ACC 406 Lecture : Chapter 7.txt

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pearsquirrel474

6 Mar 2012

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Acc 406 chapter 7 -- activity-based costing and management. Because you are using an average, rates can give you a distorted number for cos ts. For companies operating in margin-tight industries, this small distorition has huge affects. Cost system needs to take into consideration the weight of certain costs, not j ust the average. 2 factors impair unit-based plantwide and dept. rates: the proportion of nonunit-related overhead costs to total overhead costs is l arge, the degree of product diversity is great. Plantwide/dept rates assume that a product consumption of overhead resources is related strictly to the units produced. Unit-level activities: activities that are performed each time a unit is produce d. However, for non-unit level activies: activities that are not performed each ti me a product is produced. Therefore, these are unlikely to change w/ units produced. Activity-based costing: cost hierarchy that categorizes cost to display costs as sociated with non-unit level activities (pg.

Related Questions

Which costing method assumes all products use overhead costs in the same proportions?

	All cost allocation methods
	Plantwide overhead rate method
	Activity-based costing
	Departmental overhead rate method

Which of the following would usually not be used in computing plantwide overhead rates?

	Direct labor dollars
	Number of quality inspections
	Machine hours
	Direct labor hours

With ABC, overhead costs should be traced to which cost object first?

	Departments
	Units of product
	Activities
	Product batches

bluewater-buffalo592

The Oscuro Chocolate Company uses activity-based costing (ABC).The controller identified two activities and their budgetedcosts:

Setting Up Equipment $108,000

Other Overhead$360,000

Setting up equipment is based on set up hours, and otheroverhead is based on oven hours. Oscuro produces two products,Fudge and Cookies. Information on each product is as follows:

Fudge Cookies

Units produced 2,000 10,000

Set Up hours1,600400

Oven hours 400 2,000

1. Calculagte the activity rate for (a) setting up equipment,(b) other overhead

2. How much total overhead is assigned to Fudge using ABC?

3. What is the unit overhead assigned to Fudge using ABC?

4. Now, ignoring the ABC resutls, claculate the plantwideovehead rate, based on oven hours

5. How much total overhead is assigned to Fudge using theplantwide overhead rate?

6. Explain why the total overhead assigned to Fudge is differentunder ABC system (i.e. using the acgtivity rates) than under thenon-ABC system (i.e. using the plantwide rate)

brownhyena923

Select a letter A through D that corresponds to the description of that term. Some letters are used more than once.

A.	Uses more than one rate to allocate overhead costs to products.
B.	Uses only volume-based measures such as direct labor hours to allocate overhead costs to products.
C.	Typically uses the most overhead allocation rates.
D.	Focuses on the costs of carrying out activities.

Term
1.		Activity-based costing
2.		Plantwide overhead rate method
3.		Departmental overhead rate method

lilacsheep352

ACC 406 Lecture : Chapter 7.txt

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