test bank chapter 8 abc for decision making
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Chapter 8
Activity-Based Costing: A Tool to Aid Decision-Making
True/False
1.
T
Easy
When combining activities in an activitybased costing system,
activities should be grouped together at the same level. For
example, batchlevel activities should not be combined with
unitlevel activities.
2.
T
Easy
Unitlevel activities arise as a result of the total volume of
production and are performed each time a unit is produced.
3.
T
Easy
Unitlevel production activities are performed each time a unit
is made.
4.
T
Easy
Organizationsustaining activities are carried out regardless
of how many units are made, how many batches are run, or how
many different products are made.
5.
F
Easy
Activitybased costing uses a number of activity cost pools,
each of which is allocated to products on the basis of direct
laborhours.
6.
F
Medium
The firststage allocation in activitybased costing is the
process by which overhead costs are assigned to products before
they are assigned to customers.
7.
T
Easy
Activity rates in activitybased costing are computed by
dividing costs from the firststage allocations by the activity
measure for each activity cost pool.
8.
T
Medium
In the secondstage allocation in activitybased costing,
activity rates are used to apply costs to products, customers,
and other cost objects.
9.
T
Medium
In traditional costing systems, all manufacturing costs are
assigned to productseven manufacturing costs that are not
caused by the products.
10.
T
Hard
When there are batchlevel or productlevel costs, in
comparison to a traditional cost system, an activitybased
costing system ordinarily will shift costs from highvolume to
lowvolume products.
Managerial Accounting, 9/e
18
11.
F
Medium
An activitybased costing system is generally easier to set up
and run than a traditional cost system.
12.
F
Medium
Activitybased costing is a costing method that is designed to
provide managers with cost information for strategic and other
decisions that potentially affect only variable costs.
13.
F
Medium
In activitybased costing, as in traditional costing systems,
nonmanufacturing costs are not assigned to products.
14.
F
Medium
In activitybased costing, a plantwide overhead rate is used
to apply overhead to products.
15
F
Medium
Changing a cost accounting system is likely to meet with little
resistance in an organization since it is a technical matter of
little interest to individuals outside of the accounting
department.
Multiple Choice
16.
D
Medium
Which of the following levels of costs should not be allocated
to products for decisionmaking purposes?
a. Unitlevel activities.
b. Batchlevel activities.
c. Productlevel activities.
d. Organizationsustaining activities
17.
C
Easy
Testing a prototype of a new product is an example of a:
a. Unitlevel activity.
b. Batchlevel activity.
c. Productlevel activity.
d. Organizationsustaining activity.
18.
B
Medium
Setting up equipment is an example of a:
a. Unitlevel activity.
b. Batchlevel activity.
c. Productlevel activity.
d. Organizationsustaining activity.
19.
B
Hard
The clerical activity associated with processing purchase
orders to produce an order for a standard product is an example
of a:
a. Unitlevel activity.
b. Batchlevel activity.
c. Productlevel activity.
d. Organizationsustaining activity.
Managerial Accounting, 9/e
19
20.
D
Medium
Worker recreational facilities is an example of a cost that
would ordinarily be considered to be:
a. Unitlevel.
b. Batchlevel.
c. Productlevel.
d. Organizationsustaining.
21.
B
Medium
Arranging for a shipment of a number of different products to a
customer is an example of an activity at which of the following
levels?
a. Unitlevel activity.
b. Batchlevel activity.
c. Customerlevel activity.
d. Organizationsustaining activity.
22.
D
Medium
Human resource management is an example of an activity at which
of the following levels?
a. Unitlevel activity.
b. Productlevel activity.
c. Batchlevel activity.
d. Organizationsustaining activity.
23.
D
Medium
Which of the following would be classified as a productlevel
activity?
a. Machine setup for a batch of a standard product.
b. Cafeteria facilities available to and used by all employees.
c. Human resource management.
d. Advertising a product.
24.
C
Hard
Departmental overhead rates may not correctly assign overhead
costs due to:
a. the use of direct labor hours in allocating overhead costs
to products rather than machine time or quantity of
materials used.
b. the high correlation between direct laborhours and the
incurrence of overhead costs.
c. overreliance on volume as a basis for allocating overhead
costs where products differ regarding the number of units
produced, lot size, or complexity of production.
d. difficulties associated with identifying cost pools for the
first stage of the allocation process.
25.
B
Medium
Overhead allocation based on volume alone:
a. is a key aspect of the activitybased costing model.
b. will systematically overcost highvolume products and
undercost lowvolume products.
c. will systematically overcost lowvolume products and
undercost highvolume products.
d. must be used for external financial reporting.
Managerial Accounting, 9/e
20
26.
C
Medium
Paul Company has two products: A and B. The company uses
activitybased costing. The estimated total cost and expected
activity for each of the company's three activity cost pools
are as follows:
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 P22,000 400 100 500
Activity 2 P16,240 380 200 580
Activity 3 P14,600 500 250 750
The activity rate under the activitybased costing system for
Activity 3 is closest to:
a. P70.45.
b. P28.87.
c. P19.47.
d. P58.40.
27.
B
Medium
Selena Company has two products: A and B. The company uses
activitybased costing. The estimated total cost and expected
activity for each of the company's three activity cost pools
are as follows:
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 P17,600 800 300 1,100
Activity 2 P12,000 500 200 700
Activity 3 P26,000 800 400 1,200
The activity rate under the activitybased costing system for
Activity 3 is closest to:
a. P46.33.
b. P21.67.
c. P65.00.
d. P18.53.
Managerial Accounting, 9/e
21
28.
D
Hard
Matt Company uses activitybased costing. The company has two
products: A and B. The annual production and sales of Product A
is 8,000 units and of Product B is 6,000 units. There are three
activity cost pools, with estimated total cost and expected
activity as follows:
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 P20,000 100 400 500
Activity 2 P37,000 800 200 1,000
Activity 3 P91,200 800 3,000 3,800
The cost per unit of Product A under activitybased costing is
closest to:
a. P2.40.
b. P3.90.
c. P10.59.
d. P6.60.
29.
Bridget Company uses activitybased costing. The company has two
products: A and B. The annual production and sales of Product A
is 2,000 units and of Product B is 3,000 units. There are three
activity cost pools, with estimated total cost and expected
activity as follows:
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 P9,000 400 350 750
Activity 2 P12,000 100 400 500
Activity 3 P48,000 400 1,200 1,600
The cost per unit of Product A under activitybased costing is
closest to:
a. P6.00.
b. P9.60.
c. P8.63.
d. P13.80.
Reference: 81
Note to the Instructor: Questions 30 to 32, 33 to 35, and 36 to 38 are
different versions of the same questions.
Dideda Company uses an activitybased costing system with three activity
cost pools. The company has provided the following data concerning its costs
and its activity based costing system:
Managerial Accounting, 9/e
22
Costs:
Manufacturing overhead ........... P360,000
Selling and admin. expenses ...... P240,000
Total .......................... P600,000
Distribution of resource consumption:
Activity Cost Pools
Order Customer
Size Support Other Total
Manufacturing overhead ......... 25% 65% 10% 100%
Selling and admin. expenses .... 60% 20% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
You have been asked to complete the firststage allocation of costs to
the activity cost pools.
30.
D
Easy
Refer To:
81
How much cost, in total, would be allocated in the firststage
allocation to the Order Size activity cost pool?
a. P150,000
b. P360,000
c. P255,000
d. P234,000
31.
B
Easy
Refer To:
81
How much cost, in total, would be allocated in the firststage
allocation to the Customer Support activity cost pool?
a. P255,000
b. P282,000
c. P120,000
d. P390,000
32.
C
Medium
Refer To:
81
How much cost, in total, should NOT be allocated to orders and
products in the second stage of the allocation process if the
activitybased costing system is used for internal decision
making?
a. P60,000.
b. P0.
c. P84,000.
d. P120,000.
Reference: 82
NOTE TO THE INSTRUCTOR: Questions 30 to 32, 33 to 35, and 36 to 38 are
different versions of the same questions.
Diehl Company uses an activitybased costing system with three activity cost
pools. The company has provided the following data concerning its costs and
its activity based costing system:
Managerial Accounting, 9/e
23
Costs:
Manufacturing overhead ........... P480,000
Selling and admin. expenses ...... P100,000
Total .......................... P580,000
Distribution of resource consumption:
Activity Cost Pools
Order Customer
Size Support Other Total
Manufacturing overhead ........ 5% 85% 10% 100%
Selling and admin. expenses ... 60% 20% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
You have been asked to complete the firststage allocation of costs to
the activity cost pools.
33.
D
Easy
Refer To:
82
How much cost, in total, would be allocated in the firststage
allocation to the Order Size activity cost pool?
a. P348,000
b. P188,500
c. P29,000
d. P84,000
34.
D
Easy
Refer To:
82
How much cost, in total, would be allocated in the firststage
allocation to the Customer Support activity cost pool?
a. P304,500
b. P493,000
c. P116,000
d. P428,000
35.
A
Medium
Refer To:
82
How much cost, in total, should NOT be allocated to orders and
products in the second stage of the allocation process if the
activitybased costing system is used for internal decision
making?
a. P68,000.
b. P0.
c. P116,000.
d. P58,000.
Reference: 83
NOTE TO THE INSTRUCTOR: Questions 30 to 32, 33 to 35, and 36 to 38 are
different versions of the same questions.
Dierich Company uses an activitybased costing system with three activity
cost pools. The company has provided the following data concerning its costs
and its activity based costing system:
Managerial Accounting, 9/e
24
Costs:
Manufacturing overhead ........... P600,000
Selling and admin. expenses ...... P220,000
Total .......................... P820,000
Distribution of resource consumption:
Activity Cost Pools
Order Customer
Size Support Other Total
Manufacturing overhead ........ 15% 75% 10% 100%
Selling and admin. expenses ... 60% 20% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
You have been asked to complete the firststage allocation of costs to
the activity cost pools.
36.
A
Easy
Refer To:
83
How much cost, in total, would be allocated in the firststage
allocation to the Order Size activity cost pool?
a. P222,000
b. P307,500
c. P123,000
d. P492,000
37.
D
Easy
Refer To:
83
How much cost, in total, would be allocated in the firststage
allocation to the Customer Support activity cost pool?
a. P389,500
b. P615,000
c. P164,000
d. P494,000
38.
B
Medium
Refer To:
83
How much cost, in total, should NOT be allocated to orders and
products in the second stage of the allocation process if the
activitybased costing system is used for internal decision
making?
a. P82,000.
b. P104,000.
c. P0.
d. P164,000.
Reference: 84
Davis Company uses an activitybased costing system in which there
are three activity cost pools. The company has provided the following data
concerning its costs and its activitybased costing system:
Costs:
Manufacturing overhead .......... P400,000
Selling and admin. Expenses ..... P200,000
Total ......................... P600,000
Managerial Accounting, 9/e
25
Distribution of resource consumption:
Activity Cost Pools
Order Customer
Size Support Other Total
Manufacturing overhead ........... 35% 55% 10% 100%
Selling and admin. Expense ....... 50% 30% 20% 100%
The "other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
You have been asked to complete the firststage allocation of the costs
to the activity cost pools.
39.
B
Easy
Refer To:
84
How much cost, in total, would be allocated in the firststage
allocation to the Order Size activity cost pool?
a. P210,000.
b. P240,000.
c. P300,000.
d. P255,000.
40.
D
Easy
Refer To:
84
How much cost, in total, would be allocated in the firststage
allocation to the Customer Support activity cost pool?
a. P255,000.
b. P180,000.
c. P330,000.
d. P280,000.
41.
C
Medium
Refer To:
84
How much cost, in total should NOT be allocated to orders and
products in the second stage of the allocation process if the
activitybased costing system is used for internal decision
making?
a. P0.
b. P60,000.
c. P80,000.
d. P120,000.
Reference: 85
NOTE TO THE INSTRUCTOR: Questions 42 to 44, 45 to 47, and 48 to 50 are
different versions of the same questions.
Escau Company is a wholesale distributor that uses activitybased costing
for all of its overhead costs. The company has provided the following data
concerning its annual overhead costs and its activity based costing system:
Overhead costs:
Wages and salaries .. P380,000
Other expenses ...... P100,000
Total ............. P480,000
Managerial Accounting, 9/e
26
Distribution of resource consumption:
Activity Cost Pools
Filling Customer
Orders Support Other Total
Wages and salaries .. 30% 60% 10% 100%
Other expenses ...... 35% 45% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
The activity measures for the activity cost pools for the year are as
follows:
Activity Cost Pool Activity
Filling orders ...... 3,000 orders
Customer support..... 20 customers
42.
C
Medium
Refer To:
85
What would be the total overhead cost per order according to
the activity based costing system? In other words, what would
be the overall activity rate for the filling orders activity
cost pool? (Round to the nearest whole cent.)
a. P56.00
b. P48.00
c. P49.67
d. P52.00
43.
A
Medium
Refer To:
85
What would be the total overhead cost per customer according to
the activity based costing system? In other words, what would
be the overall activity rate for the customer support activity
cost pool? (Round to the nearest whole peso.)
a. P13,650
b. P12,600
c. P14,400
d. P10,800
44.
B
Hard
Refer To:
85
To the nearest whole peso, how much wages and salaries cost
would be allocated to a customer who made 8 orders in a year?
a. P14,784.
b. P11,704.
c. P7,392.
d. P9,548.
Reference: 86
NOTE TO THE INSTRUCTOR: Questions 42 to 44, 45 to 47, and 48 to 50 are
different versions of the same questions.
Escalona Company is a wholesale distributor that uses activitybased costing
for all of its overhead costs. The company has provided the following data
concerning its annual overhead costs and its activity based costing system:
Managerial Accounting, 9/e
27
Overhead costs:
Wages and salaries .. P580,000
Other expenses ...... P200,000
Total ............. P780,000
Distribution of resource consumption:
Activity Cost Pools
Filling Customer
Orders Support Other Total
Wages and salaries .. 40% 50% 10% 100%
Other expenses ...... 35% 45% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Activity
Filling orders ...... 1,000 orders
Customer support .... 30 customers
45.
B
Medium
Refer To:
86
What would be the total overhead cost per order according to
the activity based costing system? In other words, what would
be the overall activity rate for the filling orders activity
cost pool? (Round to the nearest whole cent.)
a. P273.00
b. P302.00
c. P312.00
d. P292.50
46.
D
Medium
Refer To:
86
What would be the total overhead cost per customer according to
the activity based costing system? In other words, what would
be the overall activity rate for the customer support activity
cost pool? (Round to the nearest whole peso.)
a. P11,700
b. P13,000
c. P12,350
d. P12,667
47.
C
Hard
Refer To:
86
To the nearest whole peso, how much wages and salaries cost
would be allocated to a customer who made 4 orders in a year?
a. P8,859.
b. P7,124.
c. P10,595.
d. P14,248.
Managerial Accounting, 9/e
28
Reference: 87
NOTE TO THE INSTRUCTOR: Questions 42 to 44, 45 to 47, and 48 to 50 are
different versions of the same questions.
Escoto Company is a wholesale distributor that uses activitybased costing
for all of its overhead costs. The company has provided the following data
concerning its annual overhead costs and its activity based costing system:
Overhead costs:
Wages and salaries .. P540,000
Other expenses ...... P200,000
Total ............. P740,000
Distribution of resource consumption:
Activity Cost Pools
Filling Customer
Orders Support Other Total
Wages and salaries .. 10% 80% 10% 100%
Other expenses ...... 20% 60% 20% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Activity
Filling orders ...... 4,000 orders
Customer support .... 40 customers
48.
C
Medium
Refer To:
87
What would be the total overhead cost per order according to
the activity based costing system? In other words, what would
be the overall activity rate for the filling orders activity
cost pool? (Round to the nearest whole cent.)
a. P27.75
b. P37.00
c. P23.50
d. P18.50
49.
D
Medium
Refer To:
87
What would be the total overhead cost per customer according to
the activity based costing system? In other words, what would
be the overall activity rate for the customer support activity
cost pool? (Round to the nearest whole peso.)
a. P12,950
b. P11,100
c. P14,800
d. P13,800
50.
D
Hard
Refer To:
87
To the nearest whole peso, how much wages and salaries cost
would be allocated to a customer who made 8 orders in a year?
a. P7,474.
b. P14,948.
c. P9,191.
d. P10,908.
Managerial Accounting, 9/e
29
Reference: 88
NOTE TO THE INSTRUCTOR: Questions 51 to 54 and 55 to 58 are different
versions of the same questions.
Acton Company has two products: A and B. The annual production and sales of
Product A is 800 units and of Product B is 500 units. The company has
traditionally used direct laborhours as the basis for applying all
manufacturing overhead to products. Product A requires 0.3 direct labor
hours per unit and Product B requires 0.2 direct labor hours per unit. The
total estimated overhead for next period is P92,023.
The company is considering switching to an activitybased costing system
for the purpose of computing unit product costs for external reports. The
new activitybased costing system would have three overhead activity cost
poolsActivity 1, Activity 2, and General Factorywith estimated overhead
costs and expected activity as follows:
Estimated
Activity Overhead Expected Activity
Cost Pool Costs Product A Product B Total
Activity 1 P14,487 500 600 1,100
Activity 2 P64,800 2,500 500 3,000
General Factory P12,736 240 100 340
Total P92,023
(Note: The General Factory activity cost pool's costs are allocated on the
basis of direct labor hours.)
51.
D
Medium
Refer To:
88
The predetermined overhead rate under the traditional costing
system is closest to:
a. P37.46.
b. P21.60.
c. P13.17.
d. P270.66.
52.
A
Medium
Refer To:
88
The overhead cost per unit of Product B under the traditional
costing system is closest to:
a. P54.13.
b. P7.49.
c. P4.32.
d. P2.63.
53.
B
Medium
Refer To:
88
The predetermined overhead rate (i.e., activity rate) for
Activity 1 under the activitybased costing system is closest
to:
a. P28.97.
b. P13.17.
c. P83.66.
d. P24.15.
Managerial Accounting, 9/e
30
54.
A
Hard
Refer To:
88
The overhead cost per unit of Product A under the activity
based costing system is closest to:
a. P86.97.
b. P70.79.
c. P81.20.
d. P11.24.
Reference: 89
NOTE TO THE INSTRUCTOR: Questions 51 to 54 and 55 to 58 are different
versions of the same questions.
Addy Company has two products: A and B. The annual production and sales of
Product A is 1,700 units and of Product B is 1,100 units. The company has
traditionally used direct laborhours as the basis for applying all
manufacturing overhead to products. Product A requires 0.3 direct labor
hours per unit and Product B requires 0.6 direct labor hours per unit. The
total estimated overhead for next period is P98,785.
The company is considering switching to an activitybased costing system
for the purpose of computing unit product costs for external reports. The
new activitybased costing system would have three overhead activity cost
poolsActivity 1, Activity 2, and General Factorywith estimated overhead
costs and expected activity as follows:
Estimated
Activity Overhead Expected Activity
Cost Pool Costs Product A Product B Total
Activity 1 P30,528 1,000 600 1,600
Activity 2 P17,385 1,700 200 1,900
General Factory P50,872 510 660 1,170
Total P98,785
(Note: The General Factory activity cost pool's costs are allocated on the
basis of direct labor hours.)
55.
C
Medium
Refer To:
89
The predetermined overhead rate under the traditional costing
system is closest to:
a. P9.15.
b. P43.48.
c. P84.43.
d. P19.08.
56.
A
Medium
Refer To:
89
The overhead cost per unit of Product B under the traditional
costing system is closest to:
a. P50.66.
b. P5.49.
c. P26.09.
d. P11.45.
Managerial Accounting, 9/e
31
57.
A
Medium
Refer To:
89
The predetermined overhead rate (i.e., activity rate) for
Activity 2 under the activitybased costing system is closest
to:
a. P9.15.
b. P51.99.
c. P86.93.
d. P10.23.
58.
D
Hard
Refer To:
89
The overhead cost per unit of Product B under the activity
based costing system is closest to:
a. P50.66.
b. P26.09.
c. P35.28.
d. P38.16.
Reference: 810
NOTE TO THE INSTRUCTOR: Questions 59 to 60 and 61 to 62 are different
versions of the same questions.
Abel Company uses activitybased costing. The company has two products: A
and B. The annual production and sales of Product A is 200 units and of
Product B is 400 units. There are three activity cost pools, with estimated
costs and expected activity as follows:
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 P16,660 600 100 700
Activity 2 P18,450 1,100 700 1,800
Activity 3 P 9,731 60 160 220
59.
D
Medium
Refer To:
810
a. P24.91.
b. P26.36.
c. P16.77.
d. P10.25.
60.
A
Medium
Refer To:
810
The cost per unit of Product B is closest to:
a. P41.58.
b. P81.53.
c. P74.73.
d. P17.69.
Reference: 811
NOTE TO THE INSTRUCTOR: Questions 59 to 60 and 61 to 62 are different
versions of the same questions.
Accola Company uses activitybased costing. The company has two products: A
and B. The annual production and sales of Product A is 1,100 units and of
Product B is 700 units. There are three activity cost pools, with estimated
costs and expected activity as follows:
Managerial Accounting, 9/e
32
Activity Estimated Expected Activity
Cost Pool Cost Product A Product B Total
Activity 1 P18,271 600 500 1,100
Activity 2 P35,891 1,600 300 1,900
Activity 3 P48,796 440 420 860
61.
D
Medium
Refer To:
811
The activity rate for Activity 3 is closest to:
a. P119.72.
b. P116.18.
c. P26.67.
d. P56.74.
62.
A
Hard
Refer To:
811
The cost per unit of Product A is closest to:
a. P59.23.
b. P57.20.
c. P47.89.
d. P22.70.
Reference: 812
Arthur Company has two products: S and D. The company uses activitybased
costing and has prepared the following analysis showing the estimated total
cost and expected activity for each of its three activity cost pools:
Activity Estimated Expected Activity
Cost Pool Cost Product S Product D Total
Activity 1 P20,000 100 400 500
Activity 2 P14,600 500 250 750
Activity 3 P90,000 300 2,700 3,000
The annual production and sales of Product S is 4,547 units. The annual
production and sales of Product D is 7,913.
63.
B
Medium
Refer To:
812
The activity rate under the activitybased costing system for
Activity 3 is closest to:
a. P33.33.
b. P30.00.
c. P29.32.
d. P41.53.
64.
A
Hard
Refer To:
812
The cost per unit of Product S under activitybased costing is
closest to:
a. P5.00.
b. P1.98.
c. P10.00.
d. P1.83.
Reference: 813
Monson Company has two products: G and P. The company uses activitybased
costing and has prepared the following analysis showing the estimated total
cost and expected activity for each of its three activity cost pools:
Managerial Accounting, 9/e
33
Activity Estimated Expected Activity
Cost Pool Cost Product G Product P Total
Activity 1 P30,000 200 400 600
Activity 2 P24,000 600 900 1,500
Activity 3 P80,000 400 3,600 4,000
The annual production and sales of Product G is 10,640 units. The annual
production and sales of Product P is 26,600.
65.
D
Medium
Refer To:
813
The activity rate under the activitybased costing system for
Activity 2 is closest to:
a. P89.33.
b. P21.97.
c. P26.67.
d. P16.00.
66.
A
Hard
Refer To:
813
The cost per unit of Product P under activitybased costing is
closest to:
a. P4.00.
b. P30.16.
c. P10.00.
d. P6.88.
Reference: 814
NOTE TO THE INSTRUCTOR: Questions 67 to 68, 69 to 70, and 71 to 72 are
different versions of the same questions.
Forse Florist specializes in large floral bouquets for hotels and other
commercial spaces. The company has provided the following data concerning
its annual overhead costs and its activity based costing system:
Overhead costs:
Wages and salaries .. P80,000
Other expenses ...... P40,000
Total ............. P120,000
Distribution of resource consumption:
Activity Cost Pools
Making
Bouquets Delivery Other Total
Wages and salaries .. 60% 30% 10% 100%
Other expenses ...... 45% 25% 30% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Activity
Making bouquets ...... 60,000 bouquets
Delivery ............. 5,000 deliveries
Managerial Accounting, 9/e
34
67.
D
Medium
Refer To:
814
What would be the total overhead cost per bouquet according to
the activity based costing system? In other words, what would
be the overall activity rate for the making bouquets activity
cost pool? (Round to the nearest whole cent.)
a. P0.90
b. P1.05
c. P1.20
d. P1.10
68.
D
Medium
Refer To:
814
What would be the total overhead cost per delivery according to
the activity based costing system? In other words, what would
be the overall activity rate for the deliveries activity cost
pool? (Round to the nearest whole cent.)
a. P6.00
b. P6.60
c. P7.20
d. P6.80
Reference: 815
NOTE TO THE INSTRUCTOR: Questions 67 to 68, 69 to 70, and 71 to 72 are
different versions of the same questions.
Foster Florist specializes in large floral bouquets for hotels and other
commercial spaces. The company has provided the following data concerning
its annual overhead costs and its activity based costing system:
Overhead costs:
Wages and salaries .. P70,000
Other expenses ...... P50,000
Total ............. P120,000
Distribution of resource consumption:
Activity Cost Pools
Making
Bouquets Delivery Other Total
Wages and salaries .. 70% 20% 10% 100%
Other expenses ...... 45% 25% 30% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Activity
Making bouquets ...... 40,000 bouquets
Delivery ............. 1,000 deliveries
Managerial Accounting, 9/e
35
69.
A
Medium
Refer To:
815
What would be the total overhead cost per bouquet according to
the activity based costing system? In other words, what would
be the overall activity rate for the making bouquets activity
cost pool? (Round to the nearest whole cent.)
a. P1.79
b. P1.73
c. P2.10
d. P1.35
70.
B
Medium
Refer To:
815
What would be the total overhead cost per delivery according to
the activity based costing system? In other words, what would
be the overall activity rate for the deliveries activity cost
pool? (Round to the nearest whole cent.)
a. P27.00
b. P26.50
c. P30.00
d. P24.00
Reference: 816
NOTE TO THE INSTRUCTOR: Questions 67 to 68, 69 to 70, and 71 to 72 are
different versions of the same questions.
Foss Florist specializes in large floral bouquets for hotels and other
commercial spaces. The company has provided the following data concerning
its annual overhead costs and its activity based costing system:
Overhead costs:
Wages and salaries .. P70,000
Other expenses ...... P40,000
Total ............. P110,000
Distribution of resource consumption:
Activity Cost Pools
Making
Bouquets Delivery Other Total
Wages and salaries .. 55% 35% 10% 100%
Other expenses ...... 45% 25% 30% 100%
The "Other" activity cost pool consists of the costs of idle capacity
and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Activity
Making bouquets ...... 20,000 bouquets
Delivery ............. 7,000 deliveries
Managerial Accounting, 9/e
36
71.
A
Medium
Refer To:
816
What would be the total overhead cost per bouquet according to
the activity based costing system? In other words, what would
be the overall activity rate for the making bouquets activity
cost pool? (Round to the nearest whole cent.)
a. P2.83
b. P2.75
c. P3.03
d. P2.48
72.
D
Medium
Refer To:
816
What would be the total overhead cost per delivery according to
the activity based costing system? In other words, what would
be the overall activity rate for the deliveries activity cost
pool? (Round to the nearest whole cent.)
a. P3.93
b. P5.50
c. P4.71
d. P4.93
Reference: 817
NOTE TO THE INSTRUCTOR: Questions 73 to 75, 76 to 78, and 79 to 81 are
different versions of the same questions.
Grogam Catering uses activitybased costing for its overhead costs. The
company has provided the following data concerning the activity rates in its
activitybased costing system:
Activity Cost Pools
Preparing Arranging
Meals Functions
Wages ............ P1.15 P110.00
Supplies ......... P0.35 P380.00
Other expenses ... P0.25 P70.00
The number of meals served is the measure of activity for the Preparing
Meals activity cost pool. The number of functions catered is used as the
activity measure for the Arranging Functions activity cost pool.
Management would like to know whether the company made any money on a
recent function at which 100 meals were served. The company catered the
function for a fixed price of P21.00 per meal. The cost of the raw
ingredients for the meals was P8.25 per meal. This cost is in addition to
the costs of wages, supplies, and other expenses detailed above.
For the purposes of preparing action analyses, management has assigned
ease of adjustment codes to the costs as follows: wages are classified as a
Yellow cost; supplies and raw ingredients as a Green cost; and other
expenses as a Red cost.
Managerial Accounting, 9/e
37
73.
A
Medium
Refer To:
817
According to the activitybased costing system, what was the
total cost (including the costs of raw ingredients) of the
function mentioned above? (Round to the nearest whole peso.)
a. P1,560
b. P1,760
c. P1,060
d. P910
74.
D
Hard
Refer To:
817
Suppose an action analysis report is prepared for the function
mentioned above. What would be the "red margin" in the action
analysis report? (Round to the nearest whole peso.)
a. P690
b. P440
c. P390
d. P540
75.
A
Hard
Refer To:
817
Suppose an action analysis report is prepared for the function
mentioned above. What would be the "yellow margin" in the
action analysis report? (Round to the nearest whole peso.)
a. P635
b. P815
c. P710
d. P760
Reference: 818
NOTE TO THE INSTRUCTOR: Questions 73 to 75, 76 to 78, and 79 to 81 are
different versions of the same questions.
Groce Catering uses activitybased costing for its overhead costs. The
company has provided the following data concerning the activity rates in its
activitybased costing system:
Activity Cost Pools
Preparing Arranging
Meals Functions
Wages ............ P0.70 P145.00
Supplies ......... P0.45 P230.00
Other expenses ... P0.40 P100.00
The number of meals served is the measure of activity for the Preparing
Meals activity cost pool. The number of functions catered is used as the
activity measure for the Arranging Functions activity cost pool.
Management would like to know whether the company made any money on a
recent function at which 150 meals were served. The company catered the
function for a fixed price of P14.00 per meal. The cost of the raw
ingredients for the meals was P8.75 per meal. This cost is in addition to
the costs of wages, supplies, and other expenses detailed above.
For the purposes of preparing action analyses, management has assigned
ease of adjustment codes to the costs as follows: wages are classified as a
Yellow cost; supplies and raw ingredients as a Green cost; and other
expenses as a Red cost.
Managerial Accounting, 9/e
38
76.
B
Medium
Refer To:
818
(including the costs of raw ingredients) of the function
mentioned above? (Round to the nearest whole peso.)
a. P1,520
b. P2,020
c. P1,370
d. P2,220
77.
A
Hard
Refer To:
818
Suppose an action analysis report is prepared for the function
mentioned above. What would be the "red margin" in the action
analysis report? (Round to the nearest whole peso.)
a. P80
b. (P20)
c. (P70)
d. P230
78.
A
Hard
Refer To:
818
Suppose an action analysis report is prepared for the function
mentioned above. What would be the "yellow margin" in the
action analysis report? (Round to the nearest whole peso.)
a. P240
b. P365
c. P315
d. P420
Reference: 819
NOTE TO THE INSTRUCTOR: Questions 73 to 75, 76 to 78, and 79 to 81 are
different versions of the same questions.
Grodt Catering uses activitybased costing for its overhead costs. The
company has provided the following data concerning the activity rates in its
activitybased costing system:
Activity Cost Pools
Preparing Arranging
Meals Functions
Wages ............ P0.85 P110.00
Supplies ......... P0.50 P310.00
Other expenses ... P0.30 P120.00
The number of meals served is the measure of activity for the Preparing
Meals activity cost pool. The number of functions catered is used as the
activity measure for the Arranging Functions activity cost pool.
Management would like to know whether the company made any money on a
recent function at which 60 meals were served. The company catered the
function for a fixed price of P19.00 per meal. The cost of the raw
ingredients for the meals was P8.60 per meal. This cost is in addition to
the costs of wages, supplies, and other expenses detailed above.
For the purposes of preparing action analyses, management has assigned
ease of adjustment codes to the costs as follows: wages are classified as a
Yellow cost; supplies and raw ingredients as a Green cost; and other
expenses as a Red cost.
Managerial Accounting, 9/e
39
79.
B
Medium
Refer To:
819
According to the activitybased costing system, what was the
total cost (including the costs of raw ingredients) of the
function mentioned above? (Round to the nearest whole peso.)
a. P655
b. P1,155
c. P505
d. P1,355
80.
D
Hard
Refer To:
819
Suppose an action analysis report is prepared for the function
mentioned above. What would be the "red margin" in the action
analysis report? (Round to the nearest whole peso.)
a. P135
b. (P165)
c. (P115)
d. (P15)
81.
D
Hard
Refer To:
819
Suppose an action analysis report is prepared for the function
mentioned above. What would be the "yellow margin" in the
action analysis report? (Round to the nearest whole peso.)
a. P248
b. P198
c. P303
d. P123
Managerial Accounting, 9/e
40
Essay
82.
Hard
Ingersol Draperies makes custom draperies for homes and
businesses. The company uses an activitybased costing system
for its overhead costs. The company has provided the following
data concerning its annual overhead costs and its activity cost
pools.
Overhead costs:
Production overhead .. P120,000
Office expense ....... P120,000
Total .............. P240,000
Distribution of resource consumption:
Activity Cost Pools
Making Job
Drapes Support Other Total
Production overhead .. 35% 45% 20% 100%
Office expense ....... 5% 65% 30% 100%
The "Other" activity cost pool consists of the costs of
idle capacity and organizationsustaining costs.
The amount of activity for the year is as follows:
Activity Cost Pool Annual Activity
Making drapes ....... 2,000 yards
Job support ......... 160 jobs
Other ............... Not applicable
Required:
a. Prepare the firststage allocation of overhead costs to the
activity cost pools by filling in the table below:
Making Job
Drapes Support Other Total
Production overhead ..
Office expense .......
Total ..............
b. Compute the activity rates (i.e., cost per unit of activity)
for the Making Drapes and Job Support activity cost pools by
filling in the table below:
Making Job
Drapes Support
Production overhead ..
Office expense .......
Total ..............
Managerial Accounting, 9/e
41
c. Prepare an action analysis report in good form of a job that
involves making 71 yards of drapes and has direct materials
and direct labor cost of P2,510. The sales revenue from this
job is P4,400.
For purposes of this action analysis report, direct
materials and direct labor should be classified as a Green
cost; production overhead as a Red cost; and office expense
as a Yellow cost.
Answer:
a. Firststage allocation
Making Job
Drapes Support Other Total
Production overhead .. P42,000 P54,000 P24,000 P120,000
Office expense ....... P6,000 P78,000 P36,000 P120,000
Total .............. P48,000 P132,000 P60,000 P240,000
Activity ............. 2,000 160
yards jobs
b. Activity rates (costs divided by activity)
Production overhead .. P21.00 P337.50
Office expense ....... P3.00 P487.50
Total .............. P24.00 P825.00
c.
Overhead cost of the job.
Making Job
Drapes Support Total
Activity ............ 71 1
Production overhead . P1,491.00 P337.50 P1,828.50
Office expense ...... P213.00 P487.50 P700.50
Total ............. P1,704.00 P825.00 P2,529.00
Revenue ......................... P4,400.00
Green costs:
Direct materials and labor ... P2,510.00
Green margin .................... P1,890.00
Yellow costs:
Office expense ............... P700.50
Yellow margin ................... P1,190.50
Red costs:
Production overhead .......... P1,828.50
Red margin ...................... (P638.00)
Managerial Accounting, 9/e
42
