Accounting 230 Chapter 5 Practice Quiz Zeta Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of manufacturing overhead that should be allocated to the individual product lines from the information given below: Wall Mirrors Specialty Windows Units produced 25 25 Material moves per product line 5 15 Direct Manufact. Labor-hrs per unit 200 200 Budgeted material-handling costs are $50,000 Under a costing system that allocates manufacturing overhead on the basis of direct manufacturing labor hours, the material handling costs allocated on one wall mirror are: $1,000 $ 500 $2,000 $5,000 $0 Using the above data, the material handling costs allocated to one wall mirror under ABC are: $1,000 $ 500 $1,500 $2,500 $0 What is the usual effect on the number of cost pools and cost allocation bases if ABC replaces a traditional costing system? Cost pools Cost allocation bases A. No effect No effect B. Increase No effect C. No effect Increase D. Increase Increase Which of the following is NOT a characteristic of ABC? Operating personnel play a key role in identifying the individual activities. It is usually difficult to find a good cause-and-effect relationship between a cost allocation base and organization sustaining costs. There are many homogenous indirect cost pools. Cost allocation bases of indirect cots pools are usually financial in nature. ABC tends to pass the cost-benefit test for companies with: operations that are relatively simple. many products that use different amounts of resources. many products that use about the same amount of resources. few products that use about the same amount of resources.
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