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

Which of the following falls under the Activity-Based Management umbrella? Continuous              Businessprocess                 Activity-base $\text {\underline{improvement} }$    $\text {\underline{ reengine ering} }$              $\text {\underline{ costing} }$

The "Rule of One" underlies the premise that all costs are

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 MP3 players is approximately:

Reed Company Reed Company produces 50,000 units of Product Q and 6,000 units of Product Z during a period.In that period,four set-ups were required for color changes.All units of Product Q are black,which is the color in the process at the beginning of the period.A set-up was made for 1,000 blue units of Product Z;a set-up was made for 4,500 red units of Product Z;a set-up was made for 500 green units of Product Z.A set-up was then made to return the process to its standard black coloration and the units of Product Q were run.Each set-up costs $500. Refer to Reed Company.Assume that Reed Company has decided to allocate overhead costs using levels of cost drivers.What would be the approximate per-unit set-up cost for the blue units of Product Z?

Traditional overhead allocations result in which of the following situations?

Discuss the four different levels of costs identified by activity based costing (ABC).How should these types of costs be treated in the determination of product cost?

In the "new era" of manufacturing,good performance indicators are

_________________________ refers to the number of products made.

An activity driver is used for which of the following reasons? $\text {\underline{ To measure demands} }$         $\text {\underline{ To measure ie sources consumed} }$

Simultaneous engineering helps companies accomplish which of the following? Reducesproduct                           Reduces process $\text {\underline{ complexity} }$                       $\text {\underline{ camplexity } }$

Discuss some of the factors that could motivate an organization to implement activity based costing.

Awesome Wood Products manufactures two types of wooden bookends: plain and hand-carved.The following information about the production process is available:

	Plain	Hand-Carved
Number produced	120,000	75,000
Machine hours	95,000	25,000
Inspection hours	7,000	35,000
Revenues	$4,800,000	$4,400,000
Direct costs	$3,800,000	$3,100,000

Total factory overhead is $1,200,000.Of this overhead,$500,000 is related to utilities and the remainder is related to quality control. a.Determine the total overhead cost assigned to each type of bookend using machine hours as the allocation base.Calculate the gross profit per unit for each product. b.Determine the total overhead cost assigned to each type of bookend if overhead is assigned using allocation bases appropriate to the overhead costs.Calculate the gross profit per unit of each product. c.Explain why the unit cost for each model is different between the two methods of allocation.

Activity-based costing and activity-based management are effective in helping managers do all of the following except

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 an activity-based costing (ABC)system to allocate factory overhead,the materials handing cost allocated to projection TVs would be:

Manufacturing cycle efficiency should be increased by employing which of the following techniques? $\text { JIT }$                                    Flexible                                             Batch $\text {\underline{ Inventory} }$                   $\text {\underline{ Manufactuxing Systems} }$     $\text {\underline{ Manfacturing} }$

Activity-based costing is appropriate for a company that manufactures a single product.

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 video camera is approximately:

In allocating variable costs to products,

Product costing systems in use over the last 40 years

If activity-based costing is implemented in an organization without any other changes being implemented,total overhead manufacturing costs will