Figure 4-21 Jones Manufacturing uses an activity-based costing system.The company produces Model X and Model Y.Information relating to the two products is as follows:
The following overhead costs are reported for the following activities of the production process:
Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table below:
Jones Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
-
Refer to Figure 4-21.Under this new approach, which activities would be selected as the cost pools?
A) materials handling and labor related
B) labor related and batch inspections
C) product design and batch inspections
D) materials handling and central purchasing

Question

Figure 4-21 Jones Manufacturing uses an activity-based costing system.The company produces Model X and Model Y.Information relating to the two products is as follows:
 The following overhead costs are reported for the following activities of the production process:
 Jones manufacturing has used activity based costing to assign costs to Models X and Y as given in the table below:
 Jones Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
-
Refer to Figure 4-21.Under this new approach, which activities would be selected as the cost pools?
A) materials handling and labor related 
B) labor related and batch inspections 
C) product design and batch inspections 
D) materials handling and central purchasing

Quizplus · Accepted Answer

According to the question, Jones Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment. Looking at the table, we can see that the two most expensive activities are labor related and batch inspections. Therefore, these two activities should be selected as the cost pools. Choice B is the only option that includes both of these activities.

Figure 4-21 Jones Manufacturing Uses an Activity-Based Costing System