COSTACC

MODULE 5 QUIZ
ACTIVITY-BASED COSTING

Use the following to answer questions 1-2:

Vinnie Morelli Corporation has the following overhead costs and cost drivers. Direct labor hours are estimated
at 100,000 for the year.

Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity
Ordering and Receiving Orders P 120,000 500 orders
Machine Setup Setups 297,000 450 setups
Machining Machine hours 1,500,000 125,000 MH
Assembly Parts 1,200,000 1,000,000 parts
Inspection Inspections 300,000 500 inspections

1. If overhead is applied using traditional costing based on direct labor hours, the overhead
application rate is
A) P9.60.
B) P12.00.
C) P15.00.
D) P34.17.

2. If overhead is applied using activity-based costing, the overhead application rate for
ordering and receiving is
A) P1.20 per direct labor hour.
B) P240 per order.
C) P0.12 per part.
D) P6,834 per order.

Use the following to answer questions 3-5:

R-Ball Corporation manufactures deluxe and standard racquetball racquets. R-Ball’s total overhead costs
consist of assembly costs and inspection costs. The following information is available:

Cost Deluxe Standard Total Cost

Assembly 500 mach. hours 500 mach. hours P30,000
Inspections 350 150 P50,000
2,100 labor hours 1,900 labor hours

R-Ball is considering switching from one overhead rate based on labor hours to activity-based costing.

3. Total overhead costs assigned to deluxe racquets, using a single overhead rate, are
A) P40,000.
B) P42,000.
C) P50,000.
D) P56,000.

4. Using activity-based costing, how much assembly cost is assigned to deluxe racquets?
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 A) P10,500.
B) P15,000.
C) P15,750.
D) P21,000.

5. Using activity-based costing, how much inspections cost is assigned to deluxe racquets?
A) P15,000.
B) P23,750.
C) P25,000.
D) P35,000.

6. Calvin Co. produces 3 products: A1, B2, and C3. A1 requires 400 purchase orders, B2
requires 600 purchase orders, and C3 requires 1,000 purchase orders. Calvin has identified
an ordering and receiving activity cost pool with allocated overhead of P480,000 for
which the cost driver is purchase orders. Direct labor hours used on each product are
50,000 for A1, 40,000 for B2, and 110,000 for C3. How much ordering and receiving
overhead is assigned to each product?
A1 B2 C3
A) P160,000 P160,000 P160,000
B) P30,000 P96,000 P354,000
C) P96,000 P144,000 P240,000
D) P215,000 P30,000 P235,000

Use the following to answer questions 7-8:

A company incurs $1,800,000 of overhead each year in three departments: Processing, Packaging, and Testing.
The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in
producing 400,000 drums of oil and 600,000 drums of sludge. The following data are available:

Production information for the two products is as follows:

7. The amount of overhead assigned to sludge is

A) $900,000.
B) $828,750.
C) $971,250.
D) $690,000.

8. The amount of overhead assigned to oil is

A) $900,000.
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 B) $971,250.
C) $828,750.
D) $690,000.

Use the following to answer questions 9-12:

Poodle Company manufactures two products, Mini A and Maxi B) Poodle's overhead costs consist of setting up
machines, P1,200,000; machining, P2,700,000; and inspecting, P900,000. Information on the two products is:

Mini A Maxi B
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700

9. Overhead applied to Maxi B using activity-based costing is

A) P1,920,000.
B) P2,304,000.
C) P2,496,000.
D) P3,000,000.

10. Overhead applied to Maxi B using traditional costing using direct labor hours is
A) P1,920,000.
B) P2,304,000.
C) P2,505,000.
D) P3,000,000.

11. Overhead applied to Mini A using traditional costing using direct labor hours is
A) P1,800,000.
B) P2,304,000.
C) P2,505,000.
D) P2,880,000.

12. Overhead applied to Mini A using activity-based costing is

A) P1,800,000.
B) P2,304,000.
C) P2,496,000.
D) P2,880,000.

13. Which account is used in just-in-time processing?

A) Raw materials inventory
B) Work-in-process inventory
C) Merchandise inventory
D) Raw and In-Process inventory

14. Gee-Tar Company manufactures two models of its guitar, the Beginner and the Pro. The
Beginner model requires 10,000 direct labor hours and the Pro requires 30,000 direct labor
hours. The company produces 3,400 units of the Beginner model and 600 units of the Pro
model each year. The company inspects one Beginner for every 100 produced, and
inspects one Pro for every 10 produced. The company expects to incur P122,200 of total
inspecting costs this year. How much of the inspecting costs should be allocated to the
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 Beginner model using ABC costing?
A) P30,550
B) P44,200
C) P61,100
D) P103,870

15. Hammock Company manufactures two models of its hammock, the Superior and the
Deluxe. The Superior model requires 10,000 direct labor hours and the Deluxe model
requires 40,000 direct labor hours. The company produces 4,000 units of the Superior
model and 1,000 units of the Deluxe model each year. The company produces the
Superior model in batch sizes of 200, while it produces the Deluxe model in batch sizes
of 100. The company expects to incur P150,000 of total setup costs this year. How much
of the setup costs are allocated to the Superior model using ABC costing?
A) P100,000
B) P50,000
C) P30,000
D) P125,000

16. CJ Accounting performs two types of services, Tax and Consulting. CJ’s overhead costs
consist of computer support, P80,000; and legal support, P20,000. Information on the two
services is:

Tax Consulting
Direct labor cost P80,000 P120,000
CPU minutes 40,000 10,000
Legal hours used 200 800

Overhead applied to consulting services using traditional costing is

A) P15,000.
B) P30,000.
C) P48,000.
D) P60,000.

17. B&J Accounting performs two types of services, Tax and Auditing. B&J’s overhead costs
consist of computer support, P630,000; and legal support, P70,000. Information on the
two services is:

Tax Auditing
Direct labor cost P50,000 P150,000
CPU minutes 135,000 15,000
Legal hours used 200 800

Overhead applied to auditing services using activity-based costing is

A) P525,000.
B) P119,000.
C) P644,000.
D) P700,000.

Use the following to answer questions 18-20:

Canterra Co, incurs P240,000 overhead costs each year in its three main departments, setup (P15,000), machining
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(P165,000), and packing (P60,000). The setup department performs 40 setups per year, the machining department
works 5,000 hours per year, and the packing department packs 500 orders per year. Information about Canterra’s
two products is as follows:

18. If machining hours are used as a base, how much overhead is assigned to Product One
each year?
A) P48,000
B) P120,000
C) P82,500
D) P72,000

19. Using ABC, how much overhead is assigned to Product One each year?
A) P120,000
B) P181,500
C) P48,000
D) P58,500

20. Using ABC, how much overhead is assigned to Product Two each year?
A) P120,000
B) P96,000
C) P181,500
D) P192,000

21. Donkey Company manufactures two products, Standard and DeLuxe. Donkey’s overhead
costs consist of machining, P300,000; and assembling, P100,000. Information on the two
products is:
Standard DeLuxe
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000

Overhead applied to Standard using traditional costing using direct labor hours is
A) P111,000.
B) P160,000.
C) P240,000.
D) P289,000.

22. DJ Accounting performs two types of services, Tax and Consulting. DJ’s overhead costs
consist of computer support, P250,000; and legal support, P100,000. Information on the
two services is:

Tax Consulting
Direct labor cost P50,000 P150,000
CPU minutes 10,000 10,000
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 Legal hours used 200 800

Overhead applied to tax services using activity-based costing is

A) P70,000.
B) P107,500.
C) P145,000.
D) P350,000.

23. JC Accounting performs two types of services, Tax and Consulting. JC’s overhead costs
consist of computer support, P106,250; and legal support, P293,750. Information on the
two services is:

Tax Consulting
Direct labor cost P75,000 P125,000
CPU minutes 40,000 10,000
Legal hours used 200 800

Overhead applied to tax services using traditional costing is

A) P150,000.
B) P120,000.
C) P180,000.
D) P50,000.

24. Donkey Company manufactures two products, Standard and DeLuxe. Donkey’s overhead
costs consist of machining, P750,000; and assembling, P250,000. Information on the two
products is:
Standard DeLuxe
Direct labor hours 15,000 22,500
Machine hours 10,000 30,000
Number of parts 90,000 160,000

Overhead applied to DeLuxe using traditional costing using direct labor hours is
A) P277,500.
B) P400,000.
C) P600,000.
D) P722,500.

25. A company incurs P2,400,000 of overhead each year in three departments: Ordering and
Receiving, Mixing, and Testing. The company prepares 2,000 purchase orders, works
50,000 mixing hours, and performs 1,500 tests per year in producing 1,110,000 drums
of Goo and 370,000 of Slime. The following data are available:

Department Expected use of Driver Cost

Ordering and Receiving 2,000 P500,000
Mixing 50,000 700,000
Testing 1,500 1,200,000

Information for Goo is as follows:

Department Expected use of Driver
Ordering and Receiving 400
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 Mixing 20,000
Testing 500

The amount of overhead assigned to Goo.

A) P600,000
B) P780,000
C) P990,000
D) P1,200,000

26. A company incurs P1,350,000 of overhead each year in three departments: Ordering and
Receiving, Mixing, and Testing. The company prepares 2,000 purchase orders, works
50,000 mixing hours, and performs 1,500 tests per year in producing 1,140,000 drums of
Goo and 380,000 of Slime. The following data are available:

Department Expected use of Driver Cost

Ordering and Receiving 2,000 P500,000
Mixing 50,000 700,000
Testing 1,500 150,000

Information for Slime is as follows:

Department Expected use of Driver
Ordering and Receiving 1600
Mixing 30,000
Testing 1000

The amount of overhead assigned to Slime.

A) P675,000
B) P797,500
C) P920,000
D) P1,012,500

27. Veronica Co. produces three products: Rain, Snow and Wind. Rain requires 80 machine
setups, Snow requires 60 setups, and Wind requires 180 setups. Veronica has identified
an activity cost pool with allocated overhead of P840,000 for which the cost driver is
machine setups. How much overhead is assigned to each product?
Rain Snow Wind
A) P280,000 P280,000 P280,000
B) P306,000 P75,000 P459,000
C) P210,000 P157,500 P472,500
D) P157,500 P280,000 P402,500

28. For its inspecting cost pool, Hose Company expected overhead cost of P350,000 and
4,000 inspections. The actual overhead cost for that cost pool was P357,000 for 5,000
inspections. The activity-based overhead rate used to assign the costs of the inspecting
cost pool to products is
A) P71.40 per inspection.
B) P70.00 per inspection.
C) P87.50 per inspection.
D) P89.25 per inspection.

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29. Donkey Company manufactures two products, Standard and DeLuxe. Donkey’s overhead
costs consist of machining, P600,000; and assembling, P200,000. Information on the two
products is:
Standard DeLuxe
Direct labor hours 15,000 22,500
Machine hours 10,000 30,000
Number of parts 90,000 160,000

Overhead applied to Deluxe using activity-based costing is

A) P222,000.
B) P320,000.
C) P480,000.
D) P578,000.

30. Globe Company produces two products, A1 and B2. A1 is a high-volume item totaling
20,000 units annually. B2 is a low-volume item totaling only 6,000 units per year. A1
requires one hour of direct labor for completion, while each unit of B2 requires 2 hours.
Therefore, total annual direct labor hours are 32,000 (20,000 + 12,000). Expected annual
manufacturing overhead costs are P520,000. Globe uses a traditional costing system and
assigns overhead based on direct labor hours. Each unit of B2 would be assigned overhead
of
A) P16.25.
B) P26.00.
C) P32.50.
D) need more information to compute.

31. One of Astro Company's activity cost pools is machine setups, with estimated overhead
of P360,000. Astro produces sparklers (400 setups) and lighters (600 setups). How much
of the machine setup cost pool should be assigned to sparklers?
A) P360,000
B) P144,000
C) P180,000
D) P216,000

32. An element of just-in-time processing is

A) dependable suppliers who are willing to deliver on short notice.
B) a multi-skilled workforce.
C) a total quality control system.
D) all of these.

33. Sleep-Tight manufactures mattresses for the hotel industry. It has two products, Downy
and Firm, and total overhead is P790,000. The company plans to manufacture 400 Downy
mattresses and 100 Firm mattresses his year. In manufacturing the mattresses, the
company must perform 600 material moves for the Downy and 400 for the Firm; it
processes 900 purchase orders for the Downy and 700 for the Firm; and the company's
employees work 1,400 direct labor hours on the Downy product and 3,400 on the Firm.
Sleep-Tight's total material handling costs are P500,000 and its total processing costs are
P290,000. Using ABC, how much overhead would be assigned to the Downy product?
A) P395,000
B) P463,125
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 C) P326,875
D) P559,583

34. Sasse Inc. manufactures 2 products: hammers and screwdrivers. The company has
estimated its overhead in the assembling department to be P280,000. The company
produces 300,000 hammers and 600,000 screwdrivers each year. Each hammer uses 2
parts, and each screwdriver uses 3 parts. How much of the assembly overhead should be
allocated to hammers?
A) P70,000.
B) P93,333.
C) P112,000
D) P119,980.

35. TC Accounting performs two types of services, Tax and Consulting. TC’s overhead
costs consist of computer support, P200,000; and legal support, P100,000. Information
on the two services is:

Tax Consulting
Direct labor cost P50,000 P100,000
CPU minutes 40,000 10,000
Legal hours used 200 800

TC Accounting performs tax services for Vince Morelli. Direct labor cost is P1,500; 600
CPU minutes were used; and 1 legal hour was used. What is the total cost of the Morelli
job?
A) P2,500
B) P1,500
C) P3,000
D) P4,000

Use the following to answer questions 36-37:

Zones Co. incurs P350,000 of overhead costs each year in its three main departments, machining (P200,000),
inspections (P100,000) and packing (P50,000). The machining department works 4,000 hours per year, there are
500 inspections per year, and the packing department packs 500 orders per year. Information about Zones’s
two products is as follows:

Product A Product B
Machining hours 1,000 3,000
Inspections 100 500
Orders packed 350 650
Direct labor hours 1,700 1,800

36. Using ABC, how much overhead is assigned to Product A this year?
A) P84,167
B) P121,154
C) P170,000
D) P175,000

37. If traditional costing based on direct labor hours is used, how much overhead is assigned
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 to Product A this year?
A) P84,167
B) P121,154
C) P170,000
D) P175,000

38. Ben and Jake's Accounting Services estimates for next year revenues of P3,000,000,
direct labor of P600,000, and overhead of P1,050,000. Under traditional costing, overhead
is applied to audit jobs using the rate of
A) 35% of revenues.
B) 20% of revenues.
C) 56% of direct labor.
D) 175% of direct labor.

39. OldMaid Inc) computed an overhead rate for machining costs (P7,000,000) of P10 per
machine hour. Machining costs are driven by machine hours. If computed based on direct
labor hours, the overhead rate for machining costs would be P20 per direct labor hour.
The company produces two products, Gert and Mill. Gert requires 280,000 machine hours
and 116,667 direct labor hours, while Mill requires 420,000 machine hours and 680,000
direct labor hours. Using activity-based costing, machining costs assigned to each product
is

Gert Mill
A) P4,200,000 P2,800,000
B) P3,500,000 P3,500,000
C) P1,025,105 P5,974,895
D) P2,800,000 P4,200,000

40. Donkey Company manufactures two products, Standard and DeLuxe. Donkey’s overhead
costs consist of machining, P750,000; and assembling, P250,000. Information on the two
products is:
Standard DeLuxe
Direct labor hours 15,000 22,500
Machine hours 10,000 30,000
Number of parts 90,000 160,000

Overhead applied to Standard using activity-based costing is

A) P277,500.
B) P400,000.
C) P600,000.
D) P722,500.

41. Estimated costs for activity cost pools and other item(s) are as follows:
Machining P525,000
Assembling 450,000
Advertising 100,000
Inspecting and testing 75,000

Total estimated overhead is

A) P625,000.
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 B) P1,050,000.
C) P700,000.
D) P1,150,000.

42. One of Jetson Company's activity cost pools is inspecting, with estimated overhead of
P300,000. Jetson produces throw rugs (700 inspections) and area rugs (1,300 inspections).
How much of the inspecting cost pool should be assigned to throw rugs?
A) P105,000.
B) P210,000.
C) P195,000.
D) P300,000.

43. Jaime Inc. manufactures two products, sweaters and jackets. The company has estimated
its overhead in the order-processing department to be P120,000. The company produces
50,000 sweaters and 80,000 jackets each year. Sweater production requires 25,000
machine hours, jacket production requires 50,000 machine hours. The company places
raw materials orders 10 times per month, 2 times for raw materials for sweaters and the
remainder for raw materials for jackets. How much of the order processing overhead
should be allocated to jackets?
A) P60,000
B) P80,000
C) P73,846
D) P96,000

44. Which of the following is not a benefit of just-in-time processing?

A) Control of significant inventory balances
B) Enhanced product quality
C) Reduction of rework costs
D) Production cost savings

45. Under just-in-time processing, all of the following are received or completed “just in
time” except
A) finished goods.
B) raw materials.
C) subassembly parts.
D) supplies.
End of Quiz

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