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Exam 4: Activity-Based Costing and Analysis

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Question 121

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Freeze Frame, Inc. produces cameras that require three processes, A, B, and C, to complete. Digital camera model #789 is the best-selling of all the many types of cameras produced. Information related to the 550,000 units of digital camera model #789 produced annually is shown below: Freeze Frame's total expected overhead costs and related overhead data are shown in the following table: $\begin{array} { | l | l | l | l | } \hline & \text { Department A } & \text { Department B } & \text { Department C } \\\hline \text { Direct labor hours } & 90,000 \mathrm { DLH } & 75,000 \mathrm { DLH } & 42,000 \mathrm { DLH } \\\hline \text { Machine hours } & 67,500 \mathrm { MH } & 135,000 \mathrm { MH } & 53,200 \mathrm { MH } \\\hline \text { Manufacturing overhead costs } & \$ 540,000 & \$ 675,000 & \$ 399,000 \\\hline\end{array}$ a. Compute a departmental overhead rate for department A based on machine hours. b. How much overhead is associated with model 789 from department A? c. Compute a departmental overhead rate for department B based on direct labor hours. d. How much overhead is associated with model 789 from department B? e. Compute a departmental overhead rate for department C based on machine hours. f. How much overhead is associated with model 789 from department C? g What is the per unit cost of the 550,000 units of model 789?

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a. $540,000/67,500 MH = $8 per MH
b. ($8...

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Question 122

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The cost object of the plantwide overhead rate method is:

A) The unit of product.
B) The production departments of the company.
C) The production activities of the company.
D) Manufacturing cost pools.
E) The time period.

F) A) and E)
G) A) and D)

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Question 123

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Outer Limits, Inc. produces fencing units which require two processes, A and B, to complete. The best-selling type of fence is made of PVC. Information related to the 8,000 units of pvc fencing produced annually is shown below. $\begin{array} { | c | c | } \hline \text { Direct materials } & \$ 450,000 \\\hline \text { Direct labor } & \\\hline \text { Department A (5,000 DLH x } \$ 23 \text { per DLH) } & \$ 115,000 \\\hline \text { Department B (4,000 DLH x } \$ 25 \text { per DLH) } & \$ 100,000 \\\hline \text { Machine hours } & \\\hline \text { Department A } & 2,000 \mathrm { MH } \\\hline \text { Department B } & 3,000 \mathrm { MH } \\\hline\end{array}$ Outer Limits' total expected overhead costs and related overhead data are shown below. The company uses departmental overhead rates based on machine hours in department A and direct labor hours in department B. $\begin{array} { | l | l | l | } \hline & \text { Department A } & \text { Department B } \\\hline \text { Direct labor hours } & 9,000 \mathrm { DLH } & 7,000 \mathrm { DLH } \\\hline \text { Machine hours } & 6,500 \mathrm { MH } & 13,000 \mathrm { MH } \\\hline \text { Manufacturing overhead costs } & \$ 54,600 & \$ 67,060 \\\hline\end{array}$ Determine the total amount of overhead assigned to each unit of PVC fencing.