Exam 10: Activity Analysis: Costing and Management

Fonesforall Ltd manufactures and sells mobile phones. Which of the following activities is least likely to be considered a value-added activity for BVH?

Generally the costs of ABC are higher when there are fewer activities in the businesses processes.

ABC are more costly to develop when activities:

How can ABM be used to manage constrained resources?

Accountants need to consider cost benefit trade-offs when choosing activities and cost drivers in an ABC system.

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. Assume processing costs are allocated on the basis of number of machine setups. How much processing cost will be allocated to each product line?

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. Extracting juice from oranges is done by one machine. A possible cost driver for the extracting juice for processing 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 Which cost listed above is most likely to be a unit level cost?

The managers of Financial Burden Ltd are analysing some of their corporate costs to determine the costs of each department's use of administrative services. The accountant wants to allocate the costs of payroll processing using an activity-based costing system. The most appropriate cost driver for the payroll processing cost pool is the:

ABC can be used to separate committed costs from flexible costs.

Materials handling is an example of an activity for a manufacturing organisation

The salary of the manager of Information Technology Services in a multinational organisation is:

ABC systems are typically associated with:

Administration-sustaining is a category in the cost hierarchy in ABC.

Both activity-based costing and traditional costing allocate direct costs to cost objects.

Which of the following is not a benefit of an ABC system?

ABC has been found to be helpful in increasing the accuracy of overhead cost allocation in manufacturing firms.

Activity based costing uses a cost ______________ to help identify activities and assign costs to activities.

How are direct and overhead costs assigned to cost objects under activity based costing systems? a. Allocate Trace b. Trace Allocate c. Allocate Allocate d. Trace Trace

It is impossible to identify the exact amount of cost associated with each activity when using allocated costs.