ACC/560 ACC560 ACC 560 WEEK 4 QUIZ

Activity-based costing

Direct labor is sometimes the appropriate basis for assigning overhead cost to products. It is appropriate to use direct labor when which of the following is true?

(1) Direct labor constitutes a significant part of total product cost.
(2) A high correlation exists between direct labor and changes in the amount of overhead costs.

Estimated costs for activity cost pools and other item(s) are as follows:
Machining $500,000
Assembling 200,000
Advertising 450,000
Inspecting and testing 175,000
Total estimated overhead is

The primary benefit of ABC is it provides

Which of the following is not a benefit of activity-based costing?

An activity-based overhead rate is computed as follows:

A company incurs $3,600,000 of overhead each year in three departments: Processing, Packaging, and Testing. The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of Oil and 600,000 drums of Sludge. The following data are available:

 
Department Expected Use of Driver Cost
Processing 800 $1,500,000
Packaging 200,000 1,500,000
Testing 2,000 600,000

 
Production information for the two products is as follows:
Oil Sludge
Department Expected Use of Driver Expected Use of Driver
Processing 300 500
Packaging 120,000 80,000
Testing 1,600 400

 
The amount of overhead assigned to Oil using ABC is

Which of the following factors would suggest a switch to activity-based costing?

Boswell Company manufactures two products, Regular and Supreme. Boswell’s overhead costs consist of machining, $3,000,000; and assembling, $1,500,000. Information on the two products is:
Regular Supreme
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000
Overhead applied to Supreme using traditional costing using direct labor hours is

An example of an activity cost pool is