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

For one product that a firm produces,the manufacturing cycle efficiency is 25 percent.If the total production time is 10 hours,what is the total manufacturing time?

The first step in performing activity analysis is to prepare a process map.

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 number of units produced to allocate factory overhead,the materials handing cost allocated to LCD TVs would be:

Activity analysis allows managers to

The sum of value-added processing time plus non-value added time equals __________________________. or or

A key concept underlying cost driver analysis is that

The proportion of value added processing time to total cycle time equals __________________________________________________. or

Adopting a just-in-time (JIT)manufacturing process may enable a company to increase manufacturing cycle efficiency (MCE).

Which of the following is not a drawback of mass customization?

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

For a company that manufactures candy,how would the costs of product inspection be classified? $\text {\underline{ Direct Costs} }$           $\text {\underline{ Value-A dded Costs} }$

Machine setup is normally considered a batch-level cost

Danner Company makes ten different styles of inexpensive feather masks.Which of the following is this company most likely to have?

Unit level costs occur once for each unit produced.

Exotic Chocolate Company produces baking chocolate for use by commercial organizations.The company is analyzing its operations in preparation for reconfiguring its factory setup. Currently,each batch of chocolate requires the following processes:

Function	Time (Minutes)
Receiving ingredients from vendors	90
Transporting ingredients to stockroom	100
Ingredient storage	6,400
Transporting ingredients to production area	75
Mixing ingredients	400
Cooking ingredients	180
Cooling chocolate	90
Packaging chocolate	160
Moving finished goods to warehouse	105
Storing finished goods in warehouse	20,500
Moving finished goods to trucks	150

a)Calculate the total cycle time necessary to manufacture a batch of chocolate. b)Identify the value-added functions c)Calculate the manufacturing cycle efficiency (MCE)of this process. d)Assume that a management consultant has established a goal that Exotic Chocolate Company increase its MCE to 5 percent or greater.Identify three possible areas in which the company could reduce its cycle time.

Machine setup is normally considered a unit-level cost

In activity-based costing,preliminary cost allocations assign costs to

Morrison Company Morrison Company manufactures two products: digital cameras and video cameras.The company uses an activity-based costing system.The annual production and sales volume of digital cameras is 10,000 units and of video cameras is 8,000 units.Direct costs for the digital cameras are $122;for the video cameras,direct costs are $153. For overhead costs,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	$30,000	100	500	600
Activity 2	$45,000	600	300	900
Activity 3	$96,600	400	2,000	2,400

Refer to Morrison Company.Using ABC,the total cost per digital camera is approximately:

Management should strive to reduce or eliminate non-value added activities from a production process.

Activity based costing is most effective when it is implemented in an environment that supports total quality management