Exam 10: Activity Analysis: Costing and Management

Which of the following is not part of the process used to assign costs in an ABC system?

Symphonix Corporation is preparing its annual budget. As part of its analysis of the contribution of individual products to overall profitability, the controller estimates the amount of overhead that should be assigned to the individual product lines. Budgeted inspection costs are $12,000. Additional information is as follows: Small Pumps Large Pumps Units inspected 120 120 Hours spent inspecting 2.5 17.5 Direct labor hours per unit 2 2 Under a traditional costing system that assigns overhead on the basis of units inspected, the inspection costs allocated to one small pump 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 If Century Point is the cost object, which of the following best describes the cleaning and maintenance costs.

Manufacturing overhead costs include:

When implementing an ABC system, the costs attached are generally higher when:

Characteristics of customers with high service costs include purchasing small quantities or requiring flexible delivery times.

The allocation bases used in conventional costing systems are more likely to be cost drivers than those used in ABC systems.

Compared to an activity-based costing system, a traditional costing system usually involves:

The cost of implementing an ABC system is likely to be lower if the number of times an activity is performed:

Manufacturing firm managers generally believe that ABC provides less support for financial, operational and strategic decisions.

A takeaway shop invests in a marketing campaign to advertise the launch of a new hamburger called the Monster Burger. This is an example of a product sustaining cost.

Activity based management can be used to manage constrained resources.

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 What is the ABC allocation rate for machining costs?

In an ABC system costs are first assigned to cost pools, then to cost objects.

When the number of ABC cost pools increase the risk of measurement error is higher.