Exam 4: Cost Management Systems and Activity-Based Costing

Benchmarking is the continuous process of comparing products, services, and activities to the average industry standards.

Companies try to maximize nonvalue- added costs.

Period costs and product costs:

is a true statement.

is the process of measuring products, services, and activities against the best levels of performance.

Opie Corporation has gathered the following information for the year ended December 31, 20X0: Sales \ 38,400 Direct material s used 7,340 Direct labor 3,040 Fixed: Factory overhead 2,480 Selling expenses 840 Administrative expenses 1,720 Variable: Factory overhead 12,470 Selling expenses 1,580 Administrative expenses 1,230 There were no beginning or ending inventories. The total product costs are:

The finished goods inventory account is only found on the balance sheet.

Traditional costing systems work well with complex production and operating systems.

In designing an ABC system, at least one cost driver must be determined for every activity.

is an example of the operational purpose of the cost management system.

Clyde Corporation has gathered the following information for the year ended December 31, 20X0: Sales \ 38,400 Direct materials used 7,340 Direct labor 3,040 Fixed: Factory overhead 2,480 Selling expenses 840 Administrative expens es 1,720 Variable: Factory overhead 1,320 Selling expenses 1,760 Administrative expenses 920 There were no beginning or ending inventories. The total conversion costs are:

Rams 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 $2,720 of finished goods at year end. The cost of goods manufactured is:

A manufacturing firm typically has inventory account(s).

are considered conversion costs.

Two- stage ABC systems use operational information more than multistage ABC systems.

A reason that more organizations in manufacturing and nonmanufacturing industries are adopting activity- based costing systems is that new production techniques have decreased the proportion of indirect costs.

Period costs become expenses during the current period.

Direct manufacturing costs are the same as manufacturing overhead costs.

The following information was extracted from the accounting records of Chamberlain Company: Direct materials purchased \ 80,000 Direct materials used 76,000 Direct manuf acturing labor costs 10,000 Indirect manufacturing lab or costs 12,000 Sales sal aries 14,000 Other factory expenses 22,000 Selling and administrative expens es 20,000 The finished goods inventory was $0 at the beginning of the period and $15,000 at the end of the period. The cost of goods sold is:

Multistage ABC systems: