ACC Test2 (ch5,7,and8)

ABC costing

Assign costs to activities and then products.

Safety stock

= (Max daily usage-Avg daily usage) x Lead time

6. . Calculate Total Inventory-Related Costs

= Ordering costs +Carrying costs

1. Calculate the Economic Order Quantity

= the square root of: 2x Cost of placing one order x annual units/Cost of carrying one unit in inventory

2. Calculate the number of orders required annually

=Annual units/EOQ

5. Calculate the carrying costs

=Average inventory x Carrying cost of one unit in inventory

Ch 8a

Absorption, and variable costing

3. Calculate the predetermined activity overhead rate (Activity rate) for each activity.

Activity Over Head / Total driver quantity,

4, Assign activity Overhead cost to products for each activity using

Activity rate, times, driver quantity per product, Or Consumption ration, Times, Total activity Over Head cost.

Reorder point

Max Daily usage x Lead time

Which of the following is typically a process-costing firm?

Paint manufacturer

Which of the following is a quality prevention cost?

Quality planning Supplier evaluation and selection Quality audits Field trials

Which of the following is a nonunion-level driver?

Set up hours.

2, Assign costs to each activity, use DRIVER TRACING to allocate costs if costs are share among activities

Share costs, times, % per activity

The predetermined overhead rate equals

estimated overhead divided by estimated activity level for a period.

The costs of a job are accounted for on the

job-order cost sheet

Which of the following represents environmental detection costs?

Carrying out contamination tests

The job-order cost sheet is a subsidiary account to

Jobs Started.

Which of the following is an internal failure cost (quality)?

Retesting

Which of the following is a true statement about activity-based supplier costing?

Suppliers can affect many internal activities of a firm and significantly increase the cost of purchasing.

Common Fixed Expenses;

Fixed expenses that are jointly caused by two or more segments. These expenses exist even if one of the segments is eliminated.

Suppose that a company is spending $60,000 per year for inspecting, $30,000 for purchasing, and $40,000 for reworking products. A good estimate of nonvalue-added costs would be

$100,000

Assume that the moving activity has an expected cost of $80,000 . Expected direct labor hours are 20,000 , and expected number of moves is 40,000 . The best activity rate for moving is

$2 per move

The receiving department employs one worker, who spends 25% of his time on the receiving activity and 75% of his time on inspecting products. His salary is $40,000 . The amount of cost assigned to the receiving activity is

$30,000

This year, Lambert Company will ship 1,500,000 pounds of goods to customer at a cos of $1200,000. If a customer orders 10,000 pounds and produces $200,000 of revenue (total revenue is $20 millions), the amount of shipping cost assigned to the customer by using ABC would be

$8000, ($0.80per pound shipped).

Refer to the information above. The consumption ratios for the inspection activity for each product are

.5 and .5

Which of the following are nonvalue-added activities?

1, Moving goods 2, Storing goods 3, Inspecting finished goods 4, Reworking a defective product

Interview questions are asked to determine

1,what activities are being performed., 2,who performs the activities., 3,the relative amount of time spent on each activity by individual workers., 4, possible activity drivers for assigning costs to products,

Chapter 5 1, Applies overhead costs to products produced, 2, Uses one plantwide overhead rate or departmental overhead rates on the basis of a unit-level cost driver, 3, Assumes overhead costs are directly related to units produced,

Chapter 7 1, Applies overhead costs to products produced 2, Uses multiple activity overhead rates on the basis of a non-unit-level cost driver 3, Assumes overhead costs are related to activity consumption for units produced

Which of the following is a true statement about activity-based customer costing?

Customer diversity requires multiple drivers to trace costs accurately to customers.

Lead time:

Days required to receive EOQ once order is placed

The optimal number of units that should be ordered at one time to minimize total inventory costs

EOQ= the square root of: 2x Cost of placing one order x annual units/Cost of carrying one unit in inventory

Variable Costing

Thus, under absorption costing, fixed overhead is viewed as a period cost.

Absorption Costing

Thus, under absorption costing, fixed overhead is viewed as a product cost, not a period cost.

The ending balance of which of the following accounts is calculated by summing the totals of the open (unfinished) job-order cost sheets?

Work in proces

A batch-level driver is consumed by a product each and every time that

a batch of product is produced.

1, Identify activities and

activity cost driver.

The second stage of ABC entails the assignment of

activity costs to products or customers.

The cost of inspecting incoming parts is most likely to be reduced by

activity elimination.

A forklift and its driver used for moving materials are examples of

activity inputs.

In a normal costing system, the cost of a job includes

actual direct materials, actual direct labor, and estimated (applied) overhead

The overhead variance is overapplied if

actual overhead is less than applied overhead.

When a job is completed, the total cost of the job is

added to the finished goods account.

Applied overhead is

an important part of normal costing.

Variable and selling expense

common selling and administrative expense

An example of an environmental internal failure cost is

cost of operating scrubbers

An example of an environmental prevention cost is

developing environmental management systems.

An example of a societal cost is

medical care due to polluted air.

The first stage of ABC entails the assignment of

resource costs to individual activities.

Segments

subunit of a company for which performance reports are prepared Examples: divisions departments product lines customer types

Ordering costs:

the costs of placing and receiving and order order processsing insurance unloading , receiving

Lambert Company has two suppliers: Deming and Leming. The cost of warranty work due to defective components is $2,000,000. The total units repaired under warranty average 100,000 , of which 90,000 have components from Deming and 10,000 have components from Leming. Select the items below that represent true statements.

1, Components purchased from Leming cost $200,000 more than their purchase price. 2, Components purchased from Deming cost $1,800,000 more than their purchase price. 3, Components from Leming appear to be of higher quality.

Job-Order, and Process costing

1. Job-order costing is used only in manufacturing firms, 2, Process costing is used only for services, 3, job- order costing is simpler to use that process costing because the record keeping requirements are less. 4, The job cost sheet is subsidiary to the work-in-process account.

Wilson Company has a predetermined overhead rate of $5 per direct labor hour. The job-order cost sheet for Job 145 shows 500 direct labor hours costing $10,000 and materials requisitions totaling $17,500 Job 145 had 1000 completed and transferred to Finished Goods. What is the cost per unit for Job 145?

30

OR Reorder point

= (Avg daily usage x lead time)+ Safety stock

4. Calculate the average inventory.

= (EOQ- 0)/2

3. Calculate the ordering costs

=Number of orders per year x Cost of placing an order

Striving to produce the same activity output with lower costs for the input used is concerned with which of the following dimensions of activity performance?

Efficiency

Variable selling Expense

Example. A 5% sales commission is paid for each of the product lines. You multiply .05, times Sales to get the Variable selling expense.

Safety stock:

Extra inventory carried to serve as insurance against changes in demand

Direct Fixed Expenses;

Fixed expenses that are directly traceable to a segment; vanish if the segment is eliminated.

Which of the following is typically a job-order costing firm?

Large regional medical center

Refer to the information above. Suppose that machine hours are used to assign all overhead cost to the two products. Select the best answer from the following;

Laser printers are undercosted, and inkjet printers are overcosted.

Which of the following is an external failure cost (quality)?

Lost sales

Which of the following is an appraisal cost (quality)?

Manager of an inspection team

Chapter 5, versus, Chapter 7

Multiple Choice Questions

Thom Company produces 60units in 10hours. The cycle time for Thom

is 6 units per hour.

Carrying costs:

the costs of storing inventory insurance property taxes storage space handling costs

Reorder point:

the point in time when a new order should be placed ; function of EOQ, lead time, rate of inventory usage

When materials are requisitioned for use in production in a job-order costing firm, the cost of materials is added to the

work-in-process account.