Exam 10: Activity Analysis: Costing and Management

The best allocation base choice for an ABC cost pool is a(n):

Rework and waste are considered to be non-valued added activities.

Characteristics typical of customers with low service costs do not include:

Environmental protection costs are usually outside the control of managers.

Swim4Life provides swimming classes and training in South East Queensland. Swim4Life offers four training levels: Learn to Swim Baby, Learn to Swim Junior, Learn to Swim Senior, Swim Squad. In November 2019, the firm's information system produced the following data No of Swirn Teachers No of Students Area Occupied Number of Classes Direct Costs Baby 4 20 10\% 108 \ 1,000 Jurior 3 24 40\% 94 \ 1,500 Serior 5 15 20\% 84 \ 3,000 Squad 3 9 30\% 48 \ 1,000 Regardless of level, students pay $15 per hour for lessons. Only 5 swimmers can be supervised by the teacher in each lesson. Swim4Life also provides lessons to school students who come with their school during school hours. These lessons are provided at a discounted rate of $12 per child. Costs associated with the Swim4Life operations for November 2019 included: Facility rent $2,500 Provision of Life Savers $800 Utilities $1,100 Computer equipment depreciation $800 Advertising $400 Training $1,500 Which of the following could be a cost object for Swim4Life? I A student II A swim level III A high school class

Which of these do managers use in choosing activities and cost drivers to include in an ABC system?

Which of the following is not a use of Activity Based Management?

Cost accounting systems have adapted over time to accommodate changes in:

Depreciation on production machinery in a food processing facility is best described as a:

Swim4Life provides swimming classes and training in South East Queensland. Swim4Life offers four training levels: Learn to Swim Baby, Learn to Swim Junior, Learn to Swim Senior, Swim Squad. In November 2019, the firm's information system produced the following data No of Swirn Teachers No of Students Area Occupied Number of Classes Direct Costs Baby 4 20 10\% 108 \ 1,000 Jurior 3 24 40\% 94 \ 1,500 Serior 5 15 20\% 84 \ 3,000 Squad 3 9 30\% 48 \ 1,000 Regardless of level, students pay $15 per hour for lessons. Swim4Life also provides lessons to school students who come with their school during school hours. These lessons are provided at a discounted rate of $12 per child. However, during November no school's required lessons. Costs associated with the Swim4Life operations for November 2019 included: Facility rent $2,500 Provision of Life Savers $800 Utilities $1,100 Computer equipment depreciation $800 Advertising $400 Training $1,500 Assume Swim4Life allocates facility rent, and utilities on the basis of area occupied, computer equipment depreciation on the basis of number of students and training on the basis of number of swim teachers. Lifesaving is allocated based on the number of classes. Advertising is not allocated. The total amount of indirect costs allocated to senior classes is?

Direct labour was a common allocation base in traditional costing systems.

Swim4Life provides swimming classes and training in South East Queensland. Swim4Life offers four training levels: Learn to Swim Baby, Learn to Swim Junior, Learn to Swim Senior, Swim Squad. In November 2019, the firm's information system produced the following data No of Swirn Teachers No of Students Area Occupied Number of Classes Direct Costs Baby 4 20 10\% 108 \ 1,000 Jurior 3 24 40\% 94 \ 1,500 Serior 5 15 20\% 84 \ 3,000 Squad 3 9 30\% 48 \ 1,000 Regardless of level, students pay $15 per hour for lessons. Only 5 swimmers can be supervised by the teacher in each lesson. Swim4Life also provides lessons to school students who come with their school during school hours. These lessons are provided at a discounted rate of $12 per child. Costs associated with the Swim4Life operations for November 2019 included: Facility rent $2,500 Provision of Life Savers $800 Utilities $1,100 Computer equipment depreciation $800 Advertising $400 Training $1,500 If the number of swim teachers is the cost driver for training costs, the total training cost allocated to Learn to Swim Baby would be:

Century Point is a modern business club in the inner city of Brisbane. It is owned by Silvera Property Holdings, which operates additional properties in Auckland, Christchurch and Singapore. Century Point has 6 separate areas each with corporate facilities for various membership groups. Also on premises is a gymnasium, restaurant, and pool. The business club is organised in 5 departments: front desk, housekeeping, food & beverage, and customer relations. As part of its operation, Century Point regularly incurs the following costs: General Manager's salary Cleaning and maintenance costs Utility costs Depreciation on gym equipment Advertising Food and beverage costs Depreciation on restaurant equipment Century Point has been approached by a leading law firm to provide a specialised membership for their employees. Costs associated with this membership would best be described as:

Skyfire Manufacturing has two departments, Assembly and Testing. You are given the following information about the costs of 4 activities that occur at the manufacturing plant monthly: Material handling Supervision on of direct labor Maintenance and cleaning Machining Total costs \ 100,000 105,000 150,000 200,000 parts 70 employees 3,000 hours 6,000 machine hours The above activities are used by the two departments as follows: Material handling 150,000 parts 50,000 parts Supervision of direct labor 30 employees 40 employees Time spent cleaning 2,000 hours 1,000 hours Number of machine hours 4,000 machine hours 2,000 machine hours How much of the material handling cost will be allocated to Testing?

The benefits of ABC may be achieved through the process of collecting the required information, and embedding ABC into the costing system may be unnecessary.

Activity based costing attempts to trace costs more accurately to products or other cost objects.

All customers are equally profitable to an individual entity.

The Supreme Juice Company undertakes the following activities in its production operation and incurred the following costs during the first half of 2019: Harvest oranges \2 5,000 Prepare oranges for processing 20,000 Extract juice from oranges 18,000 Process juice into orange juice concentrate, 15,000 orange juice or orange smoothies Package completed products 9,000 Processing the juice into 3 final products involves the use of 2 machines, each of which incurred depreciation costs of $15,000 for the first half of 2019. Each product requires a different set up on the processing machines, so Supreme Juice normally sets up the machines to produce concentrate for the first week of each month. The machine is then set up to produce orange juice for the next 2 weeks. Finally, workers set up the same machines to produce orange smoothies during the last week of each month. During the first half of 2019, 30% of the oranges harvested were turned into orange juice concentrate, 45% were processed into orange juice, and 25% became orange smoothies. The relative sales values of each product were: 5% for orange juice, 20% for orange juice concentrate, and 10% for smoothies. The orange juice concentrate operation takes up 40% of Supreme Juice's total factory space. Regular orange juice and orange smoothies occupy 35% and 25%, respectively. Which of the following activities is likely to be classified as product-level?

Successful ABC implementations are typically accompanied by top management support, links to strategy and performance evaluation.

Activity based costing uses one cost pool to allocate costs.