Exam 7: Activity-Based Costing and Management

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 personnel cost pool is:

Life Lessons provides academic enrichment and review activities for high school students in 4 subject areas: English, mathematics, science, and history. In November 20x1, the firm's information system produced the following data: Number of Number of Percent of Direct Tutors Students Faculty Costs English 4 20 10\% \ 6,000 Mathematics 3 24 25 8,000 Science 5 15 50 12,000 History 2 8 15 3,000 Regardless of subject area, clients pay $50 per hour for tutoring services. Costs associated with the Life Lessons operations for November 20x1 included: Facility rent \ 2,500 Custodial services 1,800 Utilities 600 Computer equipment amortization 800 Advertising 400 The number of students in each area is most likely to be a cost driver for:

ABC systems are typically associated with:

BVH Corporation manufactures and sells cellular phones. Which of the following activities is least likely to be considered a value-added activity for BVH?:

ABC systems allow managers to focus on measurement at the activity level.

The managers of HRY Corporation are analyzing some of their corporate costs to determine the costs of each department's use of administrative services. The accountant wants to allocate the costs of payroll processing using an activity-based costing system. The most appropriate cost driver for the payroll processing cost pool is the:

Ideally, activity costs are allocated to cost objects using a ___ that explains changes in activity ___.

FNG Corporation employs 4 purchasing agents. Rick processes purchase orders for vendors starting with the letters A through H, while Merrill does the same task for vendors from I through N. Esteban deals with vendors in the O through R range, and Kathy handles the rest of the alphabet. The most likely cost driver for the purchasing agents' salaries is the:

The availability of activity costs is inversely related to the cost of implementing an ABC system.

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 non-medical supplies is:

Phuong is a customer of PVL Corporation. She consistently orders low-margin products, but requires costly services from PVL. In employing ABM techniques to manage customer profitability, PVL's staff should:

In an ABC system, flexible costs:

An allocation base is:

In an ABC system, committed costs:

Cost drivers are most likely to be identified using information:

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 janitorial costs will be allocated to Testing?

Flagler Corporation is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be assigned to the individual product lines from the information given as follows: Wall Mirrors Specialty Windows Units produced 25 25 Material moves per product line 5 15 Direct labour hours per unit 200 200 Budgeted materials handling costs are \5 0,000 Under activity-based costing (ABC), the materials handling costs assigned to one unit of wall mirrors would be:

Operating efficiency improves with ABM through the use of ABC information to better manage:

Life Lessons provides academic enrichment and review activities for high school students in 4 subject areas: English, mathematics, science, and history. In November 20x1, the firm's information system produced the following data: Number of Number of Percent of Direct Tutors Students Faculty Costs English 4 20 10\% \ 6,000 Mathematics 3 24 25 8,000 Science 5 15 50 12,000 History 2 8 15 3,000 Regardless of subject area, clients pay $50 per hour for tutoring services. Costs associated with the Life Lessons operations for November 20x1 included: Facility rent \ 2,500 Custodial services 1,800 Utilities 600 Computer equipment amortization 800 Advertising 400 Which of the following groups of costs are most likely to have a common cost driver?

One of the uncertainties associated with ABC and ABM systems is employee response to design and implementation.