Exam 5: Activity-Based Costing and Management

A hospital administrator is in the process of implementing an activity-based-costing system.Which of the following tasks would not be part of this process?

Alexander Corporation produces flat-screen computer monitors.Consider the following selected costs that arose during the current year: 1.Direct materials used: $3,640,000 2.Plant rent,utilities,and taxes: $1,229,000 3.New technology design engineering: $2,040,000 4.Materials receiving: $318,000 5.Manufacturing-run/set-up charges: $115,000 6.Equipment depreciation: $92,000 7.General management salaries: $1,564,000 Required: A.A batch-level activity is performed for each batch of products rather than for each unit.In contrast,a facility-level activity is required for an entire process to occur.Examples of the latter,which support the organization as a whole,include plant maintenance and property taxes. A.Briefly distinguish between batch-level and facility-level activities. B.Determine the cost of the firm's unit-level,batch-level,product-sustaining,and facility-level activities. B.Unit-level: $3,640,000 (1) Batch-level: $318,000 (4)+ $115,000 (5)= $433,000 Product-sustaining: $2,040,000 (3) Facility-level: $1,229,000 (2)+ $92,000 (6)+ $1,564,000 (7)= $2,885,000

Consider the following statements regarding traditional costing systems: I.Overhead costs are applied to products on the basis of volume-related measures. II.All manufacturing costs are easily traceable to the goods produced. III.Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements. Which of the above statements is (are)true?

The overhead cost allocated to Beta by using traditional costing procedures would be:

Assuming the use of activity-based costing,the proper percentage to use in allocating staff support costs to tax planning services is:

Which of the following inventories would a company try to reduce and/or eliminate under a just-in-time system?

Under an activity-based costing system,what is the per-unit overhead cost of Standard?

The controller for Wofford Machining has established the following overhead cost pools and cost drivers: A. B $538,000 /20,000 machine hours = $26.90 per hour; $26.90 per hour * 850 hours = $22,865 A.Compute the total overhead that should be assigned to order no.715 by using activity-based costing. B.Suppose that Wofford were to use a single,predetermined overhead rate based on machine hours.Compute the rate per hour and the total overhead assigned to order no.715. C.Activity-based costing (ABC)uses multiple cost drivers,more closely aligning individual costs with the factors that are creating them.Traditional systems,in contrast,use fewer drivers and therefore result in "lumping" unlike activities (unit-level,batch-level,and so forth)together.The end result is that ABC tends to eliminate the cost distortion that sometimes arises with traditional systems,more specifically,the under- or overcosting of products. C.Discuss the merits of an activity-based costing system in comparison with a traditional costing system.

The overhead cost allocated to Zeta by using traditional costing procedures would be:

Alamo's customer service department follows up on customer complaints by telephone inquiry.During a recent period,the department initiated 7,000 calls and incurred costs of $203,000.If 2,940 of these calls were for the company's wholesale operation (the remainder were for the retail division),costs allocated to the retail division should amount to:

Consider the following costs that relate to a bank and a manufacturer of software: Bank 1.Review cost of commercial loan applications 2.Operating cost of human resources department 3.Immediate processing cost of a specific customer's cash deposit 4.Bank membership cost of joining local Chamber of Commerce Software manufacturer 5.Label and packaging charges from a commercial printer for a new software release 6.Air conditioning/heating costs of the firm's production plant 7.Transport cost of moving the CD-output from production run no.1 to the company's warehouse 8.Design,development,and coding cost of new spreadsheet software Required: A. A.Classify the eight costs listed as arising from either a unit-level,batch-level,product-sustaining,or facility-level activity. B.The number of loan applications would be more appropriate because it has a higher correlation with the amount of review cost incurred.Applications create review cost;customers,on the other hand,may not. B.Would number of loan applications or number of customers be a more appropriate cost-driver base for the review of loan applications? Briefly explain.

The following tasks are associated with an activity-based costing system: 1- Assignment of cost to products 2- Calculation of pool rates 3- Identification of cost drivers 4- Identification of cost pools Which of the following choices correctly expresses the proper order of the preceding tasks?

Which of the following activity cost pools and activity measures likely has the lowest degree of correlation?

Jackson manufactures products X and Y,applying overhead on the basis of labor hours.X,a low-volume product,requires a variety of complex manufacturing procedures.Y,on the other hand,is both a high-volume product and relatively simplistic in nature.What would an activity-based costing system likely disclose about products X and Y as a result of Jackson's current accounting procedures?

Falcon Enterprises,which manufactures lawn mowers,recently installed a just-in-time purchasing system and an activity-based management program. Required: A.Determine whether the following items would be apt to increase or decrease as a result of the just-in-time system: 1.Inventory storage costs. 2.Number of suppliers used. 3.Number of raw material shipments handled. 4.Dollars available for alternative investment opportunities. 5.Quality of raw materials purchased. B.Identify the following items as value-added activities,non-value-added activities,or both. 1.Attaching the engine to the mower's body. 2.Installing a new air-conditioning system in the executive offices. 3.Replacing a defective wheel with a new wheel. 4.Designing and printing an owner's instruction manual for a new model. 5.Moving completed mowers to the finished-goods warehouse. 6.Attaching the handle to the mower's body.The process took longer than normal because of a worker slowdown caused by disgruntled employees.

During a recent accounting period,Marty's shipping department processed 26 orders.Each order typically takes four hours to complete;however,the average time increased to five hours because of various departmental inefficiencies.If shipping labor is paid $14 per hour,the company's non-value-added cost would be:

At a recent professional meeting,two controllers discussed product-costing problems in their respective companies.Both controllers are familiar with ABC systems,but neither of their firms utilizes such a system. Controller D reported that part of the problem in his firm results from major differences among product lines with respect to unit volume,utilization of activities,quality assurance requirements established by customers,and product size.Controller M noted that in her company,which manufactures consumer goods,all items undergo the same basic production processes in the same sequence.Lately,however,there has been a significant increase in the number of item colors. Both controllers are worried about the potential distortion of product costs under their traditional product-costing systems. Required: Which controller should be more concerned about the potential distortion? Explain.

Grist Enterprises is converting to an activity-based costing system and needs to depict the various activities in its manufacturing process along with the activities' relationships.Which of the following is a possible tool that the company can use to accomplish this task?

Which of the following is not a key feature of a JIT system?

Feinstein,Inc. ,an appliance manufacturer,is developing a new line of ovens that uses controlled-laser technology.The research and testing costs associated with the new ovens is said to arise from a: