Exam 7: Activity-Based Costing and Management

Receiving provides 4,000 receiving hours and costs $80,000 per year.What is the activity rate for receiving?

Indeed Company makes a product using two departments: Department 1 and Department 2.Information on these departments is as follows:

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Tigra Company manufactures engines. Tigra produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Customer 1 and Customer 2. Both suppliers are reliable and rarely deliver late; however, Customer 1 sells the component for $10.00 per unit and Customer 2 sells the same component for $8.95. Hamilton purchases 70% of its components from Customer 2 because of the lower price. The total annual demand is 75,000 units. I. Activity Data Inspecting components (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 Customer 1 Customer 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 the Figure.What is the total activity cost per component associated with using Customer 1 as the supplier?

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: Total overhead costs equal $400,000.Randy Candy applies overhead based on direct labour hours.

Match each item with the correct statement below. -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

Tigra Company manufactures engines. Tigra produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Customer 1 and Customer 2. Both suppliers are reliable and rarely deliver late; however, Customer 1 sells the component for $10.00 per unit and Customer 2 sells the same component for $8.95. Hamilton purchases 70% of its components from Customer 2 because of the lower price. The total annual demand is 75,000 units. I. Activity Data Inspecting components (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 Customer 1 Customer 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 the Figure.Suppose that Tigra 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 Customer 1.What would be the new cost per unit as a result of the lost sales?

What costs are incurred to determine whether products and services are conforming to their requirements or customer needs?

CompInc. produces two products: a high-end laptop computer and an inexpensive laptop. The two products use two overhead activities, which have the following costs: The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production. Setting up equipment \ 8,000 Machining 48,000 High-end Inexpensive Direct Labour \ 24,000 \ 8,000 Direct Materials 15,000 4,000 Units 2,000 2,000 Machine Hours 1,000 3,000 Setup Hours 150 50 -Refer to the Figure.What is the overhead cost per unit for each inexpensive laptop,when using overhead rates that are based on machine hours and setup hours?

Which of the following is one of the three conditions necessary to classify an activity as discretionary?

Refer to First Choice Credit Union.First Choice Credit Union 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 of statements issued.The activity rate for processing transactions 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.

A plant produces 92 different electronic products.Each product requires an average of seven components that are purchased externally.By redesigning the products,it is possible to produce the 92 products that have five components in common.This redesign will reduce the demand for purchasing,receiving,and paying bills.Estimated savings from the reduced demand are $1,500,000 per year.What is the non-value-added cost of purchasing,receiving,and paying bills?

Lauren's Volleyball Company produces two types of volleyballs: Volleylite and Official Game.Both products pass through two producing departments.The Official Game production is much more labour-intensive than the Volleylite.The Volleylite is also more popular.The following data have been gathered for the two products: Lauren's Volleyball has decided to used activity-based costing and has developed two types of activities,machine related (based on machine hours),and other overhead (based on packing orders).Machine-related costs equal $160,000.Other overhead costs equal $240,000.

Match each item with the correct statement below. -Process that answers the question "How many people perform the activities?"

What is the term for the identification and removal of activities that fail to add value?

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?

Which of the following are assigned using direct tracing and resource drivers?

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?

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

Tigra Company manufactures engines. Tigra produces all the parts necessary for its engines except for one electronic component, which is purchased from two local suppliers: Customer 1 and Customer 2. Both suppliers are reliable and rarely deliver late; however, Customer 1 sells the component for $10.00 per unit and Customer 2 sells the same component for $8.95. Hamilton purchases 70% of its components from Customer 2 because of the lower price. The total annual demand is 75,000 units. I. Activity Data Inspecting components (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 Customer 1 Customer 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 the Figure.Suppose that Tigra 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 Customer 2 Company.What would be the new cost per unit as a result of the lost sales?