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Folk Practice Quiz - Chapter 3 1. All of the following are examples of product-level activities except: Human resource management.

B) Advertising a product. C) Testing a prototype of a new product. ) !arts administration. ". All of the following are examples of #atch-level activities except: A) !urchase order processing. B) $etting up e%uipment. C) The clerical activity associated with processing purchase orders to produce an order for a standard product. D) Worker recreational facilities. &. Angelina Company uses activity-#ased costing to determine the costs of its two products: A and B. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: Activity Cost !ool Activity 1 Activity " Activity & (stimated Cost )1*+,-)1.+--)1/+--!roduct A ,-"+"-/-(xpected Activity !roduct B &-1+,-&-Total 1+1-/+--0--

The activity rate under the activity-#ased costing system for Activity & is closest to: A) )/.--. B) ),.1*. C) )1,.--. D) $ !.!!. Solution: Activity rate for Activity &: )1/+--- 0-- 2 )"-.-/. 3laherty Company uses activity-#ased costing to compute product costs for external reports. The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool. (stimated costs and activities for the current year are presented #elow for the three activity cost pools: (stimated 4verhead Cost (xpected Activity

Activity 1 Activity " Activity &

)&.+--)"-+--)/-+---

1+,-"+--"+1--

Actual activity for the current year was as follows: Actual Activity 1+,11 "+--1 "+/*-

Activity 1 Activity " Activity &

The amount of overhead applied for Activity & during the year was closest to: A) )&.+&--. ") $3#$%&!. C) )/-+---. ) )*.+1*-. Solution: Activity rate for Activity &: )/-+--- "+1-- 2 )1..-Amount of overhead applied for Activity &: "+/*- x )1..-- 2 )&*+,/1. Charles Company has two products: A and B. The company uses activity-#ased costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools: Activity Cost !ool Activity 1 Activity " Activity & (stimated 4verhead Cost ) /-+--) "*+"-)1,-+--(xpected Activity !roduct ' !roduct " "-,-1+--1-.-1+/--

Total 1+--1+1-.+---

The annual production and sales level of !roduct A is *+-*/ units. The annual production and sales level of !roduct B is 11+,".. The activity rate under the activity#ased costing system for Activity & is closest to: A) )"*.&". ") $3!.!!. C) )&&.&&. ) )/1.1&.

Solution: Activity rate for Activity &: )1,-+--- .+--- 2 )&-.-.. Charles Company has two products: A and B. The company uses activity-#ased costing and has prepared the following analysis showing the estimated total cost and expected activity for each of its three activity cost pools: Activity Cost !ool Activity 1 Activity " Activity & (stimated 4verhead Cost ) /-+--) "*+"-)1,-+--(xpected Activity !roduct ' !roduct " "-,-1+--1-.-1+/--

Total 1+--1+1-.+---

The annual production and sales level of !roduct A is *+-*/ units. The annual production and sales level of !roduct B is 11+,".. 56ote that this is the same information as provided for the previous %uestion.) The overhead cost per unit of !roduct ' under activity-#ased costing is closest to: A) )1.,&. B) )1.*,. C) $(.!!. ) )1-.--. Solution: 4verhead cost for !roduct A: Activity 1: 5)/-+--- 1+---) x "-Activity ": 5)"*+"-- 1+1--) x 1+--Activity &: 5)1,-+--- .+---) x .-Total overhead cost per unit for !roduct A ivided #y num#er of units produced 4verhead cost per unit of !roduct A 0. ) ,+---.-1*+/....0 1,+---.-/1+/....0 *+-*/ ) 1.--

u!age Company uses activity-#ased costing to compute product costs for external reports. The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool. (stimated costs and activities for the current year are presented #elow for the three activity cost pools: (stimated 4verhead (xpected

Activity 1 Activity " Activity &

Cost ) 1,+.1. ) .-+-/, )1&-+&"/

Activity "+/-/+,-/+/--

Actual costs and activities for the current year were as follows: Actual 4verhead Cost ) 1,+/0. ) 1*+0*, )1&-+"&/ Actual Activity "+&0/+,&/+/1-

Activity 1 Activity " Activity &

The total de#its to the 7anufacturing 4verhead account during the year were closest to: ') $ &%$(!%. B) )"/,+*,,. C) )"11+11-. ) )"1-+&&/ Solution: Actual 4verhead Cost ) 1,+/0. 1*+0*, 1&-+"&/ )"/,+1-,

Activity 1 Activity " Activity & Total ,

u!age Company uses activity-#ased costing to compute product costs for external reports. The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool. (stimated costs and activities for the current year are presented #elow for the three activity cost pools. 56ote that this is the same data as that provided for the %uestion a#ove.) (stimated 4verhead Cost ) 1,+.1. ) .-+-/, )1&-+&"/ (xpected Activity "+/-/+,-/+/--

Activity 1 Activity " Activity &

Actual costs and activities for the current year were as follows: Actual 4verhead Cost ) 1,+/0. ) 1*+0*, )1&-+"&/ Actual Activity "+&0/+,&/+/1-

Activity 1 Activity " Activity &

The total credits to the 7anufacturing 4verhead account during the year were closest to: A) )"/,+1-,. B) )"/,+*,,. C) $ (!$)(). ) )"11+&&/. Solution: Total credits to 7anufacturing 4verhead account 5that is+ amount of overhead applied to production): Activity 1: 5)1,+.1. "+/--) x "+&0) 10+*"".,Activity ": 5).-+-/, /+,--) x /+,&.-+/"&.&Activity &: 5)1&-+&"/ /+/--) x /+/11&1+,-/.*. Total overhead cost per unit for !roduct A )"1-+111.-. *. 8hich of the following statements is 5are) true9 A) An activity-#ased costing system is generally easier to implement and maintain than a traditional costing system. B) 4ne of the goals of activity-#ased management is the elimination of waste #y allocating costs to products that waste resources. C) Activity-#ased costing uses a num#er of activity cost pools+ each of which is allocated to products on the #asis of direct la#or-hours. D) 'cti*it+ rates in acti*it+-,ase- costing are compute- ,+ -i*i-ing costs from the first-stage allocations ,+ the acti*it+ measure for each acti*it+ cost pool. 1-. 8hen there are #atch-level or product-level costs+ in comparison to a traditional cost system+ an activity-#ased costing system ordinarily will: A) $hift costs from low-volume to high-volume products. ") .hift costs from high-*olume to lo/-*olume pro-ucts. C) $hift costs from standardi:ed to speciali:ed products. ) $hift costs from speciali:ed to standardi:ed products.