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

A cost management system in which a company produces just in time to satisfy customer needs is known as just-in-time management.

When preparing the report to analyze a proposed quality improvement program,which of the following costs are included in the total costs of undertaking the quality improvement program?

________ is the maximum cost to develop,produce,and deliver a product or service and earn the desired profit.

The costs incurred in training employees is an example of a(n)________.

Cardec,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 departmental predetermined overhead allocation rates. Production Packing Machine hours Labor hours Part1 10,000 30,000 Part2

J-Time,Inc.is planning to launch a new brand of watches for kids.Similar watches are available in the market for $58.In order to penetrate the market,the company plans to use target pricing and desires a 22% net profit markup on total cost.Calculate the target cost.(Round your answer to the nearest cent. )

Myoung Company,a manufacturer of small appliances,had the following activities,allocated costs,and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 61,000 2,400 hours Account billing (lines) \ 35,000 17,000 lines Account verification (accounts) \ 13,000 20,000 accounts Correspondence (letters) \ 11,000 1,000 letters The above activities are carried out at two of its regional offices. Activities Northeast Office Midwest Office Account inquiry (hours) 120 hours 250 hours Account billing (lines) 16,000 lines 9,000 lines Account verification (accounts) 1,500 accounts 600 accounts Correspondence (letters) 70 letters 150 letters What is the cost per hour for the account inquiry activity? (Round your answer to the nearest cent. )

Which of the following is a disadvantage of a just-in-time management system?

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

Reichert Company manufactures ceiling fans and uses an activity-based costing system.Each ceiling fan has 20 separate parts.The direct materials cost is $95,and each ceiling fan requires 3.00 hours of machine time to manufacture.Additional information is as follows: Predetermined Overhead Activity Allocation Base Allocation Rate Materials handling Number of parts \ 0.08 Machining Machine hours 6.20 Assembling Number of parts 0.30 Sackaging Number of finished units 2.30 What is the cost of machining per ceiling fan? (Round any intermediate calculations and your final answer to the nearest cent. )

The common factor in all quality management systems is the desire to improve the business's performance by providing quality products or services.

Moonrays,Inc.manufactures both normal and premium tube lights.The company allocates manufacturing overhead using a single plantwide rate with machine hours as the allocation base.Estimated overhead costs for the year are $108,000.Additional estimated information is given below. Normal Premium Machine hours (MHr) 29,000 48,000 Direct materials \ 58,000 \ 440,000 Calculate the predetermined overhead allocation rate.(Round your answer to the nearest cent. )

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.

Brannon Company manufactures ceiling fans and uses an activity-based costing system.Each ceiling fan has 20 separate parts.The direct material cost is $70,and each ceiling fan requires 4.00 hours of machine time to manufacture.Additional information is as follows: Predetermined Overhead Activity Allocation Base Allocation Rate Materials handling Number of parts \ 0.08 Machining Machine hours 6.20 Assembling Number of parts 0.30 Sackaging Number of finished units 2.30 What is the cost of materials handling per ceiling fan? (Round any intermediate calculations and your final answer to two decimal places. )

AAA 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 AAA 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 \ 245.00 Manufacturing overhead cost Total manufacturing cost \ 324.00 \ 338.00 Sales price per unit 350.00 \ 370.00 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 was 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 ABC methodology,calculate the production cost and gross profit for one unit of standard bearings.(Round your intermediate calculations to two decimal places. )

Which of the following is an example of internal failure costs?

Ferrero Corp.manufactures gourmet dips along with potato chips flavored with Cajun spices.The market price for similar chips is $7.The management of the company desires a 30% net profit margin. The current costing data relating to this product are as follows. Direct materials \ 1.00 Direct labor 1.50 Manufacturing overhead 2.75 Nonmanufacturing costs 0.75 Requirement: Determine if Ferrero's current full-product costs meet its target cost.

A furniture corporation manufactures two models of furniture-Standard and Deluxe.The total estimated manufacturing overhead costs are $64,300.The following estimates are available: Standard Deluxe Direct materials cost per unit \ 240 \ 280 Direct labor cost per unit \ 120 \ 135 Number of units 250 500 The company uses direct labor costs as the base to allocate manufacturing overhead.Calculate the predetermined overhead rate.(Round your answer to two decimal places. )

Achibald,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 $44,000 for conversion costs.Record the adjusting entry for the amount of underallocated or overallocated conversion costs.

Halo,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 $120,000.The company is expected to work 6,000 direct labor hours during the year.The direct labor rate is $200 per hour.Clients are billed at 120% of direct labor cost.Last month,Halo's consultants spent 180 hours on Bloomington,Inc.Calculate the total costs assigned to Bloomington.