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

Target cost is calculated by deducting desired gross profit from target sales price.

Bendas Company,a manufacturer of small appliances,had the following activities,allocated costs,and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 71,000 2,800 hours Account billing (lines) \ 40,000 16,000 lines Account verification (accounts) \ 12,000 21,000 accounts Correspondence (letters) \ 11,000 1,200 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) 1,100 accounts 650 accounts Correspondence (letters) 80 letters 150 letters How much of the account verification costs will be assigned to the Northeast Office? (Round any intermediate calculations to the nearest cent and your final answer to the nearest dollar. )

Abadeer Company manufactures ceiling fans and uses an activity-based costing system.Each ceiling fan has 20 separate parts.The direct materials 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 assembling per ceiling fan? (Round any intermediate calculations and your final answer to the nearest cent. )

Eide Company,a manufacturer of small appliances,had the following activities,allocated costs,and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 66,000 2,400 hours Account billing (lines) \ 42,000 17,000 lines Account verification (accounts) \ 14,000 21,000 accounts Correspondence (letters) \ 14,000 1,400 letters The above activities are carried out at two of its regional offices. Activities Northeast Office Midwest Office Account inquiry (hours) 100 hours 250 hours Account billing (lines) 12,000 lines 9,000 lines Account verification (accounts) 1,100 accounts 700 accounts Correspondence (letters) 70 letters 130 letters What is the cost per account for the account verification activity? (Round your answer to the nearest cent. )

Which of the following is the most appropriate cost driver for allocating the cost of warranty services?

Which of the following is an example of appraisal costs?

Flannery Company,a manufacturer of small appliances,had the following activities,allocated costs,and allocation bases: Activities Allocated Costs Allocation Base Account inquiry (hours) \ 79,000 2,700 hours Account billing (lines) \ 45,000 16,000 lines Account verification (accounts) \ 16,000 20,000 accounts Correspondence (letters) \ 12,000 1,000 letters The above activities are carried out at two of its regional offices. Activities Northeast Office Midwest Office Account inquiry (hours) 180 hours 200 hours Account billing (lines) 10,000 lines 9,000 lines Account verification (accounts) 1,600 accounts 650 accounts Correspondence (letters) 60 letters 150 letters What is the cost per letter for the correspondence activity? (Round your answer to the nearest cent. )

Pitt Jones 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 2,600 hours Account billing (lines) \ 32,000 18,000 lines Account verification (accounts) \ 16,000 24,000 accounts Correspondence (letters) \ 13,000 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 200 hours Account billing (lines) 10,000 lines 9,000 lines Account verification (accounts) 1,800 accounts 600 accounts Correspondence (letters) 70 letters 150 letters What is the cost per line for the account billing activity? (Round your answer to the nearest cent. )

Ace Plastics produces different kinds of products,all in one manufacturing facility.They have identified four activities for their costing system: Materials management-allocated by number of purchase orders Chemical processing-allocated on metric tons Molding-allocated on direct labor hours Packaging-allocated by number of units produced The activity rates are as follows: Materials management \ 12.00 Per purchase order Chemical processing \ 7.50 Per metric ton Molding \ 24.00 Per direct labor hour Packaging \ 0.10 Per unit Engineering design shows that the order will require direct materials that cost $540; direct labor cost will be $90.The order will also require four purchase orders to be placed,use two metric tons of chemical base,and need eight direct labor hours.The size of the order is to produce 3,000 units of product.Calculate the total production of the order.

Caprice,Inc.has adopted a JIT management system and has the following transactions in December: Dec 3 Purchased raw materials on account, $\$ 80,000$ Dec 8 Incurred labor and overhead costs, $\$ 105,000$ Dec 15 Completed 750 units with standard costs of $\$ 106$ for direct materials and $\$ 165$ for conversion costs Dec 23 Sold 650 units for $\$ 395$ each Record the journal entries for Caprice,Inc.for December.

Adriano Corp.sold 2,500 cell phones on account for $700 each.The standard direct materials and conversion costs of each unit are $173.85 and $57.95,respectively.Record the journal entries for this transaction under the just-in-time costing system.

Which of the following statements is true of just-in-time management systems?

Distinguish the following costs as prevention,appraisal,internal failure,or external failure: a)Rework substandard products b)Technical support provided to suppliers c)Warranty repairs and replacements d)Inspection of test equipment e)Liability arising from defective products f)Field testing and appraisal at customer site g)Disposal of defective products

List and briefly describe the four types of quality-related costs.

Value engineering means reevaluating activities to reduce costs while still satisfying customer needs.

When using an activity-based costing system in service companies,the allocation of indirect costs to the cost object is the last step of the process.

When preparing the report to analyze a proposed quality improvement program,which of the following costs are included in the total costs of not undertaking the quality improvement program?

A company is considering spending the following on a new quality improvement program: Inspect raw materials \ 123,000 Reengineer to improve product quality 760,000 Inspect finished goods 150,000 Preventive maintenance of equipment 140,000 The company expects this quality program to reduce costs by the following amounts: Avoid lost profits due to unhappy customers \ 910,000 Fewer sales retums 65,000 Decrease the cost of rework 155,000 Lower warranty costs 54,000 Group each cost under the four categories of quality management systems.Comment whether the company should undertake the quality improvement program.

Companies which use a just-in-time management system do not benefit from a quality management system.

Which of the following statements is true of target pricing?