1. Which of the following activities would be classified as a batch-level activity? Circle One:

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1.      Which of the following activities would be classified as a batch-level activity? Circle One:

 

 

·        Milling a part required for the final product.

 

·        Setting up equipment.

 

·        Designing a new product.

 

·        Training employees.

 

2.   Which of the following is not a limitation of activity-based costing? Circle One.

 

·        Maintaining an activity-based costing system is more costly than maintaining a traditional direct labor-based costing system.

·        In practice, most managers insist on fully allocating all costs to products, customers, and other costing objects in an activity-based costing system. This results in overstated costs.

·        More accurate product costs may result in increasing the selling prices of some products.

·         Changing from a traditional direct labor-based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers. Such changes are often resisted by managers.

 

 

3.      Designing a new product is an example of a: 

 

 

·        Unit-level activity.

 

·        Organization-sustaining activity.

 

·        Batch-level activity.

 

·        Product-level activity.

 

4.     Bulmash Corporation uses an activity-based costing system with the following three activity cost pools:

 

 

 

 

Activity Cost Pool

Total Activity

Fabrication

40,000 machine-hours

Order processing

500 orders

Other

Not applicable

 

The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.

The company has provided the following data concerning its costs:

Wages and salaries

  $420,000

Depreciation

  $100,000

Occupancy

  $120,000

Total

  $640,000

 

The distribution of resource consumption across activity cost pools is given below:

 

                Activity Cost Pools              

 

 

Fabrication

Order Processing

Other

Total

Wages and salaries

5%

80%

15%

100%

Depreciation

15%

45%

40%

100%

Occupancy

25%

50%

25%

100%

 

The activity rate for the Fabrication activity cost pool is closest to:

 

·        $0.80 per machine-hour

 

·        $2.40 per machine-hour

 

·        $1.65 per machine-hour

 

·        $4.00 per machine-hour

5.      Jordan Corporation uses an activity-based costing system with the following three activity cost pools:

Activity Cost Pool

Total Activity

Fabrication

70,000 machine-hours

Order processing

500 orders

Other

Not applicable

 

The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs.

The company has provided the following data concerning its costs:

Wages and salaries

  $420,000

Depreciation

  $160,000

Occupancy

  $200,000

Total

  $780,000

 

The distribution of resource consumption across activity cost pools is given below:

 

                Activity Cost Pools              

 

 

Fabrication

Order Processing

Other

Total

 

Wages and salaries

60%

20%

20%

100%

 

Depreciation

5%

60%

35%

100%

 

Occupancy

25%

50%

25%

100%

 

       

 

The activity rate for the Order Processing activity cost pool is closest to:

 

·        $312 per order

 

·        $780 per order

 

·        $676 per order

 

·        $560 per order

6.     Wenston Corporation has provided the following data concerning its overhead costs for the coming year:

Wages and salaries

  $440,000

Depreciation

  $120,000

Occupancy

  $160,000

Total

  $720,000

 

The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year:

Activity Cost Pool

Total Activity

Assembly

40,000 labor-hours

Order processing

600 orders

Other

Not applicable

 

The distribution of resource consumption across activity cost pools is given below:

 

                Activity Cost Pools              

 

 

Fabrication

Order Processing

Other

Total

Wages and salaries

40%

35%

25%

100%

Depreciation

20%

30%

50%

100%

Occupancy

10%

65%

25%

100%

 

The activity rate for the Order Processing activity cost pool is closest to:

 

·        $520 per order

 

·        $490 per order

 

·        $420 per order

 

·        $780 per order

7.     Bullets Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs:

Wages and salaries

  $480,000

Depreciation

  $100,000

Occupancy

  $180,000

Total

  $760,000

 

The distribution of resource consumption across the three activity cost pools is given below:

 

                Activity Cost Pools              

 

 

Fabrication

Order Processing

Other

Total

Wages and salaries

25%

55%

20%

100%

Depreciation

20%

30%

50%

100%

Occupancy

35%

35%

30%

100%

 

 

How much cost, in total, would be allocated in the first-stage allocation to the Order Processing activity cost pool? 

 

·        $418,000

 

·        $304,000

 

·        $357,000

 

·        $266,000

 

8.      Strasburg Corporation has provided the following data from its activity-based costing system:

 Activity Cost Pool

Total Cost

Total Activity

Assembly

 $1,114,920

 57,000 machine-hours

Processing orders

$47,016

 1,800 orders

Inspection

$107,328

 1,560 inspection-hours

 

The company makes 430 units of product S78N a year, requiring a total of 1,120 machine-hours, 40 orders, and 30 inspection-hours per year. The product's direct materials cost is $49.81 per unit and its direct labor cost is $12.34 per unit. The product sells for $129.90 per unit.

According to the activity-based costing system, the product margin for product S78N is:

·         

·        $6,180.50

·         

·        $29,132.50

·         

·        $5,161.30

·         

·        $4,116.50

 

9. Wenstein Corporation has its headquarters in Chicago and operates from three branch offices in Portland, Dallas, and Miami. Two of the company's activity cost pools are General Service and Research Service. These costs are allocated to the three branch offices using an activity-based costing system. Information for next year follows::

 Activity Cost Pool

Activity Measure

Estimated Cost

General service

% of time devoted to branch

$700,000

Research service

Computer time

$140,000

 

Estimated branch data for next year is as follows:

 

% of time

Computer time

Portland

30%

200,000 minutes

Dallas

60%

150,000 minutes

Miami

10%

50,000 minutes

 

How much of the headquarters cost allocation should Dallas expect to receive next year?

 

·        $409,500

 

·        $280,000

 

·        $472,500

 

·        $504,000

10.   Square Corporation has provided the following data from its activity-based costing accounting system:

 Activity Cost Pool

Total Cost

Total Activity

Designing products

 $582,016

 4,547 design hours

Setting up batches

$29,760

 960 batch set-ups

Assembling products

$19,440

 1,620 assembly hours

 

The activity rate for the "designing products" activity cost pool is closest to:

 

·        $89 per product design hour

 

·        $78 per product design hour

 

·        $128 per product design hour

 

·        $582,016 per product design hour

11.   Activity rates from Pleziastic Corporation's activity-based costing system are listed below. The company uses the activity rates to assign overhead costs to products:

 Activity Cost Pool

Activity Rate

Processing customer orders

 $92.86 per customer order

Assembling products

 $1.78 per assembly hour

Setting up batches

 $52.09 per batch

 

Last year, Product F76D involved 2 customer orders, 434 assembly hours, and 20 batches. How much overhead cost would be assigned to Product F76D using the activity-based costing system?

 

·        $146.73

 

·        $2,000.04

 

·        $1,041.80

 

·        $66,908.88

 

Nets Corporation has provided the following data from its activity-based costing accounting system:

Indirect factory wages

 $520,000

Factory equipment depreciation

 $260,000

 

Distribution of Resource Consumption across Activity Cost Pools:

 

Customer Orders

Product Processing

Other

Total

Indirect factory wages

40%

50%

10%

100%

Factory equipment depreciation

15%

65%

20%

100%

 

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.

 

12.   How much indirect factory wages and factory equipment depreciation cost would be assigned to the Customer Orders activity cost pool? 

 

·        $780,000

 

·        $390,000

 

·        $247,000

 

·        $214,500

13.   How much indirect factory wages and factory equipment depreciation cost would NOT be assigned to products using the activity-based costing system?

 

·        $260,000

 

·        $520,000

 

·        $0

 

·        $104,000

 

 

 

 

 

 

 

 

 

 

 

The following data have been provided by Quintessential Corporation from its activity-based costing accounting system:

Factory supervision

 $360,000

Indirect factory labor

 $280,000

 

Distribution of Resource Consumption across Activity Cost Pools:

 

Batch Set-Up

Expediting

Other

Total

Factory supervision

5%

85%

10%

100%

Indirect factory labor

30%

50%

20%

100%

 

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs that are not assigned to products.

 

 

14.   How much factory supervision and indirect factory labor cost would be assigned to the Batch Set-Up activity cost pool? 

 

·        $640,000

 

·        $112,000

 

·        $102,000

 

·        $320,000

 

15.   How much factory supervision and indirect factory labor cost would NOT be assigned to products using the activity-based costing system? 

 

·        $280,000

 

·        $360,000

 

·        $0

 

·        $92,000

 

 

 

 

 

 

 

 

 

 

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    1. Which of the following activities would be classified as a batch-level activity? Circle One:
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