cost accounting ch 11-15
Consider the following environmental data for Cleanser A used by Omega, Inc. Cleanser A Activity rate Design hours 2,000 $12 design/hr Inspection hours 3,000 $15inspection/hr Maintenance hours 500 $20 maintenance/hr Pounds of waste 1,500 $10 per pound Determine the unit environmental cost of Cleanser A if it produces 100,000 units. (Round your answer to two decimal places.)
$0.94 per unit Unit environmental cost of Cleanser A = Total environmental costs / Number of units produced = [(2,000 × $12) + (3,000 × $15) + (500 × $20) + (1,500 × $10)] / 100,000 units = ($24,000 + $45,000 + $10,000 + $15,000) / 100,000 units = $0.94 per unit
Daisy, Inc., a furniture manufacturing firm, has four activities: cutting logs, assembly, laminating, and inspecting. Inspecting is an unnecessary activity. The following data pertain to the four activities for the year ending 20x1 (actual price per unit of the activity driver is assumed to be equal to the standard price): SQ AQ SP 15k 20k $15 22k 22.5k $25 9.8k 10k $15 0 2.5k $5 CAlculate non-value added costs for each activity.
$103,000 cutting logs: $75,000 Assembly: $12,500 Laminating: $3,000 Inspecting: $12,500 Total: $103,000
A firm currently produces a high-tech hardware machinery with 25 parts. A new configuration for the machinery that requires only 16 parts has been designed. Current activity capacity and expected activity capacity are provided: A AD AC CAD EAD Material usage #parts 250k 250k 160k Assemble parts Laborhrs 15k 15k 8k Purchasing parts #orders 20k 15k 7k The following additional cost data is also provided: Material Usage: $2 per part used Assembling parts: $10 per direct labor hour Purchasing parts: There are four salaried clerks capable of processing 4,000 purchase orders each. Each earn a salary of $25,000 annually. Variable activity costs are $0.75 per purchase order processed. Based on the new demand, the number of clerks can be reduced by one. Calculate the cost reduction produced by the new design.
$280,625 [(250,000 - 160,000) × $2] + [(15,000 - 8,000) × $10] + {$25,000 + [$0.75 × (15,000 - 7,500)]} = $180,000 + $70,000 + $30,625 = $280,625 Cost reduction produced by new design = Material usage cost reduction + Labor usage cost reduction + Purchasing cost reduction
Fluorescent Company is considering producing electric generators. The sale price and required profit per unit are $400,000 and $80,000 respectively. Compute target cost.
$320,000 $400,000 - $80,000 = $320,000 Target cost = Target price - Target profit
One activity of a manufacturing company is scheduling. Activity output is measured by scheduling hours. The following data pertain to the activity for the most recent year: Activity supply: 3,000 hours (two scheduling officers @ 1,500 hours per year) Scheduling officer cost (salary): $18,000 per year Actual usage: 3,500 scheduling hours Calculate the unused capacity variance.
$6,000 unfavorable
Cyan, Inc., a manufacturing company, produces multiple computer parts. The theoretical cycle time for one of its products, the mouse, is 30 minutes per unit. The budgeted conversion costs for the manufacturing cell dedicated to the mouse are $750,000 per year. The total labor minutes available are 250,000 minutes. During the year, the cell was able to produce 1.5 units of the product per hour. Calculate the actual conversion cost per unit using the actual cycle time and the standard cost per minute.
$90 per unit Actual conversion cost per unit = Standard cost per minute × Actual cycle time = ($750,000 / 250,000 minutes) × 30 minutes per unit = $90 per unit
Chapter 11 Prior to installing a JIT system, Barker Company, a producer of automobile parts, used maintenance hours to assign maintenance costs to its three products (wheels, brake pads, and ball bearings). The maintenance costs totaled $5,880,000 per year. The maintenance hours used by each product and the quantity of each product produced are as follows: Maintenance hours Quantity produced Wheels 180,000 157,500 Pads 180,000 157,500 Bearings 240,000 210,000 After installing JIT, three manufacturing cells were created, and cell workers were trained to perform preventive maintenance and minor repairs. A full-time maintenance person was also assigned to each cell. Maintenance costs for the three cells still totaled $5,880,000; however, these costs are now traceable to each cell as follows: Cell, wheels $1,596,000 Cell, pads 1,764,000 Cell, bearings 2,520,000
1. Compute the pre-JIT maintenance cost per unit for each product. Wheels $11.20 per unit Pads $11.20 per unit Bearings $11.20 per unit 2. Compute the maintenance cost per unit for each product after installing JIT. Wheels $10.13 per unit Pads $11.20 per unit Bearings $12.00 per unit 1. Maintenance hours: 5,880,000 / (180,000 + 180,000 + 240,000) = $9.80 per maintenance hour Wheels: ($9.80 x 180,000)/157,500 Pads: ($9.80 x 180,000)/157,500 Bearings: ($9.80 x 240,000)/210,000 2. Wheels: $1,596,000/157,500 Pads: $1,764,000/157,500 Bearings: $2,520,000/210,000
A unit passes through three processes. The data for the three processes is given below: Process Pre-processwait Process 1 5 minutes 4 minutes Process 2 6 minutes 8 minutes Process 3 3 minutes 6 minutes Calculate the total time required to process a batch of 15 units.
228 minutes Process 1 75 ( 5 min x 15 units) Process 2 92 (6 min x 15 units) Process 3 45 (3 min x 15 units) Total process: 210 min Pre-process wait time: 18 min Total batch time: 228 min
Azure, Inc., had total sales of $2,000,000 for the current fiscal year. The actual quality costs incurred for the current year are given below: Reliability engineering : 50,000 Materials inspection:25,000 Scrap:100,000 Rework: 125,000 Quality training: 10,000 Customer complaints: 150,000 Which of the following is the percentage of total prevention costs to sales?
3% Percentage of total prevention costs of the total sales = (Reliability engineering costs + Quality training costs) / Total sales = ($50,000 + $10,000) / $2,000,000 = 0.03, or 3%
_____ is a strategic-based performance management system that typically identifies objectives and measures for four different perspectives: the financial perspective, the customer perspective, the process perspective, and the learning and growth perspective.
A Balanced Scorecard
Which of the following product life-cycle viewpoints emphasizes the resource expenditure requirements to meet the sales objectives of the marketing stages of the life cycle of a product?
A cost-oriented viewpoint
Which of the following is an example of a prevention cost incurred to prevent poor quality in the products or services being produced?
A design review cost
Which of the following costs is reduced to zero under the traditional zero-defect quality model?
A failure cost
Which of the following responsibility accounting systems assigns responsibility to organizational units?
A financial-based responsibility accounting system
Identify the graph that tracks the change in quality from the beginning of the program to the present.
A multiple-period quality trend report
Which of the following statements is true of activity-based costing?
Activity-based costing is an important source of information for managing activities.
Which of the following product cost assignments to individual products is true in a just-in-time (JIT) manufacturing environment?
Allocation is used for assigning insurance and taxes.
Which of the following is a difference between an activity-based responsibility accounting system and a strategic-based responsibility accounting system?
An activity-based responsibility accounting system fails to connect with an organization's overall mission and strategy, whereas a strategic-based responsibility accounting system translates the strategy of an organization into operational objectives and measures.
Which of the following steps is associated with the activity-based costing dimension of an activity-based management (ABM) implementation model?
Calculate activity rates
In backflush costing, any difference between the actual conversion costs and the applied conversion costs is closed to:
Cost of Goods Sold.
A just-in-time (JIT) company purchased raw materials on account for $220,000. Prepare the journal entry using backflush costing assuming there are two trigger points—the purchase of raw materials and the completion of goods.
Debit Raw Materials and In Process Inventory by $220,000 and credit Accounts Payable by $220,000
Which of the following statements is true of performance evaluation under an activity-based responsibility accounting system?
Decreasing the time a process takes to deliver its output to customers is viewed as a vital objective.
Which of the following steps is associated with the process value analysis dimension of an activity-based management (ABM) implementation model?
Define root causes of each activity
Consider the following information for Alpha, Inc.: Environmental activity costs: Activity Costs Design processes $50,000 Toxic waste disposal 220,000 Driver data: Cleanser A Cleanser B Design hours 1,500 1,000 Pounds of waste 4,000 18,000 Calculate the activity rates that will be used to assign environmental costs to products.
Design process rate is $20 per hour, and waste disposal rate is $10 per pound. Design process rate = Design process cost / (Design hours for Cleanser A + Design hours for Cleanser B) = $50,000 / (1,500 + 1,000) = $20 per hour Waste disposal rate = Toxic waste disposal cost / (Pounds of waste produced by Cleanser A + Pounds of waste produced by Cleanser B) = $220,000 / (4,000 + 18,000) = $10 per pound
Which of the following is an example of subjective measures?
Employee capabilities
Which of the following is a feature of just-in-time (JIT) manufacturing and purchasing systems?
Facilitating management style
Which of the following activities is an example of a value-added activity?
Filing tax returns
Which of the following steps is a common step between activity-based costing and process value analysis of an activity-based management (ABM) implementation model?
Identify, define, and classify activities
Which of the following is an example of a non-value-added activity?
Inspecting products
Which of the following statements is true regarding a testable strategy?
It can be defined as a set of linked objectives aimed at an overall goal.
Which of the following statements is true regarding double-loop feedback?
It emphasizes both the effectiveness of strategy implementation as well as the validity of the assumptions underlying the strategy.
Which of the following statements is true of process value analysis?
It focuses on accountability for activities.
Which of the following statements is true regarding a lean manufacturing system?
It focuses on eliminating waste in manufacturing processes.
Which of the following statements is true regarding a strategy map?
It is a concise graphical representation of a testable Balanced Scorecard strategy.
Which of the following statements is true of driver analysis?
It is the effort expended to identify those factors that are the root causes of activity costs.
Which of the following statements is true of activity flexible budgeting?
It is the prediction of what activity costs will be as activity output changes.
Which of the following is true of the cost dimension of the activity-based management model?
It is useful for tactical analysis.
Identify the statement that is true of gainsharing.
It provides cash incentives for a company's entire workforce that are keyed to quality or productivity gains.
Which of the following is a result of phased price reduction under strategic pricing?
It would prevent further erosion of market share.
Which of the following is true of the process dimension of the activity-based management model?
Its objective is cost reduction.
Which of the following is true of kaizen costing?
Kaizen costing is characterized by constant, incremental improvements to existing processes and products.
Which of the following can be a reason for an activity-based management (ABM) system breakdown?
Lack of support of higher-level management
Which of the following measures measure results from past efforts?
Lag measures
Which of the following is an example of a structural cost driver in an organization?
Management style and philosophy in management structuring
Identify a true statement of the inventory effects of the just-in-time (JIT) manufacturing and production system.
Manufacturing relies on the exploitation of a customer linkage.
Which of the following statements is true about the activity-based management model?
One of the objectives of the activity-based management model is to improving the accuracy of cost assignments.
Which of the following cost reduction methods closely analyzes competitors' products in an attempt to discover more design features that create cost reductions?
Reverse engineering
Which of the following is true of single-loop feedback?
Single-loop feedback emphasizes only the effectiveness of implementation.
_____ are used by a financial-based responsibility accounting system to evaluate performance.
Static standards
Structural activities are activities that determine the underlying economic structure of the organization. Executional activities are activities that define the processes and capabilities of an organization and thus are directly related to the ability of an organization to execute successfully. Operational activities are day-to-day activities that perform as a result of the structure and processes selected by the organization.
Structural: Number of plants, Number of product lines, Number of distribution channels, Scope, Type of process technologies, Scale, Number of functional departments Executional: Degree of employee involvement, Capacity utilization, Product configuration, Quality management approach, Employee experience, Type and efficiency of layout, Number of planning meetings Operational: Number of moves, Engineering hours, Direct labor hours, Number of receiving orders, Number of defective units, Number of purchase orders
Which of the following types of linkages are external linkages in a value-chain framework?
Supplier linkages and customer linkages
Which of the following environmental costs is an example of a detection activity?
The cost of testing for contamination
Which of the following perspectives of strategic-based responsibility accounting includes the objective of adopting a new pricing strategy?
The financial perspective
Which of the following statements is true of the reward system in a financial-based responsibility accounting system?
The reward system in a financial-based responsibility accounting system is designed to encourage individuals to achieve or beat budgetary standards.
Given below is the data for the source of two electronic components, A2B and B2C, used by a purchasing manager. Activity Costs: Activity Component Failure/Late Delivery Reworking products $250,000 Expediting products $50,000 Supplier Data: A2B B2C Failed Units 600 400 Late shipments 15 10 Note: Component failure and late delivery are attributable to suppliers; process failure is caused by internal processes Calculate the activity rates for assigning costs to suppliers.
The reworking rate is $250 per failed component, and the expediting rate is $2,000 per late delivery.
Identify the statement that is true of the ISO 9000 standards.
They apply to the way in which a company ensures quality.
Identify the statement that is true about external failure costs.
They are incurred because products and services fail to conform to requirements or satisfy customer needs after being delivered to customers.
Which of the following is an objective of the customer perspective of strategic-based responsibility accounting?
To increase market share
A strategy that strives to increase customer value by increasing what the customer receives is known as:
a differentiation strategy.
Machines are grouped in families, usually in a semi-circle, and arranged so that they can be used to perform a variety of operations in sequence in:
a manufacturing cell.
A focusing strategy to increase customer value to achieve a competitive advantage involves selecting or emphasizing:
a market or customer segment in which to compete.
According to the robust quality model, a loss is experienced from producing products that vary from:
a target value.
A systemwide integrated approach that focuses management's attention on activities with the objectives of improving customer value and the profit achieved by providing this value is called:
activity-based management.
Progress with respect to a current-period standard or goal is measured and reported in:
an interim standard report.
Continuing supplier verification is an example of a(n):
appraisal cost.
Non-value-added costs can be calculated:
as the difference between the actual level of the activity's output and the value-added level, multiplied by the standard price.
In a Balanced Scorecard, the performance measures chosen should _____ to link measures to a strategy.
be balanced between the outcome and lead measures
A traditional manufacturing system tries to achieve the objective of reducing the cost of inventory by:
carrying forward the inventories of raw materials and parts to hedge against future price increases of the items purchased.
Backflush costing usually combines direct labor costs with overhead costs in a temporary account known as:
conversion cost control.
Total quality control is an approach to managing quality that:
demands the production of defect-free products.
The ability to produce competitively priced goods and services that satisfy customer needs while simultaneously reducing negative environmental impacts, resource consumption, and costs is termed as:
ecoefficiency.
The costs of activities executed to determine if products, processes, and other activities within a firm are in compliance with appropriate environmental standards are known as:
environmental detection costs.
The activities performed by an organization or its customers in response to poor quality are referred to as:
failure activities.
Traditionally, cost-volume-profit analysis relies on the analysis of:
fixed and variable costs in conjunction with cost.
The Taguchi quality loss function assumes that any variation from the target value of a quality characteristic causes:
hidden quality costs.
The original or traditional zero-defects model makes the claim that:
it is cost beneficial to reduce nonconforming units to zero.
The objective of increasing employee capabilities falls under the:
learning and growth perspective of strategic-based responsibility accounting.
A strategic-based responsibility accounting system maintains the activity-based responsibility dimensions but adds a customer and a(n):
learning and growth perspective.
Once the objectives and measures of a Balanced Scorecard have been defined and communicated, _____.
performance expectations must be established
In a Balanced Scorecard framework, distributing potential bonus money to various perspectives and measures is one thing, but payment of incentive compensation is dependent on:
performance.
Even if the standard of zero defects is achieved, a company must still have:
prevention costs.
Full environmental costing is the assignment of:
private and societal environmental costs to products produced by a firm.
The objective of lean manufacturing is to eliminate waste by:
producing a product only when it is needed and only in the quantities ordered by customers.
Unit-based costing systems typically reward purchasing managers solely on:
purchase price.
Exploiting internal linkages to strengthen a firm's strategic position means:
relationships between activities are assessed and used to reduce costs and increase value.
In a Balanced Scorecard framework, to ensure that balanced attention is given to all measures, no incentive compensation is paid unless each:
strategic measure exceeds a prespecified minimum threshold value.
The process of selecting the optimal mix of the three strategic approaches of cost leadership, product differentiation, and focusing to create a sustainable competitive advantage is referred to as:
strategic positioning.
An interim quality performance report compares:
the actual quality costs for a period with the budgeted costs for that period.
Companies that attain ISO 9000 certification have been audited by an independent test company, which certifies that:
the company meets certain quality standards.
Activity volume variance is:
the difference between actual activity level acquired and value-added standard quantity of activity that should be used, multiplied by budgeted activity rate.
For a Balanced Scorecard to be successful, _____.
the entire organization must be committed to its achievement
According to the marketing viewpoint, the stage in product life cycle, after introduction, where sales increase more slowly is referred to as:
the maturity stage.
As a result of reduction in work in process due to just-in-time (JIT) system, _____.
the need to compute equivalent units vanishes
Environmental post-purchase costs are usually societal costs because:
they are borne by society and not by a company.
Acceptable quality level (AQL) permits or allows defects to occur provided:
they do not exceed a predetermined level.
The just-in-time (JIT) approach assumes that all costs other than direct materials are driven by:
time and space drivers.
The fundamental requirement of a sound environmental accounting system is:
tracing environmental costs to the products responsible for those costs.
Costs that are caused by a firm but are incurred and paid for by parties outside the firm are known as:
unrealized external failure (societal) costs.
Activity-based management (ABM) classifies quality-related activities as:
value-added activities and non-value added activities.
