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Exam 18: Activity-Based Costing

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Question 21

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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?

A) $9.00 per machine hour
B) $19.50 per machine hour
C) $7.43 per machine hour
D) $4.00 per machine hour

E) All of the above
F) A) and D)

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Question 22

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Using multiple department factory overhead instead of a single plantwide factory overhead rate:

A) results in more accurate product costs
B) results in distorted product costs
C) is simpler and less expensive to compute than a plantwide rate
D) applies overhead costs to all departments equally

E) A) and B)
F) C) and D)

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Question 23

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Explain why it is imperative that proper factory overhead be allocated in factories that produce multiple products.

Bugaboo Co.manufactures three types of cookies: Fluffs,Crinkles,and Snaps.The production process is relatively simple,and factory overhead costs are allocated to products using a single plantwide factory rate based on direct labor hours.Information for the month of May,Bugaboo's first month of operations,follows: ​ Bugaboo has budgeted direct labor costs for May at $8.50 per hour.Budgeted direct materials costs for May are: Fluffs,$0.75 / unit; Crinkles $0.40 / unit; and Snaps $0.30 / unit. Bugaboo's budgeted overhead costs for May are: ​ Assume that Bugaboo sells all the boxes it produces in May.

Condelezza Co.manufactures two products,A and B,in two production departments,Assembly and Finishing.Condelezza Co.expects to produce 10,000 units of Product A and 20,000 units of Product B in the coming year.Budgeted factory overhead costs for the coming year are: ​ The machine hours expected to be used in the coming year are as follows: ​ (c) Which method is better (plantwide or department)? Why?

Determine the activity rate for production per machine hour.

Using the single plantwide factory overhead rate with an allocation base of direct labor hours,how much factory overhead will Blackwelder Factory allocate to small lamp production if actual direct hours for the period is 285,000?

Determine the overhead in the Finishing Department for each unit of Product A if Blue Ridge Marketing Inc.uses a multiple department rate system. ​

The Bonnington Company manufactures small lamps and desk lamps.The following shows the activities per product: ​ Using the following information prepared by the Bonnington Company,determine the total factory overhead to be charged to small lamps.

The Roget Factory has determined that its budgeted factory overhead budget for the year is $15,500,000.They plan to produce 2,000,000 units.Budgeted direct labor hours are 1,050,000 and budgeted machine hours are 750,000.Using the single plantwide factory overhead rate based on direct labor hours,calculate the factory overhead rate for the year.

If the activities causing overhead costs are different across different departments and products,use of a plantwide factory overhead rate will cause distorted product costs.

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

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

If the budget estimates that a table lamp will require 2 hours of finishing and 1 hours of production,how much factory overhead will the Kaumajet Factory allocate to each unit of table lamp using the multiple production department factory overhead rate method with an allocation base of direct labor hours?

What is the Assembly Department overhead rate per labor hour?

Tulip Company produces two products,T and U.The indirect labor costs include the following two items: ​ The following activity-base usage and unit production information is available for the two products: ​

When a plantwide factory overhead rate is used,the total overhead costs allocated to all products are the same.

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.

Service companies can effectively use single facility-wide overhead costing to compute product (service)costs.

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. ​