Exam 5: Activity-Based Costing and Customer Profitability Analysis

Everlast Co. manufactures a variety of drill bits. The company's plant is partially automated. The budget for the year includes $432,000 payroll for 4,800 direct labor-hours. Listed below is cost driver information used in the product-costing system:Using ABC, how much quality control overhead is assigned to the order?

The cost of unused capacity can be determined using ABC costing for the purpose of:

Pasternik Company produces and sells two products, Alpha and Zeta. The following information is available relating to its setup activities: Alpha Zeta Units produced 250 20,000 Batch size (units) 10 500 Total direct labor hours 1,000 39,000 Cost per setup \ 2,000 \ 2,000 Use of activity-based costing would allocate the following amounts of setup cost to each unit (rounded to the nearest cent):

A measure of the quantity of resources consumed by an activity is:

Customer lifetime value is a type of analysis used to:

Nerrod Company sells its products at $500 per unit, net 30. The firm's gross margin ratio is 40 percent. The firm has estimated the following operating costs:What is Nerrod's total customer unit-level cost applicable to XBT as a customer?

Wings Co. budgeted $555,600 manufacturing direct wages, 2,315 direct labor hours, and had the following manufacturing overhead:Using ABC, overhead cost assigned to Job #971 for machine repair is:

Diamond Cleats Co. manufactures cleats for baseball shoes. It has outlined the following overhead cost drivers:Using activity-based costing, applied machine overhead for the baseball cleat order is:

Procurement costs such as costs of placing orders for materials and paying suppliers are usually classified as:

Shaver Co. manufactures a variety of electric razors for men and women. The company's plant is partially automated. Listed below is cost driver information used in the product-costing system:What is the total manufacturing overhead assigned to the current order for Men's Razors if the firm uses a volume-based plant wide overhead rate based on direct labor dollars?

Diamond Cleats Co. manufactures cleats for baseball shoes. It has outlined the following overhead cost drivers:ABC costing helps an organization implement its strategy through all of the following means except:

Wings Co. budgeted $555,600 manufacturing direct wages, 2,315 direct labor hours, and had the following manufacturing overhead:The total overhead of Job #971 under the ABC costing is:

The costs of operating a regional warehouse is an example of a:

Engineering change orders, equipment maintenance, and product development costs are examples of:

Everlast Co. manufactures a variety of drill bits. The company's plant is partially automated. The budget for the year includes $432,000 payroll for 4,800 direct labor-hours. Listed below is cost driver information used in the product-costing system:A current product order has the following requirements: Machine setups 8 setups Materials handling 606 barrels Quality inspections 80 inspections Machine hours 830 machine hours Direct labor hour 336 hours Using ABC, how much total overhead is assigned to the order?

Moss Manufacturing has just completed a major change in its quality control (QC) process.Previously, products had been reviewed by QC inspectors at the end of each major process, and the company's ten QC inspectors were charged as direct labor to the operation or job.In an effort to improve efficiency and quality, a computerized video QC system was purchased for $250,000.The system consists of a minicomputer, 15 video cameras, other peripheral hardware, and software. The new system used cameras stationed by QC engineers at key points in the production process.Each time an operation changes or there is a new operation, the cameras are moved, and a new master picture is loaded into the computer by a QC engineer.The camera takes pictures of the units in process, and the computer compares them to the picture of a "good" unit.Any differences are sent to a QC engineer who removes the bad units and discusses the flaws with the production supervisors.The new system has replaced the ten QC inspectors with two QC engineers. The operating costs of the new QC system, including the salaries of the QC engineers, have been included as factory overhead in calculating the company's volume-based factory overhead rate which is based on direct labor dollars. The company's president is confused.His vice president of production has told him how efficient the new system is, yet there is a large increase in the factory overhead rate.The computation of the rate before and after automation is shown below. Before After Budgeted overhead \ 1,900,000 \ 2,100,000 Budgeted direct labor 1,000,000 700,000 Budgeted overhead rate 190\% 300\% "Three hundred percent," lamented the president, "How can we compete with such a high factory overhead rate?" Required: 1.a.Define factory overhead, and cite three examples of typical costs that would be included in factory overhead. b.Explain why companies develop factory overhead rates. 2.Explain why the increase in the overhead rate should not have a negative financial impact on Moss Manufacturing. 3.Explain, in the greatest detail possible, how Moss Manufacturing could change its overhead accounting system to eliminate confusion over product costs.

Activity-based costing for manufacturing operations is used to assign:

If a costing system uses a single base to allocate overhead costs that are results of several production activities:

In regard to selling activities, which one of the following would be a cost driver for selling expense?

Wang Company has established the following overhead cost pools and cost drivers for the month of May:Using ABC, what is the overhead cost per unit produced for Job M2?