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WorksheetsBAC1054 ABC
Total questions: 12
Worksheet time: 3hrs 0mins
Traditionally, overhead is allocated based on direct labor cost or direct labor hours.
True
False
Current trends in manufacturing include less direct labor and more overhead.
True
False
Activity-based costing allocates overhead to multiple cost pools and assigns the cost pools to products using cost drivers.
True
False
A cost driver does not generally have a direct cause-effect relationship with the resources consumed.
True
False
Which of the following is not typical of traditional costing systems?
Use of a single predetermined overhead rate.
Use of direct labor hours or direct labor cost to assign overhead.
Assumption of correlation between direct labor and incurrence of overhead cost.
Use of multiple cost drivers to allocate overhead.
The costs that are easiest to trace directly to products are
direct materials and direct labor.
direct labor and overhead.
direct materials and overhead.
none of the above; all three costs are equally easy to trace to the product.
Activity-based costing
allocates overhead to activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers.
accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver.
assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools.
allocates overhead directly to products and services based on activity levels.
An activity-based overhead rate is computed as follows:
actual overhead divided by actual use of cost drivers.
estimated overhead divided by actual use of cost drivers.
actual overhead divided by estimated use of cost drivers.
estimated overhead divided by estimated use of cost drivers.
One of Stine Company’s activity cost pools is machine setups, with estimated overhead of $360,000. Stine produces sparklers (400 setups) and lighters (600 setups). How much of the machine setup cost pool should be assigned to sparklers?
$360,000
$144,000
$144,000
$216,000
Which of the following is a limitation of activity-based costing?
More cost pools
Less control over overhead costs
Poorer management decisions
Some arbitrary allocations continue
The primary benefit of ABC is it provides
better management decisions.
enhanced control over overhead costs.
more cost pools.
more accurate product costing.
Bark Manufacturing has three activities in its manufacturing process: machine setups, machining, and inspections. Estimated annual overhead cost for each activity is $80,000, $162,500, and $28,000, respectively. The expected annual use in each department is 1,000 setups, 12,500 machine hours, and 875 inspections.
Instructions
Compute the overhead rate for each activity.
