Exam 4: Activity-Based Costing, Lean Operations, and the Costs of Quality

The cost of product liability claims is an example of a(n)________ cost.

Four basic steps are used in an ABC system. List the proper order of these steps, which are currently scrambled below: a. Identify the primary activities and estimate a total cost pool for each. b. Allocate the costs to the cost object using the activity cost allocation rates. c. Select an allocation base for each activity. d. Calculate an activity cost allocation rate for each activity.

Potter & Weasley Company had the following activities, estimated indirect activity costs, and allocation bases: Potter & Weasley uses activity based costing. The above activities are used by Departments P and Q as follows: What is the cost per driver unit for the account inquiry activity?

Howard, Fine, & Howard is an advertising agency. The firm uses an activity-based costing system to allocate overhead costs to its services. Information about the firm's activity cost pool rates follows: Stooge Company was a client of Howard, Fine, & Howard. Recently, 7 administrative assistant hours, 3 new ad campaigns, and 8 meeting hours were incurred for the Stooge Company account. Using the activity-based costing system, how much overhead cost would be allocated to the Stooge Company account?

If a company were to decrease its prevention costs by eliminating employee training, the company's external failure costs would most likely

Which of the following is a result of cost distortion?

The cost of fixing defective units found during the quality inspections would be classified as what type of cost?

ABC tends to increase the unit cost of low-volume products and decrease the unit cost of high-volume products.

Hummingbird Manufacturing manufactures small parts and uses an activity-based costing system. The following parts were produced in October with the following information: Total manufacturing costs for part C is

The Braveheart Corporation uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: cutting and painting. The Cutting Department uses a departmental overhead rate of $12 per machine hour, while the Painting Department uses a departmental overhead rate of $17 per direct labor hour. Job 422 used the following direct labor hours and machine hours in the two departments: The cost for direct labor is $20 per direct labor hour and the cost of the direct materials used by Job 422 is $800. Required: What was the total cost of Job 422 if the Braveheart Corporation used the departmental overhead rates to allocate manufacturing overhead?

Vintage Fun reproduces old-fashioned style roller skates and skateboards. The annual production and sales of roller skates is 950 units, while 1,750 skateboards are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Roller skates require 2.5 direct labor hours per unit, while skateboards require 1.25 direct labor hours per unit. The total estimated overhead for the period is $114,300. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools: The predetermined overhead allocation rate using the traditional costing system would be closest to

The lost profits from lost customers are an example of what type of cost?

The cost of maintenance on the entire production plant would be considered a facility-level cost.

Which of the following terms describes the process of reevaluating activities to reduce costs while satisfying customers' needs?

The cost of maintaining quality control testing equipment would be classified as a(n)________ cost.

Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1,000 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plantwide overhead rate to allocate its $8,088,000 of annual manufacturing overhead. Of this amount, $2,210,000 is associated with the Large Bag line, $3,418,800 is associated with the Medium Bag line, and $2,459,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 40,000 machine hours: 13,000 in the Large Bag line, 15,400 in the Medium Bag line, and 11,600 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs. Which product line(s)have been overcosted or undercosted by using the plantwide manufacturing overhead rate?

The cost of downtime caused by quality problems with the raw materials would be classified as what type of cost?

Unit-level activities and costs are incurred for every single unit.

Managers often reap benefits by using ABC data in ABM to pinpoint opportunities to cut costs.

Customer response time is the time that lapses between the receipt of a customer order and delivery of the product or service.