Exam 4: Cost Management Systems and Activity-Based Costing

Sealing Company manufactures only one product that is available in both a Deluxe model and a Regular model.The company has manufactured the Regular model for years and the Deluxe model was recently introduced.The company is concerned about the accuracy of its costing system because profits are declining since the Deluxe model was introduced. Indirect production costs are assigned to the products using direct labor hours.For the current year,the company estimates $2,000,000 of indirect production costs and 40,000 direct labor hours.They expect to produce 5,000 units of the Deluxe model and 40,000 units of the Regular model.The Deluxe model requires 1.6 hours of direct labor time per unit and the Regular model requires 0.8 hours.Other costs are as follows: Costs Deluxe Model Regular Model Direct materials \ 150 \ 112 Direct labor \ 16 \ 8 $\text { Assume the company's indirect production costs can be traced to four activities with the following cost drivers}$ Activity (Cost Driver) Costs Purchase orders (number of purchase orders) \ 84,000 Rework orders (number of rework orders) \ 216,000 Product testing (number of tests) \ 450,000 Machining (number of machine hours) \1 ,250,000 Deluxe Regula. Cost Drivers Model Model Number of purchase orders 400 600 Number of rework orders 200 600 Number of tests 4,000 6,000 Number of machine hours 20,000 30,000 Required: A) Assume direct labor hours are the only cost-allocation base. What is the cost to manufacture one unit of each model? B) Assume the activity-based costing method is used. What is the cost to manufacture one unit of each model? C) Based on the results obtained from the activity-based costing method, what are the implications for pricing policy for the two models?

When an automobile made in a Toyota factory is the cost object,the wages of the security guard in the factory would probably be classified as a(n)________.

In two-stage activity-based costing systems,the cost objects in the first stage are ________ and the cost objects in the second stage are ________.

Gollerowski Company has determined the following information for the year ended December 31,2015: Direct labor used \ 16,840 Direct material used \ 26,300 General and administrative expenses \ 14,240 Indirect production costs \ 56,780 Selling expenses \ 13,599 Work-In-Process Inventory, Janua1y 1, 2015 0 Work-In-Process Inventory, December 31, 2015 0 Finished Goods Inventory, January 1, 2015 0 Finished Goods Inventory, December 31, 2015 ? Cost of Goods Sold \8 0,000\ Requirements: A) What is the Cost of Goods Manufactured for the year ended December 31, 2015? B) What is Finished Goods Inventory at December 31, 2015?

A cost management system provides information for strategic management decisions and financial reporting.

A cost management system provides ________.

Fandry Company has obtained the following data concerning a new product: Production Costs, Using traditional costing method \ 3.00 per unit Production Costs, Using activity-based costing method \ 5.00 per unit Nonproduction Costs, Using activity-based costing method \ 2.50 per unit Fandry Company wants the price of the new product to cover all costs plus a 100% markup.The production process used for the low volume product is very complicated and it has a higher proportion of indirect costs than direct costs. What price per unit should Fandry Company charge for the new product?

Cost accounting is that part of the cost management system that measures costs for the sole purpose of financial reporting.

Which of the following types of costs cannot be specifically and exclusively identified with a cost object in an economically feasible manner?

Stanley Company has identified the following activities related to indirect production costs: Activity Activity Costs Cost Divers Machine Setup \ 180,000 1,500 setup hours Materials Handling \ 50,000 12,500 pounds of materials Electric Power \ 20,000 20,000 kilowatt hous Stanley Company has obtained the following data concerning two products: Product 1 Product 2 Number of units produced 4,000 20,000 Direct materials cost \ 20,000 \ 25,000 Direct labor cost \ 12,000 \ 20,000 Number of setup hours 100 120 Pounds of materials used 500 1,500 Kilowatt-hours 1,000 2,000 Using an activity-based costing system,what amount of materials handling cost is assigned to Products 1 and 2? Product 1 Product 2 A) \ 2,000 \ 6,000 B) \ 8,333 \ 41,667 C) \ 12,500 \ 37,500 D) \ 20,000 \ 30,000

________ costs can be eliminated from a product.________ costs cannot be eliminated from a product but can be reduced.

When an upholstered chair is the cost object,minor materials,such as tacks and nails,used to manufacture the chair would probably be classified as a(n)________.

Classify each step below as a value-added activity or a non-value-added activity.Use V for value-added activity and N for non-value-added activity. _____ 1.Raw materials are transferred to a storage area pending use in production. _____ 2.Raw materials are transferred to the production area for use in products. _____ 3.Partially complete products are waiting to be worked on because equipment failed. _____ 4.Raw materials are placed on pallets before they are used in production. _____ 5.Finished products are transferred to the warehouse awaiting sale. _____ 6.Finished products are checked for defects by Quality Control Department. _____ 7.Partially complete products are transferred to the Finishing Department. _____ 8.Completed products are transported to another building that has the Packaging Department. _____ 9.Partially complete products are checked for defects by the supervisor. _____ 10.Units of partially complete products are assembled by union workers.

If the Machining Department is the cost object,attaching costs to the Machining Department is called ________.

________ would appear on an income statement of both a retailer and a manufacturer.

A merchandising firm reports ________ as a current asset on the balance sheet.

In a manufacturing company,________.

Which of the following costs is a direct cost for a manufactured product?

The following information was taken from the accounting records of Henry Manufacturing Company: Direct materials purchased \ 75,000 Direct materials used \ 56,000 Direct manufacturing labor costs \ 20,000 Indirect manufacturing labor costs \ 10,000 Sales Salaries Expense \ 35,000 Miscellaneous Factory Expenses \ 5,000 Administrative Expenses \ 40,000 Finished Goods Inventory, beginning \ 10,000 Finished Goods Inventory, end \ 12,000 Work-In-Process Inventory, beginuing 0 Work-In-Process Inventory, end 0 What is Cost of Goods Manufactured?

Unallocated costs ________.