Activity-based costing uses departments overhead rate to assign overhead .a O provides the same results as traditional costing .b O .may not assign all manufacturing overhead costs to products .c O None of the given answer .d C .e is easier than the plant-wide (traditional) costing to implement because it requires less record-keeping

Activity-based costing uses departments overhead rate to assign overhead .a O provides the same results as traditional costing .b O .may not assign all manufacturing overhead costs to products .c O None of the given answer .d C .e is easier than the plant-wide (traditional) costing to implement because it requires less record-keeping

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter6: Activity-based, Variable, And Absorption Costing

Section: Chapter Questions

Problem 13MC: Activity-based costing systems: A. use a single predetermined overhead rate based on machine hours...

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Explain how a plantwide overhead rate, using a unit-based driver, can produce distorted product costs. In your answer, identify two major factors that impair the ability of plantwide rates to assign cost accurately.
Which of the following statements is true? a. Job-order costing is used only in manufacturing firms. b. Process costing is used only for services. c. Job-order costing is simpler to use than process costing because the recordkeeping requirements are less. d. The job cost sheet is subsidiary to the work-in-process account. e. All of these.
Which of the following product situations is better suited to job order costing than to process costing? A. Each product batch is exactly the same as the prior batch. B. The costs are easily traced to a specific product. C. Costs are accumulated by department. D. The value of work in process is based on assigning standard costs.
Which of the following is a reason a company would implement activity-based costing? A. The cost of record keeping is high. B. The additional data obtained through traditional allocation are not worth the cost. C. They want to improve the data on which decisions are made. D. A company only has one cost driver.
Activity-based department rate product costing and product cost distortions Big Sound Inc. manufactures two products: receivers and loudspeakers. The factory overhead incurred is as follows: The activity base associated with the two production departments is direct labor hours. The indirect labor can be assigned to two different activities as follows: The activity-base usage quantities and units produced for the two products follow: Instructions Determine the factory overhead rates under the multiple production department rate method. Assume that indirect labor is associated with the production departments, so that the total factory overhead is 420,000 and 294,000 for the Subassembly and Final Assembly departments, respectively. Determine the total and per-unit factory overhead costs allocated to each product, using the multiple production department overhead rates in (1). Determine the activity rates, assuming that the indirect labor is associated with activities rather than with the production departments. Determine the total and per-unit cost assigned to each product under activity-based costing. Explain the difference in the per-unit overhead allocated to each product under the multiple production department factory overhead rate and activity-based costing methods. production department factory overhead rate and activity-based costing methods.
A company has traditionally allocated its overhead based on machine hours but collected this information to change to activity based costing: A. How much overhead would be assigned to each unit under the traditional allocation method? B. How much overhead would be assigned to each unit under activity-based costing?
Which is not a task typically associated with ABC systems? A. calculating the overhead application rate for each cost pool B. applying a single cost rate C. identifying a cost driver D. more correctly allocating overhead costs
Which is not a step In activity-based costing? A. identify the activities performed by the organization B. identify the cost driver(s) associated with each activity C. compute a cost rate per production D. assign costs to products by multiplying the cost driver rate by the volume of the cost driver units consumed by the product
(Appendix 3A) Scattergraph, High-Low Method, Method of Least Squares, Use of Judgment The management of Wheeler Company has decided to develop cost formulas for its major overhead activities. Wheeler uses a highly automated manufacturing process, and power costs are a significant manufacturing cost. Cost analysts have decided that power costs are mixed. The costs must be broken into their fixed and variable elements so that the cost behavior of the power usage activity can be properly described. Machine hours have been selected as the activity driver for power costs. The following data for the past 8 quarters have been collected: Note: For the following requirements, round the fixed cost to the nearest dollar, round the variable rates to three decimal places, and the R2 to two decimal places. Required: 1. Prepare a scattergraph by plotting power costs against machine hours. Does the scatter-graph show a linear relationship between machine hours and power cost? 2. Using the high and low points (i.e., the high-low method), compute a power cost formula. (Note: Round answers to three decimal places.) 3. Use the method of least squares to compute a power cost formula. Evaluate the coefficient of determination. 4. CONCEPTUAL CONNECTION Rerun the regression, and drop the point (20,000, 26,000) as an outlier. Compare the results from this regression to those for the regression in Requirement 3. Which is better?
Which is not a step in analyzing the cost driver for manufacturing overhead? A. Identify the cost B. identify non-value-added costs C. analyze the effect on manufacturing overhead D. identify the correlation between the potential driver and manufacturing overhead
A CPA would recommend changing from plantwide overhead rate application to departmental rates under which of the following circumstances? a. The plant produces one product. b. The plant produces multiple products that may or may not pass through all producing departments. c. The plant produces multiple products that pass through all of the producing departments. d. The plant produces many different products that consume the same amount of resources in each producing department.
Carltons Kitchens three cost pools and overhead estimates are as follows: Compare the overhead allocation using: A. The traditional allocation method B. The activity-based costing method (Hint: the traditional method uses machine hours as the allocation base.)