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Exam 4: Activity-Based Costing

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Question 41

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Just-in-time processing

A) is based on a just-in-case philosophy.
B) results in a push approach.
C) minimizes inventory storage and waiting time.
D) all of these.

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Question 42

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Activity-based costing uses

A) one plantwide pool and a single cost driver.
B) departmental pools and a single cost driver.
C) numerous cost pools and numerous cost drivers.
D) one plantwide pool and numerous cost drivers

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Question 43

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

Non-value-added activities increase the cost of a product but not its perceived value.

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

Inventory storage costs are reduced in just-in-time processing.

Any activity that increases the cost of producing a product is a value-added activity.

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: $\begin{array} { l r r } & \text { Audit } & \text { Tax } \\\text { Direct labor cost } & \$ 50,000 & \$ 100,000 \\\text { CPU minutes } & 40,000 & 10,000 \\\text { Legal hours used } & 200 & 800\end{array}$ Overhead applied to tax services using traditional costing is

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

In service industries

In the pull approach

ABC leads to enhanced control over overhead costs.

Hartley Company produces two products, Flower and Planter. Flower is a high-volume item totaling 20,000 units annually. Planter is a low-volume item totaling only 6,000 units per year. Flower requires one hour of direct labor for completion, while each unit of Planter requires 2 hours. Therefore, total annual direct labor hours are 32,000 (20,000 + 12,000) . Expected annual manufacturing overhead costs are $960,000. Hartley uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of Planter would be assigned overhead of

Which of the following is not typical of traditional costing systems?

As compared to high-volume products, low-volume products

A non-value-added activity in a service enterprise is

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: $\begin{array} { l r r } & \text { Audit } & \text { Tax } \\\text { Direct labor cost } & \$ 50,000 & \$ 100,000 \\\text { CPU minutes } & 40,000 & 10,000 \\\text { Legal hours used } & 200 & 800\end{array}$ Overhead applied to audit services using traditional costing is

ABC eliminates all arbitrary cost allocations.

The costs that are easiest to trace directly to products are

Which of the following is a limitation of just-in-time processing?