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

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?

A plantwide overhead rate is calculated by dividing the estimated total manufacturing overhead costs for the year by estimated total amount of the allocation base for the year.

A lean company aims to eliminate which of the following wastes of the traditional operating company?

Lean thinking is a management philosophy that strives to create value by eliminating waste.

Telecom uses activity-based costing to allocate all manufacturing conversion costs. Telecom produces cellular telephones; each phone has $50.00 of direct materials, includes 20 parts and requires 6 hours of machine time. Additional information follows: What is the cost of materials handling per phone?

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?

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 10 separate parts totaling $145 in direct materials, and requires 6.0 hours of machine time to produce. Additional information follows: What is the cost of machining per chair?

The cost of evaluating potential raw material suppliers is an example of what type of cost?

The cost of maintenance on the entire production plant would be considered a facility-level cost.

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

Product testing is an appraisal cost.

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

In ABC, how is the activity allocation rate computed?

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

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 packaging fees for all three parts is

Which of the following is not likely to be a cost driver of activities associated with determining product cost?

Which of the following is true about lean thinking?

Non-value-added activities include all of the following EXCEPT

Watson's Computer Company uses ABC to account for its manufacturing process. Watson's Computer Company expects to produce 2330 computers. Watson's Computer Company also expects to use 11,000 parts and have 10 setups. The allocation rate for materials handling will be (Round all answers to two decimal places.)

The cost of inspecting and packaging each unit the company produces would be considered a facility-level activity cost.