Exam 7: Activity-Based Costing and Management

Match each item with the correct statement below. -The number of times an activity is performed.

Cycle time is the length of time required to produce one product.What is the term for the number of units that can be produced in a given period of time?

Which of the following is a view of conformance that assumes an acceptable range of values exists for each specification or quality characteristic?

Quality improvement can increase profitability by decreasing costs.

What is the term for activities that are considered unnecessary to staying in business?

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 activity rate for inspecting components on the basis of sampling hours?

A defective product is one that conforms to specifications.

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

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 the Figure.What is the total customer cost for the non-JIT distributor?

One of the three major dimensions of measuring activity performance is quality.

Which of the following are setups,material handling,and inspection all possible examples of?

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 the Figure.What is the activity rate for servicing goods?

Lindsay Company uses activity-based costing to figure product cost.Three activities have been determined and rate calculated. Lindsay provided the following data from the job order cost sheet for Job #550. Setting up equipment =\ 500 per setup Moving goods =\ 20 per move Machining =\ 4 per machine hour Direct materials \ 2,000 Direct labour 1,800 Setups 1 Moves 30 Machine hours 900

Costs that are caused by the inefficient performance of value-added activities are non-value-added costs.

A company spends $50,000 a year for inspecting,$40,000 for purchasing,and $60,000 for reworking products.What would be the best estimate of non-value-added costs?

What type of costs are field trials and quality engineering?

What type of product meets or exceeds customer expectations?

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?

One of the questions answered by activity analysis should be "What activities are done?"

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 activity rate for warranty work on the basis of warranty hours?