Question 1

Milan Company has identified three cost pools to allocate overhead costs.The following estimates are provided for the coming year:

The accounting records show the Mossman Job consumed the following resources:

Under activity-based costing,what is the amount of machine maintenance costs allocated to the Mossman Job? (Do not round any intermediary calculations. )
A)$1,881.88
B)$200.20
C)$1,681.68
D)$210.45

Accepted Answer

Machine maintenance costs = 1,681.68 mh × ($100,000 ÷ 840,000)= $200.20

Question 2

Only indirect costs are included in the cost pools of ABC.

Accepted Answer

Both direct and indirect costs are included in the cost pools associated with activities.

Question 3

Columbus Company provides the following ABC costing information:

The above activities used by their three departments are:

How much of the total cost will be assigned to the Plowing Department?
A)$564,000
B)$311,600
C)$188,000
D)$173,600

Accepted Answer

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Question 4

Xylon Corp.has contracts to complete weekly supplements required by forty-six customers.For the year 2018,manufacturing overhead cost estimates total $940,000 for an annual production capacity of 10 million pages.
For 2018,Xylon decided to evaluate the use of additional cost pools.After analyzing manufacturing overhead costs,it was determined that number of design changes,setups,and inspections are the primary manufacturing overhead cost drivers.The following information was gathered during the analysis:

During 2018,two customers,Money Managers and Hospital Systems,are expected to use the following printing services:

Under ABC costing,what is the inspection cost allocated to Hospital Systems?
A)$704
B)$80
C)$286
D)$6,574

Accepted Answer

Inspection cost = ($88,000 ÷ 8,000 inspections)× 64 = $704

Question 5

Activity-based costing attempts to identify the most relevant cause-and-effect relationship for each activity pool without restricting the cost driver to only units of output or variables related to units of output.

Accepted Answer

Activity-based costing takes into account various cost drivers such as the number of setups, the number of inspections, or the number of shipments, and attempts to identify the most relevant cause-and-effect relationship for each activity pool without restricting the cost driver to only units of output or variables related to units of output.

Question 6

Velshi Printers has contracts to complete weekly supplements required by forty-six customers.For the year 2018,manufacturing overhead cost estimates total $600,000 for an annual production capacity of 12 million pages.
For 2018 Velshi Printers has decided to evaluate the use of additional cost pools.After analyzing manufacturing overhead costs,it was determined that number of design changes,setups,and inspections are the primary manufacturing overhead cost drivers.The following information was gathered during the analysis:

During 2018,two customers,Money Managers and Hospital Systems,are expected to use the following printing services:

Using pages printed as the only overhead cost driver,what is the manufacturing overhead cost estimate for Money Managers during 2018?
A)$4,300
B)$2,800
C)$3,500
D)$4,784

Accepted Answer

$3,500 = [70,000 pages × ($600,000 / 12,000,000)]

Question 7

Columbus Company provides the following ABC costing information:

The above activities used by their three departments are:

If labor hours are used to allocate the non-labor,overhead costs,what is the overhead allocation rate?
A)$75.00 per hour
B)$26.67 per hour
C)$42.00 per hour
D)$33.00 per hour

Accepted Answer

Overhead allocation rate = ($84,000 + $180,000)÷ 8,000 = $33.00

Question 8

Columbus Company provides the following ABC costing information:

The above activities used by their three departments are:

How much of the gas cost will be assigned to the Lawn Department?
A)$1,800
B)$3,800
C)$2,400
D)$8,000

Accepted Answer

Gas cost = ($8,000 ÷ 4,000 gallons)× 1,900 gallons = $3,800

Question 9

________ is an example of an output unit-level cost in the cost hierarchy.
A)Factory rent expense
B)Building security costs
C)Top management compensation costs
D)Machine depreciation

Accepted Answer

Machine depreciation is an example of an output unit-level cost in the cost hierarchy because it is directly linked to the production of individual units of output. Other options such as factory rent, building security costs, and top management compensation costs would fall under the facility-level, batch-level, or product-level cost categories.

Question 10

Explain how activity-based costing systems can provide more accurate product costs than traditional cost systems.

Accepted Answer

The answer of Explain how activity-based costing systems can provide...

Question 11

In activity based costing systems,limiting cost-allocation bases to only units of output strengthens the cause-and-effect relationship between the cost-allocation base and the costs in a cost pool.

Accepted Answer

Limiting cost-allocation bases to only units of output weakens the cause-and-effect relationship between the cost-allocation base and the costs in a cost pool.

Question 12

Columbus Company provides the following ABC costing information:

The above activities used by their three departments are:

How much of the labor cost will be assigned to the Bush Department?
A)$127,400
B)$63,700
C)$200,900
D)$97,825

Accepted Answer

Labor cost assigned = ($392,000 ÷ 8,000)× 1,300 = $63,700

Question 13

Columbus Company provides the following ABC costing information:

The above activities used by their three departments are:

How much of the total costs will be assigned to the Lawn Department?
A)$192,000
B)$464,000
C)$174,800
D)$154,667

Accepted Answer

To calculate the total cost assigned to each department, we need to multiply the cost driver rate by the amount of activity used by that department. 
For the Lawn Department, the cost driver rate is $25 ($50,000 / 2,000), and the total amount of activity used is 6,992. 
So, the total cost assigned to the Lawn Department is $174,800 ($25 x 6,992). Therefore, the best choice is C.

Question 14

Xylon Corp.has contracts to complete weekly supplements required by forty-six customers.For the year 2018,manufacturing overhead cost estimates total $900,000 for an annual production capacity of 10 million pages.
For 2018,Xylon decided to evaluate the use of additional cost pools.After analyzing manufacturing overhead costs,it was determined that number of design changes,setups,and inspections are the primary manufacturing overhead cost drivers.The following information was gathered during the analysis:

During 2018,two customers,Money Managers and Hospital Systems,are expected to use the following printing services:

If manufacturing overhead costs are considered one large cost pool and are assigned based on 10 million pages of production capacity,what is the cost driver rate? (Round the final answer to three decimal places. )
A)$0.078 per page
B)$0.035 per page
C)$0.055 per page
D)$0.09 per page

Accepted Answer

Cost driver rate = ($900,000 ÷ 10 million pages)= $0.09 per page

Question 15

Columbus Company provides the following ABC costing information:

The above activities used by their three departments are:

How much of invoice cost will be assigned to the Bush Department?
A)$7,200
B)$141,600
C)$31,200
D)$180,000

Accepted Answer

($180,000 / 7,500 invoices)× 300 invoices = $7,200

Question 16

When allocating the total indirect cost pool to cost pools such as setup costs including depreciation and maintenance costs of setup equipment,wages of setup employees,and allocation of supervisors is called a second-stage allocation.

Accepted Answer

What is described is a first-stage allocation.

Question 17

Which of the following statements is true of ABC systems?
A)ABC systems are time-driven cost systems.
B)ABC systems classify some direct costs as indirect costs and some indirect costs as direct costs.
C)ABC systems provide valuable information to managers beyond accurate product costs.
D)ABC systems assume all costs are variable costs.

Accepted Answer

ABC systems provide valuable information to managers beyond accurate product costs. ABC systems are not time-driven cost systems (A). ABC systems classify costs based on their activity usage, not whether they are direct or indirect (B). ABC systems recognize that not all costs are variable and include fixed costs as well.

Question 18

Velshi Printers has contracts to complete weekly supplements required by forty-six customers.For the year 2018,manufacturing overhead cost estimates total $1,500,000 for an annual production capacity of 10 million pages.
For 2018 Velshi Printers has decided to evaluate the use of additional cost pools.After analyzing manufacturing overhead costs,it was determined that number of design changes,setups,and inspections are the primary manufacturing overhead cost drivers.The following information was gathered during the analysis:

During 2018,two customers,Money Managers and Hospital Systems,are expected to use the following printing services:

What is the cost driver rate if manufacturing overhead costs are considered one large cost pool and are assigned based on 10 million pages of production capacity?
A)$0.01 per page
B)$0.15 per page
C)$0.14 per page
D)$0.13 per page

Accepted Answer

$0.15 per page = ($1,500,000 / 10,000,000 pages)

Question 19

Activity-based costing is most likely to yield benefits for companies ________.
A)with complex product design processes that vary significantly from product to product
B)with operations that remain fairly consistent across product lines
C)in a monopolistic market
D)having nominal percentage of indirect costs

Accepted Answer

Activity-based costing is designed for companies with complex product design processes that vary significantly from product to product. It helps in identifying the true costs of each product or service by analyzing the activities involved in producing them. Therefore, such companies are most likely to yield benefits from implementing activity-based costing.

Question 20

Milan Manufacturing Company has identified three cost pools to allocate overhead costs.The following estimates are provided for the coming year:

The accounting records show the Mossman Job consumed the following resources:

If direct labor-hours are considered the only overhead cost driver,what is the single cost driver rate for Milan?
A)$1.05 per direct labor-hour
B)$0.59 per direct labor-hour
C)$0.95 per direct labor-hour
D)$1.71 per direct labor-hour

Accepted Answer

Cost driver rate = $874,000 ÷ 920,000 = 0.95 per dlh

Quiz 5: Activity-Based Costing and Activity-Based Management

Only indirect costs are included in the cost pools of ABC.

Columbus Company provides the following ABC costing information: The above activities used by their three departments are: How much of the total cost will be assigned to the Plowing Department?

Activity-based costing attempts to identify the most relevant cause-and-effect relationship for each activity pool without restricting the cost driver to only units of output or variables related to units of output.

Columbus Company provides the following ABC costing information: The above activities used by their three departments are: If labor hours are used to allocate the non-labor,overhead costs,what is the overhead allocation rate?

Columbus Company provides the following ABC costing information: The above activities used by their three departments are: How much of the gas cost will be assigned to the Lawn Department?

________ is an example of an output unit-level cost in the cost hierarchy.

Explain how activity-based costing systems can provide more accurate product costs than traditional cost systems.

In activity based costing systems,limiting cost-allocation bases to only units of output strengthens the cause-and-effect relationship between the cost-allocation base and the costs in a cost pool.

Columbus Company provides the following ABC costing information: The above activities used by their three departments are: How much of the labor cost will be assigned to the Bush Department?

Columbus Company provides the following ABC costing information: The above activities used by their three departments are: How much of the total costs will be assigned to the Lawn Department?

Columbus Company provides the following ABC costing information: The above activities used by their three departments are: How much of invoice cost will be assigned to the Bush Department?

When allocating the total indirect cost pool to cost pools such as setup costs including depreciation and maintenance costs of setup equipment,wages of setup employees,and allocation of supervisors is called a second-stage allocation.

Which of the following statements is true of ABC systems?

Activity-based costing is most likely to yield benefits for companies ________.