Sleep Tight Company manufactures pillows using an activity-based costing system. The following information is provided for the month of June: \[\begin{array} { | l | l | l | l | } \hline \text { Activity } & \begin{array} { l } \text { Estimated Indirect } \\ \text { Activity Costs } \end{array} & \text { Allocation Base } & \begin{array} { l } \text { Estimated Quantity of } \\ \text { Allocation Base } \end{array} \\ \hline \text { Materials handling } & \$ 3,150 & \text { Number of parts } & 4,200 \text { parts } \\ \hline \text { Assembling } & \$ 13,860 & \text { Number of parts } & 4,200 \text { parts } \\ \hline \text { Packaging } & \$ 2,730 & \text { Number of pillows } & 1,050 \text { pillows } \\ \hline \end{array}\] Each pillow consists of 4 parts and the total direct materials cost per pillow is $3.50. What is the total manufacturing cost per pillow?

A) $16.20 B) $22.30 C) $18.50 D) $26.50 A) $16.20 B) $22.30 C) $18.50 D) $26.50

Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of 20 separate parts totaling $95 in direct materials, and requires 2.5 hours of machine time to produce. Additional information follows: \[\begin{array} { | l | l | r | } \hline \text { Activity } & \text { Allocation Base } & \text { Cost Allocation Rate } \\ \hline \text { Materials handling } & \text { Number of parts } & \$ .08 \\ \hline \text { Machining } & \text { Machine hours } & \$ 7.20 \\ \hline \text { Assembling } & \text { Number of parts } & \$ .35 \\ \hline \text { Packaging } & \text { Number of finished units } & \$ 2.70 \\ \hline \end{array}\] What is the total manufacturing cost per ceiling fan?

A) $125.75 B) $121.13 C) $115.32 D) $124.30 A) $125.75 B) $121.13 C) $115.32 D) $124.30

Pitt Jones Company had the following activities, allocated costs, and allocation bases: \[\begin{array} { | l | l | l | } \hline \text { Activities } & \text { Allocated Costs } & \text { Allocation Base } \\ \hline \text { Account inquiry (hours) } & \$ 60,000 & 2,000 \text { hours } \\ \hline \text { Account billing (lines) } & \$ 30,000 & 20,000 \text { lines } \\ \hline \text { Account verification (accounts) } & \$ 15,000 & 20,000 \text { accounts } \\ \hline \text { Correspondence (letters) } & \$ 10,000 & 1,000 \text { letters } \\ \hline \end{array}\] The above activities are used by departments P and Q: \[\begin{array} { | l | l | l | } \hline & \text { Department P } & \text { Department Q } \\ \hline \text { Account inquiry (hours) } & 100 \text { hours } & 200 \text { hours } \\ \hline \text { Account billing (lines) } & 10,000 \text { lines } & 7,000 \text { lines } \\ \hline \text { Account verification (accounts) } & 1,000 \text { accounts } & 600 \text { accounts } \\ \hline \text { Correspondence (letters) } & 50 \text { letters } & 100 \text { letters } \\ \hline \end{array}\] How much of the account inquiry cost will be assigned to Department Q?

A) $2,000 B) $6,500 C) $3,000 D) $6,000 A) $2,000 B) $6,500 C) $3,000 D) $6,000

Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of 20 separate parts totaling $95 in direct materials, and requires 2.5 hours of machine time to produce. Additional information follows: \[\begin{array} { | l | l | r | } \hline \text { Activity } & \text { Allocation Base } & \text { Cost Allocation Rate } \\ \hline \text { Materials handling } & \text { Number of parts } & \$ .08 \\ \hline \text { Machining } & \text { Machine hours } & \$ 7.20 \\ \hline \text { Assembling } & \text { Number of parts } & \$ .35 \\ \hline \text { Packaging } & \text { Number of finished units } & \$ 2.70 \\ \hline \end{array}\] What is the number of finished ceiling fans?

A) 250 B) 100 C) 20 D) Cannot be determined from the information given A) 250 B) 100 C) 20 D) Cannot be determined from the information given

Pitt Jones Company had the following activities, allocated costs, and allocation bases: \[\begin{array} { | l | l | l | } \hline \text { Activities } & \text { Allocated Costs } & \text { Allocation Base } \\ \hline \text { Account inquiry (hours) } & \$ 60,000 & 2,000 \text { hours } \\ \hline \text { Account billing (lines) } & \$ 30,000 & 20,000 \text { lines } \\ \hline \text { Account verification (accounts) } & \$ 15,000 & 20,000 \text { accounts } \\ \hline \text { Correspondence (letters) } & \$ 10,000 & 1,000 \text { letters } \\ \hline \end{array}\] The above activities are used by departments P and Q: \[\begin{array} { | l | l | l | } \hline & \text { Department P } & \text { Department Q } \\ \hline \text { Account inquiry (hours) } & 100 \text { hours } & 200 \text { hours } \\ \hline \text { Account billing (lines) } & 10,000 \text { lines } & 7,000 \text { lines } \\ \hline \text { Account verification (accounts) } & 1,000 \text { accounts } & 600 \text { accounts } \\ \hline \text { Correspondence (letters) } & 50 \text { letters } & 100 \text { letters } \\ \hline \end{array}\] What is the cost per driver unit for the account billing activity?

A) $1.50 B) $30.00 C) $1.60 D) $1.43 A) $1.50 B) $30.00 C) $1.60 D) $1.43

Exam 17: Activity-Based Costing and Other Cost Management Tools

The system that focuses on activities as the fundamental cost objects and uses the costs of those activities as building blocks for compiling the costs of products and other cost objects is referred to as which of the following?

(Multiple Choice)

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Question 21

A traditional cost allocation system tends to misallocate manufacturing costs because:

(Multiple Choice)

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Question 22

Which of the following is not a characteristic of companies using just-in-time production systems?

(Multiple Choice)

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Question 23

Which of the following journal entry components is not applicable to recording the cost of completed products using just-in-time accounting?

(Multiple Choice)

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Question 24

Pitt Jones Company had the following activities, allocated costs, and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 60,000 2,000 hours Account billing (lines) \ 30,000 20,000 lines Account verification (accounts) \ 15,000 20,000 accounts Correspondence (letters) \ 10,000 1,000 letters The above activities are used by departments P and Q: Department P Department Q Account inquiry (hours) 100 hours 200 hours Account billing (lines) 10,000 lines 7,000 lines Account verification (accounts) 1,000 accounts 600 accounts Correspondence (letters) 50 letters 100 letters How much of the account verification costs will be assigned to Department P?

(Multiple Choice)

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Question 25

Target cost is the price that customers are willing to pay and is the maximum cost that the manufacturer is willing to incur.

(True/False)

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Question 26

The cost of overseeing suppliers within the total quality management philosophy is a(n):

(Multiple Choice)

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Question 27

Crump Manufacturing has provided the following information regarding its activity-based costing system: Purchasing department costs are allocated based on purchase orders and the cost allocation rate is $52 per purchase order. Assembly department costs are allocated based on the number of machine hours and the cost allocation rate is $27 per machine hour. Inspection department costs are allocated based on the number of inspection hours and the allocation rate is $39 per inspection hour. Each unit produced has a direct materials cost of $70 and a direct labor cost of $65. Crump has an Order for 500 units which will require 40 purchase orders, 750 machine hours, and 50 inspection hours. What is the selling price per unit assuming that Crump adds a 40% markup to total cost?

(Multiple Choice)

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Question 28

Quality Stereo Company has provided the following information regarding its activity-based costing system: Purchasing department costs are allocated based on purchase orders and the cost allocation rate is $75 per purchase order. Assembly department costs are allocated based on the number of parts used and the cost allocation rate is $1.00 per part. Packaging department costs are allocated based on the number of units produced and the allocation rate is $2.00 per unit produced. Each stereo produced has 50 parts and the direct materials cost per unit is $70. Quality Stereo has an order for 1,000 stereos which will require 50 purchase orders. What is the selling price per unit assuming that Quality Stereo adds a 20% markup to total cost?

(Multiple Choice)

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Question 29

A cost management technique that helps managers set goals for cost reductions through product design is called:

(Multiple Choice)

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Question 30

Sleep Tight Company manufactures pillows using an activity-based costing system. The following information is provided for the month of June: Activity Estimated Indirect Activity Costs Allocation Base Estimated Quantity of Allocation Base Materials handling \ 3,150 Number of parts 4,200 parts Assembling \ 13,860 Number of parts 4,200 parts Packaging \ 2,730 Number of pillows 1,050 pillows Each pillow consists of 4 parts and the total direct materials cost per pillow is $3.50. What is the total manufacturing cost per pillow?

(Multiple Choice)

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Question 31

Which of the following statements regarding total quality management is incorrect?

(Multiple Choice)

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Question 32

Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of 20 separate parts totaling $95 in direct materials, and requires 2.5 hours of machine time to produce. Additional information follows: Activity Allocation Base Cost Allocation Rate Materials handling Number of parts \ .08 Machining Machine hours \ 7.20 Assembling Number of parts \ .35 Packaging Number of finished units \ 2.70 What is the total manufacturing cost per ceiling fan?

(Multiple Choice)

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Question 33

Pitt Jones Company had the following activities, allocated costs, and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 60,000 2,000 hours Account billing (lines) \ 30,000 20,000 lines Account verification (accounts) \ 15,000 20,000 accounts Correspondence (letters) \ 10,000 1,000 letters The above activities are used by departments P and Q: Department P Department Q Account inquiry (hours) 100 hours 200 hours Account billing (lines) 10,000 lines 7,000 lines Account verification (accounts) 1,000 accounts 600 accounts Correspondence (letters) 50 letters 100 letters How much of the account inquiry cost will be assigned to Department Q?

(Multiple Choice)

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Question 34

The cost of improved equipment and processes within the total quality management philosophy is a(n):

(Multiple Choice)

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Question 35

Which of the following statements is correct?

(Multiple Choice)

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Question 36

Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of 20 separate parts totaling $95 in direct materials, and requires 2.5 hours of machine time to produce. Additional information follows: Activity Allocation Base Cost Allocation Rate Materials handling Number of parts \ .08 Machining Machine hours \ 7.20 Assembling Number of parts \ .35 Packaging Number of finished units \ 2.70 What is the number of finished ceiling fans?

(Multiple Choice)

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Question 37

Pitt Jones Company had the following activities, allocated costs, and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 60,000 2,000 hours Account billing (lines) \ 30,000 20,000 lines Account verification (accounts) \ 15,000 20,000 accounts Correspondence (letters) \ 10,000 1,000 letters The above activities are used by departments P and Q: Department P Department Q Account inquiry (hours) 100 hours 200 hours Account billing (lines) 10,000 lines 7,000 lines Account verification (accounts) 1,000 accounts 600 accounts Correspondence (letters) 50 letters 100 letters What is the cost per driver unit for the account billing activity?

(Multiple Choice)

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Question 38

RJ Company manufactures many products which each use a variety of direct laborers of different skill levels. Which of the following cost drivers would be the most applicable for assigning direct labor scheduling costs to the finished products?

(Multiple Choice)

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Question 39

A traditional cost allocation system may distort product costs because:

(Multiple Choice)

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Question 40

The system that focuses on activities as the fundamental cost objects and uses the costs of those activities as building blocks for compiling the costs of products and other cost objects is referred to as which of the following?

A traditional cost allocation system tends to misallocate manufacturing costs because:

Which of the following is not a characteristic of companies using just-in-time production systems?

Which of the following journal entry components is not applicable to recording the cost of completed products using just-in-time accounting?

Target cost is the price that customers are willing to pay and is the maximum cost that the manufacturer is willing to incur.

The cost of overseeing suppliers within the total quality management philosophy is a(n):

A cost management technique that helps managers set goals for cost reductions through product design is called:

Which of the following statements regarding total quality management is incorrect?

The cost of improved equipment and processes within the total quality management philosophy is a(n):

Which of the following statements is correct?

RJ Company manufactures many products which each use a variety of direct laborers of different skill levels. Which of the following cost drivers would be the most applicable for assigning direct labor scheduling costs to the finished products?

A traditional cost allocation system may distort product costs because:

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandising Inventory

Internal Control and Cash

Receivables

Plant Assets and Intangibles

Current Liabilities, Payroll, and Long-Term Liabilities

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Appendix: Process Costing

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

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