Exam 8: Activity Analysis: Costing and Management

Which of these is not a benefit of Activity Based Costing?

Activity-based management and activity-based costing are two ways of describing the same thing.

Organisations interested in using activity-based management must first implement an activity-based costing system.

In an ABC system costs are first assigned to cost pools, then always to units of product.

Wells Corporation is preparing its annual budget. As part of its analysis of the contribution of individual products to overall profitability, the controller estimates the amount of overhead that should be assigned to the individual product lines. Budgeted inspection costs are $4,800. Additional information is as follows: Under activity-based costing (ABC), the inspection cost assigned to one small pump would be

For small manufacturing firms, ABC systems are best with

Tutors-R-Us provides academic enrichment and review activities for high school students in 4 subject areas: English, mathematics, science, and history. In November 2010, the firm's information system produced the following data Regardless of subject area, clients pay $50 per hour for tutoring services. Costs associated with the Tutors-R-Us operations for November 2010 included: Facility rent $2,500 Custodial services 1,800 Utilities 600 Computer equipment depreciation 800 Advertising 400 Which of the following could be a cost object for Tutors-R-Us? I A student II A subject area III A cost pool

A cost driver is

In an ABC system, a "cost object" could be a unit of product, a product line, or a customer.

Value-added activities

Which of these do managers use in choosing activities and cost drivers to include in an ABC system?

Tutors-R-Us provides academic enrichment and review activities for high school students in 4 subject areas: English, mathematics, science, and history. In November 2010, the firm's information system produced the following data: Regardless of subject area, clients pay $50 per hour for tutoring services. Costs associated with the Tutors-R-Us operations for November 2010 included: Assume Tutors-R-Us allocates facility rent, custodial services, and utilities on the basis of square metres occupied and computer equipment depreciation on the basis of number of students. Advertising is not allocated. If students received 200 hours of mathematics tutoring in November 2010, what will the total profit from mathematics tutoring be for the same period?

How can ABC information be used to manage constrained resources?

In general, the risk of measurement error in an ABC system increases when

Wells Corporation is preparing its annual budget. As part of its analysis of the contribution of individual products to overall profitability, the controller estimates the amount of overhead that should be assigned to the individual product lines. Budgeted inspection costs are $4,800. Additional information is as follows: Under a traditional costing system that assigns overhead on the basis of units inspected, the inspection costs allocated to one small pump would be

ABC systems measure resource flows in an organisation.

Activity-based costing, compared to traditional costing, decreases the accuracy of cost measurement by using arbitrary cost allocation bases for overhead.

Which of the following is not a benefit of an ABC system?

Le Pavilion is a historic hotel just outside of Melbourne. It is owned by Refined Hotels, which operates additional properties in Sydney, Brisbane and Perth. Le Pavilion has 9 floors, with approximately 20 rooms per floor. Facilities also include a workout room, restaurant, and pool. The hotel is organised in 5 departments: front desk, engineering, housekeeping, food & beverage, and customer relations. As part of its operation, Le Pavilion regularly incurs the following costs: General manager's salary Housekeeping supplies Utility costs Depreciation on workout room equipment Advertising Food and beverage costs Depreciation on restaurant equipment Advertising for the Refined Hotels chain is best described as a(n)

In an activity-based costing system, both organisation-sustaining and facility-sustaining activities are assumed to be unaffected by the number of customers.