The LMN Company Recently Switched to Activity-Based Costing (ABC)from the Department

question 30

Multiple Choice

The LMN Company recently switched to activity-based costing (ABC) from the department allocation method.The department method allocated overhead costs at a rate of $60 per machine hour.The cost accountant for Department XZ has gathered the following data: During April,LMN purchased and used $100,000 of direct materials at $20 per ton.There were eight (8) production runs using a total of 12,000 machine hours in April.The manager of Department XZ needed 12 inspections.Actual overhead costs totaled $820,000 for the month.How much overhead costs were applied to the Work-in-Process Inventory during April using traditional costing?

• A)$536,000.
• B)$720,000.
• C)$736,000.
• D)$820,000.

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Definitions:

Normative Statements

Assertions about how the world ought to be, incorporating values and judgments rather than just factual claims.

Scientific Method

A systematic approach to research where a problem is identified, relevant data is gathered, a hypothesis is formulated from these data, and the hypothesis is empirically tested.

Economic

Pertains to the production, distribution, and consumption of goods and services, and the analysis of behaviors and decisions related to these processes.

Fallacy of Composition

The erroneous belief that what is true for a part is necessarily true for the whole, particularly in economics.