ACTIVITY-BASED COSTING
67 5K = 97 , 500 his
n0K .
20 u
5u
5 ,
hav- = 2 62
.
x 10,0
hours
44 1 875 -75 xo
RMAC
inmc
-
boo
a
O
=
200004 . 00
100
& =
150
CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
ADVANCED FINANCIAL ACCOUNTING AND REPORTING GERMAN and VALIX
ACTIVITY BASED COSTING
Part I: Theory of Accounts
1. Which of the following is typically regarded as a cost driver in traditional accounting
practices?
A. Number of purchased orders processed
B. Number of customers served
C. Number of transactions processed
D. Number of direct labor hours worked
2. The term cost driver refers to
A. Any activity that can be used to predict cost changes
B. The attempt to control expenditures at a reasonable level
C. The person who gathers and transfers cost data to the management accountant
D. Any activity that causes costs to be incurred
3. Cost allocation bases in Activity Based Costing should be
A. Cost drivers
B. Value-added activities
C. Activity centers
D. Processes
4. Traditional overhead allocations result in which of the following situations?
A. Overhead costs are assigned as period costs to manufacturing operations
B. High-volume products are assigned too much overhead, and low-volume products are
assigned too little overhead
C. Low-volume products are assigned too much overhead, and high-volume products are
assigned too little overhead
D. The resulting allocations cannot be used for financial reports
5. Relative to traditional product costing, Activity Based Costing differs in the way cost are
A. Processed
B. Allocated
C. Benchmarked
D. Incurred
9512
Page 2
Part II: Problem Solving
Problem 1
Blockbuster Corporation has two product lines: LED televisions and OLED televisions. The
company has budgeted the following production and overhead costs for the upcoming year:
LED OLED
Units Produced 1,500 2,250
Direct labor hours per Unit 20 30
Material Moves per Product Line 15 25
Budgeted Materials Handling Cost P75,000
Total Machine Hours 10,000 16,000
Machine Maintenance Costs P180,000
1. Assume the company uses total direct labor hours to allocate factory overhead, what is
the amount of total overhead cost allocated to the LED TV?
A. 78,462
B. 102,000
C. 90,077
D. 55,385
2. Assume the company uses Activity Based Costing to allocate factory overhead, what is
the amount of total overhead cost allocated to the OLED TV?
A. 158,654
B. 159,375
C. 157,644
D. 164,340
Problem 2
Import Company used Activity Based Costing. The company produced two products: Compact
Speakers and Hi-Fi Speakers. The annual production and sales volume of Compact Speakers was
8,000 units and for Hi-Fi Speakers was 6,000 units.
There were three activity cost pools with the following expected activities and estimated total
costs:
Expected Activity Expected Activity
Activity Cost Pool Estimated Cost Total
Compact Speakers Hi-Fi Speakers
Activity 1 P20,000 100 400 500
Activity 2 P37,000 800 200 1,000
Activity 3 P91,200 800 3,000 3,800
1. What is the unit cost of the Compact Speakers?
A. 2.40
B. 3.90
C. 6.60
D. 10.59
2. What is the unit cost of the Hi-Fi Speakers?
A. 4.30
B. 9.20
C. 12.00
D. 15.90
END
9512
