Barnett Products manufactures three types of remote-control devices: Economy,

Standard, and Deluxe. The company, which uses activity-based costing, has
identified five activities (and related cost drivers). Each activity, its budgeted
cost, and related cost driver is identified below.
 
Activity Cost Cost Driver
Material handling $ 230,500   Number of parts  
Material insertion  2,486,000   Number of parts  
Automated machinery   845,500   Machine hours  
Finishing   181,000   Direct labor hours  
Packaging   181,000   Orders shipped  
Total $3,924,000      

The following information pertains to the three product lines for next year:
 
  Economy   Standard   Deluxe
Units to be produced  11,100     6,100     3,100  
Orders to be shipped   1,110      610      310  
Number of parts per unit   21      26      36  
Machine hours per unit   12      14      16  
Labor hours per unit   13      13      13  

What is Barnett’s pool rate for the material-insertion activity?



$4.94 per part.

A maybe

2/ Non-value-added activities are the events that trigger activities and linkages among activities.
Maybe false

3. Rocket Products manufactures three types of remote-control devices: Economy,

Standard, and Deluxe. The company, which uses activity-based costing, has identified
five activities (and related cost drivers). Each activity, its budgeted cost, and related
cost driver is identified below.
 
Activity Cost Cost Driver
Material handling $ 238,000  Number of parts
Material insertion  2,488,000  Number of parts
Automated machinery   853,000  Machine hours
 Finishing   183,000  Direct labor hours
Packaging   183,000  Orders shipped
Total $3,945,000   

 
The following information pertains to the three product lines for next year:
 
  Economy   Standard   Deluxe
Units to be produced  11,300     6,300     3,300  
Orders to be shipped   1,130      630      330  
Number of parts per unit   10      15      25  
Machine hours per unit   1      3      5 
Labor hours per unit   2      2      2 

 
Assume that Rocket is using a volume-based costing system, and the preceding
overhead costs are applied to all products on the basis of direct labor hours. The
overhead cost that would be assigned to the Deluxe product line is closest to:
Multiple Choice
Maybe

Multiple Choice

$622,895.


4. When using ABC, overhead costs assigned to each activity comprise an activity cost pool.

True

Private Corporation manufactures two types of transponders—no. 156 and no. 157—
and applies manufacturing overhead to all units at the rate of $78.50 per machine
hour. Production information follows.
 
  No. 156 No. 157
Anticipated volume  6,000    14,368  
 (units)
Direct material cost $ 40   $ 65  
Direct labor cost   25     25  

 
The controller, who is studying the use of activity-based costing, has determined that
the firm's overhead can be identified with three activities: manufacturing setups,
machine processing, and product shipping. Data on the number of setups, machine
hours worked, and outgoing shipments, the activities' three respective cost drivers,
follow.
 
  No. 156   No. 157 Total
Setups   60    40   100 
Machine hours
 15,000   25,000  40,000 
worked
Outgoing
  120    80   200 
shipments

The firm's total overhead of $3,140,000 is subdivided as follows: manufacturing

setups, $270,000; machine processing, $2,400,000; and product shipping, $470,000.

Required:
A. Compute the pool rates that would be used for manufacturing setups, machine
processing, and product shipping in an activity-based costing system.
B. Assuming use of activity-based costing, compute the unit overhead costs of product
nos. 156 and 157 if the expected manufacturing volume is attained.
C. Assuming use of activity-based costing, compute the total cost per unit of product
no. 156.
D. If the company's selling price is based heavily on cost, would a switch to activity-
based costing from the current traditional system result in a price increase or decrease
for product no. 156?
For all requirements, round intermediate calculations to 2 decimal places and
final answers to the nearest whole dollar.

6. Barnett Products manufactures three types of remote-control devices: Economy,

Standard, and Deluxe. The company, which uses activity-based costing, has identified
five activities (and related cost drivers). Each activity, its budgeted cost, and related
cost driver is identified below.
 
Activity Cost Cost Driver
 Material handling $ 324,000   Number of parts  
Material insertion  2,770,000   Number of parts  
Automated machinery   853,000   Machine hours  
Finishing   188,000   Direct labor hours  
Packaging   188,000   Orders shipped  
Total $4,323,000      

The following information pertains to the three product lines for next year:
 
  Economy   Standard   Deluxe
Units to be produced  16,100     6,600     2,250  
Orders to be shipped   1,020      420      240  
Number of parts per unit   15      20      25  
Machine hours per unit   1      3      5 
Labor hours per unit   3      3      3 

 
What is Barnett’s pool rate for the packaging activity?
Multiple Choice

 D

$111.90 per order shipped.

7. Barnett Products manufactures three types of remote-control devices: Economy,

Standard, and Deluxe. The company, which uses activity-based costing, has identified
five activities (and related cost drivers). Each activity, its budgeted cost, and related
cost driver is identified below.
 
Activity Cost Cost Driver
Material handling $ 277,000   Number of parts  
Material insertion  3,270,000   Number of parts  
Automated machinery   874,000   Machine hours  
Finishing   197,000   Direct labor hours  
Packaging   197,000   Orders shipped  
Total $4,815,000      

The following information pertains to the three product lines for next year:
 
  Economy   Standard   Deluxe
 Units to be produced  19,400     8,700     2,000  
Orders to be shipped   1,130      760      285  
Number of parts per unit   10      20      30  
Machine hours per unit   1      3      6 
Labor hours per unit   2      2      2 

What is Barnett’s pool rate for the finishing activity?

Multiple Choice

$3.27 per labor hour.



8. Successful adoptions of activity-based costing typically occur when companies rely heavily on:
multidisciplinary project teams.

9. Which of the following is most likely to be a cost driver for a packaging and shipping activity?
Nr of orders

10. Traditional product-costing systems are structured on multiple, volume-based cost drivers.
True

11. St. Vincent’s, Inc., currently uses traditional costing procedures, applying $848,000 of
overhead to products Beta and Zeta on the basis of direct labor hours. The company is
considering a shift to activity-based costing and the creation of individual cost pools that will use
direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost
drivers. Data on the cost pools and respective driver volumes follow.
 
Pool No.1  
(Driver: Pool No. 2 Pool No. 3
Product DLH) (Driver: SU)  (Driver: PC)
Beta   1,680       35       3,450  
Zeta   3,920       65       1,150  
                     
Pool
$ 176,000     $ 296,000     $ 376,000  
Cost
 
The overhead cost allocated to Beta by using activity-based costing procedures would be:
Multiple Choice

$254,400.


12.Fairchild, Inc., manufactures two products, Regular and Deluxe, and applies
overhead on the basis of direct labor hours. Anticipated overhead and direct labor time
for the upcoming accounting period are $2,753,600 and 35,800 hours, respectively.
Information about the company's products follows.

Regular—
Estimated production volume: 1,400 units
Direct materials cost: $44 per unit
Direct labor per unit: 5 hours at $31 per hour
Deluxe—
Estimated production volume: 7,200 units
Direct materials cost: $58 per unit
Direct labor per unit: 4 hours at $31 per hour
Fairchild's overhead of $2,753,600 can be identified with three major activities: order
processing ($258,000), machine processing ($1,987,200), and product inspection
($508,400). These activities are driven by number of orders processed, machine hours
worked, and inspection hours, respectively. Data relevant to these activities follow.
 
Orders Machine
Processe   Hours Inspectio
  d Worked   n Hours
Regula 17,60
 160          7,200  
r 0
25,60
Deluxe  340          9,200  
0
43,20 16,40
Total  500           
0 0


Required:
A. Compute the pool rates that would be used for order processing, machine
processing, and product inspection in an activity-based costing system.
B. Assuming use of activity-based costing, compute the unit manufacturing
 costs of Regular and Deluxe if the expected manufacturing volume is
attained. (Round your intermediate calculations and final answers to 2
decimal places.)
C. How much overhead would be applied to a unit of Regular and Deluxe if the
company used traditional costing and applied overhead solely on the basis of
direct labor hours? Which of the two products would be undercosted by this
procedure? Overcosted? (Round your intermediate calculations and final
answers to 2 decimal places.)
13.Barnett Products manufactures three types of remote-control devices: Economy, Standard,
and Deluxe. The company, which uses activity-based costing, has identified five activities (and
related cost drivers). Each activity, its budgeted cost, and related cost driver is identified below.
 
Activity Cost Cost Driver
Material handling $ 304,000   Number of parts  
Material insertion  2,740,000   Number of parts  
Automated machinery   896,000   Machine hours  
Finishing   257,000   Direct labor hours  
Packaging   257,000   Orders shipped  
Total $4,454,000      

The following information pertains to the three product lines for next year:
 
  Economy   Standard   Deluxe
Units to be produced  15,000     9,800     2,000  
Orders to be shipped   1,390      580      210  
Number of parts per unit   10      15      25  
Machine hours per unit   1      3      6 
Labor hours per unit   2      2      2 

What is Barnett’s pool rate for the automated machinery activity?

Multiple Choice

$15.89 per machine hour.

15 Costallocation is the process of assigning indirect costs to a cost object. The indirect
costs are grouped in cost pools and then allocated by a common allocation base to the
cost object. The base that is employed to allocate a homogenous cost pool should
Have a cause-and-effect relationship with the cost items in the cost pool

16.Barnett Products manufactures three types of remote-control devices: Economy,

Standard, and Deluxe. The company, which uses activity-based costing, has identified
five activities (and related cost drivers). Each activity, its budgeted cost, and related
cost driver is identified below.
 
Activity Cost Cost Driver
 Material handling $ 277,000   Number of parts  
Material insertion  3,270,000   Number of parts  
Automated machinery   874,000   Machine hours  
Finishing   197,000   Direct labor hours  
Packaging   197,000   Orders shipped  
Total $4,815,000      

The following information pertains to the three product lines for next year:
 
  Economy   Standard   Deluxe
Units to be produced  19,400     8,700     2,000  
Orders to be shipped   1,130      760      285  
Number of parts per unit   10      20      30  
Machine hours per unit   1      3      6 
Labor hours per unit   2      2      2 

What is Barnett’s pool rate for the material-handling activity?

Multiple Choice

$0.65 per part.



18. Many traditional costing systems: combine widely varying elements of overhead into a
single cost pool.
19.Consider the following statements regarding traditional costing systems:

I. Overhead costs are applied to products on the basis of volume-related measures.

II. All manufacturing costs are easily traceable to the goods produced.
III. Traditional costing systems tend to distort unit manufacturing costs when numerous
goods are made that have widely varying production requirements.

Which of the above statements is (are) true?

D. I and III.

St. Vincent’s, Inc., currently uses traditional costing procedures, applying $1,162,400
of overhead to products Beta and Zeta on the basis of direct labor hours. The company
is considering a shift to activity-based costing and the creation of individual cost pools
that will use direct labor hours (DLH), production setups (SU), and number of parts
components (PC) as cost drivers. Data on the cost pools and respective driver volumes
follow.
 
Pool No.1   Pool No. 2 Pool No. 3
Product (Driver: DLH) (Driver: SU)   (Driver: PC)
Beta   1,700      35      2,750  
Zeta   3,500      65      810  
                     
Pool
$ 364,000    $ 300,000    $ 498,400  
Cost

The overhead cost allocated to Beta by using traditional costing procedures would be:
Multiple Choice

$380,015.
Which of the following statements is (are) true about non-value-added activities?

I. Non-value-added activities are often unnecessary and dispensable.

II. Non-value-added activities may be necessary but are being performed in an
inefficient and improvable manner.
III. Non-value-added activities can be eliminated without deterioration of product quality,
performance, or perceived value.

E. I, II, and III.

In an activity-based costing system, direct materials used would typically be classified

as a:
unit-level cost.