 & 500 & 3,000 \\\hline \text { General Factory } & \$ 12,736 & 240 & 100 & 340 \\\hline \text { Total } & \$ 92,023 & & & \\\hline\end{array}$ (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour-hours.) -The overhead cost per unit of Product B under the traditional costing system is closest to:

Assuming the predetermined overhead rate is $10.00, what is the total overhead allocated to each washing mitt using the current costing system?

Purchase order processing is an example of a:

Reference: 05-06 Accola Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A are 1,100 units and of Product B are 700 units. There are three activity cost pools, with estimated costs and expected activity as follows: $\begin{array} { | l | l | l | l | l | } \hline \text { Activity } & & \text { Expected Activity } \\\hline \text { Cost Pool } & \text { Estimated Cost } & \text { Product A } & \text { Product B } & \text { Total } \\\hline \text { Activity 1 } & \$ 18,271 & 600 & 500 & 1,100 \\\hline \text { Activity 2 } & \$ 35,891 & 1,600 & 300 & 1,900 \\\hline \text { Activity 3 } & \$ 48,796 & 440 & 420 & 860 \\\hline\end{array}$ -The overhead cost per unit of Product A is closest to: