Exam 10: Activity-Based Costing

Figure 10-5 Ander Company produces precision equipment for major buyers. Of the six customers, one accounts for 40 per cent of the sales, with the remaining five accounting for the rest of the sales. The five smaller customers purchase equipment in roughly equal quantities. Orders placed by the smaller customers are about the same size. Data concerning Ander's customer activity follow: Order-filling costs for Ander Company total £360,000, and sales-force costs are £375,000. -Refer to Figure 10-5, what amount of order-filling costs would be allocated to the large customer if these costs are allocated based on sales volume?

Figure 10-2 Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed in the sales of a new board game. The game sold only 10,000 units in 2011 when 30,000 were projected. Sales for 2008 look no better. At £100 per game, it is not a hot seller. Direct costs of the board game are £56 variable cost and £100,000 fixed. John is considering several options. Option One: Cut the price to £70 and perhaps sell 15,000 units. Option Two: Cut the price to £60, reduce material costs by £10, and cut advertising by £60,000. Anticipated volume for this option is 10,000 units. Option Three: Cut the price to £80 and include a £10 mail-in rebate offer. It is anticipated that 15,000 units could be sold and only 30 per cent of the rebate coupons would be redeemed. -Refer to Figure 10-2. What is the profit (loss) from Option One?

Many products have a predictable profit or product life cycle. Describe the product life cycle from the marketing perspective. In addition, graph profit versus the different phases. Finally, discuss the impact of the product life cycle on products, learning effects, setups, purchasing, and marketing expenses.

Figure 10-6 Multiple Products Co. has predicted the following costs for this year for 100,000 units: -Refer to Figure 10-6. What is the manufacturing cost mark up needed to obtain a target profit of £100,000?

Figure 10-6 Multiple Products Co. has predicted the following costs for this year for 100,000 units: -Refer to Figure 10-6. What is the mark up on variable costs needed to achieve a target profit of £100,000?

The activity-based resource usage model improves managerial control and decision making such as

When cost-based pricing is employed and mark up is based on manufacturing costs, the mark up must be sufficiently large enough to:

Figure 10-3 Farr Company had the following information: -Refer to Figure 10-3. What is the mark up based on cost of goods sold?

A target cost is computed as

Figure 10-6 Multiple Products Co. has predicted the following costs for this year for 100,000 units: -Refer to Figure 10-6. What is the mark up on variable costs needed to break even?

Products might consume overhead in different proportions due to

Figure 10-4 Jamie Ltd. had the following information: -Refer to Figure 10-4. What would be the price for something that has a cost of £500, assuming that the mark up is based on cost of goods sold?

Which of the following stages is characterized by rapid increases in sales and production?

World-class organizations operating in competitive markets are more likely to take which one of the following approaches toward pricing?

Price skimming occurs in which of the following life-cycle stages?

Which of the following statements concerning target costing is NOT true?

Figure 10-5 Ander Company produces precision equipment for major buyers. Of the six customers, one accounts for 40 per cent of the sales, with the remaining five accounting for the rest of the sales. The five smaller customers purchase equipment in roughly equal quantities. Orders placed by the smaller customers are about the same size. Data concerning Ander's customer activity follow: Order-filling costs for Ander Company total £360,000, and sales-force costs are £375,000. -Refer to Figure 10-5 above, what amount of order-filling costs would be allocated to the five smaller customers if these costs are allocated using an activity-based costing approach?

Cost-based pricing has traditionally been important because:

Which of the following statements describes a legitimate disadvantage of cost-based pricing?

Figure 10-5 Ander Company produces precision equipment for major buyers. Of the six customers, one accounts for 40 per cent of the sales, with the remaining five accounting for the rest of the sales. The five smaller customers purchase equipment in roughly equal quantities. Orders placed by the smaller customers are about the same size. Data concerning Ander's customer activity follow: Order-filling costs for Ander Company total £360,000, and sales-force costs are £375,000. -Refer to Figure 10-5 above, what amount of order-filling costs would be allocated to the large customer if these costs are allocated using an activity-based costing approach?