Quiz 4

1.  Which of the following is a reason for the popularity of plantwide overhead rates to allocate overhead costs?

Simplicity
Traceability
Accuracy
Lower allocation base

2.  Property taxes are an example of a cost that would be considered to be:

Unit-level.
Batch-level.
Product-level.
Facility-level.

3.  Implementing an activity-based costing system often results in a shift of overhead costs from:

overpriced to underpriced products.
unit-level to batch-level activities.
high-volume to low-volume products.
low-volume to high-volume products.

4.  Activity-based management involves focusing on activities to:

avoid cost shifts due to the use of activity-based costing.
identify a single allocation base that causes overhead costs.
decrease the cost of implementing an activity-based costing system.
eliminate waste, decrease processing time, and reduce defects.

5.  Senff Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products:

Activity Cost Pools    Activity Rate
Setting up batches    $ 84.50    per batch
Processing customer orders    $ 75.57    per customer order
Assembling products    $ 10.71    per assembly hour
 

Data concerning two products appear below:

     Product V91Z    Product V21I
Number of batches    70    13
Number of customer orders    21    10
Number of assembly hours    493    698
 

How much overhead cost would be assigned to Product V91Z using the activity-based costing system? (Round your intermediate calculations to 2 decimal places.)

$127,820.00

$170.78

$5,915.00

$12,782.00

6.  Which of the following statements is true?

Direct labor is an appropriate allocation base for overhead when overhead costs and direct labor are not highly correlated.
Product-level activities relate to specific products and typically must be carried out whenever a batch is run or a unit of the product is made.
Departmental overhead rates applied on the basis of a single activity measure will eliminate any distortions in unit costs due to product diversity.

Statements I and II are true.
Statements II and III are true.
All of the statements are true.
None of the statements are true.

7.   uses a plantwide overhead rate based on direct labor-hours. It is considering implementing an activity-based costing (ABC) system that allocates all of its manufacturing overhead to four cost pools. The following additional information is available for the company as a whole and for Products Y and Z:

Activity Cost Pool    Activity Measure    Estimated Overhead Cost    Expected Activity
Machining    Machine-hours    $ 198,000    10,000    MHs
Machine setups    Number of setups    $ 86,400    180    setups
Production design    Number of products    $ 82,000    2    products
General factory    Direct labor-hours    $ 248,000    10,000    DLHs
 

Activity Measure    Product Y    Product Z
Machining    7,800    2,200
Number of setups    50    130
Number of products    1    1
Direct labor-hours    7,800    2,200
Required:

1. What is the company’s plantwide overhead rate? (Round your answer to 2 decimal places.)

8.   What is the activity rate for the Machine Setups activity cost pool?

9.   Which of the four activities is a product-level activity?

Machine setups activity
General factory activity
Machining activity
Product design activity

10.   Using the ABC system, what percentage of Machine Setups cost is assigned to Product Y and Product Z? (Round your intermediate calculations to 2 decimal places. Round your answers to 2 decimal places.)?

Quiz 4 Answers