Exam 5: Cost Management in an Automated Business Environment: Abc, Abm, and Tqm

Which of the following statements regarding activity-based cost drivers is correct?

Which of the following statements regarding unit-level activities is (are) true? I. Unit-level activities occur each time a batch of units is produced.II. Unit-level costs follow a variable cost behavior pattern.III. Unit-level activities benefit the production as a whole and are not related to any specific product.

Sanford Tools produces a variety of scissors and other cutting instruments at its Birmingham manufacturing plant. The plant is highly automated and uses an activity-based costing system to allocate overhead costs to its various product lines. The company expects to produce 24,000 total units during the current period. The costs and cost drivers associated with four activity cost pools are given below: Production of 1,000 units of a pipe-cutting tool required 400 labor hours, 10 setups, and consumed 30% of the product sustaining activities and resulted in an overhead allocation of $15,400. What amount of batch-level overhead costs was expected during the period? ACTIVITIES: UNIT BATCH PRODUCT FACILITY LEVEL LEVEL Cost \ 50,000 ? \ 10,000 \ 120,000 river 4,000 labor hrs 100 set ups \% of use 24,000

Select from the list provided the term that best matches each of the following descriptions.

Compared to a traditional two-stage cost allocation system, activity-based costing systems:

In an activity-based costing system, a volume-based cost driver is appropriate for product-level activities.

Which of the following is an appropriate cost driver for setting up production equipment for a production run?

The first step in implementing an activity-based costing system is to trace overhead costs to one or more departments.

What is the purpose of target pricing? What are the steps in target pricing?

Managing quality costs to achieve the highest level of customer satisfaction is known as:

Discuss how an increase in one or more quality cost(s) can decrease others.Cost(s)Agree. Change made. JMF

Legal costs to file design patents are an example of a(n):

In a highly automated manufacturing company, labor costs vary considerably with volume of production.

What is the reasoning behind the use of cost pools in an activity-based costing system?

A product-level activity center would likely include all of the following costs except:

Hazel Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $8,000 to two different jobs as follows: Job 1: (10 hours) = $4,000; Job 2: (10 hours) = $4,000 The production process for Job 2 was then automated. Now Job 2 requires only two hours of direct labor but four hours of mechanical processing. As a result, total overhead increases to $12,000. Select the incorrect statement from the following.

The objective of target pricing is to establish a price that will maximize profits given existing costs.

Downstream costs are not relevant to a product elimination decision.

The term "quality" refers to the degree to which products or services exceed customer expectations.

What is the basic premise behind activity-based costing systems (ABC)? What is an activity? Describe how ABC systems work.