Exam 5: Activity-Based Costing and Activity-Based Management

Product-cost cross-subsidization means that:

Activity based costing system differs from traditional costing systems in the treatment of ________.

Columbus Company provides the following ABC costing information: The above activities used by their three departments are: How much of the total costs will be assigned to the Lawn Department?

Nile Corp. has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year: The accounting records show the Mossman Job consumed the following resources: Using the three cost pools to allocate overhead costs, what is the total amount of overhead costs to be allocated to the Mossman Job?

When "available time" (i.e., setup-hours) is used to calculate a cost of a resource and to allocate costs to cost objects , the system is called:

Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows: Tiger Pride's managers have decided to revise their current assignment of overhead costs to reflect the following ABC cost information: Using an ABC system, next year's estimates show manufacturing overhead costs will total $227,300 for 46,000 T-shirts. If all other T-shirt costs and sales prices remain the same, the profitability that can be expected is ________. (Round the final answer to the nearest whole cent.)

Demand for refinements to the costing system has accelerated due to ________.

ABC and traditional systems are quite similar in ________.

Only indirect costs are included in the cost pools of ABC.

Companies that overcost products risk becoming less effective on pricing and losing market share when competition utilizes more accurate cost systems.

Answer the following questions using the information below: Chess Woods Limited produces two products: wooden chess pieces and wooden inlaid chess boards. Under their traditional cost system using one cost driver (direct manufacturing labor hours), the cost of a set of wooden chess pieces is $325.00. An analysis of the activities and their costs revealed that three cost drivers would be used under a new ABC system. These cost drivers would be equipment usage, storage area for the material, and type of woods used. The new cost of a set of chess pieces was determined to be $298.00 per set. -The reduction in cost per unit of wooden chess pieces under ABC system is due to difference in allocation of ________.

Stark Corporation has two departments, Car Rental and Truck Rental. Central costs may be allocated to the two departments in various ways. If advertising expense of $456,000 is allocated on the basis of sales, the cost per cost driver rate would be ________.

Which of the following statements is true of ABC systems?

Activity-based management refers to the use of information derived from ABC analysis to analyze and improve operations.

Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2018, manufacturing overhead cost estimates total $600,000 for an annual production capacity of 12 million pages. For 2018 Velshi Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis: During 2018, two customers, Money Managers and Hospital Systems, are expected to use the following printing services: Using pages printed as the only overhead cost driver, what is the manufacturing overhead cost estimate for Money Managers during 2018?

Luzent Company produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labor dollars. For 2018, Luzent compiled the following data for the two products: Last year, Luzent Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information for 2018: Required: a.Using the current system, what is the estimated 1.total cost of manufacturing one unit for each type of door? 2.profit per unit for each type of door? b.Using the current system, estimated manufacturing overhead costs per unit are less for the deluxe door ($80 per unit) than the standard door ($120 per unit). What is a likely explanation for this? c. "ABC systems may result in misallocation of indirect costs." Do you agree? Give reasons for your answer. d.What considerations need to be examined when determining a sales mix strategy? e. While implementing an ABC system for the first time, achieving a significant change overnight is difficult and this may de motivate employees. How can managers overcome this problem?

________ costs support the organization as a whole.

Xylon Corp. has contracts to complete weekly supplements required by forty-six customers. For the year 2018, manufacturing overhead cost estimates total $900,000 for an annual production capacity of 10 million pages. For 2018, Xylon decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis: During 2018, two customers, Money Managers and Hospital Systems, are expected to use the following printing services: If manufacturing overhead costs are considered one large cost pool and are assigned based on 10 million pages of production capacity, what is the cost driver rate? (Round the final answer to three decimal places.)

________ is an example of an output unit-level cost in the cost hierarchy.

Distribution can be a cost-driver for a manufacturing company under ABC system.