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

James Industries uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: Assembly and Sanding. The Assembly Department uses a departmental overhead rate of $35 per machine hour, while the Sanding Department uses a departmental overhead rate of $20 per direct labor hour. Job 603 used the following direct labor hours and machine hours in the two departments: The cost for direct labor is $30 per direct labor hour and the cost of the direct materials used by Job 603 is $1,400. How much manufacturing overhead would be allocated to Job 603 using the departmental overhead rates?

Which of the following is a sign that a product cost system is not working properly?

Beartowne Enterprises uses an activity-based costing system to assign costs in its auto-parts division. The following units were produced in December with the following information: Total manufacturing costs for Part 002 is

The cost of inspecting and packaging each unit the company produces would be considered a facility-level activity cost.

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

A plantwide overhead rate is calculated by dividing the estimated total manufacturing overhead costs for the year by estimated total amount of the allocation base for the year.

The benefits of using the ABC costing system are higher if the company

The cost of installing improved production equipment and production processes is a(n)________ cost.

Which term listed below describes a system where companies purchase raw materials when needed in production and complete finished goods when needed by customers?

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 billing activity?

James Industries uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: Assembly and Sanding. The Assembly Department uses a departmental overhead rate of $35 per machine hour, while the Sanding Department uses a departmental overhead rate of $20 per direct labor hour. Job 603 used the following direct labor hours and machine hours in the two departments: The cost for direct labor is $30 per direct labor hour and the cost of the direct materials used by Job 542 is $1,400. What was the total cost of Job 542 if James Industries used the departmental overhead rates to allocate manufacturing overhead?

A system in which companies purchase raw materials only when needed is called

Which of the following is not an activity in an ABC system that determines the cost of a manufactured product?

As a result of cost distortion, some products will be overcosted while other products will be undercosted.

Columbia Corporation manufactures two products: Tricycles and Wagons. The annual production and sales of Tricycles is 2,200 units, while 1,750 units of Wagons are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Tricycles require 2 direct labor hours per unit, while Wagons require 1.5 direct labor hours per unit. The total estimated overhead for the period is $385,125. 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: Required: a. Calculate the unit cost for a Wagon using the traditional system based on a single plantwide overhead rate (use direct labor hours as the cost driver). b. Calculate the unit cost for a Wagon using the activity-based costing system.

One key element of lean production is to produce large batches.

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 cost pool activity rate for Engineering Costs would be closest to

The Cosmo Corporation manufactures and assembles office chairs. Cosmo uses an activity-based costing system to allocate all manufacturing conversion costs. Each chair consists of 15 separate parts totaling $125 in direct materials, and requires 2.0 hours of machine time to produce. Additional information follows: What is the number of finished coffee tables?

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 B is

Lean companies typically arrange production activities into self-contained cells.