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

Answer the following questions using the information below: Products S5 and CP8 each are assigned $100.00 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 ________.

________ is considered while choosing a cost allocation base for activity costs in ABC costing.

Demand for refinements to the costing system has accelerated due to ________.

ABC systems create ________.

Which of the following is true of Zitriks' overhead costing?

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

Collin Inc.produces hospital equipment and the setup requirements vary from product to product.Collin produces its products based on customer orders and uses ABC costing.In one of its indirect cost pools,setup costs and distribution costs are pooled together.Costs in this pool are allocated using number of customer orders for the easiness of costing operations.Based on the information provided,which of the following arguments is valid?

Which of the following statements is true of ABC systems?

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 cost will be assigned to the Plowing Department?

Answer the following questions using the information below: Cannady produces six products. Under their traditional cost system using one cost driver, SR6 costs $168.00 per unit. An analysis of the activities and their costs revealed that three cost drivers would be used under the new ABC system. The new cost of SR6 was determined to be $178.00 per unit. -Given this change in the cost ________.

Answer the following questions using the information below: Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2015, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages. For 2015 Velshi Printers has 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: Cost pool Manufacturing overhead costs Activity level Design changes \ 120,000 300 design changes Setups 640,000 5,000 setups Inspections 80,000 8,000 inspections Total manufacturing overhead costs \ 840,000 During 2015, two customers, Money Managers and Hospital Systems, are expected to use the following printing services: Activity Money Managers Hospital Systems Pages 60,000 76,000 Design changes 10 0 Setups 20 10 Inspections 30 38 -What is the cost driver rate if manufacturing overhead costs are considered one large cost pool and are assigned based on 12 million pages of production capacity?

If companies increase market share in a given product line because their reported costs are less than their actual costs,they will become more profitable in the long run.

Answer the following questions using the information below: Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2015, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages. For 2015 Velshi Printers has 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: Cost pool Manufacturing overhead costs Activity level Design changes \ 120,000 300 design changes Setups 640,000 5,000 setups Inspections 80,000 8,000 inspections Total manufacturing overhead costs \ 840,000 During 2015, two customers, Money Managers and Hospital Systems, are expected to use the following printing services: Activity Money Managers Hospital Systems Pages 60,000 76,000 Design changes 10 0 Setups 20 10 Inspections 30 38 -Using pages printed as the only overhead cost driver,what is the manufacturing overhead cost estimate for Money Managers during 2015?

Which of the following statements is true of activity-based costing?

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

Which of the following is true of refinement of a costing system?

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 deluxe model?

ABC assumes all costs are ________ because over the long run management can adjust the amount of resources employed.

Is it advisable to ignore facility-sustaining cost drivers during product costing?

A single indirect-cost rate distort product costs because ________.