Exam 10: Fundamentals of Cost Management

Sullivan Inc.reports the following information about resources.At the beginning of the year,Sullivan estimated it would spend $180,000 for materials,$42,000 for purchasing,$35,000 for setups,and $36,000 for repairs. Compute unused resource capacity for setups for Sullivan.

External failure activities:

QC Enterprises quality control report for August contains the following items. What would be the total of the prevention costs on the August quality control report for QC Enterprises?

Theoretical capacity is the long-run expected volume based on reasonably attainable working conditions.Theoretical is based on ideal or perfect conditions.

QC Enterprises quality control report for August contains the following items. What would be the total of the appraisal costs on the August quality control report for QC Enterprises?

Managerial decisions based on activity-based costing (ABC)information affect only volume-level,batch-level,and product-level costs.Capacity-level costs are also affected.

Unused resource capacity plus the amount of the resources used is equal to the amount of resources supplied.Unused + Used = total available

Chang Inc.has developed the following unit costs for the production of one of its products,based on a normal activity of 10,000 units per month: What is the total amount of overhead included in the overhead budget for a month in which production is expected to be 11,000 units?

Storing materials,work-in-process items,and finished goods in inventory are essential,value-added activities in most companies.These are all nonvalue-added activities.

Activity-based cost management (ABM)can best be defined as:

Activity-based costing (ABC)can be used to provide information for managerial decision-making in service,merchandising,and manufacturing companies.ABC is not limited to just manufacturing companies.

Which of the following is an appraisal activity?

MJK Molding is a specialty molder of plastic jar covers for the cosmetics industry.Because the products sold are expensive cosmetics,the large cosmetic companies who purchase the jar covers are highly sensitive to the appearance of the product.Any cuts,nicks,abrasions,or pieces of dirt embedded will result in rejection of the units.The company spends a significant amount of time in the quality control area.The following list of sub-activities has been developed for quality control: In an activity listing with value-added scores:

Rogers Company is preparing its annual profit plan.As part of its analysis of the cost of its purchasing activity,management estimates that the $48,000 for purchasing support should be assigned to the individual vendors from the information given as follows: What is the amount of the purchasing costs that should be allocated to Vendor B,assuming Rogers uses units purchased to compute activity-based costs?

Yellow Industries decides to price delivery service according to the results of a recent activity-based costing (ABC)study.The study indicates Yellow should charge $8 per order,2% of the order's value for general delivery costs,$1.25 per item,and $30 for delivery.A year later,Yellow collected the following information for two of its best customers: What are the total delivery costs charged to Customer D during the year?

Which of the following statements is(are)true? (A)Theoretical capacity is the long-run expected volume based on reasonably attainable working conditions.(B)The cost of excess capacity is allocated to individual cost objects using the cost driver rate.

Unused capacity costs incurred for the benefit of a company's customers (e.g. ,meet seasonal demands)should be assigned to the customers that require (use)the excess capacity.This is the concept of matching costs with the object that benefits from it.

Activity-based costing (ABC)information cannot be used by managerial decision-makers to evaluate the:

Black Company's cost management and product costing procedures follow activity-based costing (ABC)principles.Activities have been identified and classified as being either value-added or nonvalue-added for each product.Which of the following activities,used in Black's production process,is nonvalue-added? (CPA adapted)

Which of the following statements about activity-based costing (ABC)is not true? (CIA adapted)