Managerial Chapter 5

Ace Manufacturing identifies the following activities and drivers for its operations:ActivityActivity DriverDriver QuantityMoving MaterialsNumber of moves200MachiningMachine hours10,000Ace estimates Moving Materials and Machining will cost $1,400,000 and $3,000,000 respectively. Ace's activity rates are: a.$7,000 per move and $300 per machine hour. b.$700 per move and $3,000 per machine hour. c.$7 per move and $30 per machine hour. d.$70 per move and $3 per machine hour.

$7,000 per move and $300 per machine hour

Aquamarine Company produces precision parts for 16 major buyers. Of the 20 customers, one accounts for 40% of the sales, with the remaining 15 accounting for the rest. The 15 smaller customers purchase parts in equal quantities. Data concerning Aquamarine's customer activity follow:Large CustomerFifteen SmallerCustomersUnits purchased200,000200,000Orders placed4120Number of sales calls20230Manufacturing costs$6,000,000$6,000,000Order filling costs allocated*$ 310,000$ 310,000Sales force costs allocated*$ 150,000$ 150,000*Allocated based on sales volumeCustomer-driven costs are assigned to customers based on units sold, which is a unit-level driver. Compute the cost associated with the large customer. a.$44,000 b.$600,000 c.$876,000 d.$24,000

a.$44,000

Which of the following is an example of a supplier-driven activity? a.Reworking products b.Order picking c.Making sales calls d.Order entry

a.Reworking products

Which of the following is an example of a value-added activity? a.Waiting b.Supervision c.Inspection d.Scheduling

b.Supervision

A key component of activity-based costing is: a.calculating single activity rates for all activities. b.assigning costs and overheads to activities. c.determining a single cost driver for all activities. d.identifying the direct costs in a manufacturing environment.

b.assigning costs and overheads to activities.

Steven Co. has two products: A and B. The following is information about the assembly activity in its factory:Estimated costEstimated activityProduct AProduct BTotalAssembly$14,600510270780The activity rate for the Assembly Department is closest to: a.$58.87. b.$23.08. c.$18.72. d.$52.19.

c.$18.72.

Identify the first step in designing an activity-based system. a.Identifying costs involved b.Determining activity rates c.Identifying activities involved d.Determining activity driver quantity

c.Identifying activities involved

The use of plantwide or departmental rates assumes that a product's consumption of overhead is based on: a.complexity level activity. b.facility level activity. c.unit-level activity. d.batch level activity.

c.unit-level activity.

In an activity-based customer costing system, the cost of the resources consumed is assigned to: a.customers. b.suppliers. c.products. d.activities.

d.activities.

Activity drivers are: a.not realistic in today's manufacturing environment. b.factors that are related to each unit of the product. c.not required under activity-based costing. d.factors that measure the consumption of activities by products

d.factors that measure the consumption of activities by products.

An activity driver is a measure of the demands placed on an activity and is also called: a.product measure. b.cost measure. c.input measure. d.output measure.

d.output measure.