Rustafson Corporation is a diversified manufacturer of consumer goods.

The company's activity-based

costing system has the following seven activity cost pools:
Estimated
Overhead Cost
$ 52,000
$ 15,000
$ 42,000
$ 18,000
$ 48,000
$ 75,000
$108,800

Activity Cost Pool

Labor-related
Machine-related
Machine setups
Production orders
Product testing
Packaging
General factory

Expected Activity
8,000 direct labor-hours
20,000 machine-hours
1,000 setups
500 orders
2,000 tests
5,000 packages
8,000 direct labor-hours

2.
value:

1.00 points

Required:
1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)
Activity Cost Pool
Labor-related

Activity Rate
per DLH

Machine-related

per MH

Machine setups

per setup

Production orders

per order

Product testing

per test

Packaging

per package

General factory

per DLH

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3.
value:

1.00 points

2. Compute the company's predetermined overhead rate, assuming that the company uses a single
plantwide predetermined overhead rate based on direct labor-hours. (Round your answer to 2
decimal places.)

Predetermined overhead rate

per DLH

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4.
value:

1.00 points
Larner Corporation is a diversified manufacturer of industrial goods. The company's activity-based
costing system contains the following six activity cost pools and activity rates:
Activity Cost Pool
Labor-related
Machine-related
Machine setups
Production orders
Shipments
General factory

Activity Rates
$ 7.00 per direct labor-hour
$ 3.00 per machine-hour
$ 40.00 per setup
$160.00 per order
$120.00 per shipment
$ 4.00 per direct labor-hour

Cost and activity data have been supplied for the following products:
J78
B52
$ 6.50 $ 31.00
$ 3.75 $ 6.00
4,000
100

Direct materials cost per unit

Direct labor cost per unit
Number of units produced per year

Total Expected
Activity
J78
1,000
3,200
5
5
10

Direct labor-hours
Machine-hours
Machine setups
Production orders
Shipments

B52
40
30
1
1
1

Required:
Compute the unit product cost of each product listed above. (Round your answers to 2 decimal
places.)
J78
Unit product cost

B52
$

5.
value:

1.00 points
Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is

expected to sell 40,000 units next year and Product L is expected to sell 8,000 units. A unit of either
product requires 0.4 direct labor-hours.
The company's total manufacturing overhead for the year is expected to be $1,632,000.
Required:
1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the
allocation base. If this method is followed, how much overhead cost per unit would be applied to
each product?
Product H
Overhead cost per unit

Product L

1-b. Compute the total amount of overhead cost that would be applied to each product.
Product H
Total overhead cost

2.

Product L
$

Total
$

Management is considering an activity-based costing system and would like to know what impact
this change might have on product costs. For purposes of discussion, it has been suggested that all
of the manufacturing overhead be treated as a product-level cost. The total manufacturing overhead
would be divided in half between the two products, with $816,000 assigned to Product H and
$816,000 assigned to Product L.
If this suggestion is followed, how much overhead cost per unit would be assigned to each
product?
Product H
Overhead cost per unit

Product L
$

6.
value:

1.00 points
Sultan Company uses an activity-based costing system.
At the beginning of the year, the company made the following estimates of cost and activity for its
five activity cost pools:

Activity Cost Pool

Labor-related
Purchase orders
Parts management
Board etching
General factory

Activity
Measure
Direct labor-hours
Number of orders
Number of part types
Number of boards
Machine-hours

Expected
Overhead
Cost
$ 156,000
$ 11,000
$ 80,000
$ 90,000
$ 180,000

Required:
1. Compute the activity rate for each of the activity cost pools.
Activity Cost Pool

Activity Rate

Expected
Activity
26,000 DLHs
220 orders
100 part types
2,000 boards
20,000 MHs

Labor-related

per DLH

Purchase orders

per order

Parts management

per part type

Board etching

per board

General factory

per MH

2. The expected activity for the year was distributed among the companys four products as follows:
Expected Activity
Activity Cost Pool
Labor-related (DLHs)
Purchase orders
(orders)
Parts management
(part types)
Board etching
(boards)
General factory
(MHs)

Product A
6,000

Product B
11,000

Product C
4,000

Product D
5,000

60

30

40

90

30

15

40

15

500

900

600

3000

8,000

3,000

6,000

Using the ABC data, determine the total amount of overhead cost assigned to each product. (Leave no
cells blank - be certain to enter "0" wherever required.)
Overhead Cost Assigned
Activity Cost Pool
Labor-related (DLHs)

Product A

Product B

Product C
$

Product D
$

Purchase orders (orders)

Parts management (part types)
Board etching (boards)
General factory (MHs)
Total

8.
value:

1.00 points
Kunkel Company makes two products and uses a conventional costing system in which a single
plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two

products for the upcoming year follow:

Direct materials cost per unit
Direct labor cost per unit
Direct labor-hours per unit
Number of units produced

Mercon Wurcon
$ 10.00 $ 8.00
$ 3.00 $ 3.75
0.20
0.25
10,000 40,000

These products are customized to some degree for specific customers.

Required:
1. The company's manufacturing overhead costs for the year are expected to be $336,000. Using the
company's conventional costing system, compute the unit product costs for the two products. (Do not
round intermediate calculation. Round your final answers to 2 decimal places.)
Mercon
Unit product cost

Wurcon

2. Management is considering an activity-based costing system in which half of the overhead would
continue to be allocated on the basis of direct labor-hours and half would be allocated on the basis of
engineering design time. This time is expected to be distributed as follows during the upcoming year:
Engineering design time (in hours)

Mercon
4,000

Wurcon
4,000

Total
8,000

Compute the unit product costs for the two products using the proposed ABC system. (Do not round
intermediate calculation. Round your final answers to 2 decimal places.)
Mercon
Unit product cost

Wurcon
$

[The following information applies to the questions displayed below.]

Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the
two products follow:

Rims
Posts

Direct
Labor-Hours
per unit
0.40
0.20

Annual
Production
20,000 units
80,000 units

Additional information about the company follows:

a. Rims require $17 in direct materials per unit, and Posts require $10.
b. The direct labor wage rate is $16 per hour.
c. Rims are more complex to manufacture than Posts and they require special equipment.
d. The ABC system has the following activity cost pools:

Estimated Activity
Estimated
Activity Cost
Activity
Overhead
Pool
Measure
Cost
Machine
Number of
$
21,000
setups
setups
Special
Machine-hours $
180,000
processing
General
Direct labor$
288,000
factory
hours

Rims

Posts

Total

100

80

180

4,000

4,000

8,000

16,000

24,000

9.
value:

1.00 points

Required:
1. Compute the activity rate for each activity cost pool. (Round your final answer to two decimal
places.)
Activity Cost Pool

Activity Rate

Machine setups

per setup

Special processing

per MH

General factory

per DLH

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10.
value:

1.00 points

2. Determine the unit product cost of each product according to the ABC system. (Do not
round intermediate calculation. Round your final answers to 2 decimal places.)

Unit product cost of Rims

Unit product cost of Posts

1.
value:

1.00 points
The following activities occur at Greenwich Corporation, a company that manufactures a variety of
products:
Required:
Classify each of the activities below as either a unit-level, batch-level, product-level, or facility-level
activity.
Activity
Classification

Activity
a. Various individuals manage the parts inventories.

Product-level

b. A clerk in the factory issues purchase orders for a job.

Batch-level

c. The personnel department trains new production workers.

d. The factorys general manager meets with other department heads to
coordinate plans.
e. Direct labor workers assemble products.

Facility-level

f. Engineers design new products.

Product-level

g. The materials storekeeper issues raw materials to be used in jobs.

h. The maintenance department performs periodic preventive
maintenance on general-use equipment.

Batch-level

Facility-level
Unit-level

Facility-level

[The following information applies to the questions displayed below.]

Rustafson Corporation is a diversified manufacturer of consumer goods. The company's activity-based
costing system has the following seven activity cost pools:

Activity Cost Pool

Labor-related
Machine-related
Machine setups
Production orders
Product testing
Packaging
General factory

2.
value:

1.00 points

Estimated
Overhead Cost
$ 52,000
$ 15,000
$ 42,000
$ 18,000
$ 48,000
$ 75,000
$108,800

Expected Activity
8,000 direct labor-hours
20,000 machine-hours
1,000 setups
500 orders
2,000 tests
5,000 packages
8,000 direct labor-hours

Required:
1. Compute the activity rate for each activity cost pool. (Round your answers to 2 decimal places.)
Activity Cost Pool

Activity Rate

Labor-related

6.50

per DLH

Machine-related

0.75

per MH

Machine setups

42.00

per setup

Production orders

36.00

per order

Product testing

24.00

per test

Packaging

15.00

per package

General factory

13.60

per DLH

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3.
value:

1.00 points

2. Compute the company's predetermined overhead rate, assuming that the company uses a single
plantwide predetermined overhead rate based on direct labor-hours. (Round your answer to 2
decimal places.)

Predetermined overhead rate

44.85

per DLH

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4.
value:

1.00 points
Larner Corporation is a diversified manufacturer of industrial goods. The company's activity-based
costing system contains the following six activity cost pools and activity rates:
Activity Cost Pool
Labor-related
Machine-related
Machine setups
Production orders
Shipments
General factory

Activity Rates
$ 7.00 per direct labor-hour
$ 3.00 per machine-hour
$ 40.00 per setup
$160.00 per order
$120.00 per shipment
$ 4.00 per direct labor-hour

Cost and activity data have been supplied for the following products:

J78
B52
$ 6.50 $ 31.00
$ 3.75 $ 6.00
4,000
100

Direct materials cost per unit

Direct labor cost per unit
Number of units produced per year

Total Expected
Activity
J78
1,000
3,200
5
5
10

Direct labor-hours
Machine-hours
Machine setups
Production orders
Shipments

B52
40
30
1
1
1

Required:
Compute the unit product cost of each product listed above. (Round your answers to 2 decimal
places.)
J78
Unit product cost

B52

15.95

45.50

5.
value:

1.00 points
Pacifica Industrial Products Corporation makes two products, Product H and Product L. Product H is
expected to sell 40,000 units next year and Product L is expected to sell 8,000 units. A unit of either
product requires 0.4 direct labor-hours.
The company's total manufacturing overhead for the year is expected to be $1,632,000.
Required:
1-a. The company currently applies manufacturing overhead to products using direct labor-hours as the
allocation base. If this method is followed, how much overhead cost per unit would be applied to
each product?
Product H
Overhead cost per unit

Product L

34.00

34.00

1-b. Compute the total amount of overhead cost that would be applied to each product.
Product H
Total overhead cost

2.

1,360,00

Product L
$

272,000

Total
$

1,632,00

Management is considering an activity-based costing system and would like to know what impact
this change might have on product costs. For purposes of discussion, it has been suggested that all
of the manufacturing overhead be treated as a product-level cost. The total manufacturing overhead
would be divided in half between the two products, with $816,000 assigned to Product H and

$816,000 assigned to Product L.

If this suggestion is followed, how much overhead cost per unit would be assigned to each
product?
Product H
Overhead cost per unit

Product L

20.40

102.00

6.
value:

1.00 points
Sultan Company uses an activity-based costing system.
At the beginning of the year, the company made the following estimates of cost and activity for its
five activity cost pools:

Activity Cost Pool

Labor-related
Purchase orders
Parts management
Board etching
General factory

Expected
Overhead
Cost
$ 156,000
$ 11,000
$ 80,000
$ 90,000
$ 180,000

Activity
Measure
Direct labor-hours
Number of orders
Number of part types
Number of boards
Machine-hours

Expected
Activity
26,000 DLHs
220 orders
100 part types
2,000 boards
20,000 MHs

Required:
1. Compute the activity rate for each of the activity cost pools.
Activity Cost Pool

Activity Rate

Labor-related

Purchase orders

Parts management

Board etching

General factory

per DLH

50

per order

800

per part type

45

per board

per MH

2. The expected activity for the year was distributed among the companys four products as follows:
Expected Activity
Activity Cost Pool
Labor-related (DLHs)
Purchase orders
(orders)
Parts management
(part types)
Board etching
(boards)
General factory

Product A
6,000

Product B
11,000

Product C
4,000

Product D
5,000

60

30

40

90

30

15

40

15

500

900

600

3000

8,000

3,000

6,000

(MHs)
Using the ABC data, determine the total amount of overhead cost assigned to each product. (Leave no
cells blank - be certain to enter "0" wherever required.)
Overhead Cost Assigned
Activity Cost Pool
Labor-related (DLHs)

Product A
$

36,000

Product B
$

66000

Product C
$

24000

Product D
30,000

Purchase orders (orders)

3,000

1500

2000

4,500

Parts management (part types)

24,000

12000

32000

12,000

Board etching (boards)

22,500

40500

27000

General factory (MHs)

27,000

72000

27000

54,000

Total

112,500

192000

112000

100,500

7.
value:

1.00 points
Various activities at Companhia de Textils, S.A., a manufacturing company located in Brazil, are listed
below. The company makes a variety of products in its plant outside So Paulo.
Required:
Classify each of the activities as either a unit-level, batch-level, product-level, or facility-level activity.
Activity

Activity
Classification

a.Preventive maintenance is performed on general-purpose production equipment.

Facility-level

b.Products are assembled by hand.

Unit-level

c. A security guard patrols the company grounds after normal working hours.

Facility-level

d.Purchase orders are issued for materials to be used in production.

Batch-level

e.Modifications are made to product designs.

Product-level

f. New employees are hired by the personnel office.

Facility-level

g.Machine settings are changed between batches of different products.

Batch-level

h.Parts inventories are maintained in the storeroom. (Each product requires its own unique
parts.)
i. Insurance costs are incurred on the companys facilities.

Product-level
Facility-level

8.
value:

1.00 points
Kunkel Company makes two products and uses a conventional costing system in which a single
plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two
products for the upcoming year follow:
Direct materials cost per unit
Direct labor cost per unit
Direct labor-hours per unit
Number of units produced

Mercon Wurcon
$ 10.00 $ 8.00
$ 3.00 $ 3.75
0.20
0.25
10,000 40,000

These products are customized to some degree for specific customers.

Required:
1. The company's manufacturing overhead costs for the year are expected to be $336,000. Using the
company's conventional costing system, compute the unit product costs for the two products. (Do not
round intermediate calculation. Round your final answers to 2 decimal places.)
Mercon
Unit product cost

Wurcon

18.60

18.75

2. Management is considering an activity-based costing system in which half of the overhead would
continue to be allocated on the basis of direct labor-hours and half would be allocated on the basis of
engineering design time. This time is expected to be distributed as follows during the upcoming year:
Engineering design time (in hours)

Mercon
4,000

Wurcon
4,000

Total
8,000

Compute the unit product costs for the two products using the proposed ABC system. (Do not round
intermediate calculation. Round your final answers to 2 decimal places.)
Mercon
Unit product cost

24.20

Wurcon
$

17.35

[The following information applies to the questions displayed below.]

Performance Products Corporation makes two products, titanium Rims and Posts. Data regarding the
two products follow:

Rims
Posts

Direct
Labor-Hours
per unit
0.40
0.20

Annual
Production
20,000 units
80,000 units

Additional information about the company follows:

a. Rims require $17 in direct materials per unit, and Posts require $10.
b. The direct labor wage rate is $16 per hour.
c. Rims are more complex to manufacture than Posts and they require special equipment.
d. The ABC system has the following activity cost pools:
Estimated Activity
Estimated
Activity Cost
Activity
Overhead
Pool
Measure
Cost
Machine
Number of
$
21,000
setups
setups
Special
Machine-hours $
180,000
processing
General
Direct labor$
288,000
factory
hours

Rims

Posts

Total

100

80

180

4,000

4,000

8,000

16,000

24,000

9.
value:

1.00 points

Required:
1. Compute the activity rate for each activity cost pool. (Round your final answer to two decimal
places.)
Activity Cost Pool

Activity Rate

Machine setups

Special processing

General factory

116.67

per setup

45

per MH

12

per DLH

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10.
value:

1.00 points

2. Determine the unit product cost of each product according to the ABC system. (Do not
round intermediate calculation. Round your final answers to 2 decimal places.)

Unit product cost of Rims

Unit product cost of Posts

37.78
15.72