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

Darlington & Myrtle,Attorneys at Law,provide a variety of legal services.The law firm uses an activity-based costing system and has developed the following activity pool cost rates: Cost and activity data related to two clients is as follows: Required: a.Calculate the amount of overhead that would be allocated to Client 245 using the activity-based costing system. b.Calculate the amount of overhead that would be allocated to Client 367 using the activity-based costing system.

Which of the following cost of quality categories represents the cost incurred to "test toasters before a sale"?

As compared to traditional volume-based costing using a single plantwide overhead rate,activity-based costing (ABC)is a more refined costing system that reduces cost distortion.

Which of the following is most likely to be the cost driver for the packaging and shipping activity?

Back Porch Company manufactures lawn chairs using an activity-based costing system to allocate all manufacturing conversion costs.The following information is provided for the month of June: Each lawn chair consists of 8 parts;the total direct materials cost per pillow is $10.00. If the cost to purchase the same lawn chair from a supplier is $35.00,what should Back Porch do to maximize profits?

High Rise Display Company manufactures display cases to be sold to retail stores.The cases come in three sizes: Large,Medium,and Small.Currently,High Rise Display Company uses a single plant-wide overhead rate to allocate its $3,357,800 of annual manufacturing overhead.Of this amount,$820,000 is associated with the Large Case line,$1,276,800 is associated with the Medium Case line,and $1,261,000 is associated with the Small Case line.Clearview Display Company is currently running a total of 33,000 machine hours: 10,000 in the Large Case line,13,300 in the Medium Case line,and 9,700 in the Small Case line.High Rise Display Company uses machine hours as the cost driver for manufacturing 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?

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 A is

Which of the following is true about lean thinking?

The plantwide overhead cost allocation rate is computed by dividing the estimated total manufacturing overhead costs of the department by the estimated total quantity of the department's cost allocation base.

Which of the following is not an activity in an ABC system that determines the cost of a manufactured product?

Which of the following cost of quality categories represent the cost incurred to seek and find a new supplier that can provide quality raw materials compared to the low-quality raw materials received from a current supplier?

Vintage Fun reproduces old-fashioned style roller skates and skateboards.The annual production and sales of roller skates is 950 units,while 1,750 skateboards are produced and sold.The company has traditionally used direct labor hours to allocate its overhead to products.Roller skates require 2.5 direct labor hours per unit,while skateboards require 1.25 direct labor hours per unit.The total estimated overhead for the period is $114,300.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: The cost pool activity rate for Engineering Costs would be closest to

All of the following are considered to be part of the cost hierarchy often used to implement ABC,with the exception of

James Industries uses departmental overhead rates to allocate its manufacturing overhead to jobs.The company has two departments: Assembly and Sanding.The Assembly Department uses a departmental overhead rate of $35 per machine hour,while the Sanding Department uses a departmental overhead rate of $20 per direct labor hour.Job 603 used the following direct labor hours and machine hours in the two departments: The cost for direct labor is $30 per direct labor hour and the cost of the direct materials used by Job 603 is $1,400. How much manufacturing overhead would be allocated to Job 603 using the departmental overhead rates?

Customer response time is the time that lapses between the receipt of a customer order and delivery of the product or service.

The Cosmo Corporation manufactures and assembles office chairs.Cosmo uses an activity-based costing system to allocate all manufacturing conversion costs.Each chair consists of 15 separate parts totaling $125 in direct materials,and requires 2.0 hours of machine time to produce.Additional information follows: What is the cost of assembling per chair?

Which of the following items is not a characteristic of a lean company?

In ABC,how is the activity allocation rate computed?

Costs incurred to avoid providing poor quality services would be considered to be

Swiss Furniture Company manufactures bookshelves and uses an activity-based costing system to allocate all manufacturing conversion costs.The following information is provided for the month of May: Each bookshelf consists of 4 parts.The direct materials cost per bookshelf is $30.00. What is the total manufacturing cost per bookshelf?