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Exam 4: Activity-Based Cost Management

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Question 41

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Managers who use activity-based management should begin by asking all of the following questions except:

A) "What activities does the company perform?"
B) "How much does it cost to perform each activity?"
C) "How am I evaluated annually based on these activities?"
D) "Does the activity add value to the customer?"

E) B) and C)
F) None of the above

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Question 42

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Which of the following best defines a facility-level activity?

A) An activity that is performed to support the entire company
B) An activity that is performed to support a specific product line
C) An activity that is performed for each individual unit
D) An activity that is performed for a group of units all at once

E) A) and C)
F) C) and D)

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Question 43

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The cost of quality training is an example of what type of quality cost?

In target costing, the target cost should be determined:

Hadley, Inc. manufactures a product that uses $15 in direct materials and $5 in direct labor per unit. Under the traditional costing system Hadley uses, manufacturing overhead applied to each unit is $12. However, Hadley is considering switching to an ABC system. Under the ABC system, the total activity cost would be $25. What is the total manufacturing cost per unit for Hadley under the ABC system?

Under activity based management, cost management is achieved by:

The purpose of Stage 1 allocations is to:

Monroe, Inc. randomly selects ten units from each production run to be inspected for quality, regardless of the size of the production run. The inspection of these units would most likely be classified as a:

Each individual indirect cost should be assigned to one activity when forming activity cost pools

Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Standard?

Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows: What proportion of Inspection activity is used by Product Z?

Parker Woodworks manufactures baseball bats and wooden tops. Currently, Parker makes 5,000 baseball bats each month. Each bat uses $1.00 in direct materials and $0.50 in direct labor. Parker uses two activities in manufacturing the baseball bats: Cutting and Finishing. The cost associated with Cutting is $7,500 a month, allocated on the basis of direct labor hours. The cost associated with Finishing is $12,000 a month, allocated on the basis of batches. The activity drivers are used as follows: Baseball bats Wooden tops Direct labor hours 100 200 Batches 4 6 What is the total manufacturing cost for one baseball bat?

Which of the following would not be directly related to a volume-based allocation measure?

In a traditional volume-based cost system, total manufacturing costs are calculated by:

The gross margin is calculated by subtracting total nonmanufacturing cost per unit from the unit sales price

Garfield Personal Training Services is owned by Gina Garfield. Gina provides personal training and coaching to individuals or small groups using the local fitness facility and pool. Gina rents the group training room at the local fitness facility or the pool for scheduled classes. For one-on-one training, she meets clients at the fitness facility where she is a member. Gina is currently learning Zumba and plans to offer a Zumba class in the group training room on Wednesday mornings starting next month. The development of Zumba is considered a ___________ activity for Garfield.

Firms that use JIT often rely on:

An activity that is performed to benefit the organization as a whole is a(n) :

Which of the following is not true of activity cost drivers?

Carter, Inc. produces two different products, Product A and Product B. Carter uses a traditional volume-based costing system in which direct labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufacturing overhead cost of $1,000,000 across three activities: Design, Production, and Inspection. Under the traditional volume-based costing system, the predetermined overhead rate is $2.50/direct labor hour. Under the ABC system, the rate for each activity and usage of the activity drivers are as follows: Required: a. Calculate the indirect manufacturing costs assigned to Product A under the traditional costing system. b. Calculate the indirect manufacturing costs assigned to Product B under the traditional costing system c. Calculate the indirect manufacturing costs assigned to Product A under the ABC system. d. Calculate the indirect manufacturing costs assigned to Product B under the ABC system. e. Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC?