Question 1
Activity-based costing information can be used for ________.
◦ product-mix decisions
◦ pricing decisions
◦ advertisement decisions
◦ inventory valuation
Question 2
Excellent
Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2018, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.
For 2018 Excellent Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:
| Cost pool | Manufacturing overhead costs | Activity level |
| Design changes | $ 120,000 | 300 design changes |
| Setups | 640,000 | 5,000 setups |
| Inspections | 80,000 | 8,000 inspections |
| Total manufacturing overhead costs | $840,000 |
During 2018, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:
| Activity | Money Managers | Hospital Systems |
When costs are assigned using the single cost driver, number of pages printed, then ________.
◦ Excellent Printers will want to retain this highly profitable customer
◦ Money Managers will likely seek to do business with competitors
◦ Money Managers is unfairly over billed for its use of printing resources
◦ Money Managers is grossly under billed for the job, while other jobs will be unfairly over billed
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