ACCT
ACCT2301-002-Chap6-Additional-Solution-sp2009

ACCT2301-002-Chap6-Additional-Solution-sp2009 -

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Unformatted text preview: ACCT 2301 Spring Semester 2009 February 24, 2009 Practice Problems — Activity-Based Costing 1. If substantial batch-level or product-level costs exist, then overhead allocation based solely on a measure of volume such as direct labor-hours: A. is a key aspect of the activity-based costing model. will usually overcost high-volume products and undercost low-volume products. will usually overcost low-volume products and undercost high-volume products. D. None of the above are true. 2. The cost of leasing the office space for an advertising firm is an example of a: A. unit-level cost. B. batch-level cost. C. product-sustaining cost. ® facility-sustaining cost. 3. Which of the following is the primary goal of process-value analysis (or activity-based management)? A. To allocate overhead costs to products using volume-based drivers such as direct labor-hours. B. To increase non-value added costs. C. To eliminate virtually all overhead costs. ® To identify and eliminate activities that do not add value to goods and services. 4. Which of the following would probably be the most accurate measure of activity to use for allocating the costs associated with a factory's purchasing department? A. Machine-hours. B. Number of shipments received from suppliers. . Direct labor-hours. Q Number of purchase orders processed. 5. Which of the following statements about activity-based costing is NOT true? A. Activity-based costing is useful for allocating marketing and distribution costs. ® Activity-based costing is more likely to result in major differences from traditional functional-based (volume-based) costing systems if the firm manufactures only one product rather than multiple products. C. Activity-based costing seeks to distinguish batch-level, product-sustaining, and facility-sustaining costs from unit-level costs. D. Activity-based costing differs fiom traditional volume-based (functional-based) costing systems in that product-costing under activity-based costing tends to more accurately reflect overhead resource consumption. 6. Unit-level cost drivers are most appropriate as an overhead assignment base when A. several complex products are manufactured. only one product is manufactured. C. direct labor costs are low. D. factories produce a varied mix of products. T he following information pertains to Questions 7 and 8 Products SS and CP8 each are assigned $50,000 in overhead costs by a volume-based (or functional-based) costing system, using direct labor hours as the cost driver. An activity analysis revealed that, although production requirements are identical, product SS is produced in significantly larger batch sizes, thus requiring substantially fewer setups compared to product CP8. 7. Compared to an activity-based costing system, CP8 will be under the traditional system. undercosted [i.e., assigned lower costs than would be the case using the activity-based system] B. overcosted [i.e., assigned higher costs than would be the case using the activity-based system] C. fairly costed D. accurately costed 8. According to an ABC system, SS uses a disproportionately smaller amount of unit-level costs. larger amount of unit-level costs. A. B. © smaller amount of batch-level costs. D. larger amount of batch-level costs. The following information pertains to Questions 9 through 12 Plainview Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year: Acn v n'y Cost Pool Overhead Costs Cost driver Activifl level ILM'ES Supervision of direct labor $320,000 Direct labor-hours 800,000 ROAD/Db“ Machine maintenance $120,000 Machine-hours 960,000 3‘ O - ‘1 {/N “ Machine setups $200,000 Number of setups 1,000 5 2-00 /—‘—'6'N° Total overhead costs $640,000 The accounting records show the Littlefield job consumed the following resources: Cost driver Actual level Direct labor-hours 200 Machine-hours 1,600 Number of setups l 9. Assume direct labor-hours are used as the activity in computing a plant-wide overhead rate. What is Plainview’s resultlng overhead rate? R .06 490,80 030 ‘ #030 /Dw {L m ‘ goqoooow ‘ ___. A. $0.40 per direct labor-hour. B. $0.50 per direct labor-hour. © $0.80 per direct labor-hour. D. $1.20 per direct labor-hour. 10. Using the plant-wide rate to assign overhead, what is the amount of overhead costs allocated to the Littlefield job? 41 Ammo vao = Zoo bum 0.30/Dut A. $120. __ #' , B. $125. 2 © $160. D. $240. 3 11. Assuming Plainview Enterprises uses the three activity cost pools in an activity—based costing system to allocate overhead costs, what are the activity-cost driver rates for supervision of direct labor, machine maintenance, and machine setups, respectively? A. $0.60 per dlh, $0.025 per MH, $ 80.00 per setup. 5““ PM” 0“" W‘s B. $1.25 per dlh, $0.250 per MH, 3; 50.00 per setup. C. $0.40 per dlh, $0.050 per MH, $ 20.00 per setup. ® $0.40 per dlh, $0.125 per MH, $200.00 per setup. 12. Using the three cost pools to allocate overhead costs, what is the total amount of overhead costs to be allocated to the Littlefield job? A. $200. A233?) : L209 OM)!» flaria/(MD + (ht/00M“ XGO-‘l? {/u. I») + (\ $5er Kala" RN) ® $480. __ “80.0% 6200 + #209 C. $675. v D. $770. = W ...
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