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Exam 4: Activity Based Costing

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Question 51

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Estimated activity-base usage quantities are the total activity-base quantities related to each product.

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Question 52

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When production departments differ significantly in their manufacturing process, it is recommended that the single plantwide factory overhead rate be used for allocating factory overhead.

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Question 53

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Transformations Hair Salon uses an activity-based costing system in its beauty salon to determine the cost of services. The salon has determined the costs of services by activity as follows: (a) Using the information provided, determine the cost of services for each of the following services provided by the salon: (b) If the company budgets 10,000 haircuts, 4,000 complete styles,  3,500 perms, and 5,500 highlights, determine the budget for cost of services.

The total factory overhead for Big Light Company is budgeted for the year at $807,500. Big Light manufactures two different products - night lights and desk lamps. Night lights is budgeted for 60,000 units.  Each night light requires 1/2 hour of direct labor. Desk lamps is budgeted for 80,000 units.  Each desk lamp requires 2 hours of direct labor. Determine: (a) the total number of budgeted direct labor hours for year (b) the single plantwide factory overhead rate using direct labor hours as the allocation base (c) the factory overhead allocated per unit for each product using the single plantwide factory overhead rate calculated in (b).

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Determine the activity rate for procurement per purchase order.

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours. Using a single plantwide rate, determine the overhead rate per unit for Blue Ridge Marketing Inc.'s Product B.

Which of the following does not rely on managerial decisions involving accurate product costing?

A plantwide factory overhead rate is computed by dividing total budgeted factory overhead costs by the plantwide allocation base.

Activity rates are determined by

The Dawson Company manufactures small lamps and desk lamps. The following shows the activities per product and the total overhead information: Calculate the overhead per unit to be charged to small lamps.

A single plantwide overhead rate method is very expensive to apply.

The Valhalla Company manufactures small lamps and desk lamps. The following shows the activities per product: Using the following information prepared by the Valhalla Company, determine (a) the activity rates for each activity and (b) the activity-based factory overhead per unit for each product.

The Ramapo Company produces two products, Blinks and Dinks. They are manufactured in two departments, Fabrication and Assembly. Data for the products and departments are listed below. All of the machine hours take place in the Fabrication department, which has an estimated overhead of $84,000. All of the labor hours take place in the Assembly department, which has an estimated total overhead of $72,000. The Ramapo Company uses a single overhead rate to apply all overhead costs.  What would the single plantwide rate be if it was based on machine hours instead of labor hours?

Challenger Factory produces two similar products - regular widgets and deluxe widgets. The total plant overhead budget is $675,000 with 300,000 estimated direct labor hours. It is further estimated that deluxe widget production will need 3 direct labor hours for each unit and regular widget production will require 2 direct labor hours for each unit. Using the single plantwide factory overhead rate with an allocation base of direct labor hours, how much factory overhead will Challenger Factory allocate to deluxe widget production if budgeted production for the period is 50,000 units and actual production for the period is 58,000 units?

Determine the activity-based cost for each tape drive unit.

Adirondak Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. Calculate the plantwide factory overhead rate for Adirondack Marketing Inc.

Blue Ridge Marketing Inc. manufactures two products, A and B. Presently, the company uses a single plantwide factory overhead rate for allocating overhead to products. However, management is considering moving to a multiple department rate system for allocating overhead. The following table presents information about estimated overhead and direct labor hours. Determine the overhead in the Painting Department for each unit of Product B if Blue Ridge Marketing Inc. uses a multiple department rate system.

Panamint Systems Corporation is estimating activity costs associated with producing disk drives, tapes drives, and wire drives. The indirect labor can be traced to four separate activity pools. The budgeted activity cost and activity base data by product are provided below. Determine the activity-based cost for each wire drive unit.

ABC is used to allocate selling and administrative expenses to each product based on the product's individual differences in consuming these activities.

Which of the following are the two most common allocation bases for factory overhead?