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

question 156

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. Under this new approach using consumption ratios for labor related and batch inspections, what set of equations would be used to create equally accurate reduced ABC allocation rates (where a = labor hours and b = batch inspections) ? (round to 5 decimal places)

• A) .40 = .8a + .75b .60 = .12a + .85b
• B) .41 = .4a + .41667b .59 = .6a + .58333b
• C) .50 = .4a + .6b .50 = .6a + .4b
• D) .44 = .8a + .75b .56 = .12a + .85b

---

Definitions:

Strategic Investments

Investments made with long-term goals in mind, often intended to yield sustainable competitive advantages.

Equity Method

An accounting technique used by a company to record the profits earned through its investment in another company.

Cash Dividends

Payments made by a corporation to its shareholders, usually as a distribution of profits.

Associate

A term that may refer to a business partner, an employee position within a company, or a relationship between entities where one has significant influence over the other.