Professional Documents
Culture Documents
1. Jennifer Company has two products: A and B. The company uses Activity-Based
Costing. The estimated total cost and expected activity for each of the company's
three activity cost pools are as follows:
The correct answer is B. To calculate the activity rate for activity 3, you would divide:
Estimated
Activity Cost Pool Activity Measure Overhead Cost
General service......... % of time devoted to branch $700,000
Research service....... Computer time $140,000
% of time
devoted to
branch Computer Time
Portland 30% 200,000 minutes
Dallas 60% 150,000 minutes
Miami 10% 50,000 minutes
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How much of the headquarters cost allocation should Dallas expect to receive
next year?
A) $280,000
B) $409,500
C) $472,500
D) $504,000
C is correct. You dont have to do this with this problem, but I like to calculate an
activity rate (application rate) for each activity:
3. Matt Company uses Activity-Based Costing. The company has two products: A
and B. The annual production and sales of Product A is 8,000 units and of
Product B is 6,000 units. There are three activity cost pools, with estimated total
cost and expected activity as follows:
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D is correct. First, calculate an activity rate (application rate) for each activity:
Adelberg Company has two products: A and B. The annual production and sales of
Product A is 500 units and of Product B is 1,000 units. The company has traditionally
used Direct Labor Hours as the basis for applying all Manufacturing Overhead to
products. Product A requires 0.4 Direct Labor Hours per unit and Product B requires 0.2
Direct Labor Hours per unit. The total estimated overhead for next period is $68,756.
Estimated
Overhead Expected Activity
Activity Cost Pool Costs Product A Product B Total
Activity 1 ................ $31,031 1,000 300 1,300
Activity 2 ................ $22,249 1,600 300 1,900
General Factory....... $15,476 200 200 400
Total ........................ $68,756
(Note: The General Factory activity cost pool's costs are allocated on the basis of Direct
Labor Hours.)
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4. The Predetermined Overhead Rate under the traditional costing system is
closest to:
A) $11.71.
B) $38.69.
C) $171.89.
D) $23.87.
You are told that the estimated overhead is $68,756 and that the driver for General
Factory is direct labor hours.
$68,756/400 = $171.89
5. The overhead cost per unit of Product B under the traditional costing system is
closest to:
A) $2.34.
B) $7.74.
C) $4.77.
D) $34.38.
D is correct. You are told that Product B take .2 direct labor hours per unit. So, you
would calculate the overhead cost per unit as follows:
.2 x $171.89 = $34.378
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6. The Predetermined Overhead Rate (i.e., activity rate) for Activity 2 under the
Activity-Based Costing system is closest to:
A) $13.91.
B) $11.71.
C) $74.16.
D) $36.19.
B is correct. First, calculate an activity rate (application rate) for each activity:
7. The overhead cost per unit of Product B under the Activity-Based Costing system
is closest to:
A) $45.84.
B) $7.74.
C) $34.38.
D) $18.41.
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