139.Rather Bedding makes two types of pillow—down and foam. It is currently implementing an activity-based costing system. In the past, all overhead had been applied on the basis of machine hours. The company produces 6,000 down pillows and 18,000 foam pillows per year.
Cost PoolDriver and LevelEstimated CostsUse of Driver by Down PillowsUse of Driver by Foam Pillows
Equipment setup360 setups$216,000120 setups240 setups
Materials ordering6,000 orders$60,0002,400 orders3,600 orders
Quality control2,000 inspections$36,000800 inspections1,200 inspections
Machining8,000 machine hours$86,8004,200 machine hours3,800 machine hours
Using ABC, what is the cost per machine hour in the machining pool?
A.$10.85 per machine hour
B.$20.67 per machine hour
C.$50.00 per machine hour
D.None of these answer choices are correct.
140.Recker Recreational uses activity-based costing. The company produces wooden playground equipment. It has two models manufactured in its Texas plant—swings and slides. The estimated costs and expected activity for each of the overhead activity pools follow:
Activity EstimatedExpected Activity
Cost Pool CostSwingsSlidesTotal
Activity 1 $15,675 800 300 1,100
Activity 2 $11,900 500 200 700
Activity 3 $36,000 800 400 1,200
Which of the following is the rate for Activity 3 that will used to allocate costs to swings?
A.$90
B.$12,000
C.$30
D.There is not enough information provided to determine the answer.
141.Random House uses activity-based costing. The company produces soft and hardcover books. The estimated costs and expected activity for each of the overhead activity pools follow:
Activity EstimatedExpected Activity
Cost Pool CostHard-CoverSoft-CoverTotal
Activity 1 $15,000 800 700 1,500
Activity 2 $14,900 500 1,500 2,000
Activity 3 $27,600 800 400 1,200
How much are total overhead costs to be charged to hardcover books?
A.$30,125
B.$8,000
C.$84,945
D.$25,691
142.Hurst Productions uses activity-based costing. The company produces weekly and monthly magazines. The estimated costs and expected activity for each of the activity pools follow:
Expected Activity
Cost PoolEstimated CostWeeklyMonthlyTotal
Pressing$24,6006004001,000
Printing 6,250400100500
Binding 9,0008001,2002,000
How much pressing cost will be assigned to monthly magazines?
A.$24.60
B.$9,840
C.$61.50
D.None of these answer choices are correct.
143.Hurst Productions uses activity-based costing. The company produces weekly and monthly magazines. The estimated costs and expected activity for each of the activity pools follow:
Expected Activity
Cost PoolEstimated CostWeeklyMonthlyTotal
Pressing$24,6006004001,000
Printing 6,250400100500
Binding 9,0008001,2002,000
How much are the total costs to be allocated to monthly magazines?
A.$16,490
B.$41.60
C.$131.50
D.None of these answer choices are correct.
144.PaperPro produces two models of staplers—Executive and Basic. The annual production and sales of Executive and Basic are 800 and 500 units, respectively. The company has traditionally used direct labor hours to apply manufacturing overhead. Executive requires 0.3 labor hours per unit and Basic requires 0.2 labor hours per unit. The company has decided to utilize activity-based costing with three cost pools. Estimated costs for each pool are as follows:
Estimated
ActivityOverheadExpected Activity
Cost PoolCostsExecutiveBasicTotal
Assembly$24,025 450 420 870
Packaging16,880 2,000 750 2,750
General Factory32,014 120 150 270
Total$72,919
Which of the following is closest to the overhead rate for assembly using activity-based costing?
A.$81.81
B.$53.39
C.$57.20
D.$27.61
145.Kamber Designs produces floral bouquets for commercial businesses (i.e. hotels) and uses an activity-based costing system. The company estimated that it would design 15,000 bouquets, make 2,000 deliveries totaling 25,000 miles, and accept 300 online orders. Data concerning overhead costs and activity pools is as follows:
Bouquet designs $60,000
Deliveries 21,000
Online ordering 6,000
Total$87,000
During May, the company made 1,400 bouquets using 1,300 designs, made 420 deliveries, and accepted 30 online orders. Using activity-based costing, what is the approximate overhead cost per bouquet during May?
A.$16.50
B.$7.29
C.$62.14
D.None of these answer choices are correct.
146.Gator Dockside produces two products, A and B. The annual production and sales of product A and B are 600 and 400 units, respectively. The company has traditionally used direct labor hours to apply manufacturing overhead. Product A requires 0.5 labor hours per unit and product B requires 1.2 labor hours per unit. The company has decided to utilize activity-based costing with three cost pools. Estimated costs for each pool are as follows:
Estimated
ActivityOverheadExpected Activity
Cost PoolCostsProduct AProduct BTotal
Activity 1 $24,000 1,500 500 2,000
Activity 210,800 450 1,350 1,800
General factory19,200 80 320 400
Total$54,000
When using activity-based costing, to which of the following amounts is the total overhead cost for one unit of product A closest?
A.$66.00
B.$280.00
C.$40.90
D.$61.35
147.Fifth Third Bank is a banking services company that offers several different types of checking accounts. The bank has recently adopted an activity-based costing system to assign costs to its checking accounts. The following data relate to the Mind Your Money checking accounts and the ABC cost pools:
Annual number of accounts = 60,000 accounts
Cost PoolCostCost Drivers
Returned check costs $3,000,000 Number of returned checks
Account reconciliation costs 60,000 Number of account reconciliation requests
New account setup 650,000 Number of new accounts
Archive requests 400,000 Number of archive requests
Web site costs 195,000 Per account type
Total checking account costs $4,305,000
Annual activity information related to cost drivers:
Cost PoolAll ProductsMind Your Money Checking
Returned checks 200,000 returned checks 18,000
Account reconciliation costs3,000 reconciliation requests 420
New account setups 60,000 new accounts 15,000
Archive requests100,000 archive requests 60,000
Web site costs 10 types of accounts 1
How much is the rate to be used to apply the cost of new accounts to each Mind Your Money checking account?
A.$10.83
B.$43.33
C.$71.75
D.$60.39
148.Kamber Designs produces floral bouquets for commercial businesses (i.e. hotels) and uses an activity-based costing system. The company estimated that it would design 15,000 bouquets, make 2,000 deliveries totaling 25,000 miles, and accept 300 online orders. Data concerning overhead costs and activity pools is as follows:
Bouquet designs $60,000
Deliveries 21,000
Online ordering 6,000
Total$87,000
During June, the company made 1,500 bouquets using 1,100 designs, made 325 deliveries and accepted 45 online orders. Using activity-based costing, what is the approximate overhead cost per bouquet during June?
A.$7.92
B.$5.81
C.$5
D.None of these answer choices are correct.
149.Fifth Third Bank is a banking services company that offers several different types of checking accounts. The bank has recently adopted an activity-based costing system to assign costs to its checking accounts. The following data relate to the Mind Your Money checking accounts and the ABC cost pools:
Annual number of accounts = 60,000 accounts
Cost PoolCostCost Drivers
Returned check costs $3,000,000 Number of returned checks
Account reconciliation costs 60,000 Number of account reconciliation requests
New account setup 650,000 Number of new accounts
Archive requests 400,000 Number of archive requests
Web site costs 195,000 Per account type
Total checking account costs $4,305,000
Annual activity information related to cost drivers:
Cost PoolAll ProductsMind Your Money Checking
Returned checks 200,000 returned checks 18,000
Account reconciliation costs3,000 reconciliation requests 420
New account setups 60,000 new accounts 15,000
Archive requests100,000 archive requests 60,000
Web site costs 10 types of accounts 1
How much is the rate to be used to allocate account reconciliation cost to each Mind Your Money checking account?
A.$20.00
B.$1.00
C.$0.14
D.$142.85
150.Retirement Planning is a consulting firm with clients across the nation. Within the company is a travel group that arranges flights and hotel accommodations for its 250 consultants. The overhead cost of operating the travel group amounts to approximately $204,000 annually. Recently the company conducted an ABM study that has determined the following:
Each consultant completed approximately 15 business trips per year.
On average, 17 trips are scheduled, with 2 trips cancelled and rescheduled.
Benchmarking with a Retirement Planning’s client indicates that the client incurs a cost of $60 per scheduled trip to book travel.
How much overhead cost should be allocated to each completed trip?
A.$54.40
B.$48.00
C.$60.00
D.None of these answer choices are correct.
151.Sanford Tracking has two production plants. Recently, the company conducted an ABM study to determine the cost of activities involved in processing orders for parts at each of the plants. How might an operations manager use this information to manage the cost of processing orders?
A.By closing down the plant with the highest cost
B.By comparing the cost to process an order at each plant and the nature of the orders to determine if costs are out of control—if out of control, investigate
C.By setting up an ABC costing system
D.By including all manufacturing overhead in a single cost pool to reduce the cost of analysis
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