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Exam 3: Activity-Based Management

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Question 71

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The use of activity-based costing and activity-based management have resulted in

A) less need to maintain good relationships with suppliers.
B) overhead costs being reduced substantially.
C) increased number of supervisory personnel being hired.
D) All of the answers are correct.

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Question 72

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Which is not an example of a cost driver?

A) General and administrative expenses.
B) Machine hours.
C) Number of inspections.
D) Number of different customers.

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Question 73

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Resources used for an activity are measured by the

Resources used versus resources supplied.Selected information about resources for Morton Industries,which produces various products,is as follows: Required: a.Prepare an activity-based management income statement . b.Write a short report stating why managers should know the difference between resources used and resources supplied.Give examples of how managers could use the information about resources used and resources supplied. c.Management wants to keep the cost of unused capacity to less than 20 percent of total costs.How well is the company doing? (Morton Industries;Resources used versus resources supplied. )

In comparison with firms that use traditional costing,which of the following statements is true for firms that adopt activity-based costing (ABC) ?

Gem Systems Gem Systems uses an activity-based costing system.The company has gathered the following information concerning various cost pools and activity drivers; The following data was collected and is specific to Job 150. Refer to Gem Systems.What is the amount of machine handling cost allocated to Job 150?

Stan's Good Drugstore is an all-service drug store and fills prescriptions for nursing homes and individual customers.Stan's uses an activity-based costing system.Data concerning overhead costs and activity pools is as follows: Activity Estimated Estimated Cost Pool Wages "Other" Prescriptions $48,000 $18,000 Deliveries $24,000 $10,000 Other $ 8,000 $12,000 Total $80,000 $40,000 During the month,Stan's fills 60,000 prescriptions and makes 5,000 deliveries. Using activity-based costing what is the approximate cost per delivery?

Which of the following is a systematic way for organizations to identify and eliminate activities that add costs but not value to the product?

Which of the following is the secondstep in activity based costing?

Managers usually decide which cost driver to use based upon which of the following factors?

Activity-based costing assigns more costs to items produced in __________ than traditional methods do.

Chester Marx,the new Vice-President of Finance at Tempco,Inc. ,has just finished reviewing the company's financial statements.The company appears to be losing profits steadily.In fact,profits have dropped by 30 percent over the last two years.Upon further investigation,Marx learned that the decrease was attributable to the decline in sales resulting from higher prices than competitors.Since the company has recently changed its production method,Marx thinks the company should adopt a more relevant product costing system.The controller,Ted Vince,believes the higher sales price is necessary to cover costs.Vince,who has been controller for 20 years,feels that the company has come out of downturns before and will again.He is unaware of activity-based costing techniques and argues the current costing system has been serving the company well for a long time.What are the ethical considerations in this situation?

A major cause of difficulty in implementing activity-based costing is the failure to get buy-in of which of the following?

Which of the following are true regarding activity-based cost management (ABCM) ?

In what way(s) do managers make cost-benefit decisions as to the use of activity analysis or traditional costing methods?

The cost hierarchy can be used to organize cost information for decision-making.Which cost ispart of the product cost hierarchy of expenses?

Activity-based costing.Carlton Fisher,the manager of Kingfish Charters,uses activity-based costing to compute the costs of his deep-sea fishing charters.Each chartered boat holds six paying customers and a guide.The company offers two types of charters to corporations planning events-half-day trips for beginners and full-day trips for more seasoned fishermen.The breakdown of the costs is as follows: Required: a.Compute the cost of a corporate event requiring four boats for half-day charters for 28-persons (including four guides). b.Compute the cost of a corporate event requiring four boats for full-day charters for 28-persons (including four guides). c.Recommend a minimum price per customer to the manager if he wants to cover his costs. (Kingfish Charters;activity-based costing. )

Which of the following statements is true concerning activity-based costing (ABC) ?

Which of the following is not a step accountants must follow in activity-based costing?