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Exam 4: Cost Management Systems and Activity-Based Costing

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Question 51

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The first step in designing an ABC system is to determine the key components of the activity- based cost accounting system.

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Question 52

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Sometimes employee benefits are included in direct- labor costs.

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Question 53

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The equation for gross margin or profit

Product costs appear on either the balance sheet and income statement, but not both.

Forklift operators and factory security guards are examples of direct- labor costs.

Gunsmoke Manufacturing Company purchased $44,000 of direct materials and incurred $7,600 of direct labor costs during the year. Indirect labor amounted to $3,000 while indirect materials totaled $5,200. Factory depreciation totaled $18,800. Selling expenses were $15,400. The only inventory was $5,500 of finished goods at year end. Required: a. Compute the cost of goods manufactured. b. Compute the cost of goods sold.

Cost assignment is the tracing or allocating of costs to one or more cost objectives, such as activities and departments.

The Grinch Company has gathered the following information for the year ended December 31, 20X0: $\begin{array}{ll}\text { Sales } & \$ 75,000 \\\text { Direct materials used } & 12,900 \\\text { Direct labor } & 5,200 \\\text { Fixed: } & \\\text { Factory overhead } & 6,400 \\\text { Selling expenses } & 2,300 \\\text { Administrative expenses } & 1,700\end{array}$ $\begin{array}{l}\text { Variable: }\\\begin{array} { l l } \text { Factory overhead } & 3,300 \\\text { Selling expenses } & 5,700 \\\text { Administrative expenses } & 8,300\end{array}\end{array}$ There were no beginning or ending inventories. Net income is:

A merchandising company has direct materials inventory.

A cost object is anything for which a separate measurement of costs is desired.

Anything for which a separate measurement of costs is desired. Examples include departments, products, activities, and territories

West, Inc., started the year with $80,000 in direct materials. During the year West, Inc., purchased $535,000 in direct materials, and used $515,000 in materials. The direct materials inventory on the balance sheet is:

Examples of factory overhead costs include property taxes on the factory and factory depreciation.

Cost accounting is that part of the cost management system that measures costs for the sole purpose of financial reporting.

Finished goods inventory for a manufacturer is the same as merchandise inventory for a merchandiser.

is the necessary cost of an activity that cannot be eliminated without affecting a product's value to the customer.

An example of an unallocated cost is research and development.

A value- added cost is the cost of an activity that a company cannot eliminate without affecting a product's value to the customer.

One of the important differences between traditional and activity- based costing systems is:

Aloha Manufacturing Co. has two departments: Cooking and Bottling. For the period just ended, Aloha's costs were: direct materials, $140,000; direct labor, $80,000; and indirect manufacturing, $100,000. Costs assigned to the Cooking department were: direct materials, 50%; direct labor, 80%. Indirect costs are assigned in the same proportion as direct labor cost. The total cost incurred in the Cooking department is: