Exam 4: Activity-Based Costing, Lean Operations, and the Costs of Quality

Augustine Associates is a CPA firm that offers assurance and consulting services. The firm uses an activity-based costing system and has developed the following activity pool cost rates: Cost and activity data related to two clients is as follows: How much overhead cost would be allocated to Client 867 using the activity-based costing system?

The manager at Cyber Merchandising provided the following Cost of Quality Report to the managers at the quarterly meeting. The manager at Cyber Merchandising reported that the percentage of total costs to quality incurred in each cost category. Which cost of quality in the Costs of Quality Report are the highest expenditures at the firm? Rank the cost of quality in order from the lowest percentage cost of quality to the highest percentage cost of quality category. What can the manager at Cyber Manufacturing do to reduce the costs spent on the total internal failure costs?

Which of the following is an example of a cost item that should be classified as an internal failure cost?

Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2300 units, while 1400 units of blenders are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Toasters require 1.25 direct labor hours per unit, while blenders require 1 direct labor hours per unit. The total estimated overhead for the period is $145,315. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools: The cost pool activity rate for Engineering Costs would be closest to (Round all answers to two decimal places.)

All of the following describe an ABC system except

Beaver Company manufactures coffee tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each coffee table consists of 30 separate parts totaling $250 in direct materials, and requires 7.0 hours of machine time to produce. Additional information follows: What is the number of finished coffee tables?

Back Porch Company manufactures lawn chairs using an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of June: Each lawn chair consists of 10 parts; the total direct materials cost per lawn chair is $11. What is the total cost of packaging per lawn chair?

Managers often reap benefits by using ABC data in ABM to pinpoint opportunities to cut costs.

An example of an appraisal cost is the cost of automating the production process.

Darlington & Myrtle, Attorneys at Law, provide a variety of legal services. The law firm uses an activity-based costing system and has developed the following activity pool cost rates: Cost and activity data related to two clients is as follows: Required: a. Calculate the amount of overhead that would be allocated to Client 245 using the activity-based costing system. b. Calculate the amount of overhead that would be allocated to Client 367 using the activity-based costing system.

Why are large amounts of inventory considered wasteful?

The cost of warranty work is an example of what type of cost?

Potter & Weasley Company had the following activities, estimated indirect activity costs, and allocation bases: Potter & Weasley uses activity based costing. The above activities are used by Departments P and Q as follows: What is the cost per driver unit for the account billing activity? (Round all answers to two decimal places.)

Which of the following cost of quality categories represent the cost incurred "lost profits from lost customers?"

The allocation base selected for each department should be the cost driver of the costs in the departmental overhead pool.

The cost of testing incoming raw materials from a supplier would be classified as a(n)________ cost.

The cost of training employees would be classified as a prevention cost.

ABC tends to increase the unit cost of low-volume products and decrease the unit cost of high-volume products.

Beaver Company manufactures coffee tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each coffee table consists of 20 separate parts totaling $220 in direct materials, and requires 7.0 hours of machine time to produce. Additional information follows: What is the total manufacturing cost per coffee table?

In using an ABC system, all of the following steps are performed before the company's year begins except