Exam 5: Activity-Based Costing and Activity-Based Management

Answer the following questions using the information below: Nile Corp. has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year: Cost Pool Overhead Costs Cost driver Activity level Supervision of direct labor \ 380,000 Direct labor-hours 760,000 Machine maintenance \ 120,000 Machine-hours 960,000 Facility rent \ 200,000 Square feet of area 125,000 Total overhead costs \ 640,000 The accounting records show the Mossman Job consumed the following resources: Cost driver Actual level Direct labor-hours 200 Machine-hours 1,600 Square feet of area 50 -Using the three cost pools to allocate overhead costs,what is the total amount of overhead costs to be allocated to the Mossman Job?

What are the four parts of the cost hierarchy.Briefly explain each part,and contrast this cost hierarchy to the fixed-variable dichotomy?

Answer the following questions using the information below: Stark Corporation has two departments, Car Rental and Truck Rental. Central costs may be allocated to the two departments in various ways. Car Rental Truck Rental Number of Vehicles in fleet 850 430 Number of employees 125 75 Sales \ 750,000 \ 375,000 -If administrative expense of $62,500 is allocated on the basis of number of employees,the cost per cost driver rate would be ________.

ABC costing systems cannot be used in marketing decisions.

Which of the following statements is true of costing systems?

Answer the following questions using the information below: Comfort Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled: Number of Number of Number of Product Setups Components Direct Labor Hours Standard 12 8 255 Deluxe 28 12 245 Overhead costs \ 52,000 \ 78,000 -Number of setups and number of components are identified as activity-cost drivers for overhead.Assuming an activity-based costing system is used,what is the total amount of overhead costs assigned to the deluxe model?

For a company which produce its products in batches,the CEO's salary is a(n)________ cost.

Put the following ABC implementation steps in order ________. A Compute the allocation rates. B Compute the total cost of the products. C Identify the products that are the cost objects. D Select the cost allocation bases.

Answer the following questions using the information below: Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows: T-SHIRTS SWEATSHIRTS Production and sales volume 60,000 units 35,000 units Selling price \ 16.00 \ 29.00 Direct material \ 2.00 \ 5.00 Direct labor \ 4.50 \ 7.20 Manufacturing overhead \ 2.00 \ 3.00 Gross profit \ 7.50 \ 13.80 Selling and administrative \ 4.00 \ 7.00 Operating profit \ 3.50 \ 6.80 What is projected operating income if direct materials costs of T-Shirts increase to $4.00 per unit and direct labor costs of Sweatshirts increase to $8.20 per unit? -Using an ABC system,next year's estimates show manufacturing overhead costs will total $228,300 for 52,000 T-shirts.If all other T-shirt costs and sales prices remain the same,the profitability that can be expected is ________.

An activity-based costing system is necessary for costing services that are similar.

The homogeneous cost pools and the choice of cost-allocation bases give managers greater confidence in the activity and product cost numbers from single indirect-cost pool systems.

Which of the following statements is true of ABC systems?

Answer the following questions using the information below: Comfort Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled: Number of Number of Number of Product Setups Components Direct Labor Hours Standard 12 8 255 Deluxe 28 12 245 Overhead costs \ 52,000 \ 78,000 -Assume a traditional costing system applies the overhead costs based on direct labor hours.What is the total amount of overhead costs assigned to the standard model?

In activity based costing systems,limiting cost-allocation bases to only units of output strengthens the cause-and-effect relationship between the cost-allocation base and the costs in a cost pool.

Product-cost cross-subsidization is very common when costs are uniformly spread across various products.

Even though there are no inventories for service companies,ABC systems are of great use for service companies.Explain why and how.

Trintal Corporation manufactures two models of motorized go-carts, a standard and a deluxe model. The following activity and cost information has been compiled: Number of Number of Number of Product Setups Components Direct Labor Hours Standard 15 10 750 Del uxe 35 15 500 Overhead costs \ 16,500 \ 23,500 -Number of setups and number of components are identified as activity-cost drivers for overhead.Assuming an activity-based costing system is used,what is the total amount of overhead cost assigned to the standard model?

Refining a cost system includes ________.

Teecorp Company provides the following ABC costing information: Activities Total Costs Activity-cost drivers Labor \ 320,000 8,000 hours Gas \ 36,000 6,000 gallons Invoices \ 40,000 2,500 invoices Total costs \ 396,000 The above activities used by their three departments are: Lawn Department Bush Department Plowing Department Labor 2,500 hours 1,200 hours 4,300 hours Gas 1,700 gallons 800 gallons 3,500 gallons Invoices 1,600 invoices 400 invoices 500 invoices -How much of the total costs will be assigned to the Lawn Department?

ABC systems provide greater insight than traditional systems into the management of indirect costs.