Question : 51. Johnson Manufacturing anticipates incurring $500,000 in overhead costs this year. : 1295583

 

 

51. Johnson Manufacturing anticipates incurring $500,000 in overhead costs this year. After implementing activity-based costing (ABC), the company’s controller identified the following related information: 

Activity

Allocation Base

Proportion of Overhead Cost

Purchasing

Number of purchase orders

20%

Machine setups

Number of setups

15%

Production

Number of machine hours

65%

 

 

 

The number of activities expected are as follows: 

Total number of purchase orders ———-

4,000

Total number of setups ———————-

2,000

Total number of machine hours ———–

10,000

 

 

Refer to the Johnson Manufacturing information above. What will be the overhead rate for the production activity? A. $32.50B. $50.00C. $    .03D. $31.25

 

52. Johnson Manufacturing anticipates incurring $500,000 in overhead costs this year. After implementing activity-based costing (ABC), the company’s controller identified the following related information: 

Activity

Allocation Base

Proportion of Overhead Cost

Purchasing

Number of purchase orders

20%

Machine setups

Number of setups

15%

Production

Number of machine hours

65%

 

 

 

The number of activities expected are as follows: 

Total number of purchase orders ———-

4,000

Total number of setups ———————-

2,000

Total number of machine hours ———–

10,000

 

 

Refer to the Johnson Manufacturing information above. How much total overhead would be applied to a job that required 1 purchase order, 5 setups, and 300 machine hours? A. $9,750.00B. $9,962.50C. $9,937.50D. $9,562.50

 

53. Jones Construction currently uses traditional costing where overhead is applied based on direct labor hours. Using traditional costing, the applied overhead rate is $20 per direct labor hour.They are considering a switch to activity-based costing (ABC). The company controller has come up with preliminary overhead rates for each of the following activities: 

Activity

Allocation Base

Overhead rate

Material delivery and handling

Number of deliveries

$100 per delivery

Inspections

Number of inspections

$75 per inspection

Supervision

Hours of supervisor time

$30 per supervisor hour

Purchasing

Number of purchase orders

$60 per purchase order

 

 

 

One of the company’s current jobs has the following information available: 

Direct labor hours ———————————————

50 hours

Number of deliveries —————————————–

2

Number of inspections —————————————

3

Hours of supervisor time ————————————

2

Number of purchase orders ———————————

5

 

 

Which of the following statements is true when comparing the total overhead allocated to the job using traditional versus ABC costing? A. ABC costing will yield $215 less in overhead cost being allocated to the job.B. ABC costing will yield $735 less in overhead cost being allocated to the job.C. ABC costing will yield $545 more in overhead cost being allocated to the job.D. ABC costing will yield $785 more in overhead cost being allocated to the job.

 

54. Which of the following statements regarding service companies and activity-based costing (ABC) is true? A. Service companies are not permitted to use ABC costing.B. Service companies find it easier to use ABC costing than manufacturing companies.C. Fewer repetitive activities makes ABC costing more difficult to implement in service companies.D. Service companies have proportionately less facility-level costs than manufacturing companies.

 

55. Activity-based costing (ABC): A. should not be applied to non-manufacturing activities.B. should not be applied to service companies.C. can be applied to administrative activities.D. can only be used by manufacturing companies.

 

56. Which of the following items might cause activity-based costing (ABC) to be more difficult to implement in a service company than in a manufacturing company? A. The lack of direct labor.B. The lack of facility-level costs.C. The lack of repetitive activities.D. The lack of overhead costs.

 

57. Which of the following types of costs would service-oriented companies be more likely to have proportionately more of than manufacturing companies? A. Facility-level costsB. Product-level costsC. Batch-level costsD. Unit-level costs

 

58. Which of the following is not a benefit of activity-based costing (ABC)? A. Increased product cost informationB. Increased accuracy in the budgeting processC. Increased implementation costsD. Increased understanding of activities that drive overhead costs

 

59. Which of the following in false regarding activity-based costing (ABC)? A. Companies that have a high potential for cost distortions are more likely to benefit with ABC.B. Opportunities for continuous improvement are rarely revealed by using ABC.C. The cost of implementing ABC may outweigh the benefits.D. Increased accuracy with budgeting resources is often realized.

 

60. Which of the following would be a likely disadvantage of activity-based costing (ABC)? A. A decrease in a company’s ability to accurately prepare budgets for the upcoming period.B. A decrease in a company’s ability to find opportunities for continuous improvement.C. An increase in the accuracy of product cost information.D. An increase in the cost of obtaining accurate product cost information.