Exam 7: Activity-Based Costing and Management

Control activities are performed by an organization or its customers in response to poor quality.

Reinspection and design changes are examples of _____________________ costs.

Assume that the accounts payable department of a company has 5 clerks; each one is paid $25,000 per year ($125,000 total clerical salaries). On average, the clerks spend: 20% of their time on processing payments30% of their time matching invoices, receiving documents, and billing statement 50% of their time correcting errors in the various documents In addition, long distance telephone costs of $1,700 are directly traced to the activity "correcting errors."

Tires Unlimited Corp. produces two types of tires, regular and snow tires. The company uses activity-based costing and has identified two activities and their budgeted costs: Molding is based on mixing hours and assembly is based on machine hours. Information regarding each product is as follows: Required: A. Calculate the activity rate for molding and assembly. Round your answer to two decimal places. B. Calculate how much total overhead is assigned to each type of tire. C. Calculate the unit overhead assigned to each type of tire. D. Assume the company does not use ABC costing. Calculate the plantwide overhead rate, based on machine hours. Round your answer to two decimal places. E. Calculate the total overhead assigned to each type of tire using the plantwide overhead rate.

____ costs in many firms represent a much higher percentage of product costs than direct labor.

Activity inputs are the resources consumed by the activity in producing its output.

Environmental internal failure costs are the costs of activities performed after discharging contaminants and waste into the environment.

Figure 7-6. Xander Company produces televisions. One of its plants produces two versions of televisions: a basic model and a premium model. At the beginning of the year, the following data were prepared for the plant: Additionally, the following overhead activity costs are reported: Xander uses activity-based costing to calculate product cost. -Refer to Figure 7-6.

Match each item with the correct statement below. a. cycle time b. direct tracing c. activity sharing d. driver tracing e. value-added activities f. activity selection -Increases the efficiency of necessary activities by using economies of scale.

Costs incurred when products and services prior to being delivered do not conform to specifications or customer needs are

Which of the following is not an example of a nonvalue-added activity?

MATCHING Match each item with the correct statement below. a. activity drivers b. activity-based costing system c. consumption ratio d. unit-level activities e. activity attributes f. resource drivers -Activities that are performed each time a unit is produced.

Randy Company produces candy sticks (hooked and straight). Both products pass through two producing departments. The hooked stick's production is much more labor-intensive than the straight stick. The straight stick is also more popular. The following data have been gathered for the two products: Total overhead costs equal $400,000. Randy applies overhead based on direct labor hours.

Resource drivers are factors that measure the consumption of resources by product.

An activity dictionary lists the activities in an organization along with some critical activity attributes.

Which is not a component of process value analysis?

Nonvalue-added activities

MATCHING Match each item with the correct statement below. a. activity drivers b. activity-based costing system c. consumption ratio d. unit-level activities e. activity attributes f. resource drivers -Financial and nonfinancial information items that describe individual activities.

Control activities are performed by an organization to prevent or detect poor quality.

Assume that a company takes 3,500 hours to produce 10,000 units of a product. What is the cycle time?