Page 1 Quiz – Chapter 8 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: Estimated Expected Activity Activity Cost Pool Cost Product A Product B Total Activity 1................ $23,500 400 100 500 Activity 2................ $18,000 500 200 700 Activity 3................ $34,600 600 300 900 The activity rate under the Activity-Based Costing system for Activity 3 is closest to: A) $36.24. B) $38.44. C) $84.56. D) $115.33. 2. Reach Consulting Corporation has its headquarters in Chicago and operates from three branch offices in Portland, Dallas, and Miami. Reach's headquarter activities are assigned to two activity cost pools: General Service and Research Service. These costs are then allocated to the three branch offices. Information for next year related to this Activity-Based Costing system is as follows: Activity Cost Pool Activity Measure Estimated Overhead Cost General service......... % of time devoted to branch $700,000 Research service....... Computer time $140,000 Estimated branch data for next year is as follows: % of time devoted to branch Computer Time Portland 30% 200,000 minutes Dallas 60% 150,000 minutes Miami 10% 50,000 minutes How much of the headquarters cost allocation should Dallas expect to receive next year? A) $280,000 B) $409,500 C) $472,500 D) $504,000Page 2 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: Estimated Expected Activity Activity Cost Pool Cost Product A Product B Total Activity 1................ $20,000 100 400 500 Activity 2................ $37,000 800 200 1,000 Activity 3................ $91,200 800 3,000 3,800 The cost per unit of Product A under Activity-Based Costing is closest to: A) $2.40. B) $3.90. C) $10.59. D) $6.60. Use the following to answer questions 4-7: 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. The company is considering switching to an Activity-Based Costing system for the purpose of computing unit product costs for external reports. The new Activity-Based Costing system would have three overhead activity cost pools--Activity 1, Activity 2, and General Factory--with estimated overhead costs and expected activity as follows: 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.)Page 3 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. 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. 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. 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)
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