Exam 19: Cost Management Systems: Activity-Based, just-In-Time, and Quality Management Systems

Which of the following is true about value engineering?

Indirect costs allocated to products using activity-based costing are more accurate than traditional allocation systems.

Drive Safe,Inc.a leading manufacturer of car spare parts,divided its manufacturing process into two Departments - Production and Packing.The estimated overhead costs for the Production and Packing departments amounted to $14,000,000 and $20,000,000,respectively.The company produces two types of parts - Part 1 and Part 2.The total estimated labor hours for the year were 40,000,and estimated machine hours were 35,000.The Production department is mechanized,whereas the Packing department is labor oriented.Calculate the amount of manufacturing overhead costs allocated to Part 1. Production Packing Machine hours Labor hours Part1 10,000 30,000 Part 2

Which of the following triggers manufacturing under the just-in-time management system?

For each of the following activities,indicate an appropriate allocation base: Activity Allocation Base Materials purchases Machine set-ups Quality inspections Employee training

Companies using just-in-time production systems are far more vulnerable to production shutdowns if they receive defective raw materials.

Value engineering means reevaluating activities to reduce costs while still satisfying customer needs.

Marino,Inc.completed the production of 500 units with standard costs of $520 for direct materials and $75 for conversion costs.During the current year,it incurred $260,000 for direct materials and $31,000 for conversion costs.The company uses a just-in-time costing system.Record the adjusting entry for the amount of underallocated or overallocated conversion costs.Omit explanation.

Direct material costs and direct labor costs cannot be easily traced to products.Therefore,they are allocated to products.

________ in just-in-time management systems is completed in self-contained work cells.

The activity-based costing system improves the allocation of ________.

________ is a costing system that starts with output that has been completed and then assigns manufacturing costs to units sold and to inventories.

In selecting machine usage as the primary cost driver of overhead costs for the Production Department,management feels that there is a direct relationship between the number of machine hours used and the amount of overhead costs incurred.

Nguyen,Inc.has received a bid for 15,000 units.The costing estimates show that the average cost per unit for this bid will be $500.The company uses cost-based pricing and adds 20% markup to total costs.What total price will Nguyen ask for the entire order?

Compass Metal Bearings produces two sizes of metal bearings (sold by the crate)-standard and heavy.The standard bearings require $200 of direct materials per unit (per crate),and the heavy bearings require $245 of direct materials per unit.The operation is mechanized,and there is no direct labor.Previously Compass used a single plantwide allocation rate for manufacturing overhead,which was $1.55 per machine hour.Based on the single rate,gross profit was as follows: Per unit Standard Heavy Direct materials cost \ 200.00 \ 245.0 Manufacturing overhead cost Total manufacturing cost \ 324.00 \ 338.0 Sales price per unit Gross profit per unit \ 26.00 \ 32.00 Although the data showed that the heavy bearings were more profitable than the standard bearings,the plant manager knew that the heavy bearings required much more processing in the metal fabrication phase than the standard bearings,and that this factor was not adequately reflected in the single plantwide allocation rate.He suspected that it was distorting the profit data.He suggested adopting an activity-based costing approach. Working together,the engineers and accountants identified the following three manufacturing activities and broke down the annual overhead costs as shown below: Activities: Estimated Cost Metal fabrication \ 420,000 Machine processing 152,000 Packaging Total overhead cost \ 589,000 Engineers believed that metal fabrication costs should be allocated by weight and estimated that the plant processed 12,000 kilos of metal per year.Machine processing costs were correlated to machine hours,and the engineers estimated a total of 380,000 machine hours for the year.Packaging costs were the same for both types of products,and so they could be allocated simply by the number of units produced.The production plan provided for 4,000 units of standard and 1,000 units of heavy bearings to be produced during the year.Additional data on a per unit basis were as given below: Standard Heavy Kilos per unit 2.00 4.00 Machine hours per unit 80.00 60.00 Using the data above,calculate the predetermined overhead allocation rates using activity-based costing.Then,following the activity-based costing methodology,calculate the production cost and gross profit for one unit of standard bearings.(Round your intermediate calculations to two decimal places.)

The common factor in all quality management systems is the desire to _________.

Room Chill Company manufactures ceiling fans and uses an activity-based costing system.Each ceiling fan has 20 separate parts.The direct materials cost is $85,and each ceiling fan requires 2.50 hours of machine time to manufacture.Additional information is as follows: Activity Allocation Base Predetermined Overhead Allocation Rate Materials handling Number of parts \ 0.04 Machining Machine hours 6.80 Assembling Number of parts 0.40 Packaging Number of finished units 2.50 What is the cost of assembling per ceiling fan? (Round any intermediate calculations and your final answer to the nearest cent.)

What is the purpose of implementing a just-in-time inventory system?

The steps of an activity-based costing system for a service firm are significantly different from that used for a manufacturing firm.

Activity-based management (ABM)uses activity-based costs to make decisions that increase profits while meeting customer needs.