Activity Cost \[\begin{array} { l l } \text { Inspecting comp onents (sampling only) } & \$ 190,000 \\ \text { Reworking products (due to failed component) } & \$ 2,254,000 \\ \text { Warranty work (due to failed component) } & \$ 1,723,000 \end{array}\] II. Supplier Data $\begin{array}{lrr}&\text { Supplier } 1 &\text { Supplier } 2\\ \text { Units Purchase Price } & \$ 10.00 & \$ 8.95 \\ \text { Units Purchased } & 22,500 & 52,500 \\ \text { Sampling Hours } & 50 & 2,450 \\ \text { Rework Hours } & 135 & 3,625 \\ \text { Warranty Hours } & 475 & 6,000 \end{array}$ -Refer to Tigra Company. What is the activity rate for warranty work on the basis of warranty hours?

A) $262 per hour B) $264 per hour C) $266 per hour D) $268 per hour A) $262 per hour B) $264 per hour C) $266 per hour D) $268 per hour

Moustache Manufacturing Moustache Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors purchase the same product. The customer activities and costs for the previous quarter are found below: $\begin{array}{lrr}&\text { JIT } & \text { Non-JIT }\\ \text { Sales Orders } & 300 & 20 \\ \text { Sales Calls } & 25 & 25 \\ \text { Service Calls } & 150 & 75 \\ \text { Average Order Size } & 100 & 1,000 \\ \text { Manufacturing Cost/Unit } & \$ 50 & \$ 50 \end{array}$ \[\begin{array}{l} \text { Customer Costs: }\\ \begin{array} { l l } \text { Processing Sales Orders } & \$ 200,000 \\ \text { Selling Goods } & \$ 120,000 \\ \text { Servicing Goods } & \$ 150,000 \\ \text { Total } & \$ 470,000 \end{array} \end{array}\] -Refer to Moustache Manufacturing. What is the activity rate for processing sales orders?

A) $1.47 per order B) $182.00 per order C) $625.00 per order D) $667.00 per order A) $1.47 per order B) $182.00 per order C) $625.00 per order D) $667.00 per order

Blackie Manufacturing Company uses activity-based costing. The manufacturing overhead budget for the coming period is $1,053,000, consisting of the following: $\begin{array}{lr}&\text { Budgeted }\\ \text { Cost Pool }&\text { Amount }\\ \text { Supervision } & \$ 320,000 \\ \text { Machine usage } & 420,000 \\ \text { Machine setups } & 187,000 \\ \text { Desion changes } & 126,000\\ \text { Totals } & \$ 1,053,000 \end{array}$ The potential allocation bases and their estimated amounts were as follows: \[\begin{array} { l r } \text { Allocation } &\text { Budgeted } \\ \text { Base } & \text { Amount } \\ \hline \text { Number of design changes } & 35 \\ \text { Number of setups } & 110 \\ \text { Machine hours } & 6,000 \\ \text { Direct labour hours } & 10,000 \end{array}\] A. Determine the manufacturing overhead rate for each cost pool, using the most appropriate allocation base for each pool. B. Job 80130 required $45,000 for direct materials, $20,000 for direct labour, 2,000 direct labour hours, 800 machine hours, five setups, and four design changes. Determine the cost of Job 80130.

A. Supervision: $320,000/10,000 = $32 --

Moustache Manufacturing Moustache Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors purchase the same product. The customer activities and costs for the previous quarter are found below: $\begin{array}{lrr}&\text { JIT } & \text { Non-JIT }\\ \text { Sales Orders } & 300 & 20 \\ \text { Sales Calls } & 25 & 25 \\ \text { Service Calls } & 150 & 75 \\ \text { Average Order Size } & 100 & 1,000 \\ \text { Manufacturing Cost/Unit } & \$ 50 & \$ 50 \end{array}$ \[\begin{array}{l} \text { Customer Costs: }\\ \begin{array} { l l } \text { Processing Sales Orders } & \$ 200,000 \\ \text { Selling Goods } & \$ 120,000 \\ \text { Servicing Goods } & \$ 150,000 \\ \text { Total } & \$ 470,000 \end{array} \end{array}\] -Refer to Moustache Manufacturing. What is the total customer cost for the JIT distributor?

A) $60,000 B) $100,050 C) $187,500 D) $347,550 A) $60,000 B) $100,050 C) $187,500 D) $347,550

SarahLou Company had sales of $2,500,000 for last year. Data on quality-related costs for last year are as follows: \[\begin{array} { l r } \text { Inspection } & \$ 80,000 \\ \text { Scrap } & 10,000 \\ \text { Rework } & 45,000 \\ \text { Quality training } & 20,000 \\ \text { Warranty work } & 100,000 \\ \text { Customer complaints } & 30,000 \end{array}\] A. Classify each of the quality-related costs as control (prevention and appraisal), internal failure, or external failure. B. What percentage of sales is accounted for by quality-related costs? C. If quality-related costs could be reduced to 2% of sales, by how much would SarahLou's profit increase?

A. Control costs: inspection, quality tr

Moustache Manufacturing Moustache Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors purchase the same product. The customer activities and costs for the previous quarter are found below: $\begin{array}{lrr}&\text { JIT } & \text { Non-JIT }\\ \text { Sales Orders } & 300 & 20 \\ \text { Sales Calls } & 25 & 25 \\ \text { Service Calls } & 150 & 75 \\ \text { Average Order Size } & 100 & 1,000 \\ \text { Manufacturing Cost/Unit } & \$ 50 & \$ 50 \end{array}$ \[\begin{array}{l} \text { Customer Costs: }\\ \begin{array} { l l } \text { Processing Sales Orders } & \$ 200,000 \\ \text { Selling Goods } & \$ 120,000 \\ \text { Servicing Goods } & \$ 150,000 \\ \text { Total } & \$ 470,000 \end{array} \end{array}\] -Refer to Moustache Manufacturing. What is the activity rate for servicing goods?

A) $650 per service call B) $667 per service call C) $675 per service call D) $2,000 per service call A) $650 per service call B) $667 per service call C) $675 per service call D) $2,000 per service call

Activity Cost \[\begin{array} { l l } \text { Inspecting comp onents (sampling only) } & \$ 190,000 \\ \text { Reworking products (due to failed component) } & \$ 2,254,000 \\ \text { Warranty work (due to failed component) } & \$ 1,723,000 \end{array}\] II. Supplier Data $\begin{array}{lrr}&\text { Supplier } 1 &\text { Supplier } 2\\ \text { Units Purchase Price } & \$ 10.00 & \$ 8.95 \\ \text { Units Purchased } & 22,500 & 52,500 \\ \text { Sampling Hours } & 50 & 2,450 \\ \text { Rework Hours } & 135 & 3,625 \\ \text { Warranty Hours } & 475 & 6,000 \end{array}$ -Refer to Tigra Company. What is the activity rate for reworking products on the basis of rework hours?

A) $595 per hour B) $599 per hour C) $602 per hour D) $605 per hour A) $595 per hour B) $599 per hour C) $602 per hour D) $605 per hour

Exam 7: Activity-Based Costing and Management

Consider the following information on activities: A. Which of the three activities, if any, is value-added? B. Calculate the non-value-added cost of each activity. C. Calculate the total value-added cost of the activities.

(Essay)

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Question 41

Activity Cost Inspecting comp onents (sampling only) \ 190,000 Reworking products (due to failed component) \ 2,254,000 Warranty work (due to failed component) \ 1,723,000 II. Supplier Data Supplier 1 Supplier 2 Units Purchase Price \ 10.00 \ 8.95 Units Purchased 22,500 52,500 Sampling Hours 50 2,450 Rework Hours 135 3,625 Warranty Hours 475 6,000 -Refer to Tigra Company. What is the activity rate for warranty work on the basis of warranty hours?

(Multiple Choice)

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Question 42

A company has two inspectors, each earning a salary of $150,000. One inspector works exclusively on inspecting parts received from outside suppliers, while the other spends 40% of her time inspecting parts and 60% of her time inspecting final products. How much labour cost should be assigned to the activity of inspecting parts?

(Multiple Choice)

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Question 43

Appraisal costs are incurred to prevent poor quality in the products or services being produced.

(True/False)

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Question 44

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. -Activities necessary to remain in business

(Multiple Choice)

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Question 45

What is NOT a possible source of customer diversity?

(Multiple Choice)

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Question 46

Which of the following focuses on the relationship of activity inputs to activity outputs?

(Multiple Choice)

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Question 47

Activity input measure is the result or product of an activity.

(True/False)

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Question 48

Moustache Manufacturing Moustache Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors purchase the same product. The customer activities and costs for the previous quarter are found below: JIT Non-JIT Sales Orders 300 20 Sales Calls 25 25 Service Calls 150 75 Average Order Size 100 1,000 Manufacturing Cost/Unit \ 50 \ 50 Customer Costs: Processing Sales Orders \ 200,000 Selling Goods \ 120,000 Servicing Goods \ 150,000 Total \ 470,000 -Refer to Moustache Manufacturing. What is the activity rate for processing sales orders?

(Multiple Choice)

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Question 49

Blackie Manufacturing Company uses activity-based costing. The manufacturing overhead budget for the coming period is $1,053,000, consisting of the following: Budgeted Cost Pool Amount Supervision \ 320,000 Machine usage 420,000 Machine setups 187,000 Desion changes 126,000 Totals \ 1,053,000 The potential allocation bases and their estimated amounts were as follows: Allocation Budgeted Base Amount Number of design changes 35 Number of setups 110 Machine hours 6,000 Direct labour hours 10,000 A. Determine the manufacturing overhead rate for each cost pool, using the most appropriate allocation base for each pool. B. Job 80130 required $45,000 for direct materials, $20,000 for direct labour, 2,000 direct labour hours, 800 machine hours, five setups, and four design changes. Determine the cost of Job 80130.

(Essay)

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Question 50

Moustache Manufacturing Moustache Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors purchase the same product. The customer activities and costs for the previous quarter are found below: JIT Non-JIT Sales Orders 300 20 Sales Calls 25 25 Service Calls 150 75 Average Order Size 100 1,000 Manufacturing Cost/Unit \ 50 \ 50 Customer Costs: Processing Sales Orders \ 200,000 Selling Goods \ 120,000 Servicing Goods \ 150,000 Total \ 470,000 -Refer to Moustache Manufacturing. What is the total customer cost for the JIT distributor?

(Multiple Choice)

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Question 51

Unrealized external failure costs are also known as societal costs.

(True/False)

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Question 52

One of the questions answered by activity analysis should be "What activities are done?"

(True/False)

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Question 53

SarahLou Company had sales of $2,500,000 for last year. Data on quality-related costs for last year are as follows: Inspection \ 80,000 Scrap 10,000 Rework 45,000 Quality training 20,000 Warranty work 100,000 Customer complaints 30,000 A. Classify each of the quality-related costs as control (prevention and appraisal), internal failure, or external failure. B. What percentage of sales is accounted for by quality-related costs? C. If quality-related costs could be reduced to 2% of sales, by how much would SarahLou's profit increase?

(Essay)

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Question 54

Moustache Manufacturing Moustache Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors purchase the same product. The customer activities and costs for the previous quarter are found below: JIT Non-JIT Sales Orders 300 20 Sales Calls 25 25 Service Calls 150 75 Average Order Size 100 1,000 Manufacturing Cost/Unit \ 50 \ 50 Customer Costs: Processing Sales Orders \ 200,000 Selling Goods \ 120,000 Servicing Goods \ 150,000 Total \ 470,000 -Refer to Moustache Manufacturing. What is the activity rate for servicing goods?

(Multiple Choice)

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Question 55

Last year, Tevia Inc. shipped 6,000,000 kg of goods to customers at a cost of $4,800,000. Suppose an individual customer orders 40,000 kg and produces $400,000 of revenue. (The total revenue is $40 million.) What amount of shipping cost would be assigned to the customer when using activity-based costing?

(Multiple Choice)

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Question 56

A defective product is one that conforms to specifications.

(True/False)

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Question 57

Activity Cost Inspecting comp onents (sampling only) \ 190,000 Reworking products (due to failed component) \ 2,254,000 Warranty work (due to failed component) \ 1,723,000 II. Supplier Data Supplier 1 Supplier 2 Units Purchase Price \ 10.00 \ 8.95 Units Purchased 22,500 52,500 Sampling Hours 50 2,450 Rework Hours 135 3,625 Warranty Hours 475 6,000 -Refer to Tigra Company. What is the activity rate for reworking products on the basis of rework hours?

(Multiple Choice)

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Question 58

Inspection time for a plant is 20,000 hours per year. The cost of inspection consists of the salaries of four inspectors, totalling $120,000. Inspection also uses supplies costing $6 per inspection hour. The company has a close to zero-defect state and has eliminated the need for any inspection activity. What is the non-value-added cost of inspection per year?

(Multiple Choice)

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Question 59

One way to improve efficiency is to produce higher activity output with higher cost.

(True/False)

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Question 60

Consider the following information on activities: A. Which of the three activities, if any, is value-added? B. Calculate the non-value-added cost of each activity. C. Calculate the total value-added cost of the activities.

Appraisal costs are incurred to prevent poor quality in the products or services being produced.

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. -Activities necessary to remain in business

What is NOT a possible source of customer diversity?

Which of the following focuses on the relationship of activity inputs to activity outputs?

Activity input measure is the result or product of an activity.

Unrealized external failure costs are also known as societal costs.

One of the questions answered by activity analysis should be "What activities are done?"

A defective product is one that conforms to specifications.

One way to improve efficiency is to produce higher activity output with higher cost.

Introduction to Managerial Accounting

Basic Managerial Accounting Concepts

Cost Behaviour

Cost-Volume-Profit Analysis: a Managerial Planning Tool

Job-Order Costing

Process Costing

Absorption and Variable Costing, and Inventory Management

Budgeting, Production, Cash, and Master Budget

Standard Costing: a Managerial Control Tool

Flexible Budgets and Overhead Analysis

Performance Evaluation and Decentralization

Short-Run Decision Making: Relevant Costing

Capital Investment Decisions

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