Exam 5: Activity-Based Costing and Activity-Based Management

Answer the following questions using the information below: Cannady produces six products. Under their traditional cost system using one cost driver, SR6 costs $168.00 per unit. An analysis of the activities and their costs revealed that three cost drivers would be used under the new ABC system. The new cost of SR6 was determined to be $178.00 per unit. -The total amount of indirect costs assigned to product SR6 using the traditional method is ________ the total amount assigned using ABC.

Using activity-cost rates rather than department indirect-cost rates to allocate costs results in different product costs when:

How are cost drivers selected in activity-based costing systems?

Answer the following questions using the information below: Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2010, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages. For 2010 Velshi Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis: During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services: -Assuming activity-cost pools are used, what are the activity-cost driver rates for design changes, setups, and inspections cost pools?

ABC systems create:

Answer the following questions using the information below: Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows: What is projected operating income if direct materials costs of T-Shirts increase to $4.00 per unit and direct labor costs of Sweatshirts increase to $8.20 per unit. -Under the revised ABC system, supervision costs allocated to Sweatshirts will be:

Answer the following questions using the information below: Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year: The accounting records show the Mossman Job consumed the following resources: -Which of the following is a sign that an ABC system may be useful?

Answer the following questions using the information below: Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2010, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages. For 2010 Velshi Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis: During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services: -Using the three cost pools to allocate overhead costs, what is the total manufacturing overhead cost estimate for Money Managers during 2010?

Undercosting of a product is most likely to result from:

Answer the following questions using the information below: Monster Vehicle Rental Corporation has two departments, Car Rental and Truck Rental. Central costs may be allocated to the two departments in various ways. -If administrative expense of $62,500 is allocated on the basis of number of employees, the amount allocated to the Truck Rental Department would be:

Product lines that produce different variations (models, styles, or colors)often require specialized manufacturing activities that translate into:

The Guy Fawkes Company is noted for an exceptionally impressive line of Mardi Gras masks. Guy Fawkes has established the following selling and distribution support activity-cost pools and their corresponding activity drivers for the year 2010: Required: a. Determine the activity-cost-driver rate for each of the four selling and distribution activities. b. Under what circumstances is it appropriate to use each of the activity-cost drivers? c. Describe at least one possible negative behavioral consequence for each of the four activity-cost drivers.

Answer the following questions using the information below: Mertens Company provides the following ABC costing information: The above activities are used by Departments A and B as follows: -How much of the account inquiry cost will be assigned to Department A?

In a homogeneous cost pool, all costs have a similar cause-and-effect relationship with the cost-allocation base.

Output unit-level costs CANNOT be determined unless you know how many units are in a given batch.

If products are different, then for costing purposes:

Answer the following questions using the information below: Whitman Printing has contracts to complete weekly supplements required by forty-six customers. For the year 20X5, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages. For 2010 Whitman Printing decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis: During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services: -Activity-based-costing information:

Answer the following questions using the information below: Happy Valley Land and Snow Company provides the following ABC costing information: The above activities used by their three departments are: -How much of invoice cost will be assigned to the Bush Department?

Answer the following questions using the information below: Happy Valley Land and Snow Company provides the following ABC costing information: The above activities used by their three departments are: -How much of the labor cost will be assigned to the Lawn Department?

Answer the following questions using the information below: Whitman Printing has contracts to complete weekly supplements required by forty-six customers. For the year 20X5, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages. For 2010 Whitman Printing decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis: During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services: -If manufacturing overhead costs are considered one large cost pool and are assigned based on 12 million pages of production capacity, what is the cost driver rate?