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

Petrov Corporation has adopted a JIT management system and has the following transactions in February: Feb 2 Incurred labor and overhead costs, $89,00 Feb 18 Completed 750 units with standard costs of $93 for direct materials and $146 for conversion costs Open a T-account for Conversion Costs.Post appropriate entries to determine the amount of underallocated or overallocated overhead.Record the adjusting entry on February 28.Omit explanation.

Quality management systems use many nonfinancial measures,such as the number of customer complaints and the volume of incoming customer-service phone calls,as a means to measure success or failure.

Cellular Connections,Inc.sold 2,500 cell phones on account for $700 each.The standard direct materials and conversion costs of each unit are $173.85 and $57.95,respectively.The company uses the perpetual inventory system.Record the journal entries for this transaction under the just-in-time costing system.Omit explanation.

Which of the following would most likely be treated as an activity in an activity-based costing system?

Traditional costing systems employ multiple allocation rates for manufacturing overhead costs,but an activity-based costing system uses only one rate for allocating manufacturing overhead costs.

Companies which use a just-in-time management system do not benefit from a quality management system.

Direct materials cost and direct labor cost can be ________ ________ to products.Manufacturing overhead costs are ________ in cost pools and then ________ to products.

Flasket,Inc.manufactures water bottles for children.Similar water bottles are available in the market for $14.Flasket desires a 30% net profit margin.Flasket's target cost is ________.(Round your answer to the nearest cent.)

Atomic Microwave Company,a manufacturer of microwave ovens,had the following activities,allocated costs,and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 62,000 2400 hours Account billing (lines) \ 49,000 16,000 lines Account verification (accounts) \ 17,000 29,000 accounts Correspondence (letters) \ 14,000 1600 letters The above activities are carried out at two of its regional offices. Activities Northeast Office Midwest Office Account inquiry (hours) 120 hours 200 hours Account billing (lines) 16,000 lines 8000 lines Account verification (accounts) 1600 accounts 600 accounts Correspondence (letters) 80 letters 150 letters How much of the account verification costs will be assigned to the Northeast Office? (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar.)

Activity-based management is not suitable for service companies as it deals with the proper allocation of manufacturing overhead costs.

Activity-based costing allows managers to evaluate overall production capacity and focus on producing the mix of products that is most profitable.

Under a just-in-time costing system,the journal entry that is recorded when the goods are completed and moved to Finished Goods Inventory is ________.

The just-in-time management system results in an increase in the costs to buy,store,insure,and move inventory.

Galley Company,a manufacturer of small kitchen appliances,had the following activities,allocated costs,and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 66,000 2000 hours Account billing (lines) \ 47,000 15,000 lines Account verification (accounts) \ 17,000 23,000 accounts Correspondence (letters) \ 14,000 1400 letters The above activities are carried out at two of its regional offices. Activities Northeast Office Midwest Office Account inquiry (hours) 100 hours 250 hours Account billing (lines) 12,000 lines 8000 lines Account verification (accounts) 1500 accounts 700 accounts Correspondence (letters) 40 letters 100 letters What is the cost per line for the account billing activity? (Round your answer to the nearest cent.)

Why is using a single plantwide predetermined overhead allocation rate not always accurate?

A modification of the overhead allocation method which uses a single plantwide rate,is to use multiple predetermined overhead allocation rates that have different allocation bases.

Kaminski,Inc.has adopted a JIT management system and has the following transactions in December: Dec 3 Purchased raw materials on account, $80,000 Dec 8 Incurred labor and overhead costs, $105,000. Wages were not paid. Dec 15 Completed 750 units with standard costs of $106 for direct materials and $165 for conversion costs Dec 23 Sold 650 units for $395 each on account. The company uses the perpetual inventory system. Record the journal entries for Kaminski,Inc.for December.Omit explanations.

In the first step in developing an activity-based costing system for a manufacturing company,the management team must determine the activities that incur the majority of the product and period costs.

In the first step in developing an activity-based costing system for a manufacturing company,the management team must determine the activities that incur the majority of the manufacturing overhead costs.

Bar None Legal Services,Inc.is a consulting firm that offers optimal legal solutions.It allocates indirect costs using a single predetermined overhead allocation rate with direct labor hours as the allocation base.The estimated indirect costs for this year amount to $170,000.The company is expected to work 17,000 direct labor hours during the year.The direct labor rate is $200 per hour.Clients are billed at 130% of direct labor cost.Last month,Bar None's consultants spent 180 hours on Henderson,Inc.Calculate the total costs assigned and allocated to Henderson.