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

A radial tire manufacturer produces products in two departments-Divisions A and B.The company uses separate predetermined overhead allocation rates for each department to allocate its overhead.Divisions A and B have estimated manufacturing overhead costs of $160,000 and $340,000,respectively.Division A uses machine hours as the allocation base,and Division B uses direct labor hours as the allocation base.The total estimated machine hours were 31,000,and direct labor hours were 22,000 for the year.Calculate the departmental predetermined overhead allocation rates.(Round your answer to the nearest cent. )

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.

________ are costs incurred after the company delivers poor-quality goods or services to customers and then has to make things right with the customer.

Which of the following statements is true of costing systems?

Which of the following statements is true?

Quality Stereo Company has provided the following information regarding its activity-based costing system: • Purchasing department costs are allocated based on purchase orders,and the predetermined overhead allocation rate is $79 per purchase order. • Assembly department costs are allocated based on the number of parts used,and the predetermined overhead allocation rate is $2 per part. • Packaging department costs are allocated based on the number of units produced,and the predetermined overhead allocation rate is $2 per unit produced. Each stereo produced has 50 parts,and the direct materials cost per unit is $62.There are no direct labor costs.Quality Stereo has an order for 1,000 stereos,which will require 40 purchase orders in all.What is the total cost for the 1,000 stereos?

Companies using just-in-time management systems are far more vulnerable to production shutdowns if they receive poor-quality or defective raw materials.

Which of the following triggers manufacturing under the just-in-time management system?

Just-in-time costing does not track the cost of products from Raw Materials Inventory to Work-in-Process Inventory to Finished Goods Inventory.

Under the just-in-time management system,________.

Alpha Company manufactures breadboxes and uses an activity-based costing system.The following information is provided for the month of May: Estimated Estimated Indirect Quantity of Activity Activity Costs Allocation Base Allocation Base Materials handling \ 3,400 Number of parts 3,000 parts Assembling \ 4,800 Number of parts 3,000 parts Packaging \ 5,700 Number of bread boxes 1,300 bread boxes Each breadbox consists of four parts,and the direct materials cost per breadbox is $7.80.There is no direct labor.What is the total manufacturing cost per breadbox? (Round any intermediate calculations and your final answer to the nearest cent. )

Just-in-time costing is also known as ________.

Define target cost.How is target cost determined?

Brisbane,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 the amount of manufacturing overhead costs allocated to Part 1. Production Packing Machine hours Labor hours Part 1 10,000 30,000 Part 2

Cilia Corporation specializes in the production of door knobs,which are mostly sold within its territory.The selling price for each door knob is $15.Using the traditional allocation method to allocate manufacturing overhead,the full-product cost is determined to be $10.The company recently introduced the activity-based costing method to allocate its overhead.The refinement of costs shows that the full-product cost is $2.50 lower with activity-based costing than with traditional costing. Requirement: 1.Calculate the change in net profit percentage as a result of the introduction of activity-based costing. 2.The desired net profit margin of the company is 60%.If the production costs cannot be reduced,by how much should the selling price be increased in order to achieve the desired profit? (Use the cost estimates under activity-based costing. )

Which of the following is the correct formula to calculate the target cost?

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.

Which of the following is the last step in developing an activity-based costing system?

The main difference between activity-based costing and traditional costing systems is that activity-based costing uses a separate allocation base for each activity.

Why is using multiple predetermined overhead allocation rates more accurate than using a single plantwide allocation rate?