Exam 7: Activity-Based Costing and Management

What type of activity is performed in response to poor quality?

Andiamo Andiamo Manufacturing produces two types of tablets: basic and deluxe. The tablets are produced using one continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used to assign costs to each activity. The manufacturing overhead activities, their costs, and the other related data are as follows: Product Machine Hours Setups Receiving Orders Packing Orders basic 20,000 200 100 800 deluxe 20,000 500 400 4,000 Costs \ 80,000 \ 60,000 \ 10,000 \ 30,000 -Refer to Andiamo Manufacturing. What is the activity rate for packing that is based on packing orders?

Sallisaw Savings & Loan Sallisaw Savings & Loan has requested an analysis of checking account profitability by customer type. Customers are categorized according to size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: Opening and closing accounts \ 100,000 Issuing monthly statements \ 150,000 Frocessing transactions \ 1,025,000 Customer inquiries \ 200,000 Froviding ATM services \ 560,000 Total Costs \2 ,035,000 Additional data concerning the usage of the activities by the various customers are also provided: Number of accounts 7,500 1,500 1,000 opened/olosed Number of 225,000 50,000 25,000 Sutements issued Processing transactions 9,000,000 1,000,000 250,000 Number of telephone minutes 500,000 300,000 200,000 Number of ATM transactions 675,000 100,000 25,000 Number of checking accolnts 19,000 4,000 2,000 The company uses an activity-based costing system. The activity rate for opening and closing statements is based on the number of accounts opened and closed. The activity rate for issuing monthly statements is based on the number os statements issued. The activity rate for processing transactins is based on the number of transactions processed. The activity rate for customer inquiries is based on the number of telephone minutes. The rate for ATM services is based on the number of ATM transactions. -Refer to Sallisaw Savings & Loan. Using activity-based costing, what is the activity rate for customer inquiries?

What is the activity based costing hierarchy? Give an example for each.

An activity dictionary lists the activities in an organization along with some critical activity attributes.

Activities necessary to remain in business are called value-added activities.

What type of costs are field trials and quality engineering?

What type of costs are packaging inspection and process acceptance?

Zero defects means that most products conform to specifications.

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -The length of time it takes to produce a unit of output from the time raw materials are received until the good is delivered to Finished Goods Inventory

What type of costs are scrap and retesting?

The current manual process takes 36 minutes of direct labour time and 12 kg of material to make a product. Automating the process would require 24 minutes of machine time and 10 kg of material. The cost per labour hour is $18, the cost per machine hour is $14, and the cost per kilogram of materials is $22. What is currently the non-value-added cost per unit?

Sallisaw Savings & Loan Sallisaw Savings & Loan has requested an analysis of checking account profitability by customer type. Customers are categorized according to size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: Opening and closing accounts \ 100,000 Issuing monthly statements \ 150,000 Frocessing transactions \ 1,025,000 Customer inquiries \ 200,000 Froviding ATM services \ 560,000 Total Costs \2 ,035,000 Additional data concerning the usage of the activities by the various customers are also provided: Number of accounts 7,500 1,500 1,000 opened/olosed Number of 225,000 50,000 25,000 Sutements issued Processing transactions 9,000,000 1,000,000 250,000 Number of telephone minutes 500,000 300,000 200,000 Number of ATM transactions 675,000 100,000 25,000 Number of checking accolnts 19,000 4,000 2,000 The company uses an activity-based costing system. The activity rate for opening and closing statements is based on the number of accounts opened and closed. The activity rate for issuing monthly statements is based on the number os statements issued. The activity rate for processing transactins is based on the number of transactions processed. The activity rate for customer inquiries is based on the number of telephone minutes. The rate for ATM services is based on the number of ATM transactions. -Refer to Sallisaw Savings & Loan. Using activity-based costing, what is the total cost of each low balance account?

Randy Candy Company produces candy sticks (hooked and straight). Both products pass through two producing departments. The hooked stick's production is much more labour-intensive than the straight stick. The straight stick is also more popular. The following data have been gathered for the two products: Product Data Hooked Straight Units produced per year 200,000 2,000,000 Direct labour hours 10,000 40,000 Machine hours 10,000 70,000 Total manufacturing overhead costs equal $400,000. Randy Candy applies manufacturing overhead based on direct labour hours. A. Calculate the plantwide manufacturing overhead rate based on direct labour hours. B. Using the plantwide manufacturing overhead rate, calculate the manufacturing overhead cost per unit for hooked sticks. C. Using the plantwide manufacturing overhead rate, calculate the manufacturing overhead cost per unit for straight sticks. D. Recalculate the plantwide manufacturing overhead rate assuming Randy Candy Company supplies manufacturing overhead based on machine hours. E. Assuming the prime costs for hooked sticks is $0.47, calculate the total cost using the manufacturing overhead rate developed in part a.F. Assuming the prime costs for hooked sticks is $0.47, calculate the total cost using the manufacturing overhead rate developed in part D.

Match each of the following terms with their correct description from the items listed below.* Each term may be used more than once, and it is possible that one or more of the classifications may not be used at all. -The number of times an activity is performed

Sallisaw Savings & Loan Sallisaw Savings & Loan has requested an analysis of checking account profitability by customer type. Customers are categorized according to size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: Opening and closing accounts \ 100,000 Issuing monthly statements \ 150,000 Frocessing transactions \ 1,025,000 Customer inquiries \ 200,000 Froviding ATM services \ 560,000 Total Costs \2 ,035,000 Additional data concerning the usage of the activities by the various customers are also provided: Number of accounts 7,500 1,500 1,000 opened/olosed Number of 225,000 50,000 25,000 Sutements issued Processing transactions 9,000,000 1,000,000 250,000 Number of telephone minutes 500,000 300,000 200,000 Number of ATM transactions 675,000 100,000 25,000 Number of checking accolnts 19,000 4,000 2,000 The company uses an activity-based costing system. The activity rate for opening and closing statements is based on the number of accounts opened and closed. The activity rate for issuing monthly statements is based on the number os statements issued. The activity rate for processing transactins is based on the number of transactions processed. The activity rate for customer inquiries is based on the number of telephone minutes. The rate for ATM services is based on the number of ATM transactions. -Refer to Sallisaw Savings & Loan. Using activity-based costing, what is the activity rate for providing ATM services?

A product currently requires eight moves. By changing the plant layout, the number of moves can be reduced to zero. The cost per move is $150. What is the reduction in the non-value-added cost of the moving activity?

Environmental costs are costs that are incurred because poor environmental quality exists.

Sallisaw Savings & Loan Sallisaw Savings & Loan has requested an analysis of checking account profitability by customer type. Customers are categorized according to size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: Opening and closing accounts \ 100,000 Issuing monthly statements \ 150,000 Frocessing transactions \ 1,025,000 Customer inquiries \ 200,000 Froviding ATM services \ 560,000 Total Costs \2 ,035,000 Additional data concerning the usage of the activities by the various customers are also provided: Number of accounts 7,500 1,500 1,000 opened/olosed Number of 225,000 50,000 25,000 Sutements issued Processing transactions 9,000,000 1,000,000 250,000 Number of telephone minutes 500,000 300,000 200,000 Number of ATM transactions 675,000 100,000 25,000 Number of checking accolnts 19,000 4,000 2,000 The company uses an activity-based costing system. The activity rate for opening and closing statements is based on the number of accounts opened and closed. The activity rate for issuing monthly statements is based on the number os statements issued. The activity rate for processing transactins is based on the number of transactions processed. The activity rate for customer inquiries is based on the number of telephone minutes. The rate for ATM services is based on the number of ATM transactions. -Refer to Sallisaw Savings & Loan. Using activity-based costing, what is the total cost of each high balance account?

Product diversity means that products consume manufacturing overhead activities in systematically similar proportions.