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

Traditional cost systems with a single-allocation base tend to overcost high-volume products and undercost low-volume products as compared to activity-based costing systems.

Only manufacturers can use refined costing systems to allocate manufacturing overhead.

With increased competition,managers need more accurate estimates of product costs in order to set prices and to identify the most profitable products.

Which of the following condition(s)favors using departmental overhead rates in place of a plantwide overhead rate?

Watson's Computer Company uses ABC to account for its manufacturing process. Watson's Computer Company expects to produce 2,250 computers.Watson's Computer Company also expects to use 13,000 parts and have 20 setups. The allocation rate for packaging is

On a Cost of Quality report,which of the following cost items should be classified as a prevention cost?

Which of the following pertains to a lean company?

Vandalay Industries manufactures two products: toasters and blenders.The annual production and sales of toasters is 2,200 units,while 1,500 units of blenders are produced and sold.The company has traditionally used direct labor hours to allocate its overhead to products.Toasters require 1.25 direct labor hours per unit,while blenders require 1 direct labor hours per unit.The total estimated overhead for the period is $149,115.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 overhead cost per blender using an activity-based costing system would be closest to

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 lawn chair is $10.00. What is the total manufacturing cost per lawn chair?

When overhead is allocated to every product using the same manufacturing overhead rate,this rate is called the departmental overhead rate.

If a company were to increase its appraisal costs by inspecting more units as the units are are in production (during production),the company's external failure costs would most likely

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 number of finished coffee tables?

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 verification costs will be assigned to Department P?

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 machining per chair?

External failure costs occur when poor-quality goods or services are not detected until after delivery to customers.

Ryan Fabrication allocates manufacturing overhead to each job using departmental overhead rates.Ryan's operations are divided into a metal casting department and a metal finishing department.The casting department uses a departmental overhead rate of $52 per machine hour,while the finishing department uses a departmental overhead rate of $28 per direct labor hour.Job A216 used the following direct labor hours and machine hours in the two departments: The cost for direct labor is $32 per direct labor hour and the cost of the direct materials used by Job A216 is $1,800. How much manufacturing overhead would be allocated to Job A216 using the departmental overhead rates?

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

Dursley & Marvolo,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: How much overhead cost would be allocated to Client 82 using the activity-based costing system?

Production loss caused by downtime is an example of a(n)

All of the following statements regarding total quality management are true except