Exam 5: Activity-Based Costing and Management

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: -If manufacturing overhead costs are considered one large cost pool and are assigned based on 10 million pages of production capacity,what is the cost driver rate?

Cecelia Schell is taking four clients (who are not related)on a tour of her retirement development.The clients incurred the following expenses while on the tour.All tour expenses are paid by Cecelia because she has business discounts for most of her business dealings.These expenses will be billed to the clients by Cecelia. Required: Compute the total average cost per client showing average indirect (overhead)and average direct (other)charges separately.

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: -If Gregory Enterprises uses a simple cost system based on direct labour hours then what amount of indirect costs will be allocated to the Mossman job?

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. -According to an ABC system,S5 uses a disproportionately

Explain how activity-based costing systems can provide more accurate product costs than traditional (simple)cost systems.

Use the information below to answer the following question(s). Bill Cobb Corporation had the following activities,pooled costs,and physical flow of driver units.The company uses activity-based costing. The above activities are used by departments X and Y as follows: -How much of the account verification cost will be assigned to Department Y?

An ABC system results in a better measure of the nonuniformity of a company's resources by jobs,products,or services than by using broad averages to assign costs.

For each of the following activities identify an appropriate activity-cost driver. a.machine maintenance b.machine setup c.quality control d.material ordering e.production scheduling f.warehouse expense g.engineering design

Use the information below to answer the following question(s). Fran Ferry Company had the following activities,pooled costs,and physical flow of driver units.The company uses activity-based costing. 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?

How does direct cost tracing improve cost accuracy?

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 current year: 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.

The benefit of an ABC system is that it provides information to make better decisions at a lower costs than traditional (simple)cost systems.

A cost accounting system should be revised when

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: -If Gregory Enterprises uses an ABC system then what amount of indirect costs will be allocated to the Mossman job?

Which of the following is NOT a decision within the framework of Activity-based management (ABM)?

The costs of hiring building security would be which of the following?

Hans Sorensen,controller of Franklin Production,has the choice of allocating indirect manufacturing cost using either direct manufacturing labour hours or manufacturing machine hours.If he uses labour hours for the month of January,Product A receives $312,000 in manufacturing overhead charges and Product B receives $448,000.When machine hours are used Product A receives $352,000 in manufacturing overhead charges while Product B receives only $408,000. Required:You are the department manager in charge of Product A and are strongly in favour of using labour hours.Of course,your co-manager,who is in charge of Product B,is strongly in favour of machine hours.What are some arguments you may be able to give for the allocation base that favours your department's product?

Uniformly assigning the costs of resources to cost objects when those resources are actually used in a non-uniform way is called

Product-cost cross-subsidization means that if a company undercosts one of its products,it will gain market share due to a more competitive price.

Improved direct cost tracing is a benefit of activity-based costing.