Exam 7: Activity-Based Costing and Management

Which term reflects the process of decreasing the time and resources required by an activity?

Which term reflects increasing the efficiency of necessary activities by using economies of scale?

What costs are incurred to avoid poor quality in the products or services being produced?

What type of analysis is concerned with identifying the root causes of activity 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. Suppose the company uses an activity rate for receiving that is based on receiving orders. What would be the receiving costs allocated to the basic?

Lindsay Company uses activity-based costing to figure product cost. Three activities have been determined and rate calculated. Setting up equipment = $500 per setup Moving goods = $20 per move Machining = $4 per machine hour Lindsay provided the following data from the job order cost sheet for Job #550: Direct materials $2,000 Direct labour $1,800 Setups 1 Moves 30 Machine hours 900 A. Calculate the manufacturing overhead applied to Job #550. B. Calculate the total cost of Job #550. C. Assuming sales price is calculated by applying a 30% markup on cost, calculate the sales price for Job #550 D. Assume Job #550 required 2 setups, 15 moves, and 700 machine hours. Calculate the manufacturing overhead applied to Job #550. E. Assuming a 50% markup on cost, calculate the sales price of Job #550 using the manufacturing overhead rate calculated in part D

Which of the following is NOT a supplier-driven activity?

What is one of the three conditions necessary to classify a discretionary activity as value-added?

Which ratio measures the proportion of an activity consumed by a product?

A work distribution matrix is derived from an interview or a written survey.

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. Suppose that the company loses $2,500,000 in sales per year because of its reputation for defective units attributable to failed components. Using warranty hours, assign the proportional cost of lost sales to Supplier 2. What would be the additional cost per unit as a result of the lost sales?

Activity analysis is the effort expended to identify those factors that are the root causes of activity costs.

Discretionary activities are necessary to comply with legal mandates.

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 issuing monthly statements?

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. -System that emphasizes direct tracing and driver tracing

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 selling goods?

Factors that measure the consumption of activities by products and other cost objects are value-added costs.

A company takes 10,000 hours to produce 20,000 units of a product. What is the cycle time?

What costs are incurred when products and services fail to either conform to requirements or satisfy customer needs after being delivered to customers?

A company was evaluating the activity-based environmental cost of two different products: Product ABC and Product XYZ. Information on two environmental activities is as follows: Activity Driver Cost Maintaining pollution equipment Maintenance hours \ 120,000 Toxic waste disposal Kilograms of waste \ 80,000 Data on Product X and Product Y follows: Product Product XYZ Production costs (non-environmental) \ 400,000 \ 500,000 Units produced 100,000 200,000 Maintenance hours for pollution equipment 1,000 4,000 Kilograms of toxic waste 10,000 30,000 A. Assign the environmental activity costs to Product ABC and to Product XYZ. B. Calculate the unit environmental cost of Product ABC. C. Calculate the unit environmental cost of Product XYZ. D. Calculate the overall unit cost of Product ABC. E. Calculate the overall unit cost of Product XYZ.