Exam 7: Activity-Based Costing and Management

The cost of implementing an ABC system is likely to be lower if the number of times an activity is performed:

Product-sustaining costs include:

The terms "cost driver" and "allocation base" are interchangeable.

Which of the following statements is true?

Which of the following is performed first in setting up an ABC system?

Flowing Wells Corporation is preparing its annual budget. As part of its analysis of the contribution of individual products to overall profitability, the controller estimates the amount of overhead that should be assigned to the individual product lines. Budgeted inspection costs are $4,800. Additional information is as follows Small Pumps Large Pumps Units inspected 120 120 Hours spent inspecting 2.5 17.5 Direct labour hours per unit 2 2 Under a traditional costing system that assigns overhead on the basis of direct labour hours, the inspection costs allocated to one small pump would be:

Which of the following is not part of the process used to assign costs in an ABC system?

Which of the following factors are associated with successful ABC implementations?

Regarding the use of ABC product cost information for short-term decision making, which of the following is likely to be true?

To provide better decision making information about products, ABC systems can be set up with separate activity pools and cost rates for: I. Different levels of the ABC cost hierarchy II. Committed and flexible costs within each cost pool III. Different customers based on profitability levels

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 What is the ABC allocation rate for supervision of direct labour?

Which of the steps listed below normally occurs first when assigning costs in an ABC system?

Caring Change Medical Practice specializes in plastic surgery. Which of the following costs is most likely to be a committed cost in its operations?

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 If Le Château Joyal is the cost object, which of the following best describes the general manager's salary?

In an ABC system costs are first assigned to cost pools, then always to units of product.

Lookin' for a Home is an animal shelter in Saskatoon, Saskatchewan. The shelter relies on government grants and private donations for funding. It takes in homeless dogs and cats and keeps them until they are adopted by qualified individuals. One of the shelter's cost pools is animal recordkeeping, which involves maintaining a database with details about each animal in the shelter. Which of the following is the most appropriate cost driver for the animal recordkeeping cost pool?

Managers are most likely to identify activities in an ABC system by:

One difference between a traditional costing system and an ABC system is:

The FSOJ Company undertakes the following activities in its production operation and incurred the following costs during the first half of 20x2: Harvest apples \ 25,000 Prepare apples for processing 20,000 Extract juice from apples 18,000 Process juice into apple juice concentrate, apple juice or apple cider 30,000 Package completed products 9,000 Processing the juice into 3 final products involves the use of 2 machines, each of which incurred amortization costs of $15,000 for the first half of 20x2. Each product requires a different set up on the processing machines, so FSOJ normally sets up the machines to produce concentrate for the first week of each month. The machine is then set up to produce apple juice for the next 2 weeks. Finally, workers set up the same machines to produce apple cider during the last week of each month. During the first half of 20x2, 20% of the apples harvested were turned into apple juice concentrate, 50% were processed into apple juice, and 30% became apple cider. The relative sales values of each product were: 75% for apple juice, 20% for apple juice concentrate, and 5% for apple cider. The apple juice concentrate operation takes up 40% of FSOJ's total factory space. Regular apple juice and apple cider occupy 35% and 25%, respectively. If juice extraction costs are allocated to product lines based on relative sales values, that is, each product line's portion of total sales, the amount allocated to apple cider will be:

ABC can be used to determine the costs of quality and to help refine quality strategies. Quality activities are commonly classified as: