Exam 4: Cost Management Systems and Activity-Based Costing

Costs that are deducted as expenses during the current period without going through an inventory stage

The change from traditional costing to activity- based costing may reveal that:

Goods fully completed but not yet sold

The Grinch Company has gathered the following information for the year ended December 31, 20X0: Sales \ 75,000 Direct materials used 12,900 Direct labor 5,200 Fixed: Factory overhead 6,400 Selling expenses 2,300 Administrative expenses 1,700 Variable: Factory overhead 3,300 Selling expenses 5,700 Administrative expenses 8,300 There were no beginning or ending inventories. The contribution margin is:

Work- in- process inventory usually decreases when finished goods inventory increases.

are the three major categories of manufacturing costs.

Red Company had the following total cost: Direct materials \ 130,000 Direct labor 90,000 Indirect manufacturing 80,000 Red has two departments, the Crimson Department and the Rose Department. The Crimson Department incurred 60% of the direct materials cost and 80% of the direct labor cost. Indirect manufacturing costs are assigned in the same proportion as the direct labor cost. a. Compute the total cost assigned to the Crimson Department. b. Compute the total cost assigned to the Rose Department.

is a factor in determining how a cost will be classified.

Uses an activity- based costing system to improve the operations of an organization

Aloha Manufacturing Co. has two departments: Cooking and Bottling. For the period just ended, Aloha's costs were: direct materials, $140,000; direct labor, $80,000; and indirect manufacturing, $100,000. Costs assigned to the Cooking department were: direct materials, 20%; direct labor, 90%. Indirect costs are assigned in the same proportion as direct labor cost. The total cost incurred in the Bottling department is:

Product costs only become an expense when sold.

A cost is consumption of resources for a particular purpose.

need aggregate measures of inventory value and cost of goods sold.

A manufacturer has three classes of inventories: direct materials, work- in- process, and merchandise inventory.

The necessary cost of an activity that cannot be eliminated without affecting a product's value to the customer

Costs that can be traced specifically and exclusively to the manufactured goods in an economically feasible way

Cost drivers are usually expressed in dollars.

is not a product cost.

Barney Corporation has gathered the following information for the year ended December 31, 20X0: Sales \ 38,400 Direct materials used 8,340 Direct lab or 5,040 Fixed: Factory overhead 2,480 Selling expens es 840 A dministrative expenses 1,720 Variable: Factory overhead 12,470 Selling expens es 1,580 Administrative expenses 1,230 There were no beginning or ending inventories. The total prime costs are:

is not a primary purpose of a cost management system.