Exam 5: Activity-Based Costing and Management

Consider the following factors: I.The degree of correlation between consumption of an activity and consumption of a particular cost driver. II.The likelihood that a particular cost driver will induce a desired behavioral effect. III.The likelihood that a particular cost driver will cause an increase in the cost of measurement. Which of these factors should be considered in the selection of a cost driver?

In an activity-based costing system, direct materials used would typically be classified as a:

A hospital administrator is in the process of implementing an activity-based-costing system.Which of the following tasks would not be part of this process?

Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe.The company, which uses activity-based costing, has identified five activities (and related cost drivers).Each activity, its budgeted cost, and related cost driver is identified below. Under Barnett's activity-based costing system, what is the per-unit overhead cost of Deluxe?

During a recent accounting period, Falcon Express' shipping department processed 26 orders.Each order typically takes four hours to complete.However, the average time increased to five hours because of various departmental inefficiencies.If shipping labor is paid $14 per hour, the company's non-value-added cost would be:

There are six important factors when selecting appropriate cost drivers.

In an activity-based costing system, materials receiving would typically be classified as a:

Ice Land offers 2 types of skating lessons for children-advanced and hockey skating lessons.The company has two different activities-skating instruction and maintenance-that provide input into its cost objectives.Data on estimated overhead for the year follows: The company provides 2,400 hockey skating lessons and 1,200 advanced skating lessons each year.How much overhead will be assigned to each hockey skating lesson?

Pound Industries' customer service department follows up on customer complaints by telephone inquiry.During a recent period, the department initiated 7,000 calls and incurred costs of $203,000.If 2,940 of these calls were for the company's wholesale operation (the remainder were for the retail division), costs allocated to the retail division should amount to:

Cost allocation is the process of assigning indirect costs to a cost object.The indirect costs are grouped in cost pools and then allocated by a common allocation base to the cost object.The base that is employed to allocate a homogeneous cost pool should:

Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe.The company, which uses activity-based costing, has identified five activities (and related cost drivers).Each activity, its budgeted cost, and related cost driver is identified below. The following information pertains to the three product lines for next year: Under Barnett's activity-based costing system, what is the per-unit overhead cost of Economy?

Charger Industries currently assigns overhead to products by using a predetermined rate based on direct labor hours.The company is considering the adoption of an activity-based costing (ABC) system, and management desires a brief overview of this system before it makes a final decision. Required: Compare ABC with the company's current system, focusing on the number of cost pools and cost drivers, costing accuracy, and cost distortion.

Flagler Corporation takes eight hours to complete the setup process for a certain electrical component, with the setup cost averaging $150 per hour.If the company's competitor can accomplish the same process in six hours, Flagler's non-value-added cost would be:

Which of the following choices correctly depicts a cost that arises from a batch-level activity and one that arises from a facility-level activity?

Which of the following would activity-based costing most likely lead to?

Dawg Town produces dog tags and bowls with the name of your dog permanently etched into a stainless steel label.Indirect etching costs are allocated to tags and bowls based on the amount of time spent on the laser etching machine.The company has budgeted etching costs of $4,224 per month and expects to spend 4,800 hours on the etching labels each month.Each dog tag uses 24 minutes and each bowl uses 6 minutes of laser etching time.How much of the etching costs will be allocated to each dog tag?

Cozy Nights Industries manufactures down-filled comforters and uses activity-based costing.The following information is provided for September. Each comforter consists of 4 parts and the direct materials cost per comforter is $14.00. Based on the information given for Cozy Nights Industries, what is the total cost of packaging each comforter?

Consider the following statements regarding traditional costing systems: I.Overhead costs are applied to products on the basis of volume-related measures. II.All manufacturing costs are easily traceable to the goods produced. III.Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements. Which of the above statements is (are) true?

Activity-based costing systems:

Cozy Nights Industries manufactures down-filled comforters and uses activity-based costing.The following information is provided for September. Each comforter consists of 4 parts and the direct materials cost per comforter is $14.00. If the cost of purchasing nearly the same comforter from a supplier is $88.80, what should Cozy Night do to maximize profits?