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Unformatted text preview: The correct answer for each question is indicated by a . Multiple Choice Q no Activity-Based Co 8 1640219 1 0073526703 1 4 1 CORRECT Bowie Company uses activity-based costing to determine the costs of its two products: X and Y. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: Activity Estimated Expected Activity Cost Pool Cost Product X Product Y Total Activity 1 $14,000 400 300 700 Activity 2 $19,800 800 300 1,100 Activity 3 $16,000 2,200 1,800 4,000 The activity rate under the activity-based costing system for Activity 1 is closest to: A) $4.00. B) $8.59. C) $18.00. D) $20.00. Feedback: The correct answer is D (Learning Objective 2):The activity rate for Activity 1 is determined as follows. Estimated cost of $14,000/total expected activity of 700 = Activity rate of $20.00. 2 4 2 CORRECT Farley Company uses activity-based costing to compute product costs for external reports. The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool. Estimated costs and activities for the current year are presented below for the three activity cost pools: Estimated Overhead Cost Expected Activity Activity 1 $36,000 1,800 Activity 2 $20,000 2,000 Activity 3 $40,000 2,500 Actual Activity Activity 1 1,815 Activity 2 2,005 Activity 3 2,490 The amount of overhead applied for Activity 3 during the year was closest to: A) $36,300. B) $39,840. C) $40,000. D) $96,190. Feedback: The correct answer is B (Learning Objectives 2 and 3):First, determine the activity rate for Activity 3 as follows. Estimated cost of $40,000/total expected activity of 2,500 = Activity rate of $16.00. Then, determine the amount of overhead applied for Activity 3 as follows. Actual activity of 2,490 x activity rate of $16.00 = Amount of overhead applied of $39,840. 3 4 3 CORRECT Garofalo Company has two products: A and B. The annual production and sales level of Product A is 9,094 units. The annual production and sales level of Product B is 15,826. The company uses activity-based costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools: Expected Activity Activity Cost Pool Estimated Overhead Cost Product A Product B Total #1 $ 29,200 1,000 500 1,500 #2 $ 40,000 200 800 1,000 #3 $180,000 600 5,400 6,000 The activity rate under the activity-based costing system for Activity 3 is closest to: A) $29.32. B) $30.00. C) $33.33. D) $41.53....
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This note was uploaded on 11/23/2011 for the course MANAGEMENT 101 taught by Professor Nguyen during the Spring '11 term at Troy.
- Spring '11