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

Plantwide 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 departmental overhead rates.

If a company were to increase its appraisal costs by inspecting more units as the units are completed,the company's internal failure costs:

Which term below best describes the quality cost category for "cost of testing food processors before sale"?

Merchandising and service companies,as well as governmental agencies,can use refined cost allocation systems to provide their managers with better cost information.

The storage of raw materials is considered a non-value-added activity

The cost of depreciation,insurance,and property tax on the entire production plant would be considered a unit-level cost.

Vittoria Corporation manufactures two products-Carts and Wheelbarrows.The annual production and sales of Carts is 2,000 units,while 1,800 units of Wheelbarrows are produced and sold.The company has traditionally used direct labor hours to allocate its overhead to products.Carts require 1.0 direct labor hours per unit,while Wheelbarrows require 0.5 direct labor hours per unit.The total estimated overhead for the period is $117,500.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 predetermined overhead allocation rate using the traditional costing system would be closest to:

All of the following are activities in an activity-based costing system that determine the cost of a manufactured product except for:

Which of the following does ABC take into account?

ABC can be used in routine planning and control decisions as well as pricing,product mix and cost cutting decisions.

Haas 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: Activity cost pool Total cast Total activity Assembly \ 595,000 25,000 Machine-hours Inspection \ 127,600 7,200 Inspection-hours Packaging \ 19,096 1,540 Orders Haas Corporation makes 300 of its product A92 a year,which requires a total of 48 machine hours,10 inspection hours,and 14 orders.Product A92 requires $51.40 in direct materials per unit and $62.80 in direct labor per unit.Product A92 sells for $140 per unit.What is the product margin in total for Product A92?

Electronics Unlimited uses activity-based costing to allocate all manufacturing conversion costs.Electronics Unlimited produces computer keyboards; each computer keyboard has $8.00 of direct materials,includes 12 parts and requires 1/2 hour of machine time.Additional information follows: Activity Allocation Base Cost Allocation Rate Materials handling Number of parts \ .25 per part Machining Machine hours \ 12.00 per machine hour Assembling Number of parts \ 1.00 per part Packaging Number of finished units \ 1.75 per finished unit - What is the cost of assembling per computer keyboard?

Which of the following cost items should be classified as an internal failure cost on a cost of quality report?

Companies that use departmental overhead rates trace direct materials and direct labor to cost objects just as in a traditional costing systems.

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

Moylan & Bolognese,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: Activity cast poul Activity rate Legal research \ 53 per hour of paralegal time Court fling costs \ 400 per case filed Document preparation \ 15 per document Cost and activity data related to two clients is as follows: Client 352 Client 487 Number of paralegal hours 42 72 Number of cases filed 3 2 Number of documents 24 33 Required: a.Calculate the amount of overhead that would be allocated to Client 352 using the activity-based costing system. b.Calculate the amount of overhead that would be allocated to Client 487 using the activity-based costing system.

Activity-based costing considers __________________ to be the fundamental cost object.

Sparrow Manufacturing manufactures small parts and uses an activity-based costing system. Activity Est. Indirect Activity Costs Allocation base Cost allocation rate Materials \ 70,000 Material moves \ 2.00/ move Assembling \ 240,000 Direct labor hours \ 8.00/ dir. labor hour Packaging \ 80,000 \# of finished units \ 0.80/ finished unit The following parts were produced in October with the following information: Part \# Produced Materials Costs \# Moves Dir. Labor Hrs. A 2,500 \ 2,500 800 200 B 3,500 \ 7,000 1,500 300 C 4,500 \ 11,250 2,200 1,000 - Total unit cost for part B is:

Companies that use ABC trace direct materials and direct labor to cost objects just as in traditional costing systems.

Lean production systems keep large inventories.