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Exam 4: Accrual Accounting Concepts

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Question 31

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Which of the following is a facility-level activity?

A) Engineering changes
B) Product design
C) Property taxes
D) Inspection

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Question 32

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Teller, Inc.produces 3 products: P1, Q2, and R3.P1 requires 400 purchase orders, Q2 requires 600 purchase orders, and R3 requires 1,000 purchase orders.Teller has identified an ordering and receiving activity cost pool with allocated overhead of $180,000 for which the cost driver is purchase orders.Direct labor hours used on each product are 50,000 for P1, 40,000 for Q2, and 110,000 for R3.How much ordering and receiving overhead is assigned to each product? $\begin{array}{lll}&P1&Q2&R3\\a.&\$ 60,000 & \$ 60,000 & \$ 60,000 \\b.&\$ 45,000 & \$ 36,000 & \$ 99,000 \\c.&\$ 36,000 & \$ 54,000 & \$ 90,000 \\d.&\$ 40,500 & \$ 45,000 & \$ 94,500\end{array}$

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Question 33

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An activity-based overhead rate is computed as follows:

Each of the following is a limitation of activity-based costing except that

Port Accounting performs two types of services, Audit and Tax.Port's overhead costs consist of computer support, $240,000; and legal support, $120,000.Information on the two services is: $\begin{array}{lrr}&\text { Audit } &\text{Tax}\\\text { Direct labor cost } & \$ 50,000 & \$ 100,000 \\\text { CPU minutes } & 40,000 & 10,000 \\\text { Leqal hours used } & 200 & 800\end{array}$ -Overhead applied to tax services using traditional costing is

Current trends in manufacturing include less direct labor and more overhead.

Sanborn Industries has the following overhead costs and cost drivers.Direct labor hours are estimated at 100,000 for the year. $\begin{array}{llrl}\text { Activity Cost Pool}&\text { Cost Driver }&\text {Est. Overhead }&\text {Cost Driver Activity }\\\text { Ordering and Receiving } & \text { Orders } & \$ 120,000 & 500 \text { orders } \\\text { Machine Setup } & \text { Setups } & 297,000 & 450 \text { setups } \\\text { Machining } & \text { Machine hours } & 1,500,000 & 125,000 \mathrm{MH} \\\text { Assembly } & \text { Parts } & 1,200,000 & 1,000,000 \text { parts } \\\text { Inspection } & \text { Inspections } & 300,000 & 500 \text { inspections }\end{array}$ - If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is

Which would be an appropriate cost driver for the purchasing activity cost pool?

Activity-based costing is used in $\begin{array}{lll}&\text { Service industries}&\text { Manufacturing industries }\\\text { a. } & \text { Yes } & \text { No } \\\text { b. } & \text { Yes } & \text { Yes } \\\text { c. } & \text { No } & \text { Yes } \\\text { d. } & \text { No } & \text { No }\end{array}$

Which of the following is not a facility-level activity?

Which of the following is not a facility-level activity?

Which of the following statements is false?

Hagar Co.computed an overhead rate for machining costs ($1,500,000) of $15 per machine hour.Machining costs are driven by machine hours.If computed based on direct labor hours, the overhead rate for machining costs would be $30 per direct labor hour.The company produces two products, Cape and Chap.Cape requires 60,000 machine hours and 20,000 direct labor hours, while Chap requires 40,000 machine hours and 30,000 direct labor hours.Using activity-based costing, machining costs assigned to each product is $\begin{array} { l r r } & \text { Cape }& \text { Chap } \\\text { a. } & \$ 600,000 & \$ 900,000 \\\text { b. } & \$ 750,000 & \$ 750,000 \\\text { c. } & \$ 800,000 & \$ 700,000 \\\text { d. } & \$ 900,000 & \$ 600,000\end{array}$

ABC is generally more costly to implement than traditional costing.

The primary benefit of ABC is it provides

A value-added activity in a service enterprise is

All of the following are examples of a value-added activity in a service company except

Use of activity-based costing will result in the development of

Which of the following is a limitation of activity-based costing?

Activity-based costing