Exam 4: Activity-Based Management and Activity-Based Costing

Glassman Company Glassman Company produces two products: A andB.The company has three overhead functions that are required for both products. Below is production information for Products A and B:

Product	Prime Costs (Direct Materials + Direct Labor)	Direct Labor Hours	Overhead Function #1	Overhead Function #2	Overhead Function #3
A	$35	4 hrs	2 hrs	1 hr	6 hrs
B	$22	1.5 hr	1 hr	8 hrs	1 hr

The company produces 800 units of Product A and 8,000 units of Product B each period. The overhead functions have the following hourly costs: Function Haurly Rate 1 \ 10 2 7 3 18 Refer to Glassman Company If total overhead is assigned to A and B on the basis of direct labor hours,Product B will have an overhead cost per unit of

Engaging in which of the following will result in radical changes being made to an organization's processes?

In allocating fixed costs to products in activity-based costing,

Direct materials are normally considered batch-level costs.

Lead time minus production time is equal to

If only one or two overhead cost pools are used,

Ultimate Vision Corporation Ultimate Vision Corporation has two product lines: LCD televisions and projection televisions.The company has budgeted the following production and overhead costs for the upcoming year:

		LCD TV’s	Projection TV’s
Units Produced		1,500	2,250
Direct labor hours per Unit		20	30
Material Moves per Product Line		15	20
Budgeted Materials Handling Cost	$75,000
Total Machine Hours		10,000	16,000
Machine Maintenance Costs	$180,000

Refer to Ultimate Vision Corporation.If the company uses total direct labor hours to allocate factory overhead,the machine maintenance cost allocated to projection TVs would be:

Which of the following have an impact on long-term variable costs? $\text {\underline{ Product variety} }$     $\text {\underline{ Prochuct complexity} }$     $\text {\underline{ Process complexity} }$

Activity-based costing is appropriate for a company that has low overhead costs that are proportional to the unit volumes of products.

Ellis Company Ellis Company uses activity-based costing.The company produces two products: IPods and MP3 players.The annual production and sales volume of IPods is 8,000 units and of MP3 players is 6,000 units.There are three activity cost pools with the following expected activities and estimated total costs:

Activity Cost Pool	Estimated Cost	Expected Activity IPods	Expected Activity MP3 players	Total
Activity 1	$20,000	100	400	500
Activity 2	$37,000	800	200	1,000
Activity 3	$91,200	800	3,000	3,800

Refer to Ellis Company.Using ABC,the cost per unit of IPods is approximately:

Glassman Company Glassman Company produces two products: A andB.The company has three overhead functions that are required for both products. Below is production information for Products A and B:

Product	Prime Costs (Direct Materials + Direct Labor)	Direct Labor Hours	Overhead Function #1	Overhead Function #2	Overhead Function #3
A	$35	4 hrs	2 hrs	1 hr	6 hrs
B	$22	1.5 hr	1 hr	8 hrs	1 hr

The company produces 800 units of Product A and 8,000 units of Product B each period. The overhead functions have the following hourly costs: Function Haurly Rate 1 \ 10 2 7 3 18 Refer to Glassman Company If total overhead is assigned to A and B on the basis of direct labor hours,Product A will have an overhead cost per unit of

Ultimate Vision Corporation Ultimate Vision Corporation has two product lines: LCD televisions and projection televisions.The company has budgeted the following production and overhead costs for the upcoming year:

		LCD TV’s	Projection TV’s
Units Produced		1,500	2,250
Direct labor hours per Unit		20	30
Material Moves per Product Line		15	20
Budgeted Materials Handling Cost	$75,000
Total Machine Hours		10,000	16,000
Machine Maintenance Costs	$180,000

Refer to Ultimate Vision Corporation.If the company uses total direct labor hours to allocate factory overhead,the materials handing cost allocated to LCD TVs would be:

Houston National Bank Houston National Bank had the following activities,traceable costs,and Physical flow of driver units:

Activities	Traceable Costs	Physical flow of Driver Units
Open new accounts	$50,000	1,000 accounts
Process deposits	36,000	400,000 deposits
Process withdrawals	15,000	200,000 withdrawals
Process loan applications	27,000	900 applications

The above activities are used by the Memorial branch and the University branch:

	Memorial	University
New accounts	200	400
Deposits	40,000	20,000
Withdrawals	15,000	18,000
Loan applications	100	160

Refer to Houston National Bank.What is the cost per driver unit for the withdrawal activity?

A value chart indicates

A process map

It is necessary for an organization to define its processes before attempting to establish relationships among company activities.

Non-value-added activities that are necessary to businesses,but not costs that customers are willing to pay for are known as

The term cost driver refers to

In activity-based costing,cost reduction efforts are directed at specific

Which of the following statements about business-value-added activities (BVAs)is true?