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

Companies that use departmental overhead rates trace direct materials and direct labor to cost objects just as they would in a traditional costing system.

Back Porch Company manufactures lawn chairs using an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of June: Each lawn chair consists of 8 parts; the total direct materials cost per lawn chair is $10.00. What is the total cost of packaging per lawn chair?

Lean thinking typically focuses on strengthening supply-chain management.

Ryan Fabrication allocates manufacturing overhead to each job using departmental overhead rates. Ryan's operations are divided into a metal casting department and a metal finishing department. The casting department uses a departmental overhead rate of $52 per machine hour, while the finishing department uses a departmental overhead rate of $28 per direct labor hour. Job A216 used the following direct labor hours and machine hours in the two departments: The cost for direct labor is $32 per direct labor hour and the cost of the direct materials used by Job A216 is $1,800. What was the total cost of Job A216 if Ryan Fabrication used the departmental overhead rates to allocate manufacturing overhead?

When calculating a departmental overhead rate, what should the numerator be?

Companies that use ABC trace direct materials and direct labor to cost objects just as would be done using traditional costing systems.

Which of the following items is not a characteristic of a lean company?

It is easier to allocate indirect costs to the products that actually caused those costs if an ABC system is used rather than a traditional costing system.

The cost of depreciation, insurance, and property tax on the entire production plant would be considered a facility-level cost.

Which of the following does activity-based costing consider to be the fundamental cost object?

Swiss Furniture Company manufactures bookshelves and uses an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of May: Each bookshelf consists of 4 parts. The direct materials cost per bookshelf is $30.00. What is the total manufacturing cost per bookshelf?

Only manufacturers can use refined costing systems to allocate manufacturing overhead.

Which of the following is not likely to be a cost driver of activities associated with determining product cost?

Value-engineering is accomplished by eliminating, reducing, or simplifying all non-value added activities, and examining whether value-added activities could be improved.

Facility-level activities and costs are incurred for every individual unit.

On a cost of quality report, which of the following cost items should be classified as a prevention cost?

Two main benefits of ABC are (1)more accurate product cost information and (2)more detailed information on the costs of activities and the drivers of those costs.

Kepple Manufacturing currently uses a traditional costing system. The company allocates overhead to its two products, Zips and Dees, using a predetermined manufacturing overhead rate based on direct labor hours. Here is data related to the company's two products: Information about the company's estimated manufacturing overhead for the year follows: Total estimated direct labor hours for the company for the year are 110,000 hours. The company is evaluating whether it should use an activity-based costing system in place of its traditional costing system. Additional information about production needed for the activity-based costing system follows: The amount of manufacturing overhead that would be allocated to one unit of Zips using the traditional costing system would be closest to

Kramer Company manufactures coffee tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each coffee tables consists of 20 separate parts totaling $240 in direct materials, and requires 5.0 hours of machine time to produce. Additional information follows: What is the cost of machining per coffee table?

The cost of training quality control supervisors who are responsible for overseeing the inspection of units would be classified as a(n)________ cost.