Exam 7: Activity-Based Costing and Activity Based Management

A company that is interested in maximizing profits will instruct its sales force to emphasize its

In an activity-based costing system,the greater the level of detail the company wants to collect,the greater the chance of misclassifying some costs and activities.

When managers reduce the workforce without considering the activities that employees performs,which of the following is not a likely consequence?

Non-value added costs cannot be eliminated without affecting the quality of products.

Identifying the activities performed in the organization is the most time consuming part of implementing an activity-based costing system.

Megan Industries manufactures several products including a basic case for a popular smart phone.The company is considering adopting an activity-based costing approach for setting its budget.The company's production activities,budgeted activity costs,and cost drivers for the coming year are as follows. The budgeted data for smart phone case production are as follows. Required: a.Calculate the activity rate for each cost pool. b.Calculate the activity-based unit cost of the smart phone case. Unit 7-2,

Which of the following would be the most appropriate cost driver for delivery of goods?

Place and "X" in the column that corresponds to the type of activity referred to in each scenario.

Mantle Co.manufactures baseball bats.The company's total overhead consists of assembly costs and inspection costs.The following data is available: Cost Pool Wood Aluminum Total Cost Assembly 500 machine hrs.500 machine hrs.$ 45,000 Inspections 350 inspections 150 inspections 75,000 2,100 labor hrs.1,900 labor hrs. Total overhead assigned to aluminum bats assuming a single overhead rate and using activity based costing,respectively,are:

Product-level activities are also referred to as product-sustaining activities.

Austin Company manufactures 2 products,Flacca and Gordo.Overhead costs are comprised of machine set-ups $1,600,000; machining $3,600,000; and inspecting $1,200,000.Recent data are shown below: Flacca Gordo Direct labor hours 15,000 25,000 Machine setups 600 400 Machine hours 24,000 26,000 Inspections 800 700 Overhead assigned to Gordo using a single overhead rate based on direct labor hours and using ABC,respectively,would be:

Activity-based costing information can be used to make decisions regarding pricing,customer profitability,distribution channel profitability,and process improvement.

In an activity-based costing system,which of the following is not a category in which activities are classified?

Place an "X" in the column that corresponds to the type of activity-level referred to in each scenario.

Mounce Catering Service uses an activity-based costing system.What would be the most appropriate cost driver for the activity of preparing meals?

Place an "X" in the column that corresponds to the type of activity level referred to in the following hospital setting.

Paula's Payroll Services provides weekly payroll processing for a number of small businesses.Paula Peraz,the company's owner,has been using an activity-based costing system for several years.She used the following information in preparing this year's budget. Required: a.Calculate the cost rates for each activity cost pool. b.Paula is preparing a proposal for a prospective client,Barney's Bistro.The client has 25 employees.What is the estimated cost of providing weekly payroll services to this client for the first year? c.How can Paula use the estimated cost information you have calculated to price the service it will provide to Barney's Bistro. Unit 7-2 and 7-3,

Auburn,Inc.'s overhead costs of $700,000 consist of machining $400,000; inspecting $200,000; and packaging $100,000.Machining works 4,000 hours a year,500 inspections occur each year,and 1,000 packing order occur each year.Information on the company's two products are as follows: Alpha Omega Machining hours 1,000 3,000 Inspections 100 400 Packing orders 350 650 Direct labor hours 1,700 1,800 Determine how much overhead is allocated to Alpha assuming the use of a single overhead rate based on direct labor hours and assuming the use of ABC,respectively.

A&W Manufacturing has implemented an activity-based costing system.For warehousing/packaging,the activity cost totals $140,400.The number of batches produced is the cost driver for this activity pool.A&W has the following information relating to its warehousing/packaging department: Required: Calculate the activity cost rate per batch for the warehousing/packaging department.

In an activity-based costing system,which of the following is not a category in which activities are classified?