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: $\begin{array}{ll} \text { Opening and closing accounts } & \$ 100,000 \\ \text { Issuing monthly statements } & \$ 150,000 \\ \text { Frocessing transactions } & \$ 1,025,000 \\ \text { Customer inquiries } & \$ 200,000 \\ \text { Froviding ATM services } & \$ 560,000\\ \text {Total Costs}&\$2,035,000 \end{array}$ Additional data concerning the usage of the activities by the various customers are also provided: \[\begin{array} { l r r r } & \underline { \text { Low } } & \underline { \text { Medium } } & \underline { \text { High } } \\ \text { Number of accounts } & 7,500 & 1,500 & 1,000 \\ \text { opened/olosed } & & \\ \text { Number of }& 225,000 & 50,000 & 25,000 \\ \text { Sutements issued } \\ \text { Processing } \\ \text { transactions }& 9,000,000 & 1,000,000 & 250,000\\ \text { Number of } \\ \text { telephone minutes } & 500,000 & 300,000 & 200,000 \\ \text { Number of ATM } \\ \text { transactions }& 675,000 & 100,000 & 25,000 \\ \text { Number of checking } \\ \text { accolnts }& 19,000 & 4,000 & 2,000 \end{array}\] 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. What is the monthly overall cost per checking account?

A) $6.78 B) $7.37 C) $8.93 D) $28.26 A) $6.78 B) $7.37 C) $8.93 D) $28.26

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 total cost per component associated with using Supplier 2?

A) $8.95 B) $12.00 C) $15.74 D) $84.26 A) $8.95 B) $12.00 C) $15.74 D) $84.26

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: $\begin{array}{ll} \text { Opening and closing accounts } & \$ 100,000 \\ \text { Issuing monthly statements } & \$ 150,000 \\ \text { Frocessing transactions } & \$ 1,025,000 \\ \text { Customer inquiries } & \$ 200,000 \\ \text { Froviding ATM services } & \$ 560,000\\ \text {Total Costs}&\$2,035,000 \end{array}$ Additional data concerning the usage of the activities by the various customers are also provided: \[\begin{array} { l r r r } & \underline { \text { Low } } & \underline { \text { Medium } } & \underline { \text { High } } \\ \text { Number of accounts } & 7,500 & 1,500 & 1,000 \\ \text { opened/olosed } & & \\ \text { Number of }& 225,000 & 50,000 & 25,000 \\ \text { Sutements issued } \\ \text { Processing } \\ \text { transactions }& 9,000,000 & 1,000,000 & 250,000\\ \text { Number of } \\ \text { telephone minutes } & 500,000 & 300,000 & 200,000 \\ \text { Number of ATM } \\ \text { transactions }& 675,000 & 100,000 & 25,000 \\ \text { Number of checking } \\ \text { accolnts }& 19,000 & 4,000 & 2,000 \end{array}\] 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 opening and closing accounts?

A) $4.00 per account B) $10.00 per account C) $81.40 per account D) $203.50 per account A) $4.00 per account B) $10.00 per account C) $81.40 per account D) $203.50 per account

Solo Company has developed cost formulas for the drivers of the following production activities: $\begin{array}{llcc}\text { Driver } & \text { Activity } & \text { Fixed} & \text { Variable }\\ \text { Labour hours } & \text { Materials } & -0- & 40 \\ \text { Labour hours } & \text { Labour } & -0- & 20 \\ \text { Machine hours } & \text { Maintenance } & 20,000 & 16 \\ \text { Machine hours } & \text { Machining } & 100,000 & 4 \\ \text { Number of setups } & \text { Inspections } & 60,000 & 400 \\ \text { Number of setups } & \text { Setups } & -0- & 600 \\ \text { Number of purchase orders } & \text { Purchasing } & 150,000 & 6 \end{array}$ What is the budgeted inspection cost for 20 setups?

A) $60,000 B) $68,000 C) $160,000 D) $330,000 A) $60,000 B) $68,000 C) $160,000 D) $330,000

Exam 7: Activity-Based Costing and Management

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. What is the monthly overall cost per checking account?

(Multiple Choice)

4.7/5

(46)

Question 81

Which of the following is NOT a category of environmental cost?

(Multiple Choice)

4.7/5

(45)

Question 82

What type of product meets or exceeds customer expectations?

(Multiple Choice)

4.8/5

(47)

Question 83

Producing 20,000 cell phone units requires $600,000 of prime costs, uses 4,000 machine hours, and takes 2,400 setup hours. The activity rates are $80 per machine hour and $200 per setup hour. What is the unit cost of a cell phone?

(Multiple Choice)

5.0/5

(40)

Question 84

The moving activity has an expected cost of $80,000. Expected direct labour hours are 20,000, and the expected number of moves is 40,000. What is the most logical activity rate for moving?

(Multiple Choice)

4.8/5

(36)

Question 85

What is a value-added activity?

(Multiple Choice)

4.8/5

(35)

Question 86

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. -Result or product of an activity

(Multiple Choice)

4.9/5

(44)

Question 87

What are non-value-added activities?

(Multiple Choice)

4.9/5

(41)

Question 88

The robust quality view of conformance is that variations in the product are acceptable.

(True/False)

4.9/5

(32)

Question 89

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. -Number of units of output that can be produced in a given period of time

(Multiple Choice)

4.7/5

(38)

Question 90

Which of the following reflects the aim of activity-based management?

(Multiple Choice)

4.8/5

(36)

Question 91

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. -Factors that measure the consumption of activities by products and other cost objects

(Multiple Choice)

4.8/5

(38)

Question 92

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 total cost per component associated with using Supplier 2?

(Multiple Choice)

4.9/5

(34)

Question 93

Which term reflects bringing a good from a nonconforming state to a conforming state?

(Multiple Choice)

4.8/5

(41)

Question 94

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 opening and closing accounts?

(Multiple Choice)

4.7/5

(40)

Question 95

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 relationship of activity inputs to activity outputs

(Multiple Choice)

4.8/5

(38)

Question 96

Solo Company has developed cost formulas for the drivers of the following production activities: Driver Activity Fixed Variable Labour hours Materials -0- 40 Labour hours Labour -0- 20 Machine hours Maintenance 20,000 16 Machine hours Machining 100,000 4 Number of setups Inspections 60,000 400 Number of setups Setups -0- 600 Number of purchase orders Purchasing 150,000 6 What is the budgeted inspection cost for 20 setups?

(Multiple Choice)

4.7/5

(35)

Question 97

Control activities are performed by an organization or its customers in response to poor quality.

(True/False)

4.9/5

(41)

Question 98

Powen The receiving department of Powen has three activities: unloading, counting goods, and inspecting. Unloading requires a forklift that is leased for $15,000 per year. The forklift is used only for unloading. The fuel for the forklift is $2,000 per year. Inspection requires special testing equipment that has a depreciation of $500 per year and an operating cost of $1,000 per year. Receiving has four employees who each have an average salary of $35,000 per year. The work distribution matrix for the receiving personnel is as follows: Percentage of ime Activity on Each Activity Unloading 25\% Counting 40\% Inspecting 35\% -Refer to Powen. What is the cost of unloading?

(Multiple Choice)

4.9/5

(38)

Question 99

Which of the following is NOT a component of process value analysis?

(Multiple Choice)

4.8/5

(37)

Question 100

Which of the following is NOT a category of environmental cost?

What type of product meets or exceeds customer expectations?

Producing 20,000 cell phone units requires $600,000 of prime costs, uses 4,000 machine hours, and takes 2,400 setup hours. The activity rates are $80 per machine hour and $200 per setup hour. What is the unit cost of a cell phone?

The moving activity has an expected cost of $80,000. Expected direct labour hours are 20,000, and the expected number of moves is 40,000. What is the most logical activity rate for moving?

What is a value-added activity?

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. -Result or product of an activity

What are non-value-added activities?

The robust quality view of conformance is that variations in the product are acceptable.

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. -Number of units of output that can be produced in a given period of time

Which of the following reflects the aim of activity-based management?

Which term reflects bringing a good from a nonconforming state to a conforming state?

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 relationship of activity inputs to activity outputs

Control activities are performed by an organization or its customers in response to poor quality.

Which of the following is NOT a component of process value analysis?

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

Filters