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Exam 4: Activity-Based Costing and Cost Management

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Question 41

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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?

A) $20
B) $25
C) $32
D) $45

E) B) and D)
F) B) and C)

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Question 42

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An activity cost driver is:

A) a measure of the underlying activity that occurs in each activity cost pool.
B) a measure of the volume of units produced or customers sold.
C) a number of activities combined into one cost pool.
D) the cost assigned to an activity.

E) B) and C)
F) A) and B)

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Question 43

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Internal failure costs result from defects that are caught during the inspection process.

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.

Elmwood Company has identified seven activities as part of its manufacturing process and chosen corresponding activity drivers for each activity.The chart below lists the total cost of each activity,the amount of activity driver used for each of Elmwood's two products,the activity rate,and the activity cost assigned to each product.Fill in the blanks below:

Sonora,Inc.is launching a new product that it estimates will sell for $25 per unit.Annual demand is estimated to be 70,000 units.Sonora estimates that using its current manufacturing technology,it can manufacture the units for $23 per unit,but if it purchases a new machine,the units can be manufactured for $22 per unit.Sonora has a target profit of 20% return on sales.Under target costing,what is the target cost for the new product?

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

Atlanta Systems produces two different products,Product A,which sells for $250 per unit,and Product B,which sells for $400 per unit,using three different activities: Design,which uses Engineering Hours as an activity driver;Machining,which uses machine hours as an activity driver;and Inspection,which uses number of batches as an activity driver.The cost of each activity and usage of the activity drivers are as follows: Atlanta manufactures 10,000 units of Product A and 7,500 units of Product B per month.Each unit of Product A uses $100 of direct materials and $45 of direct labor,while each unit of Product B uses $140 of direct materials and $75 of direct labor. Required: a.Calculate the activity rate for Design. b.Calculate the activity rate for Machining. c.Calculate the activity rate for Inspection. d.Determine the indirect costs assigned to Product A. e.Determine the indirect costs assigned to Product B. f.Determine the manufacturing cost per unit for Product A. g.Determine the manufacturing cost per unit for Product B. h.Determine the gross profit per unit for Product A. i.Determine the gross profit per unit for Product B.

A volume-based allocation measure would vary proportionately with:

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

A just-in-time (JIT)system is a demand-push system.

Fremont Systems produces two different products,Product A,which sells for $1,000 per unit,and Product B,which sells for $2,000 per unit,using three different activities: Design,which uses Engineering Hours as an activity driver;Machining,which uses machine hours as an activity driver;and Inspection,which uses number of batches as an activity driver.The cost of each activity and usage of the activity drivers are as follows: Fremont manufactures 10,000 units of Product A and 7,500 units of Product B per month.Each unit of Product A uses $500 of direct materials and $200 of direct labor,while each unit of Product B uses $750 of direct materials and $350 of direct labor. Required: a.Calculate the activity rate for Design. b.Calculate the activity rate for Machining. c.Calculate the activity rate for Inspection. d.Determine the indirect costs assigned to Product A. e.Determine the indirect costs assigned to Product B. f.Determine the manufacturing cost per unit for Product A. g.Determine the manufacturing cost per unit for Product B. h.Determine the gross profit per unit for Product A. i.Determine the gross profit per unit for Product B.

An activity that is performed to support a specific product line is a(n) :

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 Machining activity is used by Product Z?

The cost of scrap and rework is an example of what type of quality cost?

Which of the following involves analyzing the market and estimating what consumers will be willing to pay for a product with specific features?

Yuma,Inc.manufactures teddy bears and dolls.Currently,Yuma makes 2,000 teddy bears each month.Each teddy bear uses $2.00 in direct materials and $0.50 in direct labor.Yuma uses two activities in manufacturing the teddy bears: Sewing and Processing.The cost associated with Sewing is $15,000 a month,allocated on the basis of direct labor hours.The cost associated with Processing is $10,000 a month,allocated on the basis of batches.Teddy bears use 1/2 of the direct labor hours,and 35% of total batches.What is the total manufacturing cost for one teddy bear?

Chipman Inc.produces water pumps.Overhead costs have been identified as follows: Chipman makes 3 models of pumps with the following details: Required: a.Calculate the activity rate for each activity. b.Determine the amount of indirect costs assigned to each of the products.

Which of the following statements is correct about the differences between a volume-based cost system and an ABC system?

Which of the following is not a type of quality cost?