Figure 4-21 Appleby Manufacturing Uses an Activity-Based Costing System

question 70

Multiple Choice

Figure 4-21 Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G. Information relating to the two products is as follows: The following overhead costs are reported for the following activities of the production process:
Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below:
Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
Refer to Figure 4-21. Using ABC as the benchmark, what is the percentage error in the cost assigned to Model G using the approximately relevant ABC approach? (round to 4 decimal places)

• A) 0.25%
• B) 0.12%
• C) 1.2%
• D) 2.5%

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Definitions:

International Quality Standards

A set of formalized rules and guidelines for production and manufacturing that ensure products meet certain requirements for global trade.

ISO 9000

The set of standards that certifies that a business is using processes and principles to ensure the production of quality products.

Six Sigma

The tolerance range in which only 3.4 defects per million are allowed.

Defects

Imperfections or faults in a product or process that can result in a failure to meet desired quality standards.