Exam 8: Process Costing Systems

Bristol Electronics produces wide range of electronic products. The company has a labour based costing system that was introduced in the 1970s and is now considering implementing an activity based costing (ABC) system. Managers are concerned about how they should compare the ABC data with the existing costing system. Selected data from the management accounts for the year ending 31st December 2000 Cost data Total manufacturing overhead for year £1,000,000 Total hours for year 60,000 hours Direct labour cost per hour £10 Data for 3 products only Product A F roduct B Product C Annual production 1,000 units 2,000 units 5,000 units Material cost per unit £5.00 £6.00 £7.00 Direct labour hours per unit 1.00 1.50 0.50 ABC data for all products Cost pool / driver Annual costs (£s) Annual volume Number of set-ups 200,000 1,000 Inspection time (hours) 500,000 3,000 Machine maintenance (hours) 100,000 5,000 Number of purchases 100,000 500 Number of shipments 100,000 500 1,000,000 ABC data 3 products Froduct A Froduct B Froduct C Number of set-ups 20 180 30 Inspection time (hours) 20 50 300 Machine maintenance (hours) 30 40 20 Number of purchases 3 4 5 Number of shipments 3 4 6 - Determine the total unit cost for product C using the number of hours to apply overhead

Bristol Electronics produces wide range of electronic products. The company has a labour based costing system that was introduced in the 1970s and is now considering implementing an activity based costing (ABC) system. Managers are concerned about how they should compare the ABC data with the existing costing system. Selected data from the management accounts for the year ending 31st December 2000 Cost data Total manufacturing overhead for year £1,000,000 Total hours for year 60,000 hours Direct labour cost per hour £10 Data for 3 products only Product A F roduct B Product C Annual production 1,000 units 2,000 units 5,000 units Material cost per unit £5.00 £6.00 £7.00 Direct labour hours per unit 1.00 1.50 0.50 ABC data for all products Cost pool / driver Annual costs (£s) Annual volume Number of set-ups 200,000 1,000 Inspection time (hours) 500,000 3,000 Machine maintenance (hours) 100,000 5,000 Number of purchases 100,000 500 Number of shipments 100,000 500 1,000,000 ABC data 3 products Froduct A Froduct B Froduct C Number of set-ups 20 180 30 Inspection time (hours) 20 50 300 Machine maintenance (hours) 30 40 20 Number of purchases 3 4 5 Number of shipments 3 4 6 - Determine the total overhead cost for product B using the number of hours to apply overhead

Angel Corporation uses activity-based costing to determine product costs for external financial reports. The company has provided the following data concerning its activity-based costing system: Estimated Activity Cost Pools (and Activit Measures overheadCost Machine related (machine-hours) £81,600 Batch setup (setups). £387,000 General factory (direct labour-hours). £274,800 $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$ $\quad$$\text { Expected Activity }$ Activity Cost Pools Total Product X Product Y Machine related. 8,000 3,000 5,000 Batch setup. 10,000 2,000 8,000 General factory. 12,000 7,000 5,000 The activity rate for the batch setup activity cost pool is closest to:

If a cost object such as a product or customer has a negative red margin, then

ABC is mainly limited to cost cutting exercises. Discuss.

In activity-based costing, activity (i.e., overhead) rates must be computed on the basis of the budgeted or the expected activity of the period

Managing and sustaining product diversity requires many more overhead resources such as production schedulers and product design engineers than managing and sustaining a single product. The costs of these resources can be accurately allocated to products on the basis of direct labour-hours

A duration driver is

Nick Company has two products: A andB. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: Estimated Expected Activity Activity Cost Pool cost ProductA Product B Total Activity 1. £32,600 700 300 1,000 Activity 2. £17,600 600 200 800 Activity 3. £52,500 400 100 500 The activity rate under the activity-based costing system for Activity 3 is closest to

Bristol Electronics produces wide range of electronic products. The company has a labour based costing system that was introduced in the 1970s and is now considering implementing an activity based costing (ABC) system. Managers are concerned about how they should compare the ABC data with the existing costing system. Selected data from the management accounts for the year ending 31st December 2000 Cost data Total manufacturing overhead for year £1,000,000 Total hours for year 60,000 hours Direct labour cost per hour £10 Data for 3 products only Product A F roduct B Product C Annual production 1,000 units 2,000 units 5,000 units Material cost per unit £5.00 £6.00 £7.00 Direct labour hours per unit 1.00 1.50 0.50 ABC data for all products Cost pool / driver Annual costs (£s) Annual volume Number of set-ups 200,000 1,000 Inspection time (hours) 500,000 3,000 Machine maintenance (hours) 100,000 5,000 Number of purchases 100,000 500 Number of shipments 100,000 500 1,000,000 ABC data 3 products Froduct A Froduct B Froduct C Number of set-ups 20 180 30 Inspection time (hours) 20 50 300 Machine maintenance (hours) 30 40 20 Number of purchases 3 4 5 Number of shipments 3 4 6 -Determine the total overhead cost for product C using the using the activity based data

When combining activities in an activity-based costing system, batch-level activities should be combined with unit-level activities whenever possible

Property taxes and insurance is an example of a cost that would be considered to be

Matt Company uses activity-based costing. The company has two products: A andB. The annual production and sales of Product A is 8,000 units and of Product B is 6,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\text { Estimated \quad\quad\quad Expectedactivity }$ Activity CostPool Cost ProductA Product B Total Activity1 £20,000 100 400 500 Activity2 £37,000 800 200 1,000 Activity3 £91,200 800 3,000 3,800 The cost per unit of Product A under activity-based costing is closest to

Jasmine Company uses activity-based costing. The company has two products: A andB. The annual production and sales of Product A is 10,000 units and of Product B is 4,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows: Estimated Expected Activity Activity CostPool Cost ProductA Product B Total Activity 1 £25,000 150 100 250 Activity 2. £65,000 800 200 1,000 Activity 3 £90,000 1,000 2,000 3,000 The cost per unit of Product A under activity-based costing is closest to

Which of the following activities would be classified as a batch-level activity in the Lindsey Company

Which of the following statements concerning ease of adjustment codes is incorrect

Bristol Electronics produces wide range of electronic products. The company has a labour based costing system that was introduced in the 1970s and is now considering implementing an activity based costing (ABC) system. Managers are concerned about how they should compare the ABC data with the existing costing system. Selected data from the management accounts for the year ending 31st December 2000 Cost data Total manufacturing overhead for year £1,000,000 Total hours for year 60,000 hours Direct labour cost per hour £10 Data for 3 products only Product A F roduct B Product C Annual production 1,000 units 2,000 units 5,000 units Material cost per unit £5.00 £6.00 £7.00 Direct labour hours per unit 1.00 1.50 0.50 ABC data for all products Cost pool / driver Annual costs (£s) Annual volume Number of set-ups 200,000 1,000 Inspection time (hours) 500,000 3,000 Machine maintenance (hours) 100,000 5,000 Number of purchases 100,000 500 Number of shipments 100,000 500 1,000,000 ABC data 3 products Froduct A Froduct B Froduct C Number of set-ups 20 180 30 Inspection time (hours) 20 50 300 Machine maintenance (hours) 30 40 20 Number of purchases 3 4 5 Number of shipments 3 4 6 - Determine the total unit cost for product C using the activity based data

Selena Company has two products: A andB. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: Estimated Expected Activity Activity Cost Pool cost ProductA Product B Total Activity 1. £17,600 800 300 1,100 Activity 2. £12,000 500 200 700 Activity 3. £26,000 800 400 1,200 The activity rate under the activity-based costing system for Activity 3 is closest to

Leeds Catering uses activity-based costing for its overhead costs. The company has provided the following data concerning the activity rates in its activity-based costing system: Activity Cost Pools Preparing Arranging Meals Functions Wages £0.80 £180.00 Supplies £0.40 £290.00 Other expenses. £0.20 £140.00 The number of meals served is the measure of activity for the Preparing Meals activity cost pool. The number of functions catered is used as the activity measure for the Arranging Functions activity cost pool. Management would like to know whether the company made any money on a recent function at which 90 meals were served. The company catered the function for a fixed price of £25.00 per meal. The cost of the raw ingredients for the meals was £13.90 per meal. This cost is in addition to the costs of wages, supplies, and other expenses detailed above. For the purposes of preparing action analyses, management has assigned ease of adjustment codes to the costs as follows: wages are classified as a Yellow cost; supplies and raw ingredients as a Green cost; and other expenses as a Red cost. Suppose an action analysis report is prepared for the function mentioned above. - What would be the 'yellow margin' in the action analysis report? (Round to the nearest whole pound.)

If a cost object such as a product or customer has a positive red margin, then