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Exam 4: Activity-Based Costing

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Question 21

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Which of the following is not a benefit of just-in-time processing?

A) Control of significant inventory balances
B) Enhanced product quality
C) Reduction of rework costs
D) Production cost savings

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Question 22

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Just-in-time processing

A) is based on a just-in-case philosophy.
B) results in higher inventory amounts.
C) eliminates the push approach.
D) all of the above.

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Question 23

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In traditional costing systems, overhead is generally applied based on

Which of the following is a non-value-added activity?

For its inspecting cost pool, Ellsworth, Inc. expected overhead cost of $400,000 and 4,000 inspections. The actual overhead cost for that cost pool was $480,000 for 5,000 inspections. The activity-based overhead rate used to assign the costs of the inspecting cost pool to products is

Traditional costing systems use multiple predetermined overhead rates.

Predetermined overhead rates in traditional costing are often based on

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

Gant Accounting performs two types of services, Audit and Tax. Gant's overhead costs consist of computer support, $300,000; and legal support, $150,000. Information on the two services is: $\begin{array} { l r r } & \text { Audit } & \multicolumn{1}{c} { \text { Tax } } \\\cline { 2 - 3 } \text { Direct labor cost } & \$ 50,000 & \$ 100,000 \\\text { CPU minutes } & 40,000 & 10,000 \\\text { Legal hours used } & 200 & 800\end{array}$ Overhead applied to tax services using activity-based costing is

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

Zimmerman Company manufactures two products, Board 12 and Case 165. Zimmerman's overhead costs consist of setting up machines, $2,400,000; machining, $5,400,000; and inspecting, $1,800,000. Information on the two products is: $\begin{array}{lrr}&\text { Board } 12&\text { Case } 165\\\text { Direct labor hours } & 15,000 & 25,000 \\\text { Machine setups } & 600 & 400 \\\text { Machine hours } & 24,000 & 26,000 \\\text { Inspections } & 800 & 700\end{array}$ Overhead applied to Case 165 using activity-based costing is

An example of an activity cost pool is

One of Matheny Company's activity cost pools is inspecting, with estimated overhead of $200,000. Matheny produces throw rugs (700 inspections) and area rugs (1,300 inspections) . How much of the inspecting cost pool should be assigned to throw rugs?

The first step in activity-based costing is to

Activity-based costing

The last step in activity-based costing is to

Foxx Company incurs $480,000 overhead costs each year in its three main departments, setup ($30,000) , machining ($330,000) , and packing ($120,000) . The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year. Information about Foxx's two products is as follows: $\begin{array}{lrr}&\text { Product A1 }&\text { Product B1 }\\\text { Number of setups } & 20 & 20 \\\text { Machining hours } & 1,000 & 4,000 \\\text { Orders packed } & 150 & 350 \\\text { Number of products manufactured } & 600 & 400\end{array}$ If machining hours are used as a base under traditional casting, how much overhead is assigned to Product A1 each year?

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

ABC is particularly useful when overhead costs are an insignificant portion of total costs.

Engineering design is a value-added activity.