Deck 4: Activity-Based Costing, lean Production, and the Costs of Quality

Question 1

1-20 If a company uses departmental overhead allocation rates,then the amount of manufacturing overhead allocated to the job is equal to the plantwide overhead rate multiplied by the actual use of the cost allocation base.

Answer 1

False

Question 2

1-18 A departmental overhead rate is calculated by multiplying the estimated total manufacturing overhead costs of the department by the estimated total quantity of the department's cost allocation base.

Answer 2

False

Question 3

1-11 Merchandising and service companies,as well as governmental agencies,can use refined cost allocation systems to provide their managers with better cost information.

Answer 3

True

Question 4

1-3 To determine the amount of overhead allocated,the overhead rate is divided by the cost driver.

Question 5

1-9 Refined costing systems can only be used by manufacturers to allocate manufacturing overhead.

Question 6

1-8 Companies that use departmental overhead rates trace direct materials and direct labor to cost objects just as in a traditional costing systems.

Question 7

1-1 With increased competition,managers need more accurate estimates of product costs in order to set prices and to identify the most profitable products.

Question 8

1-19 The plantwide overhead cost allocation rate is computed by dividing the estimated total manufacturing overhead costs of the department by the estimated total quantity of the department's cost allocation base.

Question 9

1-17 The estimated total manufacturing overhead costs that will be incurred in each department in the coming year are often referred to as activity cost pools.

Question 10

1-15 One condition that favors using a plantwide overhead rate,rather than departmental overhead rates,is that different departments incur different amounts and types of manufacturing overhead.

Question 11

1-4 Using departmental overhead rates is generally more accurate than using a single plantwide overhead rate.

Question 12

1-5 Cost distortion occurs when the some products are overcosted while other products are undercosted by the cost allocation system.

Question 13

2-12 A plantwide overhead rate is calculated by dividing the estimated total manufacturing overhead costs for the year by the estimated total amount of the allocation base for the year.

Question 14

1-13 A plantwide overhead rate is calculated by multiplying the estimated total manufacturing overhead costs for the year by the estimated total amount of the allocation base for the year.

Question 15

1-6 As a result of cost distortion,either all products will be overcosted,or all products will be undercosted.

Question 16

1-14 If a company's plantwide overhead rate is allocated based on direct labor hours,then each job will be allocated manufacturing overhead based on the total direct labor hours incurred on the job,regardless of the manufacturing department in which those hours were incurred.

Question 17

1-10 Refined costing systems can be used to allocate ANY indirect costs to ANY cost objects.

Question 18

1-7 Companies often refine their cost allocation systems to minimize the amount of cost distortion caused by the simpler cost allocation systems.

Question 19

1-16 One condition that favors using departmental overhead rates,rather than a plantwide overhead rate,is that different jobs or products use the departments to a different extent.

Question 20

1-2 The plantwide overhead cost allocation rate is computed by dividing the estimated total manufacturing overhead costs by the estimated total quantity of the cost allocation base.

Question 21

1-22 Direct labor hours would be the most appropriate cost allocation base for a Machining Department that uses machine robotics extensively.

Question 22

2-2 It is easier to allocate indirect costs to the products that caused those costs if you use the ABC
system rather than traditional costing systems.

Question 23

2-6 The four categories of activity costs in cost hierarchy are determined by the underlying factor that drives its costs.

Question 24

1-23 Plantwide overhead rates typically do a better job of matching each department's overhead costs to the products that use the department's resources than do departmental overhead rates.

Question 25

2-3 Companies that use ABC trace direct materials and direct labor to cost objects just as in traditional costing systems.

Question 26

1-24 Cost distortion results in the:

A)overcosting of all products.
B)undercosting of all products.
C)overcosting of some products and undercosting of other products.
D)accurate costing of all products.

Question 27

1-28 The use of departmental overhead rates will generally result in the use of a:

A)single cost allocation base.
B)separate cost allocation base for each department in the factory.
C)single overhead cost pool for the factory.
D)separate cost allocation base for each activity in the factory.

Question 28

Bond Industries uses departmental overhead rates to allocate its manufacturing overhead to jobs.The company has two departments: Assembly and Sanding.The Assembly Department uses a departmental overhead rate of $20 per machine hour,while the Sanding Department uses a departmental overhead rate of $15 per direct labor hour.Job 542 used the following direct labor hours and machine hours in the two departments: $$\begin{array} { | l | c | c | } \hline \text { Actual results } & \begin{array} { c } \text { Assembly } \\\text { Department }\end{array} & \begin{array} { c } \text { Sanding } \\\text { Department }\end{array} \\\hline \text { Direct labor hours used } & 4 & 3 \\\hline \text { Machine hours used } & 9 & 5 \\\hline\end{array}$$ The cost for direct labor is $25 per direct labor hour and the cost of the direct materials used by Job 542 is $1,200.

-
What was the total cost of Job 542 if Bond Industries used the departmental overhead rates to allocate manufacturing overhead?

A)$1,375
B)$1,425
C)$1,500
D)$1,600

Question 29

1-21 The allocation base selected for each department should be the cost driver of the costs in the departmental overhead pool.

Question 30

1-27 Which of the following condition(s)favors using departmental overhead rates in place of a plantwide overhead rate?

A)Different departments incur different amounts and types of manufacturing overhead.
B)Different jobs or products use the departments to a different extent.
C)Both of the above are true.
D)Neither of the above are true.

Question 31

Bond Industries uses departmental overhead rates to allocate its manufacturing overhead to jobs.The company has two departments-Assembly and Sanding.The Assembly Department uses a departmental overhead rate of $20 per machine hour,while the Sanding Department uses a departmental overhead rate of $15 per direct labor hour.Job 542 used the following direct labor hours and machine hours in the two departments: $$\begin{array} { | l | c | c | } \hline \text { Actual results } & \begin{array} { c } \text { Assembly } \\\text { Department }\end{array} & \begin{array} { c } \text { Sanding } \\\text { Department }\end{array} \\\hline \text { Direct labor hours used } & 4 & 3 \\\hline \text { Machine hours used } & 9 & 5 \\\hline\end{array}$$ The cost for direct labor is $25 per direct labor hour and the cost of the direct materials used by Job 542 is $1,200.

-
How much manufacturing overhead would be allocated to Job 542 using the departmental overhead rates?

A)$125
B)$175
C)$225
D)$245

Question 32

2-5 The cost allocation rate for each activity is equal to the estimated total manufacturing overhead costs of the activity multiplied by the estimated total quantity of the cost allocation base.

Question 33

Green Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers.Green Bags Company sells the bags in cases of 1,000 bags.The bags come in three sizes: Large,Medium,and Small.Currently,Green Bags Company uses a single plantwide overhead rate to allocate its $7,141,100 of annual manufacturing overhead.Of this amount,$1,875,000 is associated with the Large Bag line,$2,992,500 is associated with the Medium Bag line,and $2,273,000 is associated with the Small Bag line.Green Bags Company is currently running a total of 37,000 machine hours: 12,500 in the Large Bag line,13,300 in the Medium Bag line,and 11,200 in the Small Bag line.Green Bags Company uses machine hours as the cost driver for manufacturing overhead costs.

-
Which product line(s)have been overcosted or undercosted by using the plantwide manufacturing overhead rate?
A.Large Bags has been overcosted; Medium and Small have been undercosted.
B.Large,Medium,and Small Bags have all been overcosted.
C.Large,Medium,and Small Bags have all been undercosted.
D.Large Bags has been undercosted; Medium and Small have been overcosted.

Question 34

Green Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers.Green Bags Company sells the bags in cases of 1,000 bags.The bags come in three sizes-Large,Medium,and Small.Currently,Green Bags Company uses a single plant-wide overhead rate to allocate its $7,141,100 of annual manufacturing overhead.Of this amount,$1,875,000 is associated with the Large Bag line,$2,992,500 is associated with the Medium Bag line,and $2,273,000 is associated with the Small Bag line.Green Bags Company is currently running a total of 37,000 machine hours-12,500 in the Large Bag line,13,300 in the Medium Bag line,and 11,200 in the Small Bag line.Green Bags Company uses machine hours as the cost driver for manufacturing overhead costs.

-
The plant-wide manufacturing overhead rate would be closest to:

A)$ 50.68 per machine hour.
B)$150.00 per machine hour.
C)$193.00 per machine hour.
D)$225.00 per machine hour.

Question 35

2-7 Unit-level activities and costs are incurred once for every batch.

Question 36

1-25 When calculating a departmental overhead rate,the numerator should be the:

A)total estimated departmental overhead cost pool.
B)total estimated amount of the departmental allocation base.
C)total estimated amount of manufacturing overhead for the factory.
D)actual quantity of the departmental allocation base used by the job.

Question 37

1-26 When calculating the total amount of manufacturing overhead to allocate to a particular job,the company would multiply each departmental overhead rate by ___________ and then _________ together the allocated amounts from each department.

A)the actual amount of the departmental allocation based used by the job; add
B)the actual amount of the plantwide allocation based used by the job; add
C)the actual amount of the departmental allocation based used by the job; multiply
D)the actual amount of the plantwide allocation based used by the job; multiply

Question 38

2-4 Two main benefits of ABC are (1)more accurate product cost information and (2)more detailed information on the costs of activities and the drivers of those costs.

Question 39

Clearview Display Company manufactures display cases to be sold to retail stores.The cases come in three sizes-Large,Medium,and Small.Currently,Clearview Display Company uses a single plant-wide overhead rate to allocate its $7,141,100 of annual manufacturing overhead.Of this amount,$1,875,000 is associated with the Large Case line,$2,992,500 is associated with the Medium Case line,and $2,273,000 is associated with the Small Case line.Clearview Display Company is currently running a total of 37,000 machine hours: 12,500 in the Large Case line,13,300 in the Medium Case line,and 11,200 in the Small Case line.Clearview Display Company uses machine hours as the cost driver for manufacturing overhead costs.
Required:
a.Calculate the plant-wide manufacturing overhead rate.
b.Calculate the departmental overhead rate for each of the three departments listed.
c.Which product line(s)have been overcosted by using the plant-wide manufacturing overhead rate? By how much per machine hour? Which product line(s)have been undercosted by using the plant-wide manufacturing overhead rate? By how much per machine hour?

Question 40

Green Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers.Green Bags Company sells the bags in cases of 1,000 bags.The bags come in three sizes: Large,Medium,and Small.Currently,Green Bags Company uses a single plantwide overhead rate to allocate its $7,141,100 of annual manufacturing overhead.Of this amount,$1,875,000 is associated with the Large Bag line,$2,992,500 is associated with the Medium Bag line,and $2,273,000 is associated with the Small Bag line.Green Bags Company is currently running a total of 37,000 machine hours: 12,500 in the Large Bag line,13,300 in the Medium Bag line,and 11,200 in the Small Bag line.Green Bags Company uses machine hours as the cost driver for manufacturing overhead costs.

-The departmental manufacturing overhead rate for the Small Bag line would be closest to:

A)$203.00 per machine hour
B)$150.00 per machine hour
C)$193.00 per machine hour
D)$225.00 per machine hour

Question 41

2-26 Which of the following is NOT considered to be part of the cost hierarchy often used to implement ABC?

A)Unit-level activity
B)Batch-level activity
C)Product-level activity
D)Production-level activity

Question 42

2-27 Which of the following describes how,in ABC,the activity allocation rate is computed?

A)The total estimated activity cost pool is divided by the total estimated activity allocation base.
B)The total estimated activity allocation base is divided by the total estimated activity cost pool.
C)The total estimated activity allocation base is multiplied by the total estimated activity cost pool.
D)You take the total estimated activity allocation base and subtract the total estimated total activity cost pool.

Question 43

2-14 Facility-level activities and costs are incurred no matter how many units,batches,or products are produced in the plant.

Question 44

2-10 Machine set-up would be considered a batch-level cost.

Question 45

2-16 The cost of depreciation,insurance,and property tax on the entire production plant would be considered a unit-level cost.

Question 46

2-21 Which of the following does ABC take into account?

A)The types of manufacturing activities used by the product
B)The extent to which the manufacturing activities are used by the product
C)Both A and B
D)Neither A nor B

Question 47

2-9 Batch-level activities and costs are incurred again each time a unit is produced.

Question 48

2-23 Research and development would most likely be classified as a:

A)unit-level activity.
B)batch-level activity.
C)product-level activity.
D)facility-level activity.

Question 49

2-22 Machine set-up would most likely be classified as a:

A)unit-level activity.
B)batch-level activity.
C)product-level activity.
D)facility-level activity.

Question 50

2-8 The cost of inspecting and packaging EACH unit the company produces would be considered a unit-level activity cost.

Question 51

2-11 Product-level activities and costs are incurred for a particular product,regardless of the number of units or batches of the product produced.

Question 52

2-15 The cost of maintenance on the entire production plant would be considered a batch-level cost.

Question 53

2-20 The use of which of the following costing systems is most likely to reduce cost distortion to a minimum?

A)Plantwide overhead rate
B)Departmental overhead allocation rates
C)Activity-based costing
D)Traditional costing system

Question 54

2-12 The cost to research and develop,design and market new models would be considered a unit- level cost.

Question 55

2-13 The cost to design and market new models would be considered a facility-level cost

Question 56

2-25 Molding and sanding each unit of product would most likely be classified as a

A)unit-level activity.
B)batch-level activity.
C)product-level activity.
D)facility-level activity.

Question 57

2-28 What is the last step in developing an ABC system?

A)Identify the primary activities and estimate a total cost pool for each.
B)Allocate the costs to the cost object using the activity cost allocation rates.
C)Select an allocation base for each activity.
D)Calculate an activity cost allocation rate for each activity.

Question 58

2-18 In using an ABC system,which of the following steps is NOT performed before the company's year begins?

A)Identify the primary activities and estimate a total cost pool for each.
B)Allocate the costs to the cost object using the activity cost allocation rates.
C)Select an allocation base for each activity.
D)Calculate an activity cost allocation rate for each activity.

Question 59

2-17 What is the first step in developing an ABC system?

A)Identify the primary activities and estimate a total cost pool for each.
B)Allocate the costs to the cost object using the activity cost allocation rates.
C)Select an allocation base for each activity.
D)Calculate an activity cost allocation rate for each activity.

Question 60

2-24 Using factory utilities would most likely be classified as a:

A)unit-level activity.
B)batch-level activity.
C)product-level activity.
D)facility-level activity.

Question 61

Pittinger Company manufactures cuckoo clocks and uses an activity-based costing system.Each cuckoo clock consists of 10 separate parts totaling $120 in direct materials,and requires 2.0 hours of machine time to produce.Additional information follows: $\begin{array}{|l|l|r|}\hline \text { Activity } & \text { Allocation Base } & \text { Cost Allocation Rate } \\\hline \text { Materials handling } & \text { Number of parts } & \$ 1.25 \text { per part } \\\hline \text { Machining } & \text { Machine hours } & \$ 2.50 \text { per machine hour } \\\hline \text { Assembling } & \text { Number of parts } & \$ 0.50 \text { per part } \\\hline \text { Packaging } & \text { Number of finished units } & \$ 1.50 \text { per finished unit } \\\hline\end{array}$
What is the cost of materials handling per cuckoo clock?

A)$3.00
B)$5.00
C)$4.50
D)$12.50

Question 62

2-35 All of the following are activities in an activity-based costing system that determine the cost of a manufactured product except for:

A)accounting.
B)inspecting.
C)machining.
D)materials handling.

Question 63

2-34 Which of the following is MOST likely to be the cost driver for the packaging and shipping activity?

A)Number of orders shipped
B)Number of setups
C)Number of units produced
D)Hours of testing

Question 64

Pittinger Company manufactures cuckoo clocks and uses an activity-based costing system to allocate all manufacturing conversion costs.Each cuckoo clock consists of 10 separate parts totaling $120 in direct materials,and requires 2.0 hours of machine time to produce.Additional information follows: $\begin{array}{|l|l|r|}\hline \text { Activity } & \text { Allocation Base } & \text { Cost Allocation Rate } \\\hline \text { Materials handling } & \text { Number of parts } & \$ 1.25 \text { per part } \\\hline \text { Machining } & \text { Machine hours } & \$ 2.50 \text { per machine hour } \\\hline \text { Assembling } & \text { Number of parts } & \$ 0.50 \text { per part } \\\hline \text { Packaging } & \text { Number of finished units } & \$ 1.50 \text { per finished unit } \\\hline\end{array}$


-What is the total manufacturing cost per cuckoo clock?

A)$142.50
B)$ 24.00
C)$144.00
D)$ 25.00

Question 65

Pittinger Company manufactures cuckoo clocks and uses an activity-based costing system to allocate all manufacturing conversion costs.Each cuckoo clock consists of 10 separate parts totaling $120 in direct materials,and requires 2.0 hours of machine time to produce.Additional information follows: $\begin{array}{|l|l|r|}\hline \text { Activity } & \text { Allocation Base } & \text { Cost Allocation Rate } \\\hline \text { Materials handling } & \text { Number of parts } & \$ 1.25 \text { per part } \\\hline \text { Machining } & \text { Machine hours } & \$ 2.50 \text { per machine hour } \\\hline \text { Assembling } & \text { Number of parts } & \$ 0.50 \text { per part } \\\hline \text { Packaging } & \text { Number of finished units } & \$ 1.50 \text { per finished unit } \\\hline\end{array}$


-What is the number of finished cuckoo clocks?

A)20
B)100
C)250
D)Cannot be determined from the information given

Question 66

Pittinger Company manufactures cuckoo clocks and uses an activity-based costing system to allocate all manufacturing conversion costs.Each cuckoo clock consists of 10 separate parts totaling $120 in direct materials,and requires 2.0 hours of machine time to produce.Additional information follows: $\begin{array}{|l|l|r|}\hline \text { Activity } & \text { Allocation Base } & \text { Cost Allocation Rate } \\\hline \text { Materials handling } & \text { Number of parts } & \$ 1.25 \text { per part } \\\hline \text { Machining } & \text { Machine hours } & \$ 2.50 \text { per machine hour } \\\hline \text { Assembling } & \text { Number of parts } & \$ 0.50 \text { per part } \\\hline \text { Packaging } & \text { Number of finished units } & \$ 1.50 \text { per finished unit } \\\hline\end{array}$


-What is the cost of machining per cuckoo clock?

A)$5.00
B)$3.00
C)$10.50
D)$25.00

Question 67

2-33 Which of the following is NOT likely to be a cost driver of activities associated with determining product cost?

A)Number of cost accountant's labor hours
B)Number of material requisitions
C)Number of product inspections
D)Number of production orders

Question 68

2-32 ABC costing might lead to:

A)cutting back on high-volume products that appear unprofitable.
B)expanding low-volume products that appear profitable.
C)raising the sale price of high-volume products.
D)raising the sale price of low-volume products.

Question 69

2-37 Activity-based costing considers __________________ to be the fundamental cost object.

A)activities
B)direct labor hours
C)direct materials
D)finished goods

Question 70

Pittinger Company manufactures cuckoo clocks and uses an activity-based costing system to allocate all manufacturing conversion costs.Each cuckoo clock consists of 10 separate parts totaling $120 in direct materials,and requires 2.0 hours of machine time to produce.Additional information follows: $\begin{array}{|l|l|r|}\hline \text { Activity } & \text { Allocation Base } & \text { Cost Allocation Rate } \\\hline \text { Materials handling } & \text { Number of parts } & \$ 1.25 \text { per part } \\\hline \text { Machining } & \text { Machine hours } & \$ 2.50 \text { per machine hour } \\\hline \text { Assembling } & \text { Number of parts } & \$ 0.50 \text { per part } \\\hline \text { Packaging } & \text { Number of finished units } & \$ 1.50 \text { per finished unit } \\\hline\end{array}$


-What is the cost of assembling per cuckoo clock?

A)$4.50
B)$12.50
C)$5.00
D)$3.00

Question 71

Electronics Unlimited uses activity-based costing to allocate all manufacturing conversion costs.Electronics Unlimited produces computer keyboards; each computer keyboard has $8.00 of direct materials,includes 12 parts and requires 1/2 hour of machine time.Additional information follows: $\begin{array}{|l|l|r|}\hline \text { Activity } & \text { Allocation Base } & \text { Cost Allocation Rate } \\\hline \text { Materials handling } & \text { Number of parts } & \$ .25 \text { per part } \\\hline \text { Machining } & \text { Machine hours } & \$ 12.00 \text { per machine hour } \\\hline \text { Assembling } & \text { Number of parts } & \$ 1.00 \text { per part } \\\hline \text { Packaging } & \text { Number of finished units } & \$ 1.75 \text { per finished unit } \\\hline\end{array}$



- What is the cost of materials handling per computer keyboard?

A)$ 0.88
B)$15.00
C)$ 6.00
D)$12.00

Question 72

2-31 The __________________system focuses on activities as the fundamental cost objects.It uses the costs of those activities as building blocks for compiling the indirect costs of products and other cost objects.

A)activities-based costing
B)job costing
C)process costing
D)product costing

Question 73

General Products Company manufactures toaster ovens and uses an activity-based costing system to allocate all manufacturing conversion costs.The following information is provided for the month of May: $$\begin{array} { | l | l | l | r | } \hline { \text { Activity } } & \begin{array} { l } \text { Estimated Indirect } \\\text { Activity Costs }\end{array} & \text { Allocation Base } & \begin{array} { l } \text { Estimated Quantity of } \\\text { Allocation Buse }\end{array} \\\hline \text { Materials handling } & \$ 5 , 4 0 0 & \text { Number of parts } & \text { 3,000 parts } \\\hline \text { Assembling } & \$ 9,600 & \text { Number of parts } & \text { 3,000 parts } \\\hline \text { Packaging } & \$ 2,500 & \text { Number of toaster ovens } & 1,000 \text { toaster ovens } \\\hline\end{array}$$ Each toaster oven consists of 3 parts.The direct materials cost per toaster oven is $25.00
What is the total manufacturing cost per toaster oven?

A)$42.50
B)$17.50
C)$15.00
D)$40.00

Question 74

Electronics Unlimited uses activity-based costing to allocate all manufacturing conversion costs.Electronics Unlimited produces computer keyboards; each computer keyboard has $8.00 of direct materials,includes 12 parts and requires 1/2 hour of machine time.Additional information follows: $\begin{array}{|l|l|r|}\hline \text { Activity } & \text { Allocation Base } & \text { Cost Allocation Rate } \\\hline \text { Materials handling } & \text { Number of parts } & \$ .25 \text { per part } \\\hline \text { Machining } & \text { Machine hours } & \$ 12.00 \text { per machine hour } \\\hline \text { Assembling } & \text { Number of parts } & \$ 1.00 \text { per part } \\\hline \text { Packaging } & \text { Number of finished units } & \$ 1.75 \text { per finished unit } \\\hline\end{array}$


- What is the cost of machining per computer keyboard?

A)$ 0.88
B)$12.00
C)$ 6.00
D)$ 3.00

Question 75

2-36 Which of the following statements is TRUE regarding activity-based costing systems?

A)ABC systems accumulate overhead costs by departments.
B)ABC costing systems are less complex and,therefore,less costly than traditional systems.
C)ABC costing systems can be used in manufacturing firms only.
D)ABC costing systems have separate indirect cost allocation rates for each activity.

Question 76

Electronics Unlimited uses activity-based costing to allocate all manufacturing conversion costs.Electronics Unlimited produces computer keyboards; each computer keyboard has $8.00 of direct materials,includes 12 parts and requires 1/2 hour of machine time.Additional information follows: $\begin{array}{|l|l|r|}\hline \text { Activity } & \text { Allocation Base } & \text { Cost Allocation Rate } \\\hline \text { Materials handling } & \text { Number of parts } & \$ .25 \text { per part } \\\hline \text { Machining } & \text { Machine hours } & \$ 12.00 \text { per machine hour } \\\hline \text { Assembling } & \text { Number of parts } & \$ 1.00 \text { per part } \\\hline \text { Packaging } & \text { Number of finished units } & \$ 1.75 \text { per finished unit } \\\hline\end{array}$


- What is the cost of assembling per computer keyboard?

A)$ 6.00
B)$12.00
C)$ 3.00
D)$ 0.88

Question 77

General Products Company manufactures toaster ovens and uses an activity-based costing system.The following information is provided for the month of May: $$\begin{array} { | l | r | l | r | } \hline \text { Activity } & \begin{array} { l } \text { Estimated Indirect } \\\text { Activity Costs }\end{array} & \text { Allocation Base } & \begin{array} { l } \text { Estimated Quantity of } \\\text { Allocation Buse }\end{array} \\\hline \text { Materials handling } & \$ 5,400 & \text { Number of parts } & \text { 3,000 parts } \\\hline \text { Assembling } & \$ 9,600 & \text { Number of parts } & 3,000 \text { parts } \\\hline \text { Packaging } & \$ 2,500 & \text { Number of toaster ovens } & 1,000 \text { toaster ovens } \\\hline\end{array}$$ Each toaster oven consists of 3 parts.The direct materials cost per toaster oven is $25.00
What is the cost of materials handling and assembling per toaster oven?

A)$ 9.60
B)$ 5.40
C)$17.50
D)$15.00

Question 78

2-29 Which of the following statements does NOT describe an ABC system?

A)ABC systems can create more accurate product costs.
B)ABC systems may only be used by service companies.
C)ABC systems are more complex and costly than traditional costing systems.
D)ABC systems are used in both manufacturing and nonmanufacturing companies.

Question 79

2-30 Which of the following can be used in conjunction with activity-based costing?

A)Job costing
B)Process costing
C)Neither A nor B
D)Both A and B

Question 80

Traditions Home Accessories Company manufactures pillows using an activity-based costing system to allocate all manufacturing conversion costs.The following information is provided for the month of June: $$\begin{array} { | l | r | l | r | } \hline \text { Activity } & \begin{array} { l } \text { Estimated Indirect } \\\text { Activity Costs }\end{array} & \text { Allocation Base } & \begin{array} { l } \text { Estimated Quantity of } \\\text { Allocation Buse }\end{array} \\\hline \text { Materials handling } & \$ 3,000 & \text { Number of parts } & \text { 6,000 parts } \\\hline \text { Assembling } & \$ 7,200 & \text { Number of parts } & 6,000 \text { parts } \\\hline \text { Packaging } & \$ 4,000 & \text { Number of pillows } & 2,000 \text { pillows } \\\hline\end{array}$$

- Each pillow consists of 3 parts; the total direct materials cost per pillow is $8.00.
What is the total cost of materials handling and assembling for each pillow?

A)$ 3.60
B)$11.60
C)$ 5.10
D)$15.10