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

question 75

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: $$\begin{array} { | l | l | l | l | } \hline \text { Activity Cost Pools } & \begin{array} { l } \text { Estimated } \\\text { Overhead Cost }\end{array} & { \text { Expected Activity } } \\\hline \text { Machine related (machine-hours) } & \$ 332,800 & 16,000 & \mathrm { MHs } \\\hline \text { Batch setup (setups) } & \$ 1,580,500 & 29,000 & \text { setups } \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & \$ 305,600 & 16,000 & \text { DLHs } \\\hline \begin{array} { l } \text { The actual activity for the year } \\\text { was: }\end{array} & & & \\\hline & & \text { Actual Activity for the Year } \\\hline \text { Activity Cost Pools } & \text { Total } & \text { Product X } & \text { Product } Y \\\hline \text { Machine related (machine-hours) } & 15,000 & 7,000 &8,000 \\\hline \text { Batch setup (setups) } & 30,000 & 22,000 & 8,000 \\\hline \begin{array} { l } \text { General factory (direct } \\\text { labour-hours) }\end{array} & 15,000 & 12,000 &3,000 \\\hline\end{array}$$ The actual total manufacturing overhead cost incurred for the year was $2,202,600.
-The manufacturing overhead for the year is underapplied or overapplied by:

• A)($30,900).
• B)($15,450).
• C)$15,450.
• D)$30,900.

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Definitions:

Adjusting Entry

A journal entry made at the end of an accounting period to allocate income and expenditure to the appropriate period.

Wages Expense

Costs incurred by a company for the payment of hourly employee wages within a specific accounting period.

Accumulated Depreciation

The total depreciation for a fixed asset that has been charged to expense since that asset was acquired and made available for use.

Accrued Revenue

Revenue earned but not yet received in cash or recorded at the statement date, usually recognized in accrual basis accounting.