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Exam 11: Cost Allocation and Activity-Based Costing

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Question 21

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

A) True
B) False

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Question 22

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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.

A) $14.76
B) $20.67
C) $7.75
D) $77.50

E) A) and C)
F) None of the above

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Question 23

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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.

The Ramapo Company uses a single overhead rate to apply all overhead costs based on labor hours.What is the overhead cost per unit for Dinks?

Activity-based costing is much easier to apply than single plantwide factory overhead allocation.

A plantwide factory overhead rate is computed by dividing total budgeted factory overhead costs by the plantwide allocation base.

ABC is used to allocate selling and administrative expenses to each product based on the product's individual differences in consuming these activities.

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?

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.

Multiple production department factory overhead rates are most useful when production departments significantly differ in their manufacturing processes.

Determine the activity rate per production order for scheduling.

Activity cost pools are cost accumulations associated with a given activity.

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. a Compute Bugaboo's plantwide factory overhead rate for May. b Compute the product cost in May for each type of cookie. c Does Bugaboo's use of a plantwide factory overhead rate in any way distort the product costs for May?

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

All of the following can be used as an allocation base for calculating factory overhead rates except:

Service companies can effectively use activity-based costing to compute product service costs.

Activity-based costing for selling and administrative expenses can also be beneficial in allocating expenses to various products.Which of the following is the best allocation base for help desk costs?

Which of the following are the two most common allocation bases for factory overhead?

The Camper's Edge Factory produces two products-canopies and tents.It has two separate departments-Cutting and Sewing.The budget is $350,000 for the Cutting Department and $400,000 for the Sewing Department.Each canopy requires 2 hours of cutting and 1 hour of sewing.Each tent requires 1 hour of cutting and 6 hours of sewing.The budget estimates that 20,000 canopies and 10,000 tents will be manufactured during the year.Determine a the total number of budgeted direct labor hours for the year in each department, b the departmental factory overhead rates for both departments, and c the factory overhead allocated per unit of each product using the department factory overhead allocation rates using direct labor hours as the base.

Calculate the total factory overhead to be charged to desk lamps.