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Exam 7: Activity-Based Costing and Activity Based Management

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Question 51

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Graham’s Wholesale Supply is a distributor of electrical supplies. The company has recently hired a controller who used activity-based costing at her last job. At her suggestion, Grahams is in the beginning stages of implementing activity-based costing for its operations. The following activity pools have been identified: 1. Filling sales orders 2. Maintenance of warehouse equipment 3. Warehousing of electrical supplies 4. Electricity to heat and cool warehouse 5. Delivery of goods to customer job sites Required: Identify at least one possible cost driver for each activity cost pool.

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1. Number of orders filled
2. ...

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Question 52

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Even when direct materials and direct labor comprise the majority of product costs,manufacturing overhead allocation is still a major issue.

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Question 53

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Place an "X" in the column that corresponds to the type of activity-level referred to in each scenario.

In the activity identification stage of implementing an activity-based costing system,the greater the level of detail

The process of using activity-based costing information to manage a business's activities,and thus its costs,is called activity-based management.How do managers use the information provided by an activity-based costing system?

Which of the following activities would be classified as non-value-added in the manufacture of sports jackets?

Calculating the activity rate is similar to the calculation of the

In an activity-based costing system,which of the following is $\textbf{ not }$ a category in which activities are classified?

Bayline,Inc.manufactures two types of surf boards,Beginner and Longboard.Manufacturing overhead has been applied on the basis of direct labor hours.Bayline gathers some activity information and is interested in implementing an activity-based costing system.The company wants all overhead costs to be allocated to products.The overhead cost pools and activity drivers are as follows: Other product information is as follows: Required: a. Using the traditional method, determine the overhead rate per direct labor hour. b. Using the activity-based costing approach, determine the two activity rates. c. Using the activity-based costing approach, determine the unit product cost for the Beginner board.

In an activity-based costing system,which of the following is not a category in which activities are classified?

For unit-level activities, the total level of activity performed varies proportionately with the number of units produced.

The easiest part of calculating the total product cost is

An activity-based analysis that focuses only on manufacturing overhead improves GAAP-based financial statements.

Murphy Company produces two products: Standard and Deluxe.The company uses an activity-based costing system.Murphy produces 8,000 units of Standard and 2,000 units of Deluxe. The company uses two activity cost pools, with estimated total cost and activity as follows:

In an activity-based costing system,which of the following is $\textbf{ not }$ a category in which activities are classified?

Paula's Payroll Services provides weekly payroll processing for a number of small businesses.Paula Peraz,the company's owner,has been using an activity-based costing system for several years.She used the following information in preparing this year's budget. Required: a. Calculate the cost rates for each activity cost pool. b. Paula is preparing a proposal for a prospective client, Barney’s Bistro. The client has 25 employees. What is the estimated cost of providing weekly payroll services to this client for the first year? c. How can Paula use the estimated cost information you have calculated to price the service it will provide to Barney’s Bistro.

The greatest use of activity-based costing information is for product costing and cost control.

The first step in developing activity-based product costs is to develop activity cost pools.

In an activity-based costing system,after all the activities have been identified and the appropriate level of detail selected,the activities are combined into activity cost pools based on their cost drivers.

When using an activity-based costing system,which of the following is the formula for allocating costs to products or services?