Exam 7: Activity-Based Costing and Management

Batch-level costs include:

Suppose the Burlington Donor Clinic of Canadian Blood Services has identified an individual blood drive as its cost object. It has established the following cost pools in developing an activity-based costing system: Non-medical personnel costs. Salaries and wages of the office staff who organize blood drives and keep donor records. Medical personnel costs. Salaries and wages of doctors and nurses who staff a blood drive. Medical supplies. Cost of needles, bandages, and containers for donated blood. Non-medical supplies. Costs of refreshments for blood donors and recordkeeping supplies. Blood drives typically require 5 to 7 beds for blood donors. Each donation requires one container (in the medical supplies cost pool), one needle, and one set of bandages. Canadian Blood Services normally receives donated space from a community organization (such as a university or company) for each blood drive. Non-medical personnel costs would be most appropriately allocated using:

All of the following are quality-related activities except:

ABC systems are similar to traditional costing systems in the way they:

As the number of activities in an ABC system increases, measurement error tends to:

In general, the risk of measurement error in an ABC system increases when:

APL Corporation allocates overhead to cost objects using a two-stage process. From this information, we can infer that APL:

Accountants normally can determine cost drivers for all cost pools on their own, without consulting other employees in the organization.

Suppose the Burlington Donor Clinic of Canadian Blood Services has identified an individual blood drive as its cost object. It has established the following cost pools in developing an activity-based costing system: Non-medical personnel costs. Salaries and wages of the office staff who organize blood drives and keep donor records. Medical personnel costs. Salaries and wages of doctors and nurses who staff a blood drive. Medical supplies. Cost of needles, bandages, and containers for donated blood. Non-medical supplies. Costs of refreshments for blood donors and recordkeeping supplies. Blood drives typically require 5 to 7 beds for blood donors. Each donation requires one container (in the medical supplies cost pool), one needle, and one set of bandages. Canadian Blood Services normally receives donated space from a community organization (such as a university or company) for each blood drive. The most likely cost driver for the medical supplies cost pool is:

Managers can use ABM information to manage customer profitability. The most valuable groups of customers are those having the following characteristics: Types of Service Products Ordered Requirements a) High-margin Extensive b) High-priced Low c) Low-margin Low d) High-marqin Low

An activity is a type of task or function performed in an organization.

Administrative salaries are an example of an organization-sustaining cost in an ABC system.

Activity-based costing increases the accuracy of cost measurement by using arbitrary cost allocation bases for overhead.

Le Château Joyal is an historic hotel in the heart of old Quebec City. It is owned by Riel Hotels, which operates additional properties in Halifax, Montreal, and Winnipeg. Le Château Joyal has 9 floors, with approximately 20 rooms per floor. Facilities also include a workout room, restaurant, and pool. The hotel is organized into 5 departments: front desk, engineering, housekeeping, food & beverage, and customer relations. As part of its operation, Le Château Joyal regularly incurs the following costs: General manager's salary Housekeeping supplies Utility costs Amortization on workout room equipment Advertising Food and beverage costs Amortization on restaurant equipment Le Château Joyal could define its cost objects as: I. Customers only II. Departments only III. Number of employees

The process of using ABC information to evaluate the costs and benefits of production and internal support activities is called:

When applying ABC concepts to the determination of product costs, the first step is to identify activities.

Which category of the ABC hierarchy has costs that are primarily fixed and activities with little or no cause-and-effect relationship with costs?

Quick Start Engines has two departments, Assembly and Testing. You are given the following information about the costs of 5 activities that occur at the manufacturing plant monthly: Activity Total Costs Volume of Cost Driver Material handling \ 100,000 200,000 parts Supervision of direct labour 105,000 70 employees Janitorial and cleaning 150,000 3,000 hours Machining 240,000 6,000 machine hours Total costs \5 95,000 $\text { The above activities are used by the two departments as follows: }$ Assembly Testing Material handling 150,000 parts 50,000 parts Supervision of direct labour 30 employees 40 employees Time spent cleaning 2,000 hours 1,000 hours Number of machine hours 4,000 machine hours 2,000 machine hours How much of the material handling cost will be allocated to Assembly?

NRL Corporation's accounting information system reported warranty repair and product replacement costs totalling $12,000 in a recent accounting period. These costs are an example of which of the following quality costs?

Which method(s) do traditional accounting systems use to assign the following costs to cost objects (departments or units)? A) Allocate Trace B) Trace Allocate C) Allocate Allocate D) Trace Trace