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CPA REVIEW SCHOOL OF THE PHILIPPINES Manila MANAGEMENT ADVISORY SERVICES ACTIVITY-BASED COSTING THEORY An accounting system that

collects financial and operating data on the basis of the underlying nature and extent of the cost drivers is Direct costing. Activity-based costing. The resource utilized by a given product divided by the total amount of the resource available is called the Activity driver. Consumption ratio. Which of the following statements is true? The traditional approach to costing uses many different cost drivers. Costs that are indirect to products are by definition traceable directly to products. Costs that are indirect to products are traceable to some activity. All of the above statements are true.

a. b. c. d.

product costs change because of changes in financial reporting. products that are difficult to produce show little profit. competitors prices appear unrealistically low. the company has a highly profitable niche all to itself.

1.

12. Traditional overhead allocations result in which of the following situations? a. Overhead costs are assigned as period costs to operations. c. manufacturing Cycle-time costing. b. d. High-volume products are assigned too much overhead, and Variable costing. low-volume products are assigned too little overhead. c. Low-volume products are assigned too much, and highvolume products are assigned too little overhead. d. c. The resulting allocations cannot be used for financial reports. Cost object. d. Sustaining activity. 13. Traditionally, managers have focused cost reduction efforts on a. activities. b. processes. c. departments. d. costs. 14. Which of the following is NOT a trait of a traditional cost management system? a. c. unit-based drivers allocation intensive

a. b. 2. a. b. 3. a. b. c. d.

4.Mass customization can be achieved through the use of a. Activity-based costing. b. just-in-time inventory. 5. a. b. c. d. 6. a. b. 7. a. b. Process value analysis is a key component of activity-based management that links product costing and Reduction of the number of cost pools. Continuous improvement. Accumulation of heterogeneous cost pools. Overhead rates based on broad averages. An approach to developing new ways to perform existing activities is called Process value analysis. Re-engineering. A(n) _______________ method first traces costs to a department and then to products. direct costing absorption costing

b. c. focus on managing activities Flexible manufacturing systems. d. all of the above. d. narrow and rigid product costing

15. Unit-level cost drivers are most appropriate as an overhead assignment base when a. several complex products are manufactured. b. only one product is manufactured. c. direct labor costs are low. d. factories produce a varied mix of products. c. Which Caveat analysis. 16. of the following is NOT a sign of poor cost data? Benchmarking. a. d. Competitors prices for high-volume products appear much too high. b. The company seems to have a highly profitably niche all to itself. traditionaldont costing c. c. Customers balk at price increases for low-volume d. products. activity-based costing d. Competitors prices for low-volume products appear much too high. c. In Activity-based traditional costing 17. Costing, which of the following would be d considered activity-based costing activity? a value-added a. b. Repair of machines. C .Bookkeeping. Engineering designs .d. Storage of inventory.

8. A(n)_______________ method first traces costs to activities and then to products. a. direct costing b. absorption costing 9. Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called overcosting. undercosting.

a. b.

10. An objective of activity-based management is to a. eliminate the majority of centralized activities in an organization. b. reduce or eliminate non-value-added activities incurred to make a product or provide a service. c. institute responsibility accounting systems in decentralized organizations. d. all of the above 11. Symptoms of an outdated cost system include all of the following EXCEPT

c. peanut-butter costing. d. department costing. 18. In the pharmaceutical or food industries, quality control inspections would most likely be viewed as a. c. b. d. non-value-added activities. value-added-activities. business-value-added activities. process-efficiency activities.

19. A basic assumption of activity-based costing (ABC) is that a. All manufacturing costs vary directly with units of

production.

b. c. d.

Products or services require the performance of activities, and activities consume resources. Only costs that respond to unit-level drivers are product costs. Only variable costs are included in activity-cost pools.

18. In the pharmaceutical or food industries, quality control inspections would most likely be viewed as a. c. b. d. non-value-added activities. value-added-activities. business-value-added activities. process-efficiency activities.

20. Activity-based costing and generally accepted accounting principles differ in that ABC a. does not define product costs in the same manner as GAAP. b. cannot be used to compute an income statement, but GAAP can. c. is concerned only with costs generated from automated processes, but GAAP is concerned with costs generated from both manual and automated processes. d. information is useful only to managers, while GAAP information is useful to all organizational stakeholders. 11. Symptoms of an outdated cost system include all of the following EXCEPT a. product costs change because of changes in financial reporting. b. products that are difficult to produce show little profit. c. competitors prices appear unrealistically low. d. the company has a highly profitable niche all to itself. 12. Traditional overhead allocations result in which of the following situations? a. b. c. d. Overhead costs are assigned as period costs to manufacturing operations. High-volume products are assigned too much overhead, and low-volume products are assigned too little overhead. Low-volume products are assigned too much, and highvolume products are assigned too little overhead. The resulting allocations cannot be used for financial reports.

19. A basic assumption of activity-based costing (ABC) is that a. All manufacturing costs vary directly with units of

production. b. c. d. Products or services require the performance of activities, and activities consume resources. Only costs that respond to unit-level drivers are product costs. Only variable costs are included in activity-cost pools.

20. Activity-based costing and generally accepted accounting principles differ in that ABC a. does not define product costs in the same manner as GAAP. b. cannot be used to compute an income statement, but GAAP can. c. is concerned only with costs generated from automated processes, but GAAP is concerned with costs generated from both manual and automated processes. d. information is useful only to managers, while GAAP information is useful to all organizational stakeholders. 21. ABC should be used in which of the following situations? a. b. c. d. single-product firms with multiple steps multiple-product firms with only a single process multiple-product firms with multiple processing steps in all manufacturing firms

13. Traditionally, managers have focused cost reduction efforts on a. activities. b. processes. 14. Which of the following is NOT a trait of a traditional cost management system? a. b. unit-based drivers focus on managing activities

c. departments. d. costs. 22. All of the following are examples of non-value-added activities except: A. reworking B. handling C. assembling D. expediting c. allocation intensive 23. Products make diverse demands on resources because of d. differences narrow and rigid costing in all of product the following EXCEPT a. volume. b. selling price. c. batch size. d. complexity. 24. a. c. b. d. The UNIQUE feature of an ABC system is the emphasis on costing individual jobs. multiple-cost pools. department indirect-cost rates. individual activities.

15. Unit-level cost drivers are most appropriate as an overhead assignment base when a. several complex products are manufactured. b. only one product is manufactured. c. direct labor costs are low. d. factories produce a varied mix of products. 16. Which of the following is NOT a sign of poor cost data? a. Competitors prices for high-volume products appear much too high. b. The company seems to have a highly profitably niche all to itself. c. Customers dont balk at price increases for low-volume products. d. Competitors prices for low-volume products appear much too high. 17. In Activity-based Costing, which of the following would be considered a value-added activity? a. b. Repair of machines. Engineering designs.

25. Design of an ABC system requires a. that the job bid process be redesigned. b. that a cause-and-effect relationship exists between resource costs and individual activities. c. an adjustment to product mix. d. both (b) and (c). 26. a. b. c. d. ABC systems create one large cost pool. homogenous activity-related cost pools. activity-cost pools with a broad focus. activity-cost pools containing many direct costs.

27. of the following statements about activity-based c. Which Bookkeeping. costing is not true? d. Storage of inventory.

a.

Activity-based costing is useful for allocating

c. d.

the currently attainable quantity standard zero

marketing and distribution costs. b. Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. c. In activity-based costing, cost drivers are what cause costs to be incurred. d. Activity-based costing differs from traditional costing systems in that products are not cross-subsidized. 28. If activity-based costing is implemented in an organization without any other changes being effected, total overhead costs will a. b. c. d. be reduced because of the elimination of non-value-added activities. be reduced because organizational costs will not be assigned to products or services. be increased because of the need for additional people to gather information on cost drivers and cost pools. remain constant and simply be spread over products differently.

34. include: A. C. B. D.

Examples of activities at the unit level of costs

cutting, painting, and packaging designing, changing, and advertising scheduling, setting up, and moving heating, lighting, and security

35. _____ are those that a company performs when it makes a group of units . a. Batch-level activities. c. Sustaining activities. b. Facility-sustaining activities. d. Unit-level activities. 36. include: A. C. B. D. cutting, painting, and packaging designing, changing, and advertising scheduling, setting up, and moving heating, lighting, and security Examples of activities at the batch level of costs

29. The use of activity-based costing normally results in a. Substantially greater unit costs for low-volume products than is reported by traditional product costing. b. Substantially lower unit costs for low-volume products than is reported by traditional product costing. c. Decreased setup costs being charged to low-volume products. d. Equalizing setup costs for all product lines. 30. _____ are those performed each time a unit is produced or sold. a. Batch-level activities. b. Facility-sustaining activities. 31. What is the normal effect on the numbers of cost pools and allocation bases when an activity-based cost (ABC) system replaces a traditional cost system? a. b. c. d. Cost Pools No Increase No Increase effect effect Allocation No No Increase Increase Bases effect effect 32. Book Co. uses the activity-based costing approach for cost allocation and product costing purposes. Printing, cutting, and binding functions make up the manufacturing process. Machinery and equipment are arranged in operating cells that produce a complete product starting with raw materials. Which of the following are characteristic of Boos activitybased costing approach? I. II. III. a. Cost drivers are used as a basis for cost allocation. Costs are accumulated by department or function for purposes of product costing. Activities that do not add value to the product are identified and reduced to the extent possible. I only. b. I and II.

37. If JIT manufacturing is used, maintenance of the production equipment would be classified as a a. unit-level activity c. cell-level activity b. product-level activity d. c. facility-level activity Sustaining activities. d. Unit-level activities. 38. Which of the following is not a type of sustaining activity? a. Capacity-sustaining. c. Distribution-channel sustaining. b. Customer-sustaining. d. Unit-sustaining. 39. Testing a prototype of a new product is an example of a a. Unit-level activity. c. Product-level activity. b. Batch-level activity. d. Organization-sustaining activity. 40. Examples of activities at the product level of costs include: A. C. B. D. 41. a. b. c. c. d. cutting, painting, and packaging designing, changing, and advertising scheduling, setting up, and moving heating, lighting, and security In allocating variable costs to products, a volume-based cost driver should be used. direct labor hours should always be used as the allocation base. I and III. d. II and III. a company should use the same allocation base that it uses for fixed costs. a company should never use more than one cost driver.

33. The ideal standard quantity for nonvalue-added activities is a. b. the cost of resources acquired in advance of usage practical capacity

42. The following items are used in tracing costs in an ABC system. In which order are they used? (1) a. cost object 1, 2, 3, 4 (2) b. cost driver 2, 3, 4, 1

PROBLEMS A time-and-motion study revealed that it should take 1 hour to produce a product that currently takes 3 hours to produce. (3)Labor activity driver (4) cost pool is $8 per hour. Nonvalue-added costs are c. 2, 4, 3, 1 d. 4, 3, 1, 2 a. $8 b.$16 c.$24 d.$0 1. 2. Setup time for a product is six hours. A firm that uses JIT and produces the same product has reduced setup c. time Sustaining to 30 minutes. activities. Setup labor is $24 per hour. Valued. added Unit-level costs activities. are a. 3. $144 b. $13 2c.$24 d.$12 Each unit of product requires 8 gallons of raw material. Due to scrap and rework, each unit has been averaging 9 gallons of raw material. The raw material costs $4 per gallon. Valuecosts are C. added designing, changing, and advertising b. d. $4 $36 $32

43. _____ relate to an entire plant as a whole. a. Batch-level activities. b. Facility-sustaining activities. 44. include: A. B. cutting, painting, and packaging scheduling, setting up, and moving Examples of activities at the plant level of costs

a. D. $2heating, lighting, and security c. 4.

45. An item or event that has a cause-effect relationship with the incurrence of a variable cost is called a a. mixed cost. b. predictor.

46. Which of the following is typically regarded as a cost driver in traditional accounting practices? a. b. number of purchase orders processed number of customers served

A company keeps 20 days of raw materials inventory on to avoid c. hand direct cost. shutdowns due d. to raw costmaterials driver. shortages. Carrying costs average $2,000 per day. A competitor keeps 10 days of inventory on hand the competitors carrying costs average $1,000 per day. Value-added costs are $20,000 $0

a. c. $40,000 number of transactions processed b. d. number of direct labor hours worked c. $10,000 d. 5.

47. A cost pool is a. All of the costs of a particular department. b. All costs in a group such as variable costs or discretionary fixed costs. c. All costs related to a product or product line. d. All costs that have the same driver. 48. The activities that drive resource requirements are called the a. Activity drivers. b. Cost objects. 49. __________________ are causal factors that explain the consumption of overhead. a. Activity drivers b. Cost pools 50. All of the following are unit-based activity drivers EXCEPT a. machine hours b. number of setups 51. All of the following are nonunit-based activity drivers EXCEPT a. number of setups b. number of direct labor hours 52. In an activity-based costing system, what should be used to assign a departments manufacturing overhead cost to products produced in varying lot sizes? a. b. Multiple cause and effect relationships.

New Rage Cosmetics has used a traditional cost accounting system to apply quality control costs uniformly to all products at a rate of 14.5% of direct labor cost. Monthly direct labor cost for Satin Sheen makeup is $27,500. In an attempt to distribute quality control costs more equitably, New Rage is considering activity-based costing. The monthly data shown in the chart below have been gathered for Satin Sheen. Quantity c. Resource drivers. Activity Cost Cost for d. Sustaining activities. Driver Rates Satin Sheen Incoming Type of $11.50 12 types material material per type d. Cost catchers c. Cost objectives inspection In-process Number $0.14 17,500 inspection of units per unit units c. number of units d. order direct labor hours Product Per $77per 25 certification order orders The monthly quality control cost assigned to Satin Sheen makeup using activity-based costing is c. number of inspections a. d. $88.64 perof order. number material moves b. $525.50 lower than the cost using the traditional system. c. $8,500.50 d. $525.50 higher than the cost using the traditional system.

53. In activity-based costing, preliminary cost allocations assign costs to a. departments. b. processes. 54. In activity-based costing, final cost allocations assign costs to a. departments. b. processes.

Questions 6 thru 8 are based on the following information. A single cause and effect relationship. c. Relative net sales values of the Dierich Company uses an activity-based costing system with three activity cost pools. The company has provided the d. following A products ability to bear allocations. data concerning its cost costs and its activity based costing system: Costs: Manufacturing overhead c. Selling products. d. activities. and admin. expenses Total Distribution of resource consumption: Activity Cost Pools c. products. d. Customer activities. Order Other Total Size Support Manufacturing 15% 75% 10% 100% overhead

Selling and 60% 20% 20% 100% admin. Expenses The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. You have been asked to complete the first-stage allocation of costs to the activity cost pools. 6. a. 7. How much cost, in total, would be allocated in the first-stage allocation to the Order Size activity cost pool? $222,000 b. $307,500 How much cost, in total, should NOT be allocated to orders and products in the second stage of the allocation process if the activity-based costing system is used for internal decision-making? $82,000. b. $104,000. 8. How much cost, in total, would be allocated in the first-stage allocation to the Customer Support activity cost pool? $389,500 b. $615,000 $164,000 d. $494,000 ALF Co. is an assisted-living facility that provides services in the form of residential space, meals, and other occupant assistance (OOA) to its occupants. ALF currently uses a traditional cost account system that defines the service provided as assisted living, with service output measured in terms of occupant days. Each occupant is charged a daily rate equal to ALFs annual cost of providing residential space, meals and OOA divided by total occupant days. However, an activity-based costing (ABC) analysis has revealed that occupants use of OOA varies substantially. This analysis determined that occupants could be grouped into three categories (low, moderate, and high usage of OOA) and that the activity driver of OOA is nursing hours. The driver of the other activities is occupant days. The following quantitative information was also provided: Annual Occupant Annual Nursing Days Hours 36,000 90,000 18,000 90,000 6,000 120,000 60,000 300,000 The total annual cost of OOA was $7.5 million, and the total annual cost of providing residential space and meals was $7.2 million. Accordingly, the ABC analysis indicates that the daily costing rate should be $182.50 for occupants in the low-usage category. $145.00 for occupants in the medium-usage category. $245.00 for occupants in the high-usage category. $620.00 for all occupants. Questions 10 through 13 are based on the following information. Zebra Corporation has the following activities: creating bills of materials (BOM), studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tooling. The general ledger accounts reveal the following expenditures for manufacturing engineering: Salaries Equipment Supplies Total The equipment is used for two activities: improving processes and designing tooling. Thirty-five percent of the equipments time is used for improving processes and sixty five percent is used for designing tools. The salaries are for two engineers. One is paid $100,000, while the other earns Occupant category Low Usage Medium Usage High Usage

$50,000. The $100,000 engineer spends 40% of his time training employees in new processes and 60% of his time on improving processes. The remaining engineer spends equal time on all activities. Supplies are consumed in the following proportions: Creating BOMs Studying capabilities Improving processes Training employees tooling c. Designing $123,000 d. $492,000 10. What is the cost assigned to the creating BOMs activity? a. $62,500 b. $15,000 c. $87,500 d. $250,000 11. What is the cost assigned to the improving processes c. activity? $0. d. $164,000. a. c. $250,000 $87,500 b. d. $50,000 $102,000

a.

a. c. 9.

12. What is the cost assigned to the training employees activity? a. $55,000 b. $250,000 c. $62,500 d. $162,500 13. What is the cost assigned to the designing tooling activity? a. $162,500 b. $66,000 c. $50,000 d. $250,000 Questions 14 through 16 are based on the following information. A company has identified the following overhead costs and cost drivers for the coming year. Overhead Cost Driver Budgeted Budgeted Item Cost Activity Level Machine No. of $ 20,000 200 setup setups Inspection No. of $130,000 6,500 inspections Material No. of $ 80,000 8,000 handling material moves Engineering Engineering $ 50,000 1,000 hours $280,000 The following information was collected on three jobs that were completed during the year: Job Job 102 Job 101 103 Direct materials $5,000 $12,000 $8,000 Direct labor $2,000 $ 2,000 $4,000 Units completed 100 50 200 Number of setups 1 4 2 Number of 20 inspections 10 30 Number of material moves 30 10 50 Engineering hours 10 50 10 Budgeted direct labor cost was $100,000, and budgeted direct material cost was $280,000. $150,000 14. If the company uses activity-based costing, 80,000 how much overhead cost should be allocable to Job 101? 20,000 a. $1,300 b. $2,000 $250,000 c. $5,000 d. $5,600 15. If the company uses activity-based costing, compute the cost of each unit of Job 102. a. $340 b. $392

a. b. c. d.

c.

$440

d.

$520

16. The company prices its products at 140% of cost. If the company uses activity-based costing, the price of each unit of Job 103 would be a. $98 b. $100 Questions 17 thru 22 are based on the following information Special Products recently installed an activity-based relational data base. Using the information contained in the activity relational table, the following pool rates were computed: $200 per purchase order $12 per machine hour, process A $15 per machine hour, process B $40 per engineering hour Two products are produced by Special Products: A and B. Each product has an area in the plant that is dedicated to its production. The plant has two manufacturing processes, process A and process B. Other processes include engineering, product handling and procurement. The product relational table for Special is as follows: Activity Usage Product A Product B a. c.

direct labor-hours 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 $92,023. c. The $116 company is considering d. switching $140 to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools-Activity 1, Activity 2, and General Factory--with estimated overhead costs and expected activity as follows: Estimated Expected Activity Activity Overhead Product Product Total Cost Costs A B Pool Activity 1 $14,487 500 600 1,100 Activity 2 $64,800 2,500 500 3,000 General $12,736 240 100 340 Factory Total $92,023 (Note: The General Factory activity cost pool's costs are allocated on the basis of direct labor hours.) 23. The predetermined overhead rate under the traditional costing system is closest to: $37.46. b. $21.60. $13.17. d. $270.66.

Units 200,000 25,000 Purchase 250 125 orders 3 Machine hours 80,000 10,000 4 Engineering 1,250 1,500 hours 17. How much overhead cost will be assigned to product A using the number of purchase orders? a. $50,000 b. $25,000 c. $40,000,000 d. $66,750 18. How much overhead cost will be assigned to product B using engineering hours? a. $50,000 b. $60,000 c. $1,000,000 d. $400,500 19. How much overhead cost will be assigned to product A using process A? a. $1,200,000 b. $2,400,000 c. $960,000 d. $120,000 20. How much overhead cost will be assigned to product B using process B? a. $1,200,000 b. $960,000 c. $120,000 d. $150,000 21.What is the unit cost of Product A? $4.71 b. $252.00 d.

Activity Driver # 1 2

Name

24. The overhead cost per unit of Product B under the traditional costing system is closest to: a. $54.13. b. $7.49. c. $4.32. d. $2.63. 25. .The predetermined overhead rate (i.e., activity rate) for Activity 1 under the activity-based costing system is closest to: a. $28.97. b. $13.17. c. $83.66. d. $24.15. 26.The overhead cost per unit of Product A under the activity-based costing system is closest to: $86.97. b. $70.79. $81.20. d. $11.24. Question 27 through 30 are based on the following information. This information was presented as part of Question 3 on Part 3 of the June 1992 CMA examination, which covered activity-based costing. Alaire Corporation manufactures several different types of printed circuit boards: however, two of the boards account for the majority of the companys sales. The first of these boards, a television (TV) circuit board, has been a standard in the industry for several years. The market for this type of board is competitive and therefore price-sensitive. Alaire plans to sell 65,000 of the TV boards in 1993 at a price of $150 per unit. The second high-volume product, a persona computer (PC) circuit board, is a recent addition to Alaires product line. Because the PC board incorporates the latest technology, it can be sold at a premium price, plans include the sale of 40,000 PC boards at $300 per unit. Alaires management group is meeting to discuss strategies for 1993, and the current topic of conversation is how to spend the sales and promotion dollars for next year. The sales manager believe that the market share for the TV board could be expanded by concentrating Alaires promotional efforts in this area. In response to this suggestion, the production manager said, Why dont you go after a bigger market for the PV board? The cost sheets that

a. c.

a. c.

$3.76 $5.30

22. What is the unit cost of Product B? a. $9.40 c. $252.00

b. d.

$6.00 $6.41

Questions 23 thru 26 are based on the following information. 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

I get show a premium price for the PC board, selling it should help overall profitability. Alaire uses a standard cost system, and the following data apply to the TV and PC boards. TV Board PC Board Direct materials $80 $140 Direct labor 1.5 hours 4.0 hours Machine time 0.5 hours 1.5 hours Variable factory overhead is applied on the basis of direct labor hours. For 1993, variable factory is budgeted at $1,120,000, and direct labor hours are estimated at 280,000. The hourly rates for machine time and direct labor are $10 and $14, respectively. Alaire applies a material handling charge at 10% of materials cost, thus materials handling charge is not included in variable factory overhead. Total 1993 expenditures for materials are budgeted at $10,600,000. Ed Watch, Alaires controller, believes that, the management group proceeds with the discussion about allocating sales and promotional dollars to individual products, they should consider the activities involved in the production. As Welch explained to the group, Activity-based costing integrates the cost of all activities, known as cost drivers, into individual product costs rather than including these costs in overhead pools. Welch has prepared the schedule shown below to help the management group understand this concept. Using this information, Welch explained, we can calculate an activity-based cost for each TV board and each PC board and then compare it to the standard cost we have bee using. The only cost that remains the same for both cost methods is the cost of direct materials. The cost drivers will replace the direct labor, machine time, and overhead costs in the standard cost. Annual Activity for Cost Driver

insertion Wave soldering

132,000 $5,332,000

parts No. boards

of

parts 110,000 boards

Required per unit TV Board Parts 25 Machine insertions 24 Manual insertions 1 Machine setups 2 Hazardous waste 0.02 lbs. Inspections 1 27. On the basis of standard costs, the total contribution budgeted for the TV board is a. $1,950,000 b. $2,275,000 c. $2,340,000 d. $2,470,000 28. On the basis of activity-based costs (ABC), the total contribution budgeted for the TV board is a. $1,594,000 b. $1,950,000 c. $2,037,100 d. $2,557,100 29. On the basis of standard costs, the total contribution budgeted for the PC board is a. $3,000,000 b. $2,960,000 c. $2,920,000 d. $2,360,000 30. On the basis of activity-based costs, the total contribution budgeted for the PC board is a. P1,594,000 b. $1,950,000 c. $2,360,000 d. $2,557,100 Answer Key Theory 1. B 2. B 3. C 4. C 5. B 6. B 7. C 8. D 9. C 10. B

Budgeted Cost

Cost Driver

11. 12. 13. 14. 15. 16. 17. 18. 19. 20.

B B D B B A B C B A

21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

C C B D B B B D A D

31. 32. 33. 34. 35. 36. 37. 38. 39. 40.

D C D A A B C D C C

41. 42. 43. 44. 45. 46. 47. 48. 49. 50.

A C B D D D D C A B

51. 52. 53. 54.

B B D C

Materials overhead: Procurement Production scheduling Packaging shipping

$400,000 220,000 & 440,000 $1,060,000

No. parts No. boards No. boards

of of of

4,000,000 parts 110,000 boards 110,000 boards

Variable overhead: Machine setup Hazardous waste disposal Quality control General supplies Manufacturing: Machine insertion Manual

Problems 1. B 11. 2. D 12. 3. C 13. 4. D 14. 5. D 15. 6. A 16. 7. B 17. 8. D 18. 9. A 19. 10. B 20.

D A B A A A A B C D

21. 22. 23. 24. 25. 26. 27. 28. 29. 30.

D A D A B A A D D A

$446,000 48,000 560,000 66,000 $1,120,000 $1,200,000 4,000,000

No. of setups Lbs. of waste No. of inspections No. of boards

278,750 setups 16,000 lbs. 160,000 inspectns 110,000 boards

No. parts No.

of of

3,000,000 parts 1,000,000