ACCT 2302 Chapter 4 Smart Book PDF

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ACCT 2302 CHAPTER 4 SMARTBOOK A __________ cost drier is not strictly related to the number of units produced or customers served. NON-VOLUME-BASED A bakery creates a new type of cake for sale. Under activity-based costing, this is an example of a __________-level activity. SERVICE A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned ($1200) in total overhead. A company wants to offer a new product, but only if it can earn a 20% return on sales. If the marketing department estimates that the new product will sell for $850, what is the most the company can spend on one unit and still achieve the goal (the target cost)? $680 A company’s activity rate for the general factory is $2.00 per machine hour. Product A used 3,000 machine hours and 1,000 labor hours. General factory overhead assigned to Product A is __________. $6,000 A group of similar activities that have been combined together is called an activity (COST POOL) A group of similar activities that have been combines together is an activity __________. COST POOL A group-level activity for a service company is the same as a(n) (BATCH)level activity for a manufacturing company. A just-in-time (JIT) system __________. IS USED TO HELP REDUCE COSTS; IS A DEMAND-PULL SYSTEM A local tour company offers charter buses to corporations who have conventions or meetings in the city. Under activity-based costing, renting a bus to a corporation is a(n) (GROUP)-level activity. A management system that focuses on continually improving production processes is called __________. TOTAL QUALITY MANAGEMENT A method that attempts to assign overhead costs based on what is required to produce products is __________ costing. ACTIVITY-BASED A proactive approach managers use to determine what costs should be is called __________. TARGET COSTING

A system that pulls materials and products through the manufacturing system based on customer demand is called __________. JUST-IN-TIME A technique that attempts to assign overhead costs to products based on the actions they require is called (ACTIVITY-BASED COSTING) A unit-level activity to a manufacturer is the same as a(n) (CUSTOMER)level activity to a service company. A unit-level activity to a manufacturer is the same as a(n) (CUSTOMER)level activity to a service company. Activities incurred for each product produced and not dependent on the number of units or batches are (PRODUCT)-level activities. Activities performed to design a new type of service to be offered are __________-level activities. PRODUCT Activities performed to design a new type of service to be offered are __________-level activities. PRODUCT Activities that occur regardless of how many products are produced or how many batches are run or units made are (FACILITY-LEVEL/COMPANY WIDE) activities. Activity-based costing __________. OFFERS SOME ADVANTAGES OVER TRADITIONAL COSTING SYSTEMS Activity-based costing systems typically include __________ cost drivers. BOTH VOLUME- AND NON-VOLUME-BASED Activity-based costing systems typically include __________ cost drivers. BOTH VOLUME- AND NON-VOLUME-BASED Activity-based management focuses on __________. IMPROVING OPERATIONS; INCREASING EFFICIENCY Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours? $280 All of the following are non-value-added activities except __________, which is a value-added activity. FREE DELIVERY SERVICE TO CUSTOMERS All of the following are non-volume-based cost drivers except number of __________. MACHINE HOURS

An approach that aims to improve products by reducing and eliminating errors, streamlining activities, and continuously making production processes better is called (TOTAL QUALITY) management. Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 27,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned (30)% of the total setup cost. Blanchard, Inc., is considering introducing a new product and wants to earn a 15% return on sales. If the market price is estimated to be $200, the most the company can spend and still achieve the goal (the target cost) is ($170) Costs at the batch level depend on the number of __________. BATCHES PROCESSED Costs incurred to identify defective products before they get to the customer are called (APPRAISAL) costs. Determining what a product costs and adding a markup is called __________. COST-PLUS PRICING Direct labor hours and machine hours are both examples of (VOLUME)-based cost drivers. Gross profit margin calculates gross margin as a percentage of (SALES/REVENUE) Implementing an ABC system __________. PROVIDES INFORMATION FOR COST MANAGEMENT Improving operations and reducing costs is the focus of (ACTIVITY-BASED) management. In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver? ACTIVITY RATE In order to make good product introduction decisions in today’s digital age, managers need to be able to accurately estimate __________. LIFE CYCLE COSTS Indirect costs __________. ARE NOT EASILY TRACED TO PRODUCTS OR SERVICES Indirect costs are also referred to as (OVERHEAD) costs. Indirect costs can be assigned to products or services using __________. THE ACTIVITY RATE METHOD; THE ACTIVITY PROPORTION METHOD

Indirect costs can be assigned to products or services using __________. THE ACTIVITY RATE METHOD; THE ACTIVITY PROPORTION METHOD Inspection costs __________. MAY LEAD TO INTERNAL FAILURE COSTS Installing parts on an automobile is a(n) (UNIT)-level activity. Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product. $73,160 TO MODEL XLT AND $44,840 TO MODEL TXT Making a single sale at a department store is an example of a __________level activity. CUSTOMER Non-value-added activities __________. DO NOT ENHANCE THE PRODUCT OR SERVICE; SHOULD BE ELIMINATED WHENEVER POSSIBLE Non-volume-based cost drivers __________. ALLOW MORE INDIRECT COSTS TO BE ALLOCATED TO PRODUCTS; ARE USED IN ABC SYSTEMS Once stage 2 allocation has been completed it is possible to compute total __________. MANUFACTURING OVERHEAD PER PRODUCT Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is ($500) per setup. Research and development is a(n) (PRODUCT)-level activity. Sales price per unit – manufacturing cost per unit = ___________ per unit. GROSS PROFIT Scrapped or discarded products and rework are __________ costs. INTERNAL FAILURE SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is ($2) Target costing is in stark contrast to (COST-PLUS) pricing, in which the company adds a markup to expenses required to produce the product. The activity proportion method uses (PERCENTAGES) to assign overhead costs to products.

The activity proportion method uses (PERCENTS) to assign overhead costs to products. The activity rate is computed by dividing the __________ by the __________. TOTAL ACTIVITY COST; TOTAL COST DRIVER The approach to determine what costs should be in order to earn an acceptable profit across a product’s life cycle is called (TARGET COSTING) or cost planning. The concept of the (VALUE CHAIN) begins with the customer and works backward to ensure that activities deliver what matters to customers. The duration of a product from its infancy through its eventual decline is represented by the (PRODUCT LIFE CYCLE) The final step in activity-based costing is __________. ASSIGNING INDIRECT COSTS TO PRODUCTS OR SERVICES The formula to apply overhead to products is __________. ACTIVITY RATE TIMES ACTIVITY The formula to compute activity proportion is __________. COST DRIVER FOR PRODUCT / COST DRIVER FOR ALL PRODUCTS The linked set of activities required to design, produce, and deliver products and provide aftermarket service to customers is called the (VALUE CHAIN) The perceived value of a product or service to the customer is enhanced by (VALUE-ADDED) activities. To calculate manufacturing overhead cost per unit using ABC, divide the total __________. MANUFACTURING OVERHEAD COST BY THE NUMBER OF UNITS PRODUCED To keep quality problems from happening, companies incur (PREVENTION) costs. Total manufacturing overhead under activity-based costing consists of all __________. OVERHEAD ASSIGNED DURING STAGE 2 ALLOCATIONS True or false: ABC is designed to provide managers with detailed information about the cost of activities and is therefore not useful in providing sustainability-related information. FALSE True or false: Activity-based costing is appropriate for every company. FALSE

True or false: The best reason to implement an ABC system is to obtain more accurate information about the cost of products and services. FALSE True or false: The worst type of quality costs for a company to incur are internal failure costs. FALSE True or false: When computing unit costs, the direct materials and direct labor costs are the same, regardless of whether ABC or a volume-based costing system is used. TRUE Under activity-based costing, a degree program at a university is considered a(n) (SERVICE/PRODUCT)-level activity. Unit-level activities are __________. PROPORTIONAL TO THE NUMBER OF UNITS PRODUCED; PERFORMED FOR SPECIFIC CUSTOMERS Using an ABC system, a company has estimated overhead of $2,100,000. They expect to use 1,000,000 machine hours and 500,000 labor hours. ABC has identified this as a machine-hour related activity. The activity rate for this activity is __________. $2.10 Warranty and recall costs and product replacement are __________ costs. EXTERNAL FAILURE What level of activity is performed each time a single item is produced? UNIT What types of activities are carried out regardless of which products are produced, how many batches are run, or how many units are produced? FACILITY-LEVEL What types of activities are performed each time a group of units is processed, regardless of how many units are in the group? BATCH Which of the following is NOT a value-added activity? STORING INVENTORY Which of the following is NOT a volume-based cost driver? MACHINE SETUPS Which of the following statements are true? APPRAISAL COSTS ARE ALSO KNOWN AS INSPECTION COSTS; APPRAISAL COSTS IDENTIFY DEFECTIVE PRODUCTS BEFORE THEY GET TO THE CUSTOMER Which of the following statements are true? MANAGING AND REDUCING COSTS IS THE TRUE BENEFIT OF ABC; IMPLEMENTING AN ABC SYSTEM IS NOT A TRIVIAL TASK

Which of the following statements are true? QUALITY TRAINING IS AN EXAMPLE OF A PREVENTION COST; MOST EXPERTS BELIEVE THAT INCURRING PREVENTION COSTS IS THE MOST EFFECTIVE WAY TO MANAGE QUALITY COSTS Which of the following statements are true? THE SUPPORT OF UPPER MANAGEMENT IS REQUIRED FOR SUCCESSFUL ABC IMPLEMENTATION; BEFORE IMPLEMENTING ABC, A COMPANY SHOULD WEIGH THE BENEFITS AGAINST THE COSTS Which of the following statements is true? AN EXISTING ABC SYSTEM CAN REPORT SUSTAINABILITY-RELATED INFORMATION Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour. $19.53...