Exam 4: Activity-Based Costing, lean Operations, and the Costs of Quality

Wadsworth Industries manufactures small appliances and uses an activity-based costing system.Information from its system for the year for all products follows: Wadsworth makes 775 of its stand mixers a year,which requires a total of 25 machine hours,10 inspection hours,and 12 orders.The stand mixer requires $15.00 in direct materials per unit and $11.50 in direct labor per unit.The stand mixer sells for $120 per unit.What is the profit margin in total for the stand mixer?

When calculating the total amount of manufacturing overhead to allocate to a particular job,the company would multiply each departmental overhead rate by ________ and then ________ together the allocated amounts from each department.

Salvatore LLC provides a wide variety of legal services and uses an activity-based costing system.Data from its activity-based costing system for all services follows: The cost pool activity rate for client meetings is

Lean thinking involves carrying large amounts of inventory "just in case" something goes wrong.

Regarding activity-based costing systems,which of the following statements is true?

Potter & Weasley Company had the following activities,estimated indirect activity costs,and allocation bases: Potter & Weasley uses activity based costing. The above activities are used by Departments P and Q as follows: How much of the account inquiry cost will be assigned to Department Q?

Cost distortion occurs when some products are overcosted while other products are undercosted by the cost allocation system.

Companies that use departmental overhead rates trace direct materials and direct labor to cost objects just as they would in a traditional costing system.

The estimated total manufacturing overhead costs that will be incurred in each department in the coming year are often referred to as activity cost pools.

Hummingbird Manufacturing manufactures small parts and uses an activity-based costing system. The following parts were produced in October with the following information: Total unit costs for Part A is closest to (round to two decimal points)

Alexander Inc.uses activity-based costing.The company produces two products: Snaps and Pops.The expected annual production of Snaps is 1,500 units,while the expected annual production of Pops is 2,200 units.There are three activity cost pools: Assembly,Testing,and Packing.The estimated costs and activities for each of these three activity pools follows: The cost pool activity rate for Testing would be

It is easier to allocate indirect costs to the products that actually caused those costs if an ABC system is used rather than a traditional costing system.

Product testing is an appraisal cost.

Which of the following is an example of a cost item that should be classified as an external failure cost?

Kramer Company manufactures coffee tables and uses an activity-based costing system to allocate all manufacturing conversion costs.Each coffee table consists of 20 separate parts totaling $240 in direct materials,and requires 5.0 hours of machine time to produce.Additional information follows: What is the total manufacturing cost per coffee table?

Merchandising and service companies,as well as governmental agencies,can use refined cost allocation systems to provide their managers with better cost information.

Hummingbird Manufacturing manufactures small parts and uses an activity-based costing system. The following parts were produced in October with the following information: Total manufacturing costs for part B is

ABC can be used in routine planning and control decisions as well as pricing,product mix and cost cutting decisions.

The cost to design and market new models would be considered a facility-level cost.

Unit-level activities and costs are incurred for every single unit.