Managareial Accounting 15th Edition By Garrison - Test Bank Instant Download - Complete Test Bank With Answers Sample Questions Are Posted Below Question Type Difficulty LO1: ABC concepts LO2: First-stage allocation LO3: Activity rates LO4: Second-stage allocation LO5: Product and customer margins Other topics Professional exam adapted 1 T/F M x …
$19.99
Managareial Accounting 15th Edition By Garrison – Test Bank
Instant Download – Complete Test Bank With Answers
Sample Questions Are Posted Below
Question Type Difficulty LO1: ABC concepts LO2: First-stage allocation LO3: Activity rates LO4: Second-stage allocation LO5: Product and customer margins Other topics Professional exam adapted
1 T/F M x
2 T/F M x
3 T/F E x
4 T/F E x
5 T/F M x
6 T/F M x
7 T/F M x
8 T/F M x
9 T/F M x
10 T/F M x
11 T/F M x
12 T/F M x
13 T/F M x
14 T/F M x
15 T/F M x
16 T/F M x
17 T/F M x
18 T/F M x
19 T/F E x
20 T/F M x x
21 T/F M x
22 T/F M x x
23 Conceptual M/C E x
24 Conceptual M/C E x
25 Conceptual M/C M x
26 Conceptual M/C M x
27 Conceptual M/C M x
28 Conceptual M/C M x
29 Conceptual M/C M x
30 Conceptual M/C M x
31 Conceptual M/C E x
32 Conceptual M/C M x
33 Single Part M/C M x
34 Single Part M/C M x
35 Single Part M/C M x
36 Single Part M/C M x
37 Single Part M/C M x
38 Single Part M/C M x
39 Single Part M/C M x x
40 Single Part M/C M x x
41 Single Part M/C M x x
42 Single Part M/C M x x
43 Single Part M/C E x
44 Single Part M/C E x
45 Single Part M/C E x
46 Single Part M/C M x x
47 Single Part M/C M x x
48 Single Part M/C M x x
49 Single Part M/C H x x x
50 Single Part M/C H x x x
51 Single Part M/C E x
52 Single Part M/C E x
53 Single Part M/C E x
CH07-Ref1 54-55 Multipart M/C E x x
CH07-Ref2 56-57 Multipart M/C E x x
CH07-Ref3 58-59 Multipart M/C E x x
CH07-Ref4 60-62 Multipart M/C E-M x
CH07-Ref5 63-64 Multipart M/C M x x
CH07-Ref6 65-67 Multipart M/C E-M x x x
CH07-Ref7 68-70 Multipart M/C M x x x
CH07-Ref8 71-73 Multipart M/C M x x x
CH07-Ref9 74-76 Multipart M/C M x x x
CH07-Ref10 77-80 Multipart M/C M x x x x
CH07-Ref11 81-84 Multipart M/C M x x x x
CH07-Ref12 85-88 Multipart M/C M x x x x
CH07-Ref13 89-92 Multipart M/C M x x x x
CH07-Ref14 93-94 Multipart M/C M x x
CH07-Ref15 95-96 Multipart M/C E x x
CH07-Ref16 97-98 Multipart M/C M x x
CH07-Ref17 99-100 Multipart M/C E x x
CH07-Ref18 101-102 Multipart M/C M x x
CH07-Ref19 103-104 Multipart M/C E-M x x
CH07-Ref20 105-106 Multipart M/C M x x
CH07-Ref21 107-108 Multipart M/C M x x CMA
CH07-Ref22 109-111 Multipart M/C E x x x
CH07-Ref23 112-114 Multipart M/C M x x x
CH07-Ref24 115-117 Multipart M/C E x x x
CH07-Ref25 118-120 Multipart M/C M x x x
CH07-Ref26 121-122 Multipart M/C M x x
CH07-Ref27 123-125 Multipart M/C M x x
126 Problem E x x
127 Problem E x x
128 Problem E x x
129 Problem H x x x
130 Problem E x
131 Problem E x
132 Problem E x
133 Problem M x x x x
134 Problem M x x x x
135 Problem E x
136 Problem E x
137 Problem E x
138 Problem E x x
139 Problem M x x
140 Problem M x x
141 Problem E x x x
142 Problem E x x x
143 Problem M x x x
144 Problem M x x x
145 Problem M x x x
146 Problem M x x x
147 Problem E x
148 Problem E x
149 Problem E x
150 Problem E x
Chapter 07
Activity-Based Costing: A Tool to Aid Decision Making
True / False Questions
True False
True False
True False
True False
True False
True False
True False
True False
True False
True False
True False
True False
True False
True False
True False
True False
True False
True False
True False
True False
True False
True False
Multiple Choice Questions
The distribution of resource consumption across the three activity cost pools is given below:
How much cost, in total, would be allocated in the first-stage allocation to the Other activity cost pool?
The distribution of resource consumption across the three activity cost pools is given below:
How much cost, in total, would be allocated in the first-stage allocation to the Order Processing activity cost pool?
How much cost, in total, would be allocated in the first-stage allocation to the Assembly activity cost pool?
The distribution of resource consumption across the three activity cost pools is given below:
How much cost, in total, would be allocated in the first-stage allocation to the Fabricating activity cost pool?
How much cost, in total, would be allocated in the first-stage allocation to the Other activity cost pool?
How much cost, in total, would be allocated in the first-stage allocation to the Setting Up activity cost pool?
The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:
The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Fabrication activity cost pool is closest to:
The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year:
The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs.
The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Assembly activity cost pool is closest to:
The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year:
The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs.
The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Order Processing activity cost pool is closest to:
The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:
The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Order Processing activity cost pool is closest to:
The activity rate for the “meeting with clients” activity cost pool is closest to:
The activity rate under the activity-based costing system for Activity 3 is closest to:
The activity rate for the “designing products” activity cost pool is closest to:
The activity-based costing cost per unit of Product A is closest to:
Data concerning the company’s product L19B appear below:
According to the activity-based costing system, the average cost of product L19B is closest to:
The company makes 490 units of product Q19S a year, requiring a total of 1,080 machine-hours, 60 orders, and 20 inspection-hours per year. The product’s direct materials cost is $46.42 per unit and its direct labor cost is $20.22 per unit.
According to the activity-based costing system, the average cost of product Q19S is closest to:
The company makes 230 units of product F60N a year, requiring a total of 480 machine-hours, 50 orders, and 30 inspection-hours per year. The product’s direct materials cost is $12.70 per unit and its direct labor cost is $45.93 per unit. The product sells for $126.60 per unit.
According to the activity-based costing system, the product margin for product F60N is:
Data concerning one of the company’s products, Product H73N, appear below:
According to the activity-based costing system, the product margin for product H73N is:
Data concerning two products appear below:
How much overhead cost would be assigned to Product V91Z using the activity-based costing system?
Data for one of the company’s products follow:
How much overhead cost would be assigned to Product Q79P using the activity-based costing system?
Last year, Product Q06J involved 10 customer orders, 580 assembly hours, and 12 batches. How much overhead cost would be assigned to Product Q06J using the activity-based costing system?
Ort Corporation has provided the following data from its activity-based costing accounting system:
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
The following data have been provided by Graise Corporation from its activity-based costing accounting system:
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
Conely Corporation has provided the following data from its activity-based costing accounting system:
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
Dideda Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
You have been asked to complete the first-stage allocation of costs to the activity cost pools.
Forse Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity based costing system:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
The amount of activity for the year is as follows:
Betterton Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs-equipment depreciation and supervisory expense-are allocated to three activity cost pools-Machining, Order Filling, and Other-based on resource consumption. Data to perform these allocations appear below:
In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Manton Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs-equipment expense and indirect labor-are allocated to the three activity cost pools-Processing, Supervising, and Other-based on resource consumption. Data to perform these allocations appear below:
In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Studler Corporation has an activity-based costing system with three activity cost pools-Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Mussenden Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to three activity cost pools based on resource consumption. Data used in the first stage allocations follow:
Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Vontungeln Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts-equipment depreciation and supervisory expense-to three activity cost pools-Machining, Order Filling, and Other-based on resource consumption. Data to perform these allocations appear below:
In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products.
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
Lake Corporation has an activity-based costing system with three activity cost pools-Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Finally, the costs of Processing and Supervising are combined with the following sales and direct cost data to determine product margins.
Keske Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:
Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Finally, the costs of Machining and Order Filling are combined with the following sales and direct cost data to determine product margins.
Kenrick Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts-equipment expense and indirect labor-to three activity cost pools-Processing, Supervising, and Other-based on resource consumption. Data to perform these allocations appear below:
In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
Schwering Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company’s three activity cost pools as follows: Machining, $20,800; Order Filling, $30,400; and Other, $48,800. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Glassey Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company’s three activity cost pools as follows: Processing, $20,000; Supervising, $33,500; and Other, $16,500. Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Mciver Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company’s three activity cost pools as follows: Machining, $10,900; Order Filling, $10,500; and Other, $75,600. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Trainor Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company’s three activity cost pools as follows: Processing, $29,200; Supervising, $13,000; and Other, $26,800. Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Abbe Corporation uses activity-based costing. The company makes two products: Product A and Product B. The annual production and sales of Product A is 800 units and of Product B is 600 units. There are three activity cost pools, with total cost and activity as follows:
Andruschack Corporation uses activity-based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity-based costing system:
Monson Corporation has two products: G and P. The company uses activity-based costing and has prepared the following analysis showing the total cost and activity for each of its three activity cost pools:
The annual production and sales of Product G is 10,640 units. The annual production and sales of Product P is 26,600.
The controller of Hartis Corporation estimates the amount of materials handling overhead cost that should be allocated to the company’s two products using the data that are given below:
The total materials handling cost for the year is expected to be $38,448.
Zumbrunnen Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company’s three activity cost pools-Processing, Supervising, and Other. The costs in those activity cost pools appear below:
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
Munar Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company’s three activity cost pools-Machining, Order Filling, and Other. The costs in those activity cost pools appear below:
Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
Koutz Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company’s three activity cost pools-Processing, Supervising, and Other. The costs in those activity cost pools appear below:
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
Stroth Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company’s three activity cost pools-Machining, Order Filling, and Other. The costs in those activity cost pools appear below:
Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
Thoen Nuptial Bakery makes very elaborate wedding cakes to order. The company has an activity-based costing system with three activity cost pools. The activity rate for the Size-Related activity cost pool is $0.96 per guest. (The greater the number of guests, the larger the cake.) The activity rate for the Complexity-Related cost pool is $54.24 per tier. (Cakes with more tiers are more complex.) Finally, the activity rate for the Order-Related activity cost pool is $56.44 per order. (Each wedding involves one order for a cake.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders appear below:
Carsten Wedding Fantasy Corporation makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system:
The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake. The measure of complexity is the number of tiers in the cake. The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders appear below:
Essay Questions
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
Required:
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
Required:
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
Required:
Job #309 incurred $900 of direct material, 30 hours of direct labor at $40 per hour, 80 machine hours, and 5 inspections.
Required:
Required:
Assign overhead costs to activity cost pools using activity-based costing.
Required:
Assign overhead costs to activity cost pools using activity-based costing.
Costs:
Distribution of resource consumption:
Required:
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products.
Additional data concerning the company’s products appears below:
Required:
Distribution of Resource Consumption Across Activity Cost Pools
Required:
Costs in the Fabricating cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. The following table shows the machine-hours and number of batches associated with each of the company’s two products:
Required:
Calculate activity rates for each activity cost pool using activity-based costing.
Required:
Compute the activity rates for each of the three cost pools. Show your work!
Required:
Compute the activity rates for each of the three cost pools. Show your work!
Required:
Overhead is currently assigned to the products on the basis of direct-labor-hours. The company estimated it would incur $396,000 in manufacturing overhead costs and produce 5,500 units of Product B and 22,000 units of Product A during the current year. Unit costs for materials and direct labor are:
Required:
Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year.
Required:
Using the activity-based costing approach, determine the overhead cost per unit for each product.
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. The following table shows the machine-hours and number of batches associated with each of the company’s two products:
Additional data concerning the company’s products appears below:
Required:
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. Data concerning the two products and the company’s costs appear below:
Required:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
One particular client, the Lazzara family, requested 37 jobs during the year that required a total of 222 hours of housecleaning. For this service, the client was charged $2,350.
Required:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
One particular client, the Lumbard family, requested 31 jobs during the year that required a total of 62 hours of housecleaning. For this service, the client was charged $1,620.
Required:
Required:
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. Data concerning the two products and the company’s costs appear below:
Required:
Data concerning two products appear below:
Required:
Last year, Product N79A required 28 batches, 6 customer orders, and 712 assembly hours.
Required:
How much overhead cost would be assigned to Product N79A using the company’s activity-based costing system? Show your work!
Data concerning two products appear below:
Required:
How much overhead cost would be assigned to each of the two products using the company’s activity-based costing system?
Required:
Determine the amount of overhead cost that would be assigned to each product using activity-based costing.
Chapter 07 Activity-Based Costing: A Tool to Aid Decision Making Answer Key
True / False Questions
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Multiple Choice Questions
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
The distribution of resource consumption across the three activity cost pools is given below:
How much cost, in total, would be allocated in the first-stage allocation to the Other activity cost pool?
Allocations to the Other activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
The distribution of resource consumption across the three activity cost pools is given below:
How much cost, in total, would be allocated in the first-stage allocation to the Order Processing activity cost pool?
Allocations to the Order Processing activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
How much cost, in total, would be allocated in the first-stage allocation to the Assembly activity cost pool?
Allocations to the Assembly activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
The distribution of resource consumption across the three activity cost pools is given below:
How much cost, in total, would be allocated in the first-stage allocation to the Fabricating activity cost pool?
Allocations to the Fabricating activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
How much cost, in total, would be allocated in the first-stage allocation to the Other activity cost pool?
Allocations to the Other activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
How much cost, in total, would be allocated in the first-stage allocation to the Setting Up activity cost pool?
Allocations to the Setting Up activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:
The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Fabrication activity cost pool is closest to:
Allocations to the Fabrication activity cost pool:
Fabrication: $159,000 ÷ 30,000 machine-hours = $5.30 per machine-hour
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-03 Compute activity rates for cost pools.
The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year:
The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs.
The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Assembly activity cost pool is closest to:
Allocations to the Assembly activity cost pool:
Assembly: $99,000 ÷ 10,000 labor-hours = $9.90 per labor-hour
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-03 Compute activity rates for cost pools.
The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year:
The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs.
The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Order Processing activity cost pool is closest to:
Allocations to the Order Processing activity cost pool:
Order Processing: $166,000 ÷ 400 orders = $415 per order
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-03 Compute activity rates for cost pools.
The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.
The company has provided the following data concerning its costs:
The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Order Processing activity cost pool is closest to:
Allocations to the Order Processing activity cost pool:
Order Processing: $230,000 ÷ 200 orders = $1,150 per order
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-03 Compute activity rates for cost pools.
The activity rate for the “meeting with clients” activity cost pool is closest to:
Meeting with clients activity rate: $154,791 ÷ 1,053 meeting hours = $147 per meeting hour
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
The activity rate under the activity-based costing system for Activity 3 is closest to:
Activity 3 activity rate: $34,600 ÷ 900 = $38.44
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
The activity rate for the “designing products” activity cost pool is closest to:
Designing products activity rate: $396,900 ÷ 2,450 product design hours = $162 per product design hour
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
The activity-based costing cost per unit of Product A is closest to:
The activity rates for each activity cost pool are computed as follows:
The overhead cost charged to Product A is:
Cost per unit = $70,550 ÷ 5,000 units = $14.11 per unit
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Data concerning the company’s product L19B appear below:
According to the activity-based costing system, the average cost of product L19B is closest to:
The activity rates for each activity cost pool are computed as follows:
The overhead cost charged to Product K54A is:
Cost per unit = $36,789.50 ÷ 430 units = $85.56 per unit
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
The company makes 490 units of product Q19S a year, requiring a total of 1,080 machine-hours, 60 orders, and 20 inspection-hours per year. The product’s direct materials cost is $46.42 per unit and its direct labor cost is $20.22 per unit.
According to the activity-based costing system, the average cost of product Q19S is closest to:
The activity rates for each activity cost pool are computed as follows:
The overhead cost charged to Product O37W is:
Cost per unit = $47,842.80 ÷ 490 units = $97.64 per unit
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
The company makes 230 units of product F60N a year, requiring a total of 480 machine-hours, 50 orders, and 30 inspection-hours per year. The product’s direct materials cost is $12.70 per unit and its direct labor cost is $45.93 per unit. The product sells for $126.60 per unit.
According to the activity-based costing system, the product margin for product F60N is:
The activity rates for each activity cost pool are computed as follows:
The overhead cost charged to Product S78N is:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Data concerning one of the company’s products, Product H73N, appear below:
According to the activity-based costing system, the product margin for product H73N is:
The activity rates for each activity cost pool are computed as follows:
The overhead cost charged to Product A43V is:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Data concerning two products appear below:
How much overhead cost would be assigned to Product V91Z using the activity-based costing system?
The overhead cost charged to Product V91Z is:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Data for one of the company’s products follow:
How much overhead cost would be assigned to Product Q79P using the activity-based costing system?
The overhead cost charged to Product Q79P is:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Last year, Product Q06J involved 10 customer orders, 580 assembly hours, and 12 batches. How much overhead cost would be assigned to Product Q06J using the activity-based costing system?
The overhead cost charged to Product Q06J is:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Ort Corporation has provided the following data from its activity-based costing accounting system:
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
Allocations to the Customer Orders activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Allocations to the Other activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
The following data have been provided by Graise Corporation from its activity-based costing accounting system:
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
Allocations to the Batch Set-Up activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Allocations to the Other activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
Conely Corporation has provided the following data from its activity-based costing accounting system:
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
Allocations to the Batch Processing activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Allocations to the Other activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
Dideda Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
You have been asked to complete the first-stage allocation of costs to the activity cost pools.
Allocations to the Order size activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Allocations to the Customer Support size activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Allocations to the Other size activity cost pool:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Forse Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity based costing system:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
The amount of activity for the year is as follows:
Allocations to the Making Bouquets activity cost pool:
Overhead cost per bouquet = Total cost ÷ Number of bouquets
= $66,000 ÷ 60,000 bouquets = $1.10 per bouquet
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-03 Compute activity rates for cost pools.
Allocations to the Delivery activity cost pool:
Overhead cost per delivery = Total cost ÷ Number of deliveries
= $34,000 ÷ 5,000 deliveries = $6.80 per delivery
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-03 Compute activity rates for cost pools.
Betterton Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs-equipment depreciation and supervisory expense-are allocated to three activity cost pools-Machining, Order Filling, and Other-based on resource consumption. Data to perform these allocations appear below:
In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Assign overhead costs to activity cost pools by applying the percentages in the Distribution of Resource Consumption Across Activity Cost Pools table to the respective costs. For example, the first entry in the table is computed as follows: $49,000 × 0.50 = $24,500.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Machining: $24,800 ÷ 20,000 MHs = $1.24 per MH
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Assign overhead costs to products:
Machining: $24,800 ÷ 20,000 MHs = $1.24 per MH
Order Filling: $15,900 ÷ 2,000 orders = $7.95 per order
Overhead cost for Product A8:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Manton Corporation uses an activity based costing system to assign overhead costs to products. In the first stage, two overhead costs-equipment expense and indirect labor-are allocated to the three activity cost pools-Processing, Supervising, and Other-based on resource consumption. Data to perform these allocations appear below:
In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Assign overhead costs to activity cost pools by applying the percentages in the Distribution of Resource Consumption Across Activity Cost Pools table to the respective costs. For example, the first entry in the table is computed as follows: $35,000 × 0.60 = $21,000.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Processing: $21,600 ÷ 10,000 MHs = $2.16 per MH
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Assign overhead costs to products:
Processing: $21,600 ÷ 10,000 MHs = $2.16 per MH
Supervising: $8,800 ÷ 1,000 batches = $8.80 per batch
Overhead cost for Product Z5:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Studler Corporation has an activity-based costing system with three activity cost pools-Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Assign overhead costs to activity cost pools by applying the percentages in the Distribution of Resource Consumption Across Activity Cost Pools table to the respective costs. For example, the second entry in the table is computed as follows: $83,000 × 0.60 = $16,600.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Supervising: $19,100 ÷ 2,000 batches = $9.55 per batch
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Processing: $50,300 ÷ 10,000 MHs = $5.03 per MH
Supervising: $19,100 ÷ 2,000 batches = $9.55 per batch
Overhead cost for Product R6:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Mussenden Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to three activity cost pools based on resource consumption. Data used in the first stage allocations follow:
Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Assign overhead costs to activity cost pools by applying the percentages in the Distribution of Resource Consumption Across Activity Cost Pools table to the respective costs. For example, the second entry in the table is computed as follows: $47,000 × 0.60 = $4,700.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Order Filling: $5,100 ÷ 1,000 orders = $5.10 per order
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Machining: $29,200 ÷ 10,000 MHs = $2.92 per MH
Order Filling: $5,100 ÷ 1,000 orders = $5.10 per order
Overhead cost for Product S4:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Vontungeln Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts-equipment depreciation and supervisory expense-to three activity cost pools-Machining, Order Filling, and Other-based on resource consumption. Data to perform these allocations appear below:
In the second stage, Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products.
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
Assign overhead costs to activity cost pools by applying the percentages in the Distribution of Resource Consumption Across Activity Cost Pools table to the respective costs. For example, the first entry in the table is computed as follows: $64,000 × 0.50 = $32,000.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Machining: $32,400 ÷ 20,000 MHs = $1.62 per MH
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Assign overhead costs to products:
Machining: $32,400 ÷ 20,000 MHs = $1.62 per MH
Order Filling: $19,600 ÷ 1,000 orders = $19.60 per order
Overhead cost for Product I6:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Lake Corporation has an activity-based costing system with three activity cost pools-Processing, Supervising, and Other. In the first stage allocations, costs in the two overhead accounts, equipment expense and indirect labor, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Finally, the costs of Processing and Supervising are combined with the following sales and direct cost data to determine product margins.
Assign overhead costs to activity cost pools by applying the percentages in the Distribution of Resource Consumption Across Activity Cost Pools table to the respective costs. For example, the second entry in the table is computed as follows: $96,000 × 0.40 = $19,200.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Supervising: $21,200 ÷ 1,000 batches = $21.20 per batch
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Processing: $39,600 ÷ 20,000 MHs = $1.98 per MH
Supervising: $21,200 ÷ 1,000 batches = $21.20 per batch
Overhead cost for Product L2:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Keske Corporation has an activity-based costing system with three activity cost pools-Machining, Order Filling, and Other. In the first stage allocations, costs in the two overhead accounts, equipment depreciation and supervisory expense, are allocated to the three activity cost pools based on resource consumption. Data used in the first stage allocations follow:
Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Finally, the costs of Machining and Order Filling are combined with the following sales and direct cost data to determine product margins.
Assign overhead costs to activity cost pools by applying the percentages in the Distribution of Resource Consumption Across Activity Cost Pools table to the respective costs. For example, the second entry in the table is computed as follows: $68,000 × 0.40 = $27,200.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Order Filling: $22,900 ÷ 1,000 orders = $22.90 per order
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Machining: $28,700 ÷ 10,000 MHs = $2.87 per MH
Order Filling: $22,900 ÷ 1,000 orders = $22.90 per order
Overhead cost for Product L6:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Kenrick Corporation uses activity-based costing to compute product margins. In the first stage, the activity-based costing system allocates two overhead accounts-equipment expense and indirect labor-to three activity cost pools-Processing, Supervising, and Other-based on resource consumption. Data to perform these allocations appear below:
In the second stage, Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data for the company’s two products follow:
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
Assign overhead costs to activity cost pools by applying the percentages in the Distribution of Resource Consumption Across Activity Cost Pools table to the respective costs. For example, the first entry in the table is computed as follows: $18,000 × 0.10 = $1,800.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Processing: $2,400 ÷ 10,000 MHs = $0.24 per MH
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Assign overhead costs to products:
Processing: $2,400 ÷ 10,000 MHs = $0.24 per MH
Supervising: $6,200 ÷ 2,000 batches = $3.10 per batch
Overhead cost for Product U4:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Schwering Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company’s three activity cost pools as follows: Machining, $20,800; Order Filling, $30,400; and Other, $48,800. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Total orders = 800 orders + 200 orders = 1,000 orders
Order Filling: $30,400 ÷ 1,000 orders = $30.40 per order
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Total MHs = 6,600 MHs + 13,400 MHs = 20,000 MHs
Machining: $20,800 ÷ 20,000 MHs = $1.04 per MH
Total orders = 800 orders + 200 orders = 1,000 orders
Order Filling: $30,400 ÷ 1,000 orders = $30.40 per order
Overhead cost for Product U1:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Glassey Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company’s three activity cost pools as follows: Processing, $20,000; Supervising, $33,500; and Other, $16,500. Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Processing: $20,000 ÷ 10,000 MHs = $2.00 per MH
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
Processing: $20,000 ÷ 10,000 MHs = $2.00 per MH
Supervising: $33,500 ÷ 1,000 batches = $33.50 per batch
Overhead cost for Product T3:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Mciver Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company’s three activity cost pools as follows: Machining, $10,900; Order Filling, $10,500; and Other, $75,600. Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Total MHs = 1,500 MHs + 8,500 MHs = 10,000 MHs
Machining: $10,900 ÷ 10,000 MHs = $1.09 per MH
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Total MHs = 1,500 MHs + 8,500 MHs = 10,000 MHs
Total orders = 600 orders + 400 orders = 1,000 orders
Machining: $10,900 ÷ 10,000 MHs = $1.09 per MH
Order Filling: $10,500 ÷ 1,000 orders = $10.50 per order
Overhead cost for Product K0:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Trainor Corporation uses activity-based costing to assign overhead costs to products. Overhead costs have already been allocated to the company’s three activity cost pools as follows: Processing, $29,200; Supervising, $13,000; and Other, $26,800. Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Supervising: $13,000 ÷ 1,000 batches = $13.00 per batch
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
Processing: $29,200 ÷ 10,000 MHs = $2.92 per MH
Supervising: $13,000 ÷ 1,000 batches = $13.00 per batch
Overhead cost for Product G0:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Abbe Corporation uses activity-based costing. The company makes two products: Product A and Product B. The annual production and sales of Product A is 800 units and of Product B is 600 units. There are three activity cost pools, with total cost and activity as follows:
$19,987 ÷ 2,300 = $8.69
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
The activity rates for each activity cost pool are computed as follows:
The overhead cost charged to Product B is:
Cost per unit of Product B = Total overhead cost ÷ Number of units = $20,840 ÷ 600 units = $34.73 per unit
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Andruschack Corporation uses activity-based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity-based costing system:
Activity rate = Total cost ÷ Total activity = $339,000 ÷ 10,000 setups = $33.90 per setup
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
The overhead cost charged to Product X is:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Monson Corporation has two products: G and P. The company uses activity-based costing and has prepared the following analysis showing the total cost and activity for each of its three activity cost pools:
The annual production and sales of Product G is 10,640 units. The annual production and sales of Product P is 26,600.
The activity rates are computed as follows:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
The activity rates are computed as follows:
The cost charged to Product P is:
Cost per unit of Product P = $106,400 ÷ 26,600 units = $4 per unit
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
The controller of Hartis Corporation estimates the amount of materials handling overhead cost that should be allocated to the company’s two products using the data that are given below:
The total materials handling cost for the year is expected to be $38,448.
Cost per direct labor-hour = Total materials handling cost ÷ Total direct labor-hours
= $38,448 ÷ 89,000 direct labor-hours = $0.432 per direct labor-hour
Cost allocated to wall mirrors = $0.432 per direct labor-hour × 40,000 direct labor-hours = $17,280
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Source: CMA, adapted
Cost per material move = Total materials handling cost ÷ Total expected material moves
= $38,448 ÷ 1,200 material moves = $32.04 per material move
Cost allocated to specialty windows = $32.04 per material move × 900 material moves = $28,836
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Source: CMA, adapted
Zumbrunnen Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company’s three activity cost pools-Processing, Supervising, and Other. The costs in those activity cost pools appear below:
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
Supervising: $46,800 ÷ 1,000 batches = $46.80 per batch
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
Processing: $9,000 ÷ 20,000 MHs = $0.45 per MH
Supervising: $46,800 ÷ 1,000 batches = $46.80 per batch
Overhead cost for Product H2:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Munar Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company’s three activity cost pools-Machining, Order Filling, and Other. The costs in those activity cost pools appear below:
Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
Total orders = 100 orders + 900 orders = 1,000 orders
Order Filling: $15,700 ÷ 1,000 orders = $15.70 per order
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Total MHs = 1,900 MHs + 8,100 MHs = 10,000 MHs
Machining: $5,800 ÷ 10,000 MHs = $0.58 per MH
Total orders = 100 orders + 900 orders = 1,000 orders
Order Filling: $15,700 ÷ 1,000 orders = $15.70 per order
Overhead cost for Product X6:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Koutz Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company’s three activity cost pools-Processing, Supervising, and Other. The costs in those activity cost pools appear below:
Processing costs are assigned to products using machine-hours (MHs) and Supervising costs are assigned to products using the number of batches. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Finally, sales and direct cost data are combined with Processing and Supervising costs to determine product margins.
Processing: $36,100 ÷ 10,000 MHs = $3.61 per MH
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
Assign overhead costs to products:
Processing: $36,100 ÷ 10,000 MHs = $3.61 per MH
Supervising: $10,400 ÷ 2,000 batches = $5.20 per batch
Overhead cost for Product O7:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Stroth Corporation uses activity-based costing to compute product margins. Overhead costs have already been allocated to the company’s three activity cost pools-Machining, Order Filling, and Other. The costs in those activity cost pools appear below:
Machining costs are assigned to products using machine-hours (MHs) and Order Filling costs are assigned to products using the number of orders. The costs in the Other activity cost pool are not assigned to products. Activity data appear below:
Finally, sales and direct cost data are combined with Machining and Order Filling costs to determine product margins.
Total MHs = 9,800 MHs + 200 MHs = 10,000 MHs
Machining: $5,400 ÷ 10,000 MHs = $0.54 per MH
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Assign overhead costs to products:
Total MHs = 9,800 MHs + 200 MHs = 10,000 MHs
Machining: $5,400 ÷ 10,000 MHs = $0.54 per MH
Total orders = 500 orders + 500 orders = 1,000 orders
Order Filling: $2,500 ÷ 1,000 orders = $2.50 per order
Overhead cost for Product C4:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Thoen Nuptial Bakery makes very elaborate wedding cakes to order. The company has an activity-based costing system with three activity cost pools. The activity rate for the Size-Related activity cost pool is $0.96 per guest. (The greater the number of guests, the larger the cake.) The activity rate for the Complexity-Related cost pool is $54.24 per tier. (Cakes with more tiers are more complex.) Finally, the activity rate for the Order-Related activity cost pool is $56.44 per order. (Each wedding involves one order for a cake.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders appear below:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Carsten Wedding Fantasy Corporation makes very elaborate wedding cakes to order. The owner of the company has provided the following data concerning the activity rates in its activity-based costing system:
The measure of activity for the size-related activity cost pool is the number of planned guests at the wedding reception. The greater the number of guests, the larger the cake. The measure of complexity is the number of tiers in the cake. The activity measure for the order-related cost pool is the number of orders. (Each wedding involves one order.) The activity rates include the costs of raw ingredients such as flour, sugar, eggs, and shortening. The activity rates do not include the costs of purchased decorations such as miniature statues and wedding bells, which are accounted for separately.
Data concerning two recent orders appear below:
The company would have to cover all of the avoidable costs of the wedding cake which are:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
When product-level costs are allocated based on the number of guests, too much cost is allocated to weddings that have more than the average number of guests and too little cost is allocated to weddings that have less than the average number of guests. Therefore, the cost of cakes for receptions with fewer than the average number of guests would go down.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Essay Questions
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
Required:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
Required:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Distribution of Resource Consumption across Activity Cost Pools:
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.
Required:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Job #309 incurred $900 of direct material, 30 hours of direct labor at $40 per hour, 80 machine hours, and 5 inspections.
Required:
The overhead cost charged to Job #309 is:
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = ($40,000 + $50,000 + $12,000) ÷ 8,000 direct labor-hours = $12.75 per direct labor-hour
Relative to the activity-based costing system, the traditional costing system undercosts the job by $162.50
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing system.
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Required:
Assign overhead costs to activity cost pools using activity-based costing.
Assign overhead costs to activity cost pools by applying the percentages in the above table to the respective costs. For example, the first entry in the below table is computed as follows: $88,000 × 0.10 = $8,800.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Required:
Assign overhead costs to activity cost pools using activity-based costing.
Assign overhead costs to activity cost pools by applying the percentages in the Distribution of Resource Consumption Across Activity Cost Pools table to the respective costs. For example, the first entry in the table is computed as follows: $30,000 × 0.40 = $12,000.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Costs:
Distribution of resource consumption:
Required:
All three parts can be answered using a first-stage allocation of costs. The amount in each cell in the table below is computed by multiplying the cost for the category by the percentage for the activity. For example, $270,000 is equal to $540,000 multiplied by 0.50.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products.
Additional data concerning the company’s products appears below:
Required:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Distribution of Resource Consumption Across Activity Cost Pools
Required:
Overhead cost for Product H9:
Overhead cost for Product V2:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Costs in the Fabricating cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. The following table shows the machine-hours and number of batches associated with each of the company’s two products:
Required:
Calculate activity rates for each activity cost pool using activity-based costing.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
Required:
Compute the activity rates for each of the three cost pools. Show your work!
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
Required:
Compute the activity rates for each of the three cost pools. Show your work!
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
Required:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Overhead is currently assigned to the products on the basis of direct-labor-hours. The company estimated it would incur $396,000 in manufacturing overhead costs and produce 5,500 units of Product B and 22,000 units of Product A during the current year. Unit costs for materials and direct labor are:
Required:
Using the data above and an activity-based costing approach, determine the unit product cost of each product for the current year.
Using these hours as a base, the predetermined overhead using direct labor-hours would be:
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $396,000 ÷ 49,500 DLHs = $8.00 per DLH
Using this overhead rate, the unit product cost of each product would be:
The overhead cost charged to each product is:
The overhead cost charged to Product A is:
Overhead cost per unit of Product A = $159,400 ÷ 22,000 units = $7.25 per unit (rounded)
The overhead cost charged to Product B is:
Overhead cost per unit of Product B = $236,600 ÷ 5,500 units = $43.02 per unit (rounded)
Using activity-based costing, the unit product cost of each product would be:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Required:
Using the activity-based costing approach, determine the overhead cost per unit for each product.
The activity rates for each activity cost pool are computed as follows:
The overhead cost charged to Product F is:
The overhead cost charged to Product G is:
Overhead cost per unit:
Product F: $88,190 ÷ 3,200 units = $27.56 per unit (rounded)
Product G: $89,690 ÷ 2,100 units = $42.71 per unit (rounded)
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. The following table shows the machine-hours and number of batches associated with each of the company’s two products:
Additional data concerning the company’s products appears below:
Required:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. Data concerning the two products and the company’s costs appear below:
Required:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
One particular client, the Lazzara family, requested 37 jobs during the year that required a total of 222 hours of housecleaning. For this service, the client was charged $2,350.
Required:
The overhead cost charged to the family is:
The customer margin for the family is computed as follows:
Predetermined overhead rate = Estimated total overhead cost ÷ Estimated total amount of the allocation base = $493,032 ÷ 48,100 hours = $10.25 per hour
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
The “Other” activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
One particular client, the Lumbard family, requested 31 jobs during the year that required a total of 62 hours of housecleaning. For this service, the client was charged $1,620.
Required:
The customer margin for the family is computed as follows:
Predetermined overhead rate = Estimated total overhead cost ÷ Estimated total amount of the allocation base = $906,022 ÷ 72,700 hours = $12.46 per hour
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Required:
The overhead cost charged to Product P8 is:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Costs in the Machining cost pool are assigned to products based on machine-hours (MHs) and costs in the Setting Up cost pool are assigned to products based on the number of batches. Costs in the Other cost pool are not assigned to products. Data concerning the two products and the company’s costs appear below:
Required:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Learning Objective: 07-05 Use activity-based costing to compute product and customer margins.
Data concerning two products appear below:
Required:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Last year, Product N79A required 28 batches, 6 customer orders, and 712 assembly hours.
Required:
How much overhead cost would be assigned to Product N79A using the company’s activity-based costing system? Show your work!
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Data concerning two products appear below:
Required:
How much overhead cost would be assigned to each of the two products using the company’s activity-based costing system?
The overhead cost charged to Product G32H is:
The overhead cost charged to Product U15Z is:
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Required:
Determine the amount of overhead cost that would be assigned to each product using activity-based costing.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
Original price was: $30.00.$20.00Current price is: $20.00.
