Exam 8: Activity Analysis: Costing and Management

Which statement about costing systems is true?

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: The number of students in each area is most likely to be a cost driver for

ABC systems differ from traditional systems in that ABC systems

Administrative salaries are an example of an organisation-sustaining cost in an ABC system.

Ideally, activity costs are allocated to cost objects using a ______ that explains changes in activity ______.

Generally speaking, activity-based costing traces direct costs more accurately than traditional costing.

Which category of the ABC hierarchy has costs that are primarily fixed and activities with little or no cause-and-effect relationship with costs?

The FSOJ Company undertakes the following activities in its production operation and incurred the following costs during the first half of 2010: Processing the juice into 3 final products involves the use of 2 machines, each of which incurred depreciation costs of $15,000 for the first half of 2010. Each product requires a different set up on the processing machines, so FSOJ normally sets up the machines to produce concentrate for the first week of each month. The machine is then set up to produce orange juice for the next 2 weeks. Finally, workers set up the same machines to produce orange icey-poles during the last week of each month. During the first half of 2010, 20% of the oranges harvested were turned into orange juice concentrate, 50% were processed into orange juice, and 30% became orange icey-poles. The relative sales values of each product were: 75% for orange juice, 20% for orange juice concentrate, and 5% for icey-poles. The orange juice concentrate operation takes up 40% of FSOJ's total factory space. Regular orange juice and orange icey-poles occupy 35% and 25%, respectively. Assume processing costs are allocated on the basis of number of machine setups. How much processing cost will be allocated to each product line?

Which of the following is not part of the process used to assign costs in an ABC system?

Cost drivers are most likely to be identified using information

Each cost pool in an ABC system has its own cost allocation rate.

APL Ltd allocates overhead to cost objects using a two-stage process. From this information, we can infer that APL

The salary of the manager of a plant producing a number of products, within a multinational organisation is

Managers can use activity-based management to control environmental costs.

Product advertising for a new product is an example of a customer-sustaining cost in an ABC system.

The managers of HRY are analysing some of their corporate costs to determine the costs of each department's use of administrative services. The accountant wants to allocate the costs of payroll processing using an activity-based costing system. The most appropriate cost driver for the payroll processing cost pool is the

Quick Start Engines has two departments, Assembly and Testing. You are given the following information about the costs of 4 activities that occur at the manufacturing plant monthly: The above activities are used by the two departments as follows: How much of the maintenance and cleaning costs will be allocated to Testing?

How are direct and overhead costs assigned to cost objects under traditional accounting systems?

An activity is a type of task or function performed in an organisation.

Information about potential cost drivers may be requested from employees directly involved in activities.