Exam 4: Cost Management Systems and Activity-Based Costing

Having only one cost driver is acceptable when indirect manufacturing costs are very large as compared to total costs.

Cost of goods manufactured is computed as:

is not a direct cost of a furniture manufacturer.

The Joshua Company has gathered the following information: Sales \ 124,000 Direct materials used 25,800 Direct labor 15,200 Fixed: Factory overhead 12,400 Selling exp enses 4,200 Administrative expenses 8,600 Variable: Factory overhead 6,600 Selling expenses 8,800 Administrative expenses 4,600 There were no beginning or ending inventories. Calculate the following: a. Contribution margin b. Gross margin c. Total product cost d. Total period cost

Product costs include direct labor and conversion costs.

Goods undergoing the production process but not yet fully completed

The application of computer technology has increased the number and amount of indirect costs.

is an example of the external financial reporting purpose of the cost management systems.

A cost pool is a group of individual costs that is allocated to cost objectives using a single cost driver.

Baylor Corporation had the following activities, traceable costs, and physical flow of driver units: Traceable Physical Flow of Activities Costs DriverUnits Account inquiry (hours) \ 8,000 500 hours Account billing(lines) 5,600 200,000 lines Account verification (accounts) 3,000 2,000 accounts Correspondence (letters) 1,000 200 letters The above activities are used by departments A and B as follows: A B Account inquiry (hours) 50 hours 80 hours Account billing (lines) 25,000 lines 20,000 lines Account verification (accounts) 200 contracts 100 contracts Correspondence (letters) 20 letters 100 letters The account inquiry cost assigned to Department A is:

For a merchandising company, factory insurance and depreciation are product costs.

County Bank had the following activities, traceable costs, and physical flow of driver units: Traceable Physical Flow of Activities Costs DriverUnits Open new accounts \ 50,000 1,000 accounts Process deposits 36,000 400,000 deposits Process with dr aw als 15,000 200,000 withdrawals Process loan applications 27,000 90 applications The above activities are used by North County branch and South County branch: North South New accounts 200 400 Deposits 40,000 20,000 With drawals 15,000 18,000 Loan applications 100 160 The new account cost assigned to South County branch is:

Companies do not make strategic and operational control decisions simultaneously.

Whenever economically feasible, managers prefer costs to be indirect rather than direct.

A cost accounting system typically includes two processes: cost allocation and cost determination.

would appear on an income statement of both a retailer and a manufacturer.

Rams Manufacturing Company purchased $34,000 of direct materials and incurred $9,600 of direct labor costs during the year. Indirect labor amounted to $1,000 while indirect materials totaled $1,200. Other operating expenses pertaining to the factory included utilities of $1,280, maintenance of $1,840, supplies of $720, depreciation of $6,040, and property taxes of $1,160. The only inventory was $5,000 of finished goods at year end. The cost of goods sold is:

The more costs that are determined to be direct, the less accurate the product or service costs.

is a name for a system that first accumulates overhead costs for each of the activities of an organization, and then assigns the costs of activities to the products, services, or other cost objects that caused that activity.

Handling and storing inventories and transporting finished goods from one part of the plant to another are examples of nonvalue- added activities.