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Exam 4: Activity-Based Costing and Analysis

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Question 71

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Distorted product cost information can result in poor decisions.

A) True
B) False

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Question 72

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How does ABC differ from using multiple departmental rates?

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ABC differs from using multiple departme...

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Question 73

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Facility level costs are not traceable to individual product lines, batches or units.

A cost pool is a collection of costs that are related to the same or similar activity.

From an ABC perspective, what causes costs to be incurred?

A company estimates that overhead costs for the next year will be $9,234,000 for indirect labor and $156,800 for factory utilities.The company uses machine hours as its overhead allocation base.If 500,000 machine hours are planned for this next year, what is the company's plantwide overhead rate? (Round to two decimal places)

Ridley Company estimates that overhead costs for the next year will be $6,870,000 for indirect labor and $450,000 for factory utilities.The company uses machine hours as its overhead allocation base.If 160,000 machine hours are planned for this next year, what is the company's plantwide overhead rate?

________________________focuses on activities and the cost of carrying out activities.

Allocated overhead costs vary depending upon the allocation methods used.

Case Company allocates $5.00 overhead to each unit produced.The company uses a plantwide overhead rate with machine hours as the allocation base.Given the amounts below, how many machine hours does the company expect in department 2? $\begin{array} { l c c } \text { Estimated: } & \text { Department 1 } & \text { Department } 2 \\\text { Marufacturing overhead costs } & \$ 250,000 & \$ 150,000 \\\text { Direct labor hours } & { 8 , 0 0 0 D L H } & 12,000 \mathrm { DLH } \\\text { Machine hours } & 55,000 \mathrm { MH } & ? \mathrm { MH }\end{array}$

Compute Aztec's departmental overhead rate for the mixing department based on direct labor hours.

Which of the following are advantages of using the plantwide overhead rate method?

The major advantages of using a single plantwide overhead rate are ____________________ and ____________________.

Which of the following companies would be best served by a plantwide overhead rate?

When products differ in batch size and complexity, they usually consume different amounts of overhead resources.

Kinetic Company estimates that overhead costs for the next year will be $1,600,000 for indirect labor and $400,000 for factory utilities.The company uses direct labor hours as its overhead allocation base.If 50,000 direct labor hours are planned for this next year, then the plantwide overhead rate is $.025 per direct labor hour.

Direct labor, direct materials, and manufacturing overhead are all product costs.Why is overhead more difficult to account for than either direct labor or direct materials?

The ________________________ overhead rate method uses a single rate for allocating overhead costs to products.

Compute Aztec's departmental overhead rate for the mixing department based on machine hours.

Explain cost flows for the departmental overhead rate method.