Reference: 05-13
Bressler Corporation Uses Activity-Based Costing to Determine Product

question 80

Multiple Choice

Reference: 05-13
Bressler Corporation uses activity-based costing to determine product costs for external financial reports. Activity rates computed at the beginning of the year are used to apply manufacturing overhead costs to products. The company has provided the following data concerning its activity-based costing system.
The data used to develop activity rates were:
$$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} & { \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 332,800 & 16,000 & \text { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,580,500 & 29,000 & \text { setups } \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & \$ 305,600 & 16,000 & \text { DLHs } \\\hline \begin{array} { l } \text { The actual activity for the year } \\\text { was: }\end{array} & & & \\\hline & & \text { Actual Activity for the Year } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product X } &\text { Product } Y \\\hline \text { Machine related (machine-hours) } & 15,000 & 7,000 & 8,000 \\\hline \text { Batch setup (setups) } & 30,000 & 22,000 &8,000\\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & 15,000 & 12,000 & 3,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $2,202,600.
-The debits to the Manufacturing Overhead control account during the year (prior to closing out the balance) would have totalled:

• A)$2,249,700.
• B)$2,223,500.
• C)$2,218,050.
• D)$2,202,600.

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Definitions:

Perpetual Inventory System

An approach in accounting that captures transactions related to inventory purchases or sales the moment they occur, facilitated by digital point-of-sale systems and enterprise asset management applications.

Periodic Inventory System

A method of inventory management where updates to inventory levels are made periodically at the end of an accounting period, rather than continuously.

Inventory Shrinkage

The loss of products between point of manufacture or purchase from supplier and point of sale, often due to theft, damage, or administrative errors.

Sales Tax

A tax on sales or on the receipts from sales, usually added to the consumer's purchase price and collected by the retailer.