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

Columbia Corporation manufactures two products: Tricycles and Wagons.The annual production and sales of Tricycles is 2,200 units,while 1,750 units of Wagons are produced and sold.The company has traditionally used direct labor hours to allocate its overhead to products.Tricycles require 2 direct labor hours per unit,while Wagons require 1.5 direct labor hours per unit.The total estimated overhead for the period is $385,125.The company is looking at the possibility of changing to an activity-based costing system for its products.If the company used an activity-based costing system,it would have the following three activity cost pools: Required: a.Calculate the unit cost for a Wagon using the traditional system based on a single plantwide overhead rate (use direct labor hours as the cost driver). b.Calculate the unit cost for a Wagon using the activity-based costing system.

The cost of depreciation,insurance,and property tax on the entire production plant would be considered a facility-level cost.

Which of the following is one of the four cost categories typically found on a Cost of Quality report?

Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers.Cooper's Bags Company sells the bags in cases of 1,000 bags.The bags come in three sizes: Large,Medium,and Small.Currently,Cooper's Bags Company uses a single plantwide overhead rate to allocate its $8,088,000 of annual manufacturing overhead.Of this amount,$2,210,000 is associated with the Large Bag line,$3,418,800 is associated with the Medium Bag line,and $2,459,000 is associated with the Small Bag line.Cooper's Bags Company is currently running a total of 40,000 machine hours: 13,000 in the Large Bag line,15,400 in the Medium Bag line,and 11,600 in the Small Bag line.Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs. The departmental manufacturing overhead rate for the Small Bag line would be closest to

Inspection of incoming raw materials and production loss caused by downtime are examples of prevention costs.

Kramer Company manufactures coffee tables and uses an activity-based costing system to allocate all manufacturing conversion costs.Each coffee tables 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 cost of machining per coffee table?

The cost of fixing defective units found during the quality inspections would be classified as what type of cost?

A system in which companies purchase raw materials only when needed is called

Product-level activities and costs are incurred for a particular product,regardless of the number of units or batches of the product produced.

Beartowne Enterprises uses an activity-based costing system to assign costs in its auto-parts division. The following units were produced in December with the following information: Total manufacturing costs for Part 002 is

Burning River Corporation,a manufacturer of a variety of products,uses an activity-based costing system.Information from its system for the year for all products follows: Burning River Corporation makes 750 of its product X14 a year,which requires a total of 55 machine hours,20 inspection hours,and 18 orders.Product X14 requires $77.00 in direct materials per unit and $65.00 in direct labor per unit.Product X14 sells for $195 per unit. Required: a.Calculate the cost pool activity rate for each of the three activities. b.How much manufacturing overhead would be allocated to Product X14 in total? c.What is the profit margin in total for Product X14?

The cost of training quality control supervisors who are responsible for overseeing the inspection of units would be classified as a(n)________ cost.

Bobke Technologies manufactures three types of computers for a well known national brand.The three types are: laptops,desktops,and tablets.Currently,Bobke uses a single plant-wide overhead rate to allocate its $1,667,250 of annual manufacturing overhead.Of this amount,$562,000 is associated with laptops,$492,000 is associated with desktops,and $612,750 is associated with tablets.Bobke is currently using a total of 22,150 machine hours: 7,500 for laptops,8,200 for desktops,and 6,450 for tablets.Bobke uses machine hours to allocate overhead costs. Required: a.Calculate the plant-wide manufacturing overhead rate. b.Calculate the departmental overhead rate for each of the three departments listed. c.Which product line(s)have been overcosted by using the plant-wide manufacturing overhead rate? By how much per machine hour? Which product line(s)have been undercosted by using the plant-wide manufacturing overhead rate? By how much per machine hour?

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: What is the cost per driver unit for the correspondence activity?

One condition that favors using a departmental overhead rate,rather than plantwide overhead rates,is that different departments incur different amounts and types of manufacturing overhead.

Beartowne Enterprises uses an activity-based costing system to assign costs in its auto-parts division. The following units were produced in December with the following information: Total manufacturing costs for Part 003 is

The storage of raw materials is considered a value-added activity.

Departmental overhead rates typically do a better job of matching each department's overhead costs to the products that use the department's resources than do plantwide overhead rates.

When calculating a departmental overhead rate,what should the numerator be?

The eight wastes of traditional operations includes all of the following except