Exam 7: Activity-Based Costing and Management

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

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?

What is the term for the process of choosing among different sets of activities caused by competing strategies?

Activity drivers should be classified as either internal or external.

Match each item with the correct statement below. -Activities necessary to remain in business

Assume that the accounts payable department of a company has 10 clerks; each one is paid $25,000 per year ($250,000 total clerical salaries).Six of the clerks spend the following percentages of time on the three activities: 20% of time on processing payments 30% of time matching invoices,receiving documents,and billing statement 50% of time correcting errors in the various documents One clerk,the head clerk,spends 50% of her time on administrative duties and the remainder on error correction.The remaining three clerks spend 30% of their time on processing payments and the remaining 70% of their time on matching documents. Long distance telephone costs of $1,700 are directly traced to the activity "correcting errors."

Which of the following is a value-added activity?

Which matrix is derived from the interview process (or written survey)?

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

The consumption ratio is the amount of each activity consumed by all products.

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 Time Activity on Each Activity Unloading 25\% Counting 40\% Inspecting 35\% -Refer to the Figure.What is the cost of unloading?

Activities necessary to remain in business are called value added activities.

Match each item with the correct statement below. -The relationship of activity inputs to activity outputs

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

Using the original design,a machine requires 24 hours of setup time.By redesigning the machine,the setup time is reduced by 35%.The cost per setup hour is $250.What is the reduction in non-value-added cost per setup?

Robustness means hitting the target value every time.

Match each item with the correct statement below. -Resources consumed by the activity in producing its output.

What are non-value-added activities?

An activity-based costing system first traces costs to activities and then to products.

A company has developed a list of quality-related costs as follows: 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.