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Exam 4: Activity-Based Costing and Cost Management

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Question 41

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

A) batch-level activity.
B) facility-level activity.
C) product-level activity.
D) unit-level activity.

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

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Question 42

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Parsons and Sons Woodworks manufactures baseball bats and wooden tops.Currently,Parsons and Sons makes 5,000 baseball bats each month.Each bat uses $1.00 in direct materials and $0.50 in direct labor.Parsons and Sons 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.Baseball bats use 1/3 of the direct labor hours,and 40% of total batches.What is the total manufacturing cost for one baseball bat?

A) $1.46
B) $1.50
C) $2.96
D) $3.94

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

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Question 43

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Pima,Inc.manufactures calculators that sell for $40 each.Each calculator uses $15 in direct materials and $5 in direct labor per unit.Pima has two activities: Machining,which is applied at the rate of $4 per machine hour,and Finishing,which is applied at the rate of $20 per batch.This month,Pima made 400 calculators,using 1,000 machine hours in 40 batches.What is the total manufacturing cost for one calculator?

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.

Under activity based management,cost management is achieved by

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

Life cycle cost management takes into consideration the fact that costs and revenues

In target costing,the target cost should be determined before manufacturing ever starts.Determining cost before manufacturing starts enables the firm to better plan manufacturing costs.

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

An activity that is performed for a specific customer is a(n)

Activity-based costing is not appropriate for service providers since they do not have manufacturing overhead that needs to be assigned to products.Although service providers do not have manufacturing overhead,they incur many indirect costs,such as rent,supplies,supervision,advertising,and administrative expenses.ABC can be used to assign these costs to different services and customers.

A value-added activity is one that enhances the perceived value of the product or service to the customer.This is the definition of a value-added activity.

When is a volume-based cost system appropriate for a service company?

Calverton,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 is assigned $150,000 in Machining cost,and $22,500 in Inspection cost.What proportion of Inspection activity is used by Standard?

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 first scheduled Zumba class is considered a ___________ activity for Garfield.

Prevention costs are incurred to prevent quality problems from occurring in the first place.This is the definition of prevention costs.

Internal failure costs result from defects that are caught before the product is shipped to the customer.This is the definition of internal failure costs.

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

Sherman,Inc.manufactures chainsaws that sell for $58.Each chainsaw uses $10 in direct materials and $3 in direct labor per unit.Sherman has two activities: Machining,which is applied at the rate of $2 per machine hour,and Finishing,which is applied at the rate of $20 per batch.This month,Sherman made 200 chainsaws,using 1,000 machine hours in 40 batches.What is the gross profit for one chainsaw?

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?