Exam 7: Activity-Based Costing and Management

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. -An activity that increases the time spent on or cost of a product or service without increasing its worth to the customer

Which term reflects the number of units that can be produced in a given period of time?

Each unit of a product requires eight components. The average number of components is 8.25 due to component failure. Purchasing higher quality components can reduce the average number of components to four per unit. The cost per component is $500. What is the reduction in failure costs per unit due to purchasing higher quality components?

What is an example of an activity necessary to comply with Canada Customs and Revenue Agency?

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 non-JIT distributor?

What type of cost typically represents a much higher percentage of product costs than direct labour?

The value-added standard is the waste-free component of the value-added activity.

Quality improvement can increase profitability by decreasing costs.

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 consumption ratio for setups on the deluxe?

What is an example of types of resources consumed in an activity dictionary?

What quality-control method involves sampling from batches of Finished Goods Inventory to determine whether they meet an acceptable quality level?

What costs are incurred when products and services do NOT conform to either specifications or customer needs prior to being delivered?

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 activity cost per component associated with using Supplier 1?

A company has developed a list of quality-related costs as follows: Year 1 Year 2 Supplier evaluation \0 \0 Quality training 10,000 50,000 Inspection of finished product 75,000 60,000 Rew ork 50,000 40,000 Warranty work 120,000 80,000 Sales \ 2,000,000 \ 2,000,000 The company's controller is pleased with the Year 2 results and commented that the company is now on its way toward total quality. Is the controller right? Explain.

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 inspecting components on the basis of sampling hours?

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. Suppose the company uses only machine hours to calculate a plantwide manufacturing overhead rate. What would be the total manufacturing overhead assigned to the basic tablets?

Which statement best describes unrealized external failure costs?

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. -Costs necessary to perform value-added activities with perfect efficiency

Consider the following two activities: performing warranty work and purchasing components. The warranty work costs $60,000, and the warranty cost of the most efficient competitor is $10,000. Purchasing components costs $100,000 (5,000 purchase orders). A study reveals that the most efficient level would use 2,500 purchase orders and entail a cost of $55,000. What is the non-value-added cost?

To calculate an activity rate, the practical capacity of each activity must be determined.