1. Dalian Company provides the following information:

1. Dalian Company provides the following information:

Price per unit: $20Variable cost per unit: $8Fixed costs per month: $15,000

What is the breakeven point in terms of units sold? 1,1501,2001,8751,250 

2. A traditional costing system employs multiple allocation rates, but an activity-based costing system uses only one single allocation rate. 

True

 

False

 

3. Formosa Steel Products makes steel building materials for export, and uses an activity-based costing system to account for the indirect manufacturing costs of its various products. Indirect costs for the whole factory are broken down into three activities—casting, materials handling, and milling. The cost driver for casting is machine hours; the cost driver for material handling is kilograms, and the cost driver for milling is direct labor hours. Activity costs and volumes for the year were estimated as follows:

Activity    Cost                           Volume Casting $2,000,000                 800,000.00 Machine hoursMaterial Handling $400,000           500,000.00 KilogramsMilling $1,120,000                   140,000.00 Direct labor hours

One product is steel reinforcement rods, sold by the metric ton. Engineering reports show that one metric ton of steel reinforcement rods requires $100 of direct materials cost plus $50 of direct labor cost. Producing one metric ton of steel rods also requires 24 machine hours for casting, weighs 1,000 kilograms, and requires 15 direct labor hours.

What is the activity rate for the milling activity? 

$8.00 per direct labor hr $4.40 per direct labor hr$0.13 per direct labor hr$0.80 per direct labor hr

4. Two main benefits of activity-based costing are more accurate product cost information and more detailed information on costs of activities and the drivers of these costs. 

True 

False

5. Which of the following statements is CORRECT with respect to variable cost per unit, within the relevant range? 

It will increase as production decreases.It will decrease as production decreases.It will remain the same as production levels change. It will decrease as production increases.

6. The first step in the activity-based costing system is to identify each activity and its total indirect cost. 

True False

7. Peterson Company has both fixed and variable costs. If the volume doubles, the total variable costs will double. 

TrueFalse

8. Activity-based costing systems and traditional costing systems will produce the same results for product cost and profitability, although they use different methods of calculation.  

True False

9. Jurassic Manufacturers produces flooring material. Fixed costs are $5,000 per month. Sales price for one unit of product is $50, and the variable cost per unit is $30. If Jurassic wishes to earn an operating income of $2,000, how many units need to be sold? 

270300320350 

 

10. The main difference between activity-based costing and traditional costing systems is that activity-based costing uses a separate allocation rate for each activity.

 True False