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

Alexander Inc. uses activity-based costing. The company produces two products: Snaps and Pops. The expected annual production of Snaps is 1800 units, while the expected annual production of Pops is 2500 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 overhead cost per unit of Pops would be closest to (Round all answers to two decimal places.)

Lean companies cross train their employees for all of the following reasons except:

The use of which of the following costing systems is most likely to reduce cost distortion to a minimum?

Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2200 units, while 1400 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 $150,015. 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 (Round all answers to two decimal places.)

The costs of adopting ABC may be lower for some companies than for others. This situation may occur

Costs incurred to detect poor quality goods or services are

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?

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.

The Sit-N-Spin Corporation manufactures and assembles office chairs. Sit-N-Spin uses an activity-based costing system to allocate all manufacturing conversion costs. Each chair consists of 30 separate parts totaling $125 in direct materials, and requires 6.0 hours of machine time to produce. Additional information follows: What is the cost of materials handling per chair?

Duquesne Incorporated recently implemented an activity-based costing system. Total results from all products manufactured in the current year are: Duquesne manufactures sprinkler heads for commercial applications. Annual production and sales of one of its heads, is 2,300. The following relates to the most recent year. Required: 1. Calculate the activity cost pool rates for each of the three activity cost pools listed. 2. Calculate the average cost of one sprinkler head.

OP Technologies Manufacturing manufactures small parts and uses an activity-based costing system. The following parts were produced in October with the following information: Total unit cost for part B is closest to (rounded to two decimal places)

Costs incurred in detecting poor quality goods or services are what type of costs?

Batch-level activities and costs are incurred again each time a batch is produced.

Two main benefits of ABC are (1)more accurate product cost information and (2)more detailed information on the costs of activities and the drivers of those costs.

OP Technologies 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 C is

Appraisal costs are incurred to detect poor-quality goods or services.

Beaver Company manufactures coffee tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each coffee tables consists of 40 separate parts totaling $280 in direct materials, and requires 6.0 hours of machine time to produce. Additional information follows: What is the cost of assembling per coffee table?

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.

Four basic steps are used in an ABC system. List the proper order of these steps, which are currently scrambled below: A. Identify the primary activities and estimate a total cost pool for each. B. Allocate the costs to the cost object using the activity cost allocation rates. C. Select an allocation base for each activity. D. Calculate an activity cost allocation rate for each activity.

Vintage Fun reproduces old-fashioned style roller skates and skateboards. The annual production and sales of roller skates is 1000 units, while 1760 skateboards are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Roller skates require 1.5 direct labor hours per unit, while skateboards require 1.25 direct labor hours per unit. The total estimated overhead for the period is $113,800. 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 skateboard using the traditional costing system would be closest to: (Round all answers to two decimal places.)