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Exam 4: Cost Management Systems and Activity-Based Costing

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Question 31

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The system that first measures the resources used in performing the organization's activities and then assesses the effects on costs of changes in those activities

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Question 32

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County Bank had the following activities, traceable costs, and physical flow of driver units: $\begin{array} { l l l } & \text { Traceable } & \text { Physic al Flow of } \\\text { Activities } & \text { Costs } & \text { Driver Units } \\\text { Open new acc ounts } & \$ 50,000 & 1,000 \text { accounts } \\\text { Process deposits } & 36,000 & 400,000 \text { deposits } \\\text { Process with draw als } & 15,000 & 200,000 \text { withdrawals } \\\text { Process loan applications } & 27,000 & 900 \text { applications }\end{array}$ The above activities are used by North County branch and South County branch: $\begin{array} { l l l } & \text { North } & \text { South } \\\text { New accounts } & 200 & 400 \\\text { Deposits } & 40,000 & 20,000 \\\text { Withdrawals } & 15,000 & 18,000 \\\text { Loan applications } & 100 & 160\end{array}$ The deposit cost assigned to the South County branch is:

A) $36,000
B) $3,600
C) $5,400
D) $1,800

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Question 33

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The equation for cost of goods sold

Direct labor costs plus factory overhead costs

Costs that cannot be identified specifically and exclusively with a given cost objective in an economically feasible way

Where a specific product is the cost object, the wages of a security guard would probably be classified as a(n) :

Last year Zephyr Company sold 9,000 units that cost $40,000 to produce. This cost included $3,000 in fixed computer resource cost, $10,000 in fixed labor cost, and communications resource cost at $3.00 per unit. Resource costs are expected to be the same next year. Zephyr expected to sell 18,000 units. The sales manager predicts that next year's cost will be $80,000. Required: Comment on the sales manager's cost prediction.

Direct labor costs plus direct materials costs

Identified with goods produced or purchased for resale

The Rainbow Company manufactures paint in two processes: Mixing and Cooking. Total costs incurred in the mixing and cooking departments are as follows: $\begin{array}{lll}&\text { Direct Materials }&\text { Direct labor }\\\text { Mixing } & \$ 60,000 & \$ 80,000 \\\text { Cooking } & \$ 25,000 & \$ 50,000\end{array}$ Indirect manufacturing costs were $90,000 for the Mixing department and $180,000 for the Cooking department. Rainbow Company manufactures two products, Superior Paint and Deluxe Paint. Costs are allocated to these products in the following proportions: $\begin{array}{lllll}&\text { Mixing }&&\text { Cooking }\\&DM&DL&DM&DL\\\text { Superior } & \mathbf{4 0} \% & \mathbf{7 0} \% & \mathbf{5 0} \% & \mathbf{4 0} \% \\\text { Deluxe } & \mathbf{6 0} \% & \mathbf{3 0} \% & \mathbf{5 0} \% & \mathbf{6 0} \%\end{array}$ Indirect cost is allocated in proportion to the direct labor costs with each department. The Mixing department cost allocated to Deluxe is:

Accountants can specifically and exclusively identify indirect costs with a given cost objective in an economically feasible way.

Depreciation of assembly equipment is an example of a direct cost.

Product costs first become part of the inventory on hand.

The contribution approach is a method of internal reporting that emphasizes the distinction between variable and fixed costs for the purpose of better decision making.

Youngblood Corporation had the following activities, traceable costs, and physical flow of driver units: $\begin{array}{llll}&\text { Traceable }&\text { Physical Flow of }\\\text { Activities }&\text { Costs }&\text { DriverUnits }\\\hline\text { Account inquiry (hours) } & \$ 8,000 & 500 \text { hours } \\\text { Account billing(lines) } & 5,600 & 200,000 \text { lines } \\\text { Account verification (accounts) } & 6,000 & 2,000 \text { accounts } \\\text { Correspondence (letters) } & 1,000 & 200 \text { letters }\end{array}$ The above activities are used by departments A and B as follows: $\begin{array}{lll}&A&B\\\text { Account inquiry (hours) } & 50 \text { hours } & 80 \text { hours } \\\text { Account billing (lines) } & 25,000 \text { lines } & 20,000 \text { lines } \\\text { Account verification (accounts) } & 200 \text { contracts } & 100 \text { contracts } \\\text { Correspondence (letters) } & 20 \text { letters } & 100 \text { letters }\end{array}$ The cost per driver unit for the account verification activity is:

Traditional cost systems generally allocate only indirect production costs to the products.

A schematic diagram capturing interrelationships among cost objects, activities, and resources

Indicate whether each of the following costs is an Inventoriable cost (I) or a Period cost (P): 1. depreciation on factory equipment 2. depreciation on treasurer's desk 3. direct materials 4. factory supplies 5. indirect labor 6. factory equipment repairs and maintenance 7. office supplies 8. advertising expense 9. depreciation on office equipment 10. direct labor 11. factory supervisor's salary 12. factory utilities 13. indirect materials 14. office salaries 15. sales commissions

A cost management system is the set of procedures used by managers to control costs.

Multistage ABC has resource cost drivers other than percentages.