Exam 5: Activity-Based Costing and Management

Answer the following question(s)using the information below. Products S5 and CP8 each are assigned $50.00 in indirect costs by a traditional costing system.An activity analysis revealed that although production requirements are identical,S5 requires 45 minutes less setup time than CP8. -Compared to an activity-based cost system,CP8 is ________ under the traditional system.

Which of the following is a sign that a "smoothing out" costing system exists?

One of the benefits of an ABC system is that by highlighting different activities,you can ignore the different levels of activities,such as individual units of output versus batches of output.

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

Which of the following statements is TRUE regarding activity-based costing systems?

The term used to describe a situation when at least one miscosted product causes other products to be miscosted in the organization is known as

Answer the following question(s)using the information below. Wallace Printing has contracts to complete weekly supplements required by forty-six customers.For the year 2016,manufacturing overhead cost estimates total $420,000 for an annual production capacity of 10 million pages. For 2016 Wallace 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 2016,two customers,Wayward Insurance and Hapless 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?

A busy law office has a central administration set up,with the administration work for all lawyers shared by the clerical staff.Clients are billed at the firm's hourly rate by the firm.The arrangement is that whenever there is administration work to be done,it is assigned to whoever is available at the time.One of the lawyers has complained that she hardly ever uses the administration services,and so her year end bonus should be larger than those who require the administration services.Therefore they are considering tracking the administration work done for each lawyer separately so that they know how many hours of administration services is being used by each lawyer.At the end of the year,the bonus of each lawyer would be reduced by a charge reflecting the administration services she/he used in the year.If the firm institutes this new approach,this will mean that

By defining activities and identifying the costs of performing each activity,ABC systems provide detailed information regarding how an organization utilizes its available resources.

When selling price is cost plus 25% and costs are assigned using the single cost driver,number of pages printed,then

A product that consumes a relatively low level of resources but is reported to have a relatively high cost,is an example of

Explain how traditional (simple)cost systems,using a single unit-level cost rate,may distort product costs.

Management can identify and evaluate new designs to improve performance by evaluating how product and process designs affect activities and costs.

Activity-based costing is a technique to improve the reliability of cost assignment

Which of the following is TRUE concerning selecting a cost-allocation base in an ABC system?

A costing system which focuses on individual event or tasks as the cost pool to be allocated is called

When ever possible use the number of units produced as the cost-allocation base for homogeneous indirect cost pools.

Which of the following statements is TRUE concerning product costing systems?

If the cost of an activity increases with the number of purchase orders placed,rather than to the quantity of items purchased,it is which of the following?

The Celestial Group (CG)provides financial advice to individuals and corporations.CG charges clients for (a)direct professional time,and (b)support services.The three professionals in CG and their rates per professional hour are as follows: Clients are charged a standard support service fee of $200 per month. There is one receptionist who covers the office and spends her time equally on each of the companies sixty clients.The three associate advisors work together on client files.They work a total of 500 hours per month on client accounts.During June they worked a total of 0 hours on the XB Corp file;and,18 hours on the JN Corp file. The associates provide support for the professional advisors and give advice to clients on matters that do not require a securities license. CG has just prepared the June bills for two client corporations owned by the same person.: The owner of the two corporations has questioned the June bill.She is wondering why support services is the same amount when XB Corp required no support service for the month. Required: Prepare more appropriate bills for June using the activity-based costing approach.