Exam 7: Activity-Based Costing and Management

Flynn Company has a JIT system in place. Each manufacturing cell is dedicated to the production of a single product or major subassembly. One cell, dedicated to the production of guitar pickups, has four operations: machining, finishing, assembly, and testing. For the coming year, the pickup cell has the following budgeted costs and cell time (both at theoretical capacity): During the year, the following actual results were obtained:

The time required to produce one unit of a product is the

Figure 7-1. The receiving department of Owen has three activities: unloading, counting goods, and inspecting. Unloading requires a forklift that is leased for $15,000 per year. The forklift is used only for unloading. The fuel for the forklift is $2,000 per year. Inspection requires special testing equipment that has a depreciation of $500 per year and an operating cost of $1,000 per year. Receiving has four employees who each have an average salary of $35,000 per year. The work distribution matrix for the receiving personnel is as follows: -Refer to Figure 7-1. Calculate the cost of unloading.

_____________________ are factors that measure the consumption of activities by products and other cost objects and can be classified as either unit-level or nonunit-level.

Figure 7-5. Rizzo Manufacturing produces two types of cameras: 35mm and digital. The cameras are produced using one continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used to assign costs to each activity. The overhead activities, their costs, and the other related data are as follows: -Refer to Figure 7-5. Calculate the total overhead assigned to the 35mm cameras using only machine hours to calculate a plantwide rate.

Environmental costs are costs that are incurred because poor environmental quality may or does exist.

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 -Activities necessary to remain in business

Figure 7-2. Steller Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors purchase the same product. The customer activities and costs for the previous quarter are found below: -Refer to Figure 7-2. Calculate the total customer cost for the JIT distributor.

Costs that are caused by the inefficient performance of value-added activities are value added costs.

Cleaning up a polluted lake or an oil spill are examples of __________________ costs.

_________________________ assigns costs to activities and then costs to cost objects.

The identification and elimination of activities that fail to add value refers to

Product diversity means that products consume overhead activities in systematically different proportions.

Appraisal costs are incurred to determine whether products and services are conforming to their requirements or customer needs.

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.

Russell Company uses Beltran Company and Southern Express Inc. to buy the electronic chip used in the manufacturing of its GPS device. Russell Co. has been using these two companies for several years and would like to cut down to only one supplier to purchase the 1,200,000 chips needed per year. In order to determine which supplier is the most cost effective Russell Co. compiled the following data: Required: A. Calculate the activity rate for each activity. Round your answer to two decimal places. B. Calculate the cost per chip for each supplier. C. Which supplier should Russell Company choose?

Browning Manufacturing Company uses activity-based costing. The overhead budget for the coming period is $1,053,000, consisting of the following: The potential allocation bases and their estimated amounts were as follows:

A(n) ____ ratio measures the proportion of an activity consumed by a product.