hhfma02.qc17.1 sh - Mission...

hhfma02.qc17.1_sh.tdxex

Which statement is false?


Two of 's production activities are kitting (assembling the raw materials needed for each computer in one kit)and boxing the completed products for shipment to customers. Assume that spends million a month onkitting and million a month on boxing. allocates the following:- Kitting costs based on the number of parts used in the computer- Boxing costs based on the cubic feet of space the computer requires

Suppose estimates it will use million parts a month and ship products with a total volume of millioncubic feet. Assume that each desktop computer requires 100 parts and has a volume of 5 cubic feet.

What is the activity cost allocation rate? (Round all calculations to the nearest cent.)



Suppose estimates it will use million parts a month and ship products with a total volume of millioncubic feet. Assume that each desktop computer requires parts and has a volume of cubic feet. The allocation ratefor kitting is $ /part and the allocation rate for boxing is $ /cubic foot.

What are the kitting and boxing costs assigned to one desktop computer? (Round all calculations to the nearest cent.)



Suppose estimates it will use million parts a month and ship products with a total volume of millioncubic feet. Assume that each desktop computer requires parts and has a volume of cubic feet. The allocation ratefor kitting is $ /part and the allocation rate for boxing is $ /cubic foot. The kitting and boxing costs assigned to onecomputer are and $ , respectively.

contracts with its suppliers to pre-kit certain component parts before delivering them to . Assumethis saves million of the kitting cost and reduces the total number of parts by million (because considers each pre-kit as one part). If a desktop now uses parts, what is the new kitting cost assigned to one desktop?(Round all answers to the nearest cent.)


Keyboard can use ABC information for what decisions?


Which of the following is true for Dell, the computer company?


Companies enjoy many benefits from using JIT. Which is not a benefit of adopting JIT?


Which account is not used in JIT costing?


The cost of lost future sales after a customer finds a defect in a product is which type of quality cost?


Spending on testing a product before shipment to customers is which type of quality cost?

hhfma02.s17.1_s.tdxex

Activity-based costing requires four steps.

Requirement1. Rank the following steps in the order they would be completed. Number the first step as "1" until you have ranked all four steps.

hhfma02.s17.2_sh.tdxex

and Roscoe are college friends planning a skiing trip to Aspen before the New Year. They estimated the following costs forthe trip:

(Click the icon to view the costs.)

Requirements1. suggests that the costs be shared equally. Calculate the amount each person would pay.

2. Roscoe does not like the idea because he plans to stay in the room rather than ski. Roscoe suggests that each type of costbe allocated to each person based on the cost driver listed above. Using the activity allocation for each person, calculatethe amount that each person would pay based on his own consumption of the activity.

Requirement 1. If the costs are shared equally, each person would pay $ .

Requirement 2. If the costs were allocated, each person would pay the following:

$

Roscoe $

Data Table


, Corp., is considering the use of activity-based costing. The following information is provided for the production of twoproduct lines:

(Click the icon to view the information.)

plans to produce units of Product A and units of Product B.

Requirement1. Compute the ABC indirect manufacturing cost per unit for each product. (Round your answers to the nearest cent.)

The indirect manufacturing cost per unit for Product A is $ .

The indirect manufacturing cost per unit for Product B is $ .

Data Table


The following information is provided for the Antenna, Corp., which manufactures two products: Lo-Gain antennas, andHi-Gain antennas for use in remote areas.


plans to produce Lo-Gain antennas and Hi-Gain antennas.

Requirements1. Compute the ABC indirect manufacturing cost per unit for each product.

2. Compute the indirect manufacturing cost per unit using direct labor hours from the single-allocation-base system. (Round the rates and unit costs to the nearest cent. Round total costs allocated to each product to the nearest whole dollar.)

Requirement 1. Compute the ABC indirect manufacturing cost per unit for each product.

The indirect manufacturing cost using ABC per unit for Lo-Gain antennas is $ .

The indirect manufacturing cost per unit using ABC for Hi-Gain antennas is $ .

Requirement 2. Compute the indirect manufacturing cost per unit using direct labor hours from the single-allocation-base system.(Calculate the indirect manufacturing cost per unit only after determining the total indirect manufacturing costs allocated to eachproduct.)

The indirect manufacturing cost per unit for Lo-Gain antennas is $ .

The indirect manufacturing cost per unit for Hi-Gain antennas is $ .

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Data Table

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, Corp., makes two products: C and D. The following data have been summarized:

(Click the icon to view the data.)

The company plans to manufacture units of each product.

Requirement1. Calculate the product cost per unit for Products C and D using activity-based costing. (Round your answers to the nearest cent.)

Requirement 1. Calculate the product cost per unit for Products C and D using activity-based costing. (Round your answers to thenearest cent.)

The per unit product cost for Product C is $ .

The per unit product cost for Product D is $ .

Data Table

Indirect manufacturing cost information includes the following:


, Corp., manufactures mid-fi and hi-fi stereo receivers. The following data have been summarized:


The company plans to manufacture units of the mid-fi receivers and units of the hi-fi receivers.

Requirement1. Calculate the product cost per unit for both products using activity-based costing. (Round your answers to the nearest cent.)

Requirement 1. The per unit product cost for Mid-Fi receivers is $ .

The per unit product cost for Hi-Fi receivers is $ .

Data Table

Indirect manufacturing cost information includes:


, Inc., is a technology consulting firm focused on Web site development and integration of Internet business applications. Thepresident of the company expects to incur of indirect costs this year, and she expects her firm to work direct laborhours. systems consultants earn per hour. Clients are billed at of direct labor cost. Last month consultants spent hours on engagement.

Requirements1. Compute indirect cost allocation rate per direct labor hour.

2. Compute the total cost assigned to the engagement.

3. Compute the operating income from the engagement.

Requirement 1. Compute indirect cost allocation rate per direct labor hour. (Round your answer to the nearest cent.)

Requirement 2. Compute the total cost assigned to the engagement. (Round your answer to the nearest whole dollar.)

Requirement 3. Compute the operating income from the engagement.


, Inc., is a technology consulting firm focused on Web site development and integration of Internet business applications. Thepresident of the company expects to incur of indirect costs this year, and she expects her firm to work direct laborhours. systems consultants earn per hour. Clients are billed at of direct labor cost. The president of suspects that her allocation of indirect costs could be giving misleading results, so she decides to develop an ABC system. Sheidentifies three activities: documentation preparation, information technology support, and training. The president figures thatdocumentation costs are driven by the number of pages, information technology support costs are driven by the number of softwareapplications used, and training costs are most closely associated with the number of direct labor hours worked. Estimates of thecosts and quantities of the allocation bases follow:

(Click the icon to view the cost and quantity data.)

Requirement1. Compute the cost allocation rate for each activity.

Requirement 1. Compute the cost allocation rate for document preparation.

Compute the cost allocation rate for information technology support.

Compute the cost allocation rate for training.

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Data Table

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, Inc., is a technology consulting firm focused on Web site development and integration of Internet business applications.Clients are billed at of direct labor cost. The president of , Inc., suspects that her allocation of indirect costs could begiving misleading results, so she decides to develop an ABC system. She identifies three activities: documentation preparation,information technology support, and training. The president figures that documentation costs are driven by the number of pages,information technology support costs are driven by the number of software applications used, and training costs are most closelyassociated with the number of direct labor hours worked. Suppose direct labor rate was per hour, the documentationcost was $ per page, the information technology support cost was $ per application, and training costs were $ per directlabor hour. The engagement used the following resources last month:

(Click the icon to view the cost and quantity data.)

Requirements1. Compute the cost assigned to the engagement, using the ABC system.

2. Compute the operating income from the engagement, using the ABC system.

Requirement 1. Compute the cost assigned to the engagement, using the ABC system. (Round your answer to thenearest whole dollar.)

Requirement 2. Compute the operating income from the engagement, using the ABC system.

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Data Table

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, Inc., is a technology consulting firm focused on Web site development and integration of Internet business applications. Thecosts associated with the engagement follow:

(Click the icon to view the costs.)

desires a % target profit after covering all costs.

Requirement1. Considering the total costs assigned to the engagement, what would have to charge the customer to

achieve that profit? (Round your answer to the nearest whole dollar.)

Rquirement 1. would have to charge $ to achieve the desired profit.

Data Table


Consider the following characteristics of either a JIT production system or a traditional production system.

Requirement1. Indicate whether each is characteristic of a JIT production system or a traditional production system.


Products uses a JIT system to manufacture trading pins for the Hard Rock Cafe. The standard cost per pin is for rawmaterials and for conversion costs. Last month recorded the following data:

Requirement1. Use JIT costing to prepare journal entries for the month, including the entry to close the Conversion costs account.

Requirement 1. Journalize the purchase of raw materials.

Journalize the actual conversion costs incurred.

Prepare the entry to record the completed production.

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Prepare the entry to record the cost of the units sold.

Journalize the entry to close the Conversion costs account.

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Harry, Inc., manufactures motor scooters. Consider each of the following examples of quality costs.

Requirement1. Indicate which of the following quality cost categories each example represents.

P Prevention costs

A Appraisal costs

IF Internal failure costs

EF External failure costs

hhfma02.e17.14_sh.tdxex

, Inc., uses activity-based costing to account for its chrome bumper manufacturing process. Company managers haveidentified four manufacturing activities: materials handling, machine setup, insertion of parts, and finishing. The budgeted activitycosts for 2010 and their allocation bases are as follows:

(Click the icon to view the budgeted costs and activity bases.)

expects to produce chrome bumpers during the year. The bumpers are expected to use parts, require setups, and consume hours of finishing time.

Requirements1. Compute the cost allocation rate for each activity. 2. Compute the indirect manufacturing cost of each bumper.

Requirement 1. Compute the cost allocation rate for materials handling.

Compute the cost allocation rate for machine setup.

Compute the cost allocation rate for the insertion of parts.

Compute the cost allocation rate for finishing.

Requirement 2. Compute the indirect manufacturing cost of each bumper. (Round each answer to the nearest cent.)

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Data Table

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Champs Corp. uses activity-based costing to account for its motorcycle manufacturing process. Company managers haveidentified three supporting manufacturing activities: inspection, machine setup, and machine maintenance. The budgeted activitycosts for 2011 and their allocation bases are as follows:

(Click the icon to view the budgeted costs and activity bases.)

Champs expects to produce custom-built motorcycle for the year. The motorcycles are expected to require inspections, setups, and maintenance hours.

Requirements1. Compute the cost allocation rate for each activity. 2. Compute the indirect manufacturing cost of each motorcycle.

Requirement 1. Compute the cost allocation rate for inspection.

Compute the cost allocation rate for machine setup.

Compute the cost allocation rate for machine maintenance.

Requirement 2. Compute the indirect manufacturing cost of each motorcycle.

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Data Table

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Company manufactures wheel rims. The controllerbudgeted the following ABC allocation rates for 2010:

(Click the icon to view the allocation rates.)

The number of parts is now a feasible allocation base because recently purchased bar coding technology.

produces two wheel rim models: standard and deluxe.Budgeted data for 2010 are as follows:

(Click the icon to view the budgeted data.)

The company's managers expect to produce units ofeach model during the year.

Requirements1. Compute the total budgeted indirect manufacturing cost

for 2010.

2. Compute the ABC indirect manufacturing cost per unit ofeach model. Carry each cost to the nearest cent.

3. Prior to 2010, used a direct labor hoursingle-allocation-base system. Compute the (single)allocation rate based on direct labor hours for 2010. Usethis rate to determine the indirect manufacturing cost perwheel rim for each model, to the nearest cent.

Requirement 1. Compute the total budgeted indirect manufacturing cost for 2010.

Requirement 2. Compute the ABC indirect manufacturing cost per unit of each model. (Carry the setup cost per rim to threedecimal places. Round final answers to the nearest cent.)

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Requirement 3. Compute the (single) allocation rate based on direct labor hours for 2010. (Round your answer to the nearest cent.)

Use the (single) allocation rate to determine the indirect manufacturing cost per wheel rim for each model, to the nearest cent.

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Data Table

Data Table

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Dog Collars uses activity-based costing. 's system has the following features:

(Click the icon to view the features.)

Requirements1. Compute the total cost will incur to purchase the needed materials and then assemble and package dog

collars. Also compute the cost per collar. (Round the total cost to the nearest dollar and the cost per collar to the nearest cent.)

2. For bidding, adds a % markup to total cost. What total price will the company bid for the entire PetStart order?(Round to the nearest dollar.)

3. Suppose that instead of an ABC system, has a traditional product costing system that allocates all costs other thandirect materials at the rate of per direct labor hour. The dog collar order will require direct labor hours. Whattotal price will bid using this system's total cost? (Round to the nearest dollar.)

4. Use your answers to requirements 2 and 3 to explain how ABC can help make a better decision about the bid price itwill offer PetStart.

Requirement 1.

The total cost will incur to purchase the materials and assemble and package dog collars is $ .

The cost per collar is $ .

Requirement 2.

The total price the company will bid for the PetStart order is $

Requirement 3.

The total price that will bid if using a traditional product costing system that allocates all costs on the direct labor hours is $ .

Requirement 4.

's bid would be $ using the direct labor single-allocation-base system than using ABC. If the company uses

the direct labor single-allocation-base system they their chances of winning the bid. If the company uses the ABC

system they their chance of winning the bid.

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Data Table

Each collar has parts; direct materials cost per collar is $ . Suppose PetStart has asked for a bid on dog collars. will issue a total of purchase orders if PetStart accepts 's bid.

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Company manufactures wheel rims. The company produces two wheel rim models: standard and deluxe. For 2011, managers have decided to use the same indirect manufacturing costs per wheel rim that they computed in 2010. In

addition to the unit indirect manufacturing costs, the following data are budgeted for the company's standard and deluxe models for2011:

(Click the icon to view the budgeted information.)

Because of limited machine-hour capacity, can produce either 2,000 standard rims or 2,000 deluxe rims.

Requirements1. If managers rely on the ABC unit cost data computed in 2010, which model will they produce? Carry each

cost to the nearest cent. (All nonmanufacturing costs are the same for both models.)

2. If the managers rely on the single-allocation-base cost data, which model will they produce?

3. Which course of action will yield more income for ?

Requirement 1.Use the ABC unit cost data to compute the gross profit for each model.

managers will produce 2000 units of the model to maximize income.

Requirement 2.Use the single allocation unit cost data to compute the gross profit for each model.

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If they rely on the single-allocation-base data, managers will produce the model. It will appear to maximize

income.

Requirement 3.

will earn more income by producing the model. data are generally more accurate than

data.

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Data Table

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Company manufactures wheel rims. The controller budgeted ABC allocation rates for 2010. produces two wheelrim models: standard and deluxe. Budgeted data for 2010 are as follows:

(Click the icon to view the 2010 allocation rates and budgeted data.)

In 2011, managers used the same indirect manufacturing costs per wheel rim that they computed in 2010. In addition tothe unit indirect manufacturing costs, the following data are budgeted for the company's standard and deluxe models for 2011.

(Click the icon to view the budgeted information and the deluxe unit cost calculation.)

Controller is surprised by the increase in cost of the deluxe model under ABC. He had a market research studyconducted.

(Click the icon to view the results of the market research.)

Requirement1. Would implementing the value engineering recommendation enable to achieve its target cost for the deluxe rim?

Requirement 1. First calculate the revised finishing activity cost per rim.

(Round the calculation of the total cost to the nearest cent.)

the value engineering process will bring the cost of the deluxe model to $ which is the target cost of .

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Data Table

Data Table

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More Info

Market research shows that for the deluxe rim to provide a reasonable profit, will have to meet a target manufacturing cost of per rim. A valueengineering study by employees suggests that modifications to the finishing process could cut finishing cost from to per hour and reducethe finishing direct labor hours per deluxe rim from hours to hours. Direct materials would remain unchanged at per rim, as would direct labor at

per rim. The materials handling, machine setup, and insertion of parts activity costs also would remain the same.

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, Inc., produces universal remote controls. uses a JIT costing system. One of the company's products has a standarddirect materials cost of per unit and a standard conversion cost of per unit. During January 2011, produced unitsand sold . It purchased of direct materials and incurred actual conversion costs totaling .

Requirements1. Prepare summary journal entries for January.

2. The January 1, 2011, balance of the Raw and in-process inventory account was . Use a T-account to find the January 31balance.

3. Use a T-account to determine whether conversion costs are over- or underallocated for the month. By how much? Give thejournal entry to close the Conversion costs account.

Requirement 1. Prepare the summary journal entries for January.

Journalize the purchase of raw materials.


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Journalize the completed production.

Journalize the cost of sales.

Requirement 2. Complete the T-account to find the ending balance of Raw and in-process inventory. (Make sure to use the nextavailable cell on the proper side of the T-account when posting the entries.)

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Requirement 3. Use a T-account to determine whether conversion costs are over- or underallocated for the month.

Conversion costs are by $ .

Give the journal entry to close the Conversion costs account.

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produces electronic calculators. Suppose 's standard cost per calculator is for materials and for conversioncosts. The following data apply to July production:


uses JIT costing.

Requirements1. Prepare summary journal entries for July, including the entry to close the Conversion costs account.

2. The beginning balance of Finished goods inventory was $ . Use a T-account to find the ending balance of Finishedgoods inventory.

Requirement 1. Prepare summary journal entries for July, including the entry to close the Conversion costs account.



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Requirement 2. Complete the T-account to find the ending balance of Finished goods inventory. (Make sure to use the nextavailable cell on the proper side of the T-account when posting the entries.)

Data Table

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hhfma02.e17.22_s.tdxex

Millan & Co. makes electronic components. Mike Millan, the president, recently instructed vice president Steve Bensen to develop atotal quality control program. "If we don't at least match the quality improvements our competitors are making," he told Bensen,"we'll soon be out of business." Bensen began by listing various "costs of quality" that Millan incurs. The first six items that came tomind were:


Requirement1. Classify each item as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost.

Data Table

a. Costs incurred by Millan customer representatives traveling to customer sites to repairdefective products

b. Lost profits from lost sales due to reputation for less-than-perfect products

c. Costs of inspecting components in one of Millan's production processes

d. Salaries of engineers who are designing components to withstand electrical overloads

e. Costs of reworking defective components after discovery by company inspectors

f. Costs of electronic components returned by customers


, Inc., manufactures door panels. Suppose is considering spending the following amounts on a new total qualitymanagement (TQM) program:


expects the new program would save costs through the following:


Requirements1. Classify each item as a prevention cost, an appraisal cost, an internal failure cost, or an external failure cost.2. Should implement the new quality program? Give your reason.

Requirement 1. Classify each cost into one of the four categories of quality costs.

Requirement 2. Should implement the new quality program?

implement the quality program. The cost of implementing the program is $ the costs of

failing to implement the program.

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Data Table

Data Table

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manufactures high-quality speakers. Suppose is considering a new quality program:


Requirements1. Classify each of these costs into one of the four categories of quality costs (prevention, appraisal, internal failure, external failure).2. Should implement the quality program? Give your reasons.

Requirement 1. Classify each cost into one of the four categories of quality costs.

Requirement 2. Should implement the quality program?

implement the quality program. The cost of implementing the program is $ the costs of

failing to implement the program.

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Data Table

is considering spending the following amounts on the new program:

expects this quality program to save costs, as follows:

It also expects this program to avoid lost profits from the following:

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hhfma02.p17.25a_sh.tdxex

The Manufacturing Company in Hondo, Texas, assembles and tests electronic components used in handheld video phones.Consider the following data regarding component T24:

The activities required to build the component follow:

(Click the icon to view the activity data.) (Click the icon to view the requirements.)

Requirement 1. Fill in the blanks in the list of activities.

Fill in the blanks in the opening schedule.

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Requirement 2. How is labor cost assigned to products under this ABC product costing system?

Direct labor is . This reduces accounting costs because there is elaborate

tracking of labor.

Requirement 3.

Managers favor this multiple-rate, activity-based costing system because it better pinpoints for planning and

control and it provides more accurate data for .

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Data Table

More Info

Requirements1. Fill in the blanks in both the opening schedule and the list of activities.

2. How is labor cost assigned to products under this ABC product costingsystem?

3. Why might managers favor this ABC system instead of oldersystem, which allocated all conversion costs on the basis of directlabor?

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, Inc., manufactures bookcases and uses an activity-based costing system. activity areas and related data follow:

(Click the icon to view the activity areas and related data.)

Requirements1. Compute the manufacturing product cost per unit of each type of bookcase.

2. Suppose that premanufacturing activities, such as product design, were assigned to the standard bookcases at each andto the unfinished bookcases at each. Similar analyses were conducted of postmanufacturing activities such asdistribution, marketing, and customer service. The postmanufacturing costs were per standard bookcase and perunfinished bookcase. Compute the full product costs per unit.

3. Which product costs are reported in the external financial statements? Which costs are used for management decisionmaking? Explain the difference.

4. What price should managers set for unfinished bookcases to earn a unit profit of ?

Requirement 1. Compute the manufacturing product cost per unit of each type of bookcase: Standard and Unfinished. (Completeall input boxes. Round answers to the nearest whole dollar.)

Requirement 2. Compute the full product costs per unit.

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Requirement 3. Which product costs are reported in the external financial statements? Which costs are used for managementdecision making?

are reported in the financial statements. Managers use for decisions

such as pricing and product emphasis. Full product costs includes the

that are expensed as incurred for external reporting. However, these costs often are

.

Requirement 4. What price should managers set for unfinished bookcases to earn a unit profit of ?

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Data Table

produced two styles of bookcases in April: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. Thetotals for quantities, direct materials costs, and other data follow:

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Pharmaceuticals manufacturers an over-the-counter allergy medication. The company sells both large commercialcontainers of 1,000 capsules to health-care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels.The following information has been developed to determine if an activity-based costing system would be beneficial:

(Click the icon to view the information.) (Click the icon to view the requirements.)

Requirement 1. Compute the cost allocation rate for each activity.

The cost allocation rate for materials handling is $ .

The cost allocation rate for packaging is $ .

The cost allocation rate for quality assurance is $ .

Requirement 2. Use the activity-based cost allocation rates to compute the activity costs per unit of commercial containers andtravel packs. (Round the cost per unit to the nearest cent.)

The activity costs per unit for commercial containers is $ .

The activity costs per unit for travel packs is $ .

Requirement 3. Compute the total indirect costs allocated to commercial containers and travel packs under the originalsingle-allocation-base system.

The total indirect costs allocated to commercial containers under the original system is $ .

The total indirect costs allocated to travel packs under the original system is $ .

Now compute the indirect cost per unit for each product under the orginal single-allocation-base system. (Round the cost per unit tothe nearest cent.)

The indirect cost per unit for commercial containers under the original system is $

The indirect cost per unit for travel packs under the original system is $ .

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Requirement 4. Compare the activity-based costs per unit to the costs from the single-allocation-base system. How have the unitcosts changed?

The original system the commercial containers and the travel packs.

ABC recognizes that commercial containers 3 times as much material handling and quality assurance as travel

packs and allocated of those costs to commercial containers.

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Data Table

Other production information includes the following:

More Info

Requirements1. Compute the cost allocation rate for each activity.

2. Use the activity-based cost allocation rates to compute the activity costs per unit ofcommercial containers and travel packs. (Hint: First compute the total activity costsallocated to each product line, and then compute the cost per unit.)

3. 's original single-allocation-base costing system allocated indirect costs toproducts at per machine hour. Compute the total indirect costs allocated to thecommercial containers and to the travel packs under the original system. Thencompute the indirect cost per unit for each product.

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4. Compare the activity-based costs per unit to the costs from the single-allocation-basesystem. How have the unit costs changed? Explain why the costs changed as theydid.

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produces fleece jackets. The company uses JIT costing for its JIT production system. has two inventoryaccounts: Raw and in-process inventory and Finished goods inventory. On February 1, 2010, the account balances were Raw andin-process inventory, ; Finished goods inventory, . The standard cost of a jacket is $ : direct materials plus conversion costs. Data for February's activities follow:


Requirements1. What are the major features of a JIT production system such as that of ?2. Prepare summary journal entries for February. Under- and overallocated conversion costs are closed to Cost of goods sold

monthly.3. Use a T-account to determine the February 28, 2010, balance of Raw and in-process inventory.

Requirement 1. What are the major features of a JIT system?

Requirement 2. Prepare summary journal entries for February. Under- and overallocated conversion costs are closed to Cost ofgoods sold monthly.


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Requirement 3. Use a T-account to determine the February 28, 2010, balance of Raw and in-process inventory. (Make sure to usethe next available cell on the proper side of the T-account when posting the entries.)

Data Table

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, Inc., is using a costs-of-quality approach to evaluate design engineering efforts for a new skateboard. 's senior managersexpect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductions in activitiesover the 2-year life of the skateboards follow. Also shown are the cost allocation rates for each activity.


Requirements1. Calculate the predicted quality cost savings from the design engineering work.

2. spent on design engineering for the new skateboard. What is the net benefit of this "preventive" quality activity?

3. What major difficulty would 's managers have in implementing this costs-of-quality approach? What alternative approachcould they use to measure quality improvement?

Requirement 1. Calculate the predicted quality cost savings from the design engineering work.

The predictive quality cost savings from the design engineering work is $ .

Requirement 2. spent on design engineering for the new skateboard. What is the net benefit of this "preventive"quality activity?

The net benefit of the "preventive" quality activity is $ .

Requirement 3. What major difficulty would 's managers have in implementing this costs-of-quality approach?

What alternative approach could they use to measure quality improvement?

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Data Table

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hhfma02.p17.30b_sh.tdxex

The Manufacturing Company in Hondo, Texas, assembles and tests electronic components used in handheld video phones.Consider the following data regarding component T24:

The activities required to build the component follow:

(Click the icon to view the activity data.) (Click the icon to view the requirements.)

Requirement 1. Fill in the blanks in the list of activities.

Fill in the blanks in the opening schedule.

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Requirement 2. How is labor cost assigned to products under this ABC product costing system?

Direct labor is . This reduces accounting costs because there is elaborate

tracking of labor.

Requirement 3.

Managers favor this multiple-rate, activity-based costing system because it better pinpoints for planning and

control and it provides more accurate data for .

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Data Table

More Info

Requirements1. Fill in the blanks in both the opening schedule and the list of activities.

2. How is labor cost assigned to products under this ABC product costingsystem?

3. Why might managers favor this ABC system instead of oldersystem, which allocated all conversion costs on the basis of directlabor?

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, Inc., manufactures bookcases and uses an activity-based costing system. activity areas and related datafollow:

(Click the icon to view the activity areas and related data.)

Requirements1. Compute the manufacturing product cost per unit of each type of bookcase.

2. Suppose that premanufacturing activities, such as product design, were assigned to the standard bookcases at each andto the unfinished bookcases at each. Similar analyses were conducted of postmanufacturing activities such asdistribution, marketing, and customer service. The postmanufacturing costs were per standard bookcase and perunfinished bookcase. Compute the full product costs per unit.

3. Which product costs are reported in the external financial statements? Which costs are used for management decisionmaking? Explain the difference.

4. What price should managers set for unfinished bookcases to earn a unit profit of ?

Requirement 1. Compute the manufacturing product cost per unit of each type of bookcase: Standard and Unfinished. (Completeall input boxes. Round answers to the nearest whole dollar.)

Requirement 2. Compute the full product costs per unit.

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Requirement 3. Which product costs are reported in the external financial statements? Which costs are used for managementdecision making?

are reported in the financial statements. Managers use for decisions

such as pricing and product emphasis. Full product costs includes the

that are expensed as incurred for external reporting. However, these costs often are

.

Requirement 4. What price should managers set for unfinished bookcases to earn a unit profit of ?

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Data Table

produced two styles of bookcases in May: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing.The totals for quantities, direct materials costs, and other data follow:

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Pharmaceuticals manufacturers an over-the-counter allergy medication. The company sells both large commercialcontainers of 1,000 capsules to health-care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels.The following information has been developed to determine if an activity-based costing system would be beneficial:

(Click the icon to view the information.) (Click the icon to view the requirements.)

Requirement 1. Compute the cost allocation rate for each activity.

The cost allocation rate for materials handling is $ .

The cost allocation rate for packaging is $ .

The cost allocation rate for quality assurance is $ .

Requirement 2. Use the activity-based cost allocation rates to compute the activity costs per unit of commercial containers andtravel packs. (Round the cost per unit to the nearest cent.)

The activity costs per unit for commercial containers is $ .

The activity costs per unit for travel packs is $ .

Requirement 3. Compute the total indirect costs allocated to commercial containers and travel packs under the originalsingle-allocation-base system.

The total indirect costs allocated to commercial containers under the original system is $ .

The total indirect costs allocated to travel packs under the original system is $ .

Now compute the indirect cost per unit for each product under the orginal single-allocation-base system. (Round the cost per unit tothe nearest cent.)

The indirect cost per unit for commercial containers under the original system is $

The indirect cost per unit for travel packs under the original system is $ .

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Requirement 4. Compare the activity-based costs per unit to the costs from the single-allocation-base system. How have the unitcosts changed?

The original system the commercial containers and the travel packs.

ABC recognizes that commercial containers 3 times as much material handling and quality assurance as travel

packs and allocated of those costs to commercial containers.

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Data Table

Other production information includes the following:

More Info

Requirements1. Compute the cost allocation rate for each activity.

2. Use the activity-based cost allocation rates to compute the activity costs per unit ofcommercial containers and travel packs. (Hint: First compute the total activity costsallocated to each product line, and then compute the cost per unit.)

3. 's original single-allocation-base costing system allocated indirect costs toproducts at per machine hour. Compute the total indirect costs allocated to thecommercial containers and to the travel packs under the original system. Thencompute the indirect cost per unit for each product.

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4. Compare the activity-based costs per unit to the costs from the single-allocation-basesystem. How have the unit costs changed? Explain why the costs changed as theydid.

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produces fleece jackets. The company uses JIT costing for its JIT production system. has two inventoryaccounts: Raw and in-process inventory and Finished goods inventory. On March 1, 2010, the account balances were Raw andin-process inventory, ; Finished goods inventory, . The standard cost of a jacket is $ : direct materials plus conversion costs. Data for March's activities follow:


Requirements1. What are the major features of a JIT production system such as that of ?2. Prepare summary journal entries for March. Under- and overallocated conversion costs are closed to Cost of goods sold

monthly.3. Use a T-account to determine the March 31, 2010, balance of Raw and in-process inventory.

Requirement 1. What are the major features of a JIT system?

Requirement 2. Prepare summary journal entries for March. Under- and overallocated conversion costs are closed to Cost ofgoods sold monthly.


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Requirement 3. Use a T-account to determine the March 31, 2010, balance of Raw and in-process inventory. (Make sure to usethe next available cell on the proper side of the T-account when posting the entries.)

Data Table

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, Inc., is using a costs-of-quality approach to evaluate design engineering efforts for a new wakeboard. 's seniormanagers expect the engineering work to reduce appraisal, internal failure, and external failure activities. The predicted reductionsin activities over the 2-year life of the wakeboards follow. Also shown are the cost allocation rates for each activity.


Requirements1. Calculate the predicted quality cost savings from the design engineering work.

2. spent on design engineering for the new wakeboard. What is the net benefit of this "preventive" qualityactivity?

3. What major difficulty would 's managers have in implementing this costs-of-quality approach? What alternativeapproach could they use to measure quality improvement?

Requirement 1. Calculate the predicted quality cost savings from the design engineering work.

The predictive quality cost savings from the design engineering work is $ .

Requirement 2. spent on design engineering for the new wakeboard. What is the net benefit of this "preventive"quality activity?

The net benefit of the "preventive" quality activity is $ .

Requirement 3. What major difficulty would 's managers have in implementing this costs-of-quality approach?

What alternative approach could they use to measure quality improvement?

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Data Table

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completed a special landscaping job for . If had used activity-based costing, 'sdata about the job, including ABC information, would be as follows:


Requirements1. uses one setup for the job and installs plants. What is the total cost of the job?

2. If the price paid for the job is , what is the profit or loss on the job under ABC?

Requirement 1. Calculate the total cost of the job under ABC.

Requirement 2. Calculate 's profit or loss on the job under ABC if paid . (Enter a loss with a minus sign orparentheses.)

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Data Table

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