Question

cách). 1. Activity-based costing differs from a traditional costing system in all of the following aspects EXEPT: A) Direct materials, direct labor, and shipping costs are directly assigned to cost objects. B) Numerous overhead cost pools are used in ABC system. C) Most but not all manufacturing costs are assigned to products. D) Non-manufacturing as well as manufacturing costs may be assigned to products. 2. In activity-based costing, the activity rate for an activity cost pool is computed by dividing the total overhead cost in the activity cost pool by: A) the direct labor-hours required by the product. B) the machine-hours required by the product. C) the total activity for the activity cost pool. D) the total direct labor-hours for the activity cost pool. 3. The limitations of ABC include all the following EXCEPT: A) ABC does not conform to GAAP. B) Substantial resources required to implement and maintain. C) Desire to fully allocate all costs to products. D) Cross-functional teams should be created. 4. A Corporation has provided the following data from its activity-based costing accounting system: Activity Cost Pools Total Cost Total Activity Designing products ...... $1,526,916 8,436 product design hours Setting up batches......... $15.580 380 batch set-ups Assembling products.... $39,900 3,990 assembly hours The activity rate for the "designing products" activity cost pool is closest to: A) $124 per product design hour B) $181 per product design hour C) $55 per product design hour D) $1,526,916 per product design hour Page 1 of 3

Answer 1

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Activity Based Costing System: Activity based costing is an accounting methodology that assigns costs to activities rather than products or services It is a technique in which costs are assigned to activities based on their use of resources, Requirement 1 Solution Question 1 Activity based costing differs from a traditional costing system in all of the following aspects Except: D) Non Manufacturing as well as manufacturing costs may be assigned to products Reason: Under ABC costing system costs are assigned on the basis of cost objects. But it does differetiate between manufacturing and non manufacturing cost Solution Question 2 In an Activity Based costing, the activity rate for an activity pool is computed by dividing the total overhead cost in the activity cost pool by: C) the total activity for the activity cost pool Reason: Under Activity based costing Activity wise Recovery rates are determined. There is no concept of Single overhead recovery rate as against tradition costing system in which either Multiple recovery rates or Single recovery rates are determined. Solution Question 3 The limitations of ABC include all the follwing Except D) Cross Functional Teams should be created Solution Question 4 Calculation for Activity Rate for Designing product Cost pool Activity Rate - Total cost of Designing product Activity Product Design Hours Activity Rate = $1,526,916 8436 hours Activity Rate = $181 per design per hour So Correct option is Option B Solution Question 5 Amount Resourse allocation % to Other Activity Cost pool 10% 20% Factory Supervision Cost Indirect Factory Labour Total $460,000 $220,000 Resourse allocated to Other Activity Cost pool $46,000 $44,000 $90,000 So Correct Option is option B $90000 Scanned CamScanne

Requirement 2 XYZ Corporation Statement Showing Calculation of Activity rates of three cost pools Total Activity Activity Cost Pool D A Assembling Products Designing Products Setting Up Batches Total Cost B $150,300 $1,177,535 $14,400 8350 assembly hours 7597 product Design Hours 600 Batch set up Activity Rates B/C $ 18 per assembly hour $ 155 per product design hours $ 24 per batch set up Requirement 3 Best Corporation Statement showing overhead cost to be assigned to product U9W Activity Cost Pool Activity Rates Total Activity Overhead cost Assembling Products $8.90 per Assembly hour 389 assembly hours $3,462 Processing customer $ 31.23 per customer 53 Customer orders $1,655 Orders Order Setting up batches $ 43.72 per batch 61 batches $2,667 Total $7,784 Requirement 4 Beta corporation Statement Showing Calculation of productwide overhead rate Activity Measures Total Activity Activity Cost Pool А Machining Machine Setups Product design General Factory Machine Hours Number of Setups Number of Products Direct labour hours 5000 MHS 200 set ups 2 products 10000 DLHS Total Cost D $95,000.00 $80,000.00 $96,000.00 $310,000.00 Overhead Rates D/C $ 19 per MHS $ 400 per Set ups $ 48000 per Product S 31 per DLHS Scanned with CamScanner

Statement showing Manufacturing overhead cost allocated to product B Activity Cost Pool Overhead Rates Total Activity Overhead cost Machining $ 19 per MHS 3000 MHS $57,000 Machine Setups $ 400 per Set ups 50 set ups $20,000 Product design $ 48000 per product 1 product 48000 General Factory S 31 per DLHS 7000 DLHS $217,000 Total cost Allocated $342,000 Scanned with CamScanner