FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 8: Process Costing Systems

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 41

Essay

Review LaterAdd Note

Review Later

Distinguish between unit, batch, product and customer level activities.

Correct Answer

Answered by ExamLex AI

Unit, batch, product, and customer level...

View Answer

Show Answer

Question 42

Multiple Choice

Review LaterAdd Note

Review Later

Forrest Florist specialises in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity based costing system: Overhead costs: $\begin{array}{lrr} \text { Wages and salaries } &£ 70,000\\ \text {Other expenses. } &£ 40,000\\\text {Total. } &£ 110,000 \end{array}$ Distribution of resource consumption: The 'Other' activity cost pool consists of the costs of idle capacity and organisation-sustaining costs. The amount of activity for the year is as follows: $\begin{array}{lrr} \text { Activity Cost Pool} & \text { Activity} \\ \text { Making bouquets} & \text { 20,000 bouquets } \\ \text { Delivery. } &\text {1,000 deliveries } &\\\end{array}$ - What would be the total overhead cost per bouquet according to the activity based costing system? In other words, what would be the overall activity rate for the making bouquets activity cost pool? (Round your answer to the nearest whole pence.)

A) £2.75
B) £2.83
C) £3.03
D) £2.48

E) B) and D)
F) B) and C)

Correct Answer

verified

Show Answer

Question 43

Multiple Choice

Review LaterAdd Note

Bristol Electronics produces wide range of electronic products. The company has a labour based costing system that was introduced in the 1970s and is now considering implementing an activity based costing (ABC) system. Managers are concerned about how they should compare the ABC data with the existing costing system. Selected data from the management accounts for the year ending 31st December 2000 $\begin{array} { | l | l | } \hline \text { Cost data } & \\\hline \text { Total manufacturing overhead for year } & £ 1,000,000 \\\hline \text { Total hours for year } & 60,000 \text { hours } \\\hline \text { Direct labour cost per hour } & £ 10 \\\hline\end{array}$ Data for 3 products only $\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { F roduct B } & \text { Product C } \\\hline \text { Annual production } & 1,000 \text { units } & 2,000 \text { units } & 5,000 \text { units } \\\hline \text { Material cost per unit } & £ 5.00 & £ 6.00 & £ 7.00 \\\hline \text { Direct labour hours per unit } & 1.00 & 1.50 & 0.50 \\\hline\end{array}$ $\begin{array} { | l | r | r | } \hline \text { ABC data for all products } & & \\\hline \text { Cost pool / driver } & \text { Annual costs (£s) } & \text { Annual volume } \\\hline \text { Number of set-ups } & 200,000 & 1,000 \\\hline \text { Inspection time (hours) } & 500,000 & 3,000 \\\hline \text { Machine maintenance (hours) } & 100,000 & 5,000 \\\hline \text { Number of purchases } & 100,000 & 500\\\hline \text { Number of shipments } & 100,000 & 500\\\hline &1,000,000\\\hline\end{array}$ $\begin{array} { | l | c | c | c | } \hline \text { ABC data 3 products } & \text { Froduct A } & \text { Froduct B } & \text { Froduct C } \\\hline \text { Number of set-ups } & 20 & 180 & 30 \\\hline \text { Inspection time (hours) } & 20 & 50 & 300 \\\hline \text { Machine maintenance (hours) } & 30 & 40 & 20 \\\hline \text { Number of purchases } & 3 & 4 & 5 \\\hline \text { Number of shipments } & 3 & 4 & 6 \\\hline\end{array}$ -Determine the total unit cost for product B using the number of hours to apply overhead

An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because:

Angel Corporation uses activity-based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity-based costing system: $\begin{array}{lrr} &\text { Estimated } \\ \text {Activity Cost Pools (and Activity Meseasure } & \text {overhead Cost}\\ \text { Machine related (machine-hours) . } &£ 81,600\\ \text { Batch setup (setups) .} &£ 387,000 \\ \text { General factory (direct labour-hours) . } & £ 274,800 \\\end{array}$ $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $\quad$$\text { Expected Activity }$ $\begin{array}{lrr}\text { Activity Cost Pools }& \text { Total } & \text {Product X}& \text { Product Y}\\ \text {Machine related. } &8,000&3,000&5,000\\ \text { Batch setup. } &10,000&2,000&8,000\\ \text {General factory } &12,000&7,000&5,000\\\end{array}$ Assuming that actual activity turns out to be the same as expected activity, the total amount of overhead cost allocated to Product X would be closest to:

Bristol Electronics produces wide range of electronic products. The company has a labour based costing system that was introduced in the 1970s and is now considering implementing an activity based costing (ABC) system. Managers are concerned about how they should compare the ABC data with the existing costing system. Selected data from the management accounts for the year ending 31st December 2000 $\begin{array} { | l | l | } \hline \text { Cost data } & \\\hline \text { Total manufacturing overhead for year } & £ 1,000,000 \\\hline \text { Total hours for year } & 60,000 \text { hours } \\\hline \text { Direct labour cost per hour } & £ 10 \\\hline\end{array}$ Data for 3 products only $\begin{array} { | l | r | r | r | } \hline & \text { Product A } & \text { F roduct B } & \text { Product C } \\\hline \text { Annual production } & 1,000 \text { units } & 2,000 \text { units } & 5,000 \text { units } \\\hline \text { Material cost per unit } & £ 5.00 & £ 6.00 & £ 7.00 \\\hline \text { Direct labour hours per unit } & 1.00 & 1.50 & 0.50 \\\hline\end{array}$ $\begin{array} { | l | r | r | } \hline \text { ABC data for all products } & & \\\hline \text { Cost pool / driver } & \text { Annual costs (£s) } & \text { Annual volume } \\\hline \text { Number of set-ups } & 200,000 & 1,000 \\\hline \text { Inspection time (hours) } & 500,000 & 3,000 \\\hline \text { Machine maintenance (hours) } & 100,000 & 5,000 \\\hline \text { Number of purchases } & 100,000 & 500\\\hline \text { Number of shipments } & 100,000 & 500\\\hline &1,000,000\\\hline\end{array}$ $\begin{array} { | l | c | c | c | } \hline \text { ABC data 3 products } & \text { Froduct A } & \text { Froduct B } & \text { Froduct C } \\\hline \text { Number of set-ups } & 20 & 180 & 30 \\\hline \text { Inspection time (hours) } & 20 & 50 & 300 \\\hline \text { Machine maintenance (hours) } & 30 & 40 & 20 \\\hline \text { Number of purchases } & 3 & 4 & 5 \\\hline \text { Number of shipments } & 3 & 4 & 6 \\\hline\end{array}$ -Determine the total overhead cost for product A using the using the activity based data

Outline the advantages and disadvantages of using the simplified ABC approach.