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Chapter 7
Activity-Based Costing: A Tool to Aid
Decision Making

Solutions to Questions

7-1 Activity-based costing differs from ABC system. Tapping the knowledge of cross-
traditional costing systems in a number of ways. functional employees also lessens their resistance
In activity-based costing, nonmanufacturing as to ABC because they feel included in the
well as manufacturing costs may be assigned to implementation process.
products. And, some manufacturing costs—
including the costs of idle capacity—may be 7-4 Unit-level activities are performed for
excluded from product costs. An activity-based each unit that is produced. Batch-level activities
costing system typically includes a number of are performed for each batch regardless of how
activity cost pools, each of which has its unique many units are in the batch. Product-level
measure of activity. These measures of activity activities must be carried out to support a product
often differ from the allocation bases used in regardless of how many batches are run or units
traditional costing systems. produced. Customer-level activities must be
carried out to support customers regardless of
7-2 When direct labor is used as an allocation what products or services they buy. Organization-
base for overhead, it is implicitly assumed that sustaining activities are carried out regardless of
overhead cost is directly proportional to direct the company’s precise product mix or mix of
labor. When cost systems were originally customers.
developed in the 1800s, this assumption may
have been reasonably accurate. However, direct 7-5 Organization-sustaining costs, customer-
labor has declined in importance over the years level costs, and the costs of idle capacity should
while overhead has been increasing. This not be assigned to products. These costs
suggests that there is no longer a direct link represent resources that are not consumed by the
between the level of direct labor and overhead. products.
Indeed, when a company automates, direct labor
is replaced by machines; a decrease in direct 7-6 In activity-based costing, costs must first
labor is accompanied by an increase in overhead. be allocated to activity cost pools and then they
This violates the assumption that overhead cost is are allocated from the activity cost pools to
directly proportional to direct labor. Overhead products, customers, and other cost objects.
cost appears to be driven by factors such as
product diversity and complexity as well as by 7-7 Because people are often involved in
volume, for which direct labor has served as a more than one activity, some way must be found
convenient measure. to estimate how much time they spend in each
activity. The most practical approach is often to
7-3 Top managers provide leadership that is ask employees how they spend their time. It is
needed to properly motivate all employees to also possible to ask people to keep records of
embrace the need to implement ABC. Top how they spend their time or observe them as
managers also have the authority to link ABC data they perform their tasks, but both of these
to the employee evaluation and reward system. alternatives are costly and it is not obvious that
Cross-functional employees are also important the data would be any better. People who know
because they possess intimate knowledge of they are being observed may change how they
operations that is needed to design an effective behave.

© The McGraw-Hill Companies, Inc., 2018. All rights reserved.

Solutions Manual, Chapter 7 1
7-8 In traditional cost systems, product-level 7-9 Activity rates tell managers the average
costs are indiscriminately spread across all cost of resources consumed to carry out a
products using direct labor-hours or some other particular activity such as processing purchase
allocation base related to volume. As a orders. An activity whose average cost is high
consequence, high-volume products are assigned may be a good candidate for process
the bulk of such costs. If a product is responsible improvements. Benchmarking can be used to
for 40% of the direct labor in a factory, it will be identify which activities have unusually large
assigned 40% of the manufacturing overhead costs. If some other organization is able to carry
cost in the factory—including 40% of the product- out the activity at a significantly lower cost, it is
level costs of low-volume products. In an activity- reasonable to suppose that improvement may be
based costing system, batch-level and product- possible.
level costs are assigned more appropriately. This
results in shifting product-level costs back to the 7-10 The activity-based costing approach
products that cause them and away from the described in the chapter is probably unacceptable
high-volume products. (A similar effect will be for external financial reports for two reasons.
observed with batch-level costs if high-volume First, activity-based product costs, as described in
products are produced in larger batches than low- this chapter, exclude some manufacturing costs
volume products.) and include some nonmanufacturing costs.
Second, the first-stage allocations are based on
interviews rather than verifiable, objective data.

© The McGraw-Hill Companies, Inc., 2018. All rights reserved.

2 Managerial Accounting, 16th Edition
© The McGraw-Hill Companies, Inc., 2018. All rights reserved.
Solutions Manual, Chapter 7 3
Chapter 7: Applying Excel
The completed worksheet is shown below.

© The McGraw-Hill Companies, Inc., 2018. All rights reserved.

4 Managerial Accounting, 16th Edition
Chapter 7: Applying Excel (continued)
The completed worksheet, with formulas displayed, is shown below.

© The McGraw-Hill Companies, Inc., 2018. All rights reserved.

Solutions Manual, Chapter 7 5
Chapter 7: Applying Excel (continued)
1. When the number of units ordered by OfficeMart is doubled to 160
units, the result is:

© The McGraw-Hill Companies, Inc., 2018. All rights reserved.

6 Managerial Accounting, 16th Edition
Chapter 7: Applying Excel (continued)
a. The customer margin under activity-based costing at 80 units was
only $840, whereas the customer margin at 160 units is $7,640. The
number of units ordered has doubled, but the customer margin is
almost ten times what it was. The customer margin would have
doubled only if all of the costs were strictly variable with respect to
the number of units ordered. This is not the case under activity-based
costing. Under activity-based costing, the substantial order-related
and customer-related overhead costs have not changed at all even
though the number of units ordered doubled.

b. The product margin under traditional costing has exactly doubled,

going from a loss of $10,800 to a loss of $21,600, because all of the
costs included in the product margin under traditional costing are
assumed to be strictly variable with respect to the number of units
ordered.

c. Assuming that the activity-based costing system was carefully

designed and implemented, it will provide a more accurate picture of
what happens to profits as the number of units ordered increases. If
some of the fixed manufacturing overhead costs are order-related
and customer-related costs and some are not attributable to
particular orders or customers at all, then allocating all of the
manufacturing overhead costs based on the number of units as in
traditional costing will seriously distort costs. Moreover, if some of the
selling and administrative costs are caused by the number of units
ordered, the number of orders, and the number of customers, the
activity-based costing system will more accurately assign these costs
than the traditional costing system, which does not assign them to
units, orders, or customers at all.

© The McGraw-Hill Companies, Inc., 2018. All rights reserved.

Solutions Manual, Chapter 7 7
Chapter 7: Applying Excel (continued)
2. With the changes in the data, the worksheet should look like this:

© The McGraw-Hill Companies, Inc., 2018. All rights reserved.

8 Managerial Accounting, 16th Edition
Chapter 7: Applying Excel (continued)
a. The customer margin under activity-based costing is now $(6,600).

b. The product margin under traditional costing is now $1,600.

c. Even though the number of units ordered is exactly the same, the
profitability picture has shifted radically and is summarized below:
Lower-end, Higher-end,
Fewer orders, More orders,
More units per order Fewer units per
order
Customer margin,
activity-based
costing ................. $840 $(6,600)
Product margin,
traditional costing . $(10,800) $1,600
The reasons for these changes are complex. One reason is that the
difference between the selling price and the direct materials and
direct labor costs has increased.
Lower-end, Higher-end,
Fewer orders, More orders,
More units per order Fewer units per order
Selling price ............. $595 $795
Direct materials........ 180 185
Direct labor.............. 50 90
Excess of selling
price over direct
material and
direct labor.......... $365 $520
Under the traditional costing method, $500 of manufacturing
overhead is allocated to each. Consequently, the product margin is
$20 per unit. When 80 units are ordered, the result is a total product
margin of $1,600 (= $20 per unit × 80 units).
Under activity-based costing, the additional costs of processing 20
orders rather than 4 orders increases the order-related overhead
from $4,960 to $24,800. This swamps the fact that the selling price
has gone up a lot more than the direct materials and direct labor
costs.
© The McGraw-Hill Companies, Inc., 2018. All rights reserved.
Solutions Manual, Chapter 7 9
© The McGraw-Hill Companies, Inc., 2018. All rights reserved.
10 Managerial Accounting, 16th Edition
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Chapter 7: Applying Excel (continued)
3. With the change in the selling and administrative percentages, the result
is:

© The McGraw-Hill Companies, Inc., 2018. All rights reserved.

Solutions Manual, Chapter 7 11
Chapter 7: Applying Excel (continued)
a. The customer margin under activity-based costing has improved from
$(6,600) to $(3,450) because costs have shifted from the order-
related activity cost pool to the customer-related activity cost pool.
The average number of orders per customer is 2.5 (= 250 orders ÷
100 customers). Since in this part we assume that this customer had
20 orders, this customer would be assigned much more order-related
cost than most customers. Consequently, when the percentages
change and result in costs being shifted from the order-related cost
pool to the customer-related cost pool, this particular customer
margin will improve. The customer margins for customers who place
few orders will look worse.

b. Shifting selling and administrative costs from the order-related cost

pool to the customer-related cost pool has no effect on product
margins under traditional costing for two reasons. First, selling and
administrative costs are not assigned to products under traditional
costing. Second, the order-related and customer-related cost pools do
not exist under traditional costing.

© The McGraw-Hill Companies, Inc., 2018. All rights reserved.

12 Managerial Accounting, 16th Edition
The Foundational 15
1. The plantwide overhead rate is computed as follows:
Total estimated overhead cost (a)............ $684,000
Total expected direct labor-hours (b) ....... 12,000 DLHs
Predetermined overhead rate (a) ÷ (b) .... $57.00 per DLH

2. The overhead cost assignments to Products Y and Z are as follows:

Product Y Product Z
Total direct labor hours (a) ...................... 8,000 4,000
Plantwide overhead rate per DLH (b)........ $57.00 $57.00
Manufacturing overhead assigned (a) × (b) $456,000 $228,000

3-6.
The activity rates are computed as follows:
(a)
Estimated (b) (a) ÷ (b)
Overhead Expected Activity
Activity Cost Pool Cost Activity Rate
Machining............... $200,000 10,000 MH $20 per MH
Machine setups ....... $100,000 200 setups $500 per setup
Product design........ $84,000 2 products $42,000 per product
General factory ....... $300,000 12,000 DLHs $25 Per DLH

7. Machine setups is a batch-level activity. A setup is performed to run a

batch of units. The cost of the setup is determined by the resources
consumed performing the setup and it is not influenced by the number
of units processed once the setup is complete.

8. The product design activity is a product-level activity. The product

design cost is determined by the number of products supported and it is
not influenced by the number of batches or units processed.

© The McGraw-Hill Companies, Inc., 2018. All rights reserved.

Solutions Manual, Chapter 7 13
The Foundational 15 (continued)

9-10. Using the ABC system, the total overhead assigned to Products Y and Z is computed as follows:
Product Y Product Z
Expected Expected
Activity Amount Activity Amount
Machining, at $20.00 per machine-hour ............... 7,000 $140,000 3,000 $ 60,000
Machine setups, at $500.00 per setup ................. 50 25,000 150 75,000
Product design, at $42,000 per product ............... 1 42,000 1 42,000
General factory, at $25.00 per direct labor-hour ... 8,000 200,000 4,000 100,000
Total overhead cost assigned .............................. $407,000 $277,000

© The McGraw-Hill Companies, Inc., 2018. All rights reserved.

14 Managerial Accounting, 16th Edition
The Foundational 15 (continued)
11-15. The percentages of overhead assigned using the plantwide and ABC approaches are computed
as follows:
Product Y Product Z Total
(a) (a) ÷ (c) (b) (b) ÷ (c) (c)
Plantwide Approach Amount % Amount % Amount
Manufacturing overhead ........ $456,000 66.7% $228,000 33.3% $684,000

Activity-Based Costing System

Machining ............................. $140,000 70.0% $ 60,000 30.0% $200,000
Machine setups ..................... 25,000 25.0% 75,000 75.0% 100,000
Product design ...................... 42,000 50.0% 42,000 50.0% 84,000
General factory ..................... 200,000 66.7% 100,000 33.3% 300,000
Total cost assigned to products $407,000 $277,000 $684,000

The Machining allocation percentages used in the ABC system are similar to the plantwide allocation
percentages because the Machining cost pool uses a unit-level activity measure (machine-hours).
Since the plantwide cost pool also uses a unit-level allocation base (direct labor-hours), it is
reasonable to expect these cost allocations percentages to be comparable.

Under the ABC system, 25% and 75% of the Machine Setups cost is allocated to Products Y and Z,
respectively, whereas the plantwide approach allocates 67% and 33% of all overhead costs to the
two products. These allocation percentages are different because Machine Setups is a batch-level
cost pool. Although Product Y is the high-volume product (14,000 units) and Product Z is the low-
volume product (6,000 units), Product Y only consumes 25% of the total machine setups and Product
Z consumes 75% of the total machine setups. The conventional system is allocating too much of the
machine setup costs to Product Y and too little of these costs to Product Z.
© The McGraw-Hill Companies, Inc., 2018. All rights reserved.
Solutions Manual, Chapter 7 15
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The Project Gutenberg eBook of Des
Imagistes: An Anthology
 This ebook is for the use of anyone anywhere in the United
States and most other parts of the world at no cost and with
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or re-use it under the terms of the Project Gutenberg License
included with this ebook or online at www.gutenberg.org. If you
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laws of the country where you are located before using this
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Title: Des Imagistes: An Anthology

Editor: Ezra Pound

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*** START OF THE PROJECT GUTENBERG EBOOK DES IMAGISTES:

AN ANTHOLOGY ***
 DES IMAGISTES

«Καὶ κείνα Σικελά, καὶ ἐν Αἰτναίαισιν ἔπαιζεν

ἀόσι, καὶ μέλος ᾖδε τὸ Δώριον.»
Επιτάφιος Βίωνος
“And she also was of Sikilia and was gay in
the valleys of Ætna, and knew the Doric
singing.”

DES IMAGISTES
AN ANTHOLOGY
 NEW YORK
ALBERT AND CHARLES BONI
96 FIFTH AVENUE
1914

Copyright, 1914
By
Albert and Charles Boni
CONTENTS
Richard Aldington
Choricos 7
To a Greek Marble 10
Au Vieux Jardin 11
Lesbia 12
Beauty Thou Hast Hurt Me Overmuch 13
Argyria 14
In the Via Sestina 15
The River 16
Bromios 17
To Atthis 19

H. D.
Sitalkas 20
Hermes of the Ways I 21
Hermes of the Ways II 22
Priapus 24
Acon 26
Hermonax 28
Epigram 30

F. S. Flint
I 31
II Hallucination 32
III 33
IV 34
V The Swan 35

Skipwith Cannéll
Nocturnes 36

Amy Lowell
In a Garden 38

William Carlos Williams

Postlude 39
James Joyce
I Hear an Army 40

Ezra Pound
Δώρια 41
The Return 42
After Ch’u Yuan 43
Liu Ch’e 44
Fan-Piece for Her Imperial Lord 45
Ts’ai Chi’h 46

Ford Madox Hueffer

In the Little Old Market-Place 47

Allen Upward
Scented Leaves from a Chinese Jar 51

John Cournos after K. Tetmaier

The Rose 54

Documents
To Hulme (T. E.) and Fitzgerald 57
Vates, the Social Reformer 59
Fragments Addressed by Clearchus H. to Aldi 62

Bibliography 63
CHORICOS
The ancient songs
Pass deathward mournfully.

Cold lips that sing no more, and withered wreaths,

Regretful eyes, and drooping breasts and wings—
Symbols of ancient songs
Mournfully passing
Down to the great white surges,
Watched of none
Save the frail sea-birds
And the lithe pale girls,
Daughters of Okeanus.

And the songs pass

From the green land
Which lies upon the waves as a leaf
On the flowers of hyacinth;
And they pass from the waters,
The manifold winds and the dim moon,
And they come,
Silently winging through soft Kimmerian dusk,
To the quiet level lands
That she keeps for us all,
That she wrought for us all for sleep
In the silver days of the earth’s dawning—
Proserpina, daughter of Zeus.

And we turn from the Kuprian’s breasts,

And we turn from thee,
Phoibos Apollon,
And we turn from the music of old
And the hills that we loved and the meads,
And we turn from the fiery day,
And the lips that were over sweet;
For silently
Brushing the fields with red-shod feet,
With purple robe
With purple robe
Searing the flowers as with a sudden flame,
Death,
Thou hast come upon us.

And of all the ancient songs

Passing to the swallow-blue halls
By the dark streams of Persephone,
This only remains:
That we turn to thee,
Death,
That we turn to thee, singing
One last song.

O Death,
Thou art an healing wind
That blowest over white flowers
A-tremble with dew;
Thou art a wind flowing
Over dark leagues of lonely sea;
Thou art the dusk and the fragrance;
Thou art the lips of love mournfully smiling;
Thou art the pale peace of one
Satiate with old desires;
Thou art the silence of beauty,
And we look no more for the morning
We yearn no more for the sun,
Since with thy white hands,
Death,
Thou crownest us with the pallid chaplets,
The slim colourless poppies
Which in thy garden alone
Softly thou gatherest.

And silently,
And with slow feet approaching,
And with bowed head and unlit eyes,
We kneel before thee:
And thou, leaning towards us,
Caressingly layest upon us
Flowers from thy thin cold hands,
And, smiling as a chaste woman
Knowing love in her heart,
Thou sealest our eyes
And the illimitable quietude
Comes gently upon us.

Richard Aldington
TO A GREEK MARBLE
Πότνια, πότνια
White grave goddess,
Pity my sadness,
O silence of Paros.

I am not of these about thy feet,

These garments and decorum;
I am thy brother,
Thy lover of aforetime crying to thee,
And thou hearest me not.

I have whispered thee in thy solitudes

Of our loves in Phrygia,
The far ecstasy of burning noons
When the fragile pipes
Ceased in the cypress shade,
And the brown fingers of the shepherd
Moved over slim shoulders;
And only the cicada sang.

I have told thee of the hills

And the lisp of reeds
And the sun upon thy breasts,

And thou hearest me not,

Πότνια, πότνια,
Thou hearest me not.

Richard Aldington
 AU VIEUX JARDIN

I have sat here happy in the gardens,

Watching the still pool and the reeds
And the dark clouds
Which the wind of the upper air
Tore like the green leafy boughs
Of the divers-hued trees of late summer;
But though I greatly delight
In these and the water lilies,
That which sets me nighest to weeping
Is the rose and white colour of the smooth flag-stones,
And the pale yellow grasses
Among them.

Richard Aldington
 LESBIA

Use no more speech now;

Let the silence spread gold hair above us
Fold on delicate fold;
You had the ivory of my life to carve.
Use no more speech.
. . . .

And Picus of Mirandola is dead;

And all the gods they dreamed and fabled of,
Hermes, and Thoth, and Christ, are rotten now,
Rotten and dank.
. . . .

And through it all I see your pale Greek face;

Tenderness makes me as eager as a little child
To love you

You morsel left half cold on Caesar’s plate.

Richard Aldington
BEAUTY THOU HAST HURT ME OVERMUCH

The light is a wound to me.

The soft notes
Feed upon the wound.

Where wert thou born

O thou woe
That consumest my life?
Whither comest thou?

Toothed wind of the seas,

No man knows thy beginning.
As a bird with strong claws
Thou woundest me,
O beautiful sorrow.

Richard Aldington
 ARGYRIA

O you,
O you most fair,
Swayer of reeds, whisperer
Among the flowering rushes,
You have hidden your hands
Beneath the poplar leaves,
You have given them to the white waters.

Swallow-fleet,
Sea-child cold from waves,
Slight reed that sang so blithely in the wind,
White cloud the white sun kissed into the air;
Pan mourns for you.

White limbs, white song,

Pan mourns for you.

Richard Aldington
 IN THE VIA SESTINA

O daughter of Isis,
Thou standest beside the wet highway
Of this decayed Rome,
A manifest harlot.

Straight and slim art thou

As a marble phallus;
Thy face is the face of Isis
Carven

As she is carven in basalt.

And my heart stops with awe
At the presence of the gods,

There beside thee on the stall of images

Is the head of Osiris
Thy lord.

Richard Aldington
 THE RIVER

I drifted along the river

Until I moored my boat
By these crossed trunks.

Here the mist moves

Over fragile leaves and rushes,
Colourless waters and brown fading hills.

She has come from beneath the trees,

Moving within the mist,
A floating leaf.

II

O blue flower of the evening,

You have touched my face
With your leaves of silver.

Love me for I must depart.

Richard Aldington
BROMIOS
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