Exam 7: Activity-Based Costing and Management

Discuss the pros and cons of using a team of individuals to develop an ABC / ABM system.

Cost drivers are most likely to be identified using information:

Which of the following is performed first in setting up an ABC system?

Costs associated with developing an ABC system most likely include:

MNK Corporation is a large public company that employs numerous accounts receivable clerks. Their jobs involve processing invoices and keeping the accounting records updated. Which of the following is the most likely cost driver for the accounts receivable activity cost pool?

Traditional costing and activity-based costing share some similarities, but are also different in significant ways. For each statement below, indicate whether it is a characteristic of: (A)activity-based costing only, (T)traditional costing only, (B)both traditional and activity-based costing, or (X)neither traditional nor activity-based costing. ____ 1. Allocates direct costs to cost of goods sold ____ 2. Assigns manufacturing production costs to individual units in inventory ____ 3. Attempts to trace costs more accurately to products, product lines or departments ____ 4. Can employ multiple cost pools ____ 5. Commonly uses labour or machine hours as a cost allocation base ____ 6. Costs are assigned to units in the first stage; units to inventory in the second ____ 7. Requires judgment to develop allocation rates ____ 8. Multiple cost pools and drivers are used in the allocation process ____ 9. Originally developed primarily to assign costs to products for financial reporting ____ 10. Overhead costs are first assigned to pools, then allocated to individual units

Cost accounting systems were originally developed to:

Which of the following activities involves managing a plant, area, or location within an organization?

Tutors-R-Us provides academic enrichment and review activities for high school students in 4 subject areas: English, mathematics, science, and history. In November 20x1, the firm's information system produced the following data: Number of Number of Percent of Direct Tutors Students Faculty Costs English 4 20 10% $ 6,000 Mathematics 3 24 25 8,000 Science 5 15 50 12,000 History 2 8 15 3,000 Regardless of subject area, clients pay $50 per hour for tutoring services. Costs associated with the Tutors-R-Us operations for November 20x1 included: Facility rent $2,500 Custodial services 1,800 Utilities 600 Computer equipment amortization 800 Advertising 400 Assume Tutors-R-Us allocates facility rent, custodial services, and utilities on the basis of square metres occupied and computer equipment amortization on the basis of number of students. Advertising is not allocated. If students received 200 hours of mathematics tutoring in November 20x1, what will the total profit from mathematics tutoring be for the same period?

(CMA)Flagler Corporation is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the amount of overhead that should be assigned to the individual product lines from the information given as follows: Wall Mirrors Specialty Windows Units produced 25 25 Material moves per product line 5 15 Direct labour hours per unit 200 200 Budgeted materials handling costs are $50,000. Under activity-based costing (ABC), the materials handling costs assigned to one unit of wall mirrors would be:

The process of using ABC information to evaluate the costs and benefits of production and internal support activities is called:

When implementing an ABC system, the accounting information system may require modifications to

Tutors-R-Us provides academic enrichment and review activities for high school students in 4 subject areas: English, mathematics, science, and history. In November 20x1, the firm's information system produced the following data: Number of Number of Percent of Direct Tutors Students Faculty Costs English 4 20 10% $ 6,000 Mathematics 3 24 25 8,000 Science 5 15 50 12,000 History 2 8 15 3,000 Regardless of subject area, clients pay $50 per hour for tutoring services. Costs associated with the Tutors-R-Us operations for November 20x1 included: Facility rent $2,500 Custodial services 1,800 Utilities 600 Computer equipment amortization 800 Advertising 400 The number of students in each area is most likely to be a cost driver for:

All of the following are quality-related activities except:

The managers of HRY Corporation are analyzing some of their corporate costs to determine the costs of each department's use of administrative services. The accountant wants to allocate the costs of payroll processing using an activity-based costing system. The most appropriate cost driver for the payroll processing cost pool is the:

Uncertainties associated with ABC and ABM include: I. The appropriate choice of activities II. The appropriate choice of cost drivers III. Employee response to the system

Which costs are least likely to be allocated to units under ABC?

Tutors-R-Us provides academic enrichment and review activities for high school students in 4 subject areas: English, mathematics, science, and history. In November 20x1, the firm's information system produced the following data: Number of Number of Percent of Direct Tutors Students Faculty Costs English 4 20 10% $ 6,000 Mathematics 3 24 25 8,000 Science 5 15 50 12,000 History 2 8 15 3,000 Regardless of subject area, clients pay $50 per hour for tutoring services. Costs associated with the Tutors-R-Us operations for November 20x1 included: Facility rent $2,500 Custodial services 1,800 Utilities 600 Computer equipment amortization 800 Advertising 400 If the number of tutors in each area is the cost driver for custodial services, the total custodial services cost allocated to history would be:

The FSOJ Company undertakes the following activities in its production operation and incurred the following costs during the first half of 20x2: Harvest apples $25,000 Prepare apples for processing 20,000 Extract juice from apples 18,000 Process juice into apple juice concentrate, Apple juice or apple cider 30,000 Package completed products 9,000 Processing the juice into 3 final products involves the use of 2 machines, each of which incurred amortization costs of $15,000 for the first half of 20x2. Each product requires a different set up on the processing machines, so FSOJ normally sets up the machines to produce concentrate for the first week of each month. The machine is then set up to produce apple juice for the next 2 weeks. Finally, workers set up the same machines to produce apple cider during the last week of each month. During the first half of 20x2, 20% of the apples harvested were turned into apple juice concentrate, 50% were processed into apple juice, and 30% became apple cider. The relative sales values of each product were: 75% for apple juice, 20% for apple juice concentrate, and 5% for apple cider. The apple juice concentrate operation takes up 40% of FSOJ's total factory space. Regular apple juice and apple cider occupy 35% and 25%, respectively. If juice extraction costs are allocated to product lines based on relative sales values, that is, each product line's portion of total sales, the amount allocated to apple cider will be:

In an ABC system, flexible costs: