at a pet food manufacturer is considering ading two types of pet food to its exi
ID: 2587469 • Letter: A
Question
at a pet food manufacturer is considering ading two types of pet food to its existing food in 40-pound bags Assume th product line. Research had determined that good demand exists for dog and cat food in 1/2pound cans The company ideatified for the next year the following partial list of sctivities, costs, and activity drivers expected Expected Cost Driver Activity Costs Handling materials$105,000 Number of made Storage costs$820,000Weight of finished product Dog Food Cat Food Production volume 100,000 units 200,000 units Batches made 200 batches 150 batches 44. Refer to the data above. What are the overhead rates used to apply material handling (MH) and storage costs (SC) using activity-based costing? a) MH $300/batch; SC $2.73/unit. b) MH $300/batch; SC $.20/1b. c) MH $525/batch: SC S.205/unit d) MH S700 batch; SC $.205/1b c) MH $700/batch; SC $8.201b. 45. Which of the following statements is true of activity-based costing? a) ABC ignores the allocation of marketing costs b) ABC classifies some indirect costs as direct costs e) ABC is more likely to result in big business makes only one product rather than multiple products. Activities are the cost objects of the second stage of ABC. d) 46. ABC systems a) usually will undercost complicated or complex products b) will limit cost drivers to units of output c) highlight the different levels of activities d) will allocate costs based on the overall level of activityExplanation / Answer
44.
Dog Food
Cat Food
Total
Production Volume
100,000
200,000
Weight per can (in pounds)
40
0.5
Total Weight (in pounds) (A*B)
4,000,000
100,000
4,100,000
Batches Made
200
150
350
Activity
Cost
Cost Driver
Cost per driver unit
Handling Materials
$ 105,000
Number of batches made
$ 300.00
350
Storage Costs
$ 820,000
Weight of finished products
$ 0.20
4,100,000
Answer - B
45.
ABC system of costing is an improved version of the traditional costing method. The system considers allocation of expenses to different products on the basis of activity. The whole system s divide into two stages, the first stage is to allocate the cost to various activities and the second stahe considers the activities as cost object and determine the cost drivers for the allocation of the cost of the activity.
Answer - D
46.
Activity Based Cost system is an upgraded system of traditional costing. The system considers various activities used to produce the goods and allocates the various costs on the basis of cost drivers of each activity. Therefore, the system highlights the different level of activities.
Answer - C
44.
Dog Food
Cat Food
Total
Production Volume
100,000
200,000
Weight per can (in pounds)
40
0.5
Total Weight (in pounds) (A*B)
4,000,000
100,000
4,100,000
Batches Made
200
150
350
Activity
Cost
Cost Driver
Cost per driver unit
Handling Materials
$ 105,000
Number of batches made
$ 300.00
350
Storage Costs
$ 820,000
Weight of finished products
$ 0.20
4,100,000
Answer - B
45.
ABC system of costing is an improved version of the traditional costing method. The system considers allocation of expenses to different products on the basis of activity. The whole system s divide into two stages, the first stage is to allocate the cost to various activities and the second stahe considers the activities as cost object and determine the cost drivers for the allocation of the cost of the activity.
Answer - D
46.
Activity Based Cost system is an upgraded system of traditional costing. The system considers various activities used to produce the goods and allocates the various costs on the basis of cost drivers of each activity. Therefore, the system highlights the different level of activities.
Answer - C
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