Exam 4: Cost Management Systems and Activity-Based Costing

A strategic decision that a billing department may face is whether or not to outsource certain customer accounts to a local service bureau.

Cost systems initially record costs, then group costs in different ways to make decisions.

The continuous process of measuring products, services, and activities against the best levels of performance

Youngblood 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) 2,000 200 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 cost per driver unit for the correspondence activity is:

County Bank had the following activities, traceable costs, and physical flow of driver units: Traceable Physical Flow of Activities Costs Driver Units Open new accounts \ 50,000 1,000 accounts Process deposits 36,000 400,000 deposits Process with drawals 15,000 200,000 withdrawals Process loan applications 27,000 900 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 Withdrawals 15,000 18,000 Loan applications 100 160 The loan application cost assigned to North County branch is:

In designing an ABC system, sources of data include the accounting records and special studies, but not the estimates of managers.

is the sum of direct labor and direct materials.

Cheatum Bank had the following activities, traceable costs, and physical flow of driver units: Traceable Physical Flow of Activities Costs Driver Units Open new accounts \ 30,000 1,000 accounts Process dep osits 36,000 360,000 deposits Process withdrawals 20,000 200,000 withdrawals The above activities are used by Downtown branch and Uptown branch: Downtown Uptown New accounts 200 400 Deposits 40,000 20,000 Withdrawals 15,000 18,000 a. Compute the new account cost assigned to Downtown branch. b. Compute deposit processing cost assigned to Uptown branch. c. Compute the withdrawal processing cost assigned to Downtown branch.

In general, many more costs are direct when a department is the cost objective than when a product or service is the cost objective.

A sacrifice or consumption of resources for a particular purpose

Most firms' financial statements include research and development and customer service costs as selling and administrative costs.

The cost of goods manufactured line on the income statement of a manufacturer is the equivalent to the line on a retailer's income statement.

Activity- based accounting is 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.

is the process of collecting costs by classification.

is not true.

County Bank had the following activities, traceable costs, and physical flow of driver units: Traceable Physical Flow of Activities Costs Driver Units Open new accounts \ 90,000 1,000 accounts Process deposits 36,000 400,000 dep osits Process with draw als 30,000 200,000 withdr awals Process loan applications 36,000 900 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 Withdr awals 15,000 18,000 Loan applic ations 100 160 What is the cost per driver unit for the withdrawal activity?

A period cost:

An example of an unallocated cost is factory supervisor salaries.

is not an inventory account.

In highly automated factories with a flexible workforce, there may be no direct- labor costs.