Question 1

Suppose an action analysis report is prepared for the function mentioned above. What would be the "yellow margin" in the action analysis report? (Round to the nearest whole dollar.)
A)$229
B)$334
C)$279
D)$154

Accepted Answer

D

Question 2

If a cost object such as a product or customer has a positive green margin, then:
A)its yellow margin will be positive.
B)its yellow margin may be either positive, negative, or zero.
C)its yellow margin will be negative.
D)its yellow margin will be zero.

Accepted Answer

The yellow margin may be positive, negative, or zero. The green margin only takes into account direct costs, while the yellow margin takes into account both direct and indirect costs, which may vary depending on the allocation method used. Therefore, a positive green margin does not necessarily guarantee a positive yellow margin.

Question 3

Goluski Company, a wholesale distributor, uses activity-based costing for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity based costing system:   The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
The amount of activity for the year is as follows:  Required:
Compute the activity rates (i.e., cost per unit of activity) for the Filling Orders and Product Support activity cost pools:

Accepted Answer

First-stage allocation  Activity rates (costs divided by activity)

Question 4

What would be the total overhead cost per order according to the activity based costing system? In other words, what would be the overall activity rate for the filling orders activity cost pool? (Round to the nearest whole cent.)
A)$54.00
B)$63.00
C)$58.50
D)$56.50

Accepted Answer

Allocations to the Filling Orders activity cost pool:
 11eaa48f_7b87_b030_9e4a_f5971b58b97a_TB2485_00 Cost per order = Total cost of filling orders F1F1F1S1F1F1F10 Number of orders = $226,000 F1F1F1S1F1F1F10 4,000 orders = $56.50 per order

Question 5

To the nearest whole dollar, how much wages and salaries cost would be allocated to a customer who made 4 orders in a year?
A)$15,756
B)$13,332
C)$10,908
D)$21,816

Accepted Answer

Allocations to the Wages and salary:
 11eaa48f_7b87_fe52_9e4a_0748b8bb0fee_TB2485_00 
 11eaa48f_7b87_fe53_9e4a_5f3e6058bb82_TB2485_00 
 11eaa48f_7b87_fe54_9e4a_0b5c48dfb2ee_TB2485_00

Question 6

What would be the total overhead cost per customer according to the activity based costing system? In other words, what would be the overall activity rate for the customer support activity cost pool? (Round to the nearest whole dollar.)
A)$16,200
B)$18,900
C)$20,100
D)$21,600

Accepted Answer

Allocations to the Customer Support activity cost pool:
 11eaa48f_7b87_d741_9e4a_8d3698a4faef_TB2485_00 Customer cost per order = Total customer cost F1F1F1S1F1F1F10 Number of customers = $402,000 F1F1F1S1F1F1F10 20 customers = $20,100 per customer

Question 7

Inskeep Draperies makes custom draperies for homes and businesses. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity cost pools.   The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
The amount of activity for the year is as follows:  Required:
a. Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:  b. Compute the activity rates (i.e., cost per unit of activity) for the Making Drapes and Job Support activity cost pools by filling in the table below:  c. Prepare an action analysis report in good form of a job that involves making 70 yards of drapes and has direct materials and direct labor cost of $1,870. The sales revenue from this job is $3,700.
For purposes of this action analysis report, direct materials and direct labor should be classified as a Green cost; production overhead as a Red cost; and office expense as a Yellow cost.

Accepted Answer

The answer of Inskeep Draperies makes custom draperies for homes...

Question 8

If a cost object such as a product or customer has a positive yellow margin, then:
A)its red margin will be positive.
B)its red margin may be either positive, negative, or zero.
C)its red margin will be negative.
D)its red margin will be zero.

Accepted Answer

The answer of If a cost object such as a...

Question 9

Hasher Hardwood Floors installs oak and other hardwood floors in homes and businesses. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity based costing system:   The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
The amount of activity for the year is as follows:  A "square" is a measure of area that is roughly equivalent to 1,000 square feet.
Required:
a. Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:  b. Compute the activity rates (i.e., cost per unit of activity) for the Installing Floors and Job Support activity cost pools by filling in the table below:  c. Compute the overhead cost, according to the activity-based costing system, of a job that involves installing 2.8 squares.

Accepted Answer

The answer of Hasher Hardwood Floors installs oak and other...

Question 10

Suppose an action analysis report is prepared for the function mentioned above. What would be the "red margin" in the action analysis report? (Round to the nearest whole dollar.)
A)$(68)
B)$32
C)$(118)
D)$182

Accepted Answer

The "red margin" is the difference between the total cost of the function and the total revenue it generates. Based on the given information, the total revenue is $1,768 ($1,540 from sales and $228 from subsidies) and the total cost is $1,800 ($1,000 fixed cost and $800 variable cost). Thus, the "red margin" is $32, which means the function is not making a profit. Choice B is the closest to this value.

Question 11

Which of the following statements concerning ease of adjustment codes is incorrect?
A)"Green" costs adjust automatically to changes in activity.
B)"Yellow" costs could be adjusted to changes in activity, but such adjustments require management action; the adjustment is not automatic.
C)"Red" costs cannot be adjusted to changes in activity.
D)The costs of idle capacity and organization-sustaining costs are not assigned codes.

Accepted Answer

The statement that "Red" costs cannot be adjusted to changes in activity is incorrect. In fact, "Red" costs are those that are completely avoidable and can be eliminated if the underlying activity is stopped. Therefore, they are the most prone to adjustment in response to changes in activity.

Question 12

Jansen Painting paints the interiors and exteriors of homes and commercial buildings. The company uses an activity-based costing system for its overhead costs. The company has provided the following data concerning its activity-based costing system.  The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs.
The company has already finished the first stage of the allocation process in which costs were allocated to the activity cost centers. The results are listed below:  Required:
a. Compute the activity rates (i.e., cost per unit of activity) for the Painting and Job Support activity cost pools. Round off all calculations to the nearest whole cent.
b. Prepare an action analysis report in good form of a job that involves painting 97 square meters and has direct materials and direct labor cost of $3,150. The sales revenue from this job is $4,200.
For purposes of this action analysis report, direct materials and direct labor should be classified as a Green cost; production overhead as a Red cost; and office expense as a Yellow cost.

Accepted Answer

The answer of Jansen Painting paints the interiors and exteriors...

Question 13

An action analysis report provides more detail about costs and how they might adjust to changes in activity than a conventional activity-based costing analysis.

Accepted Answer

An action analysis report provides a more detailed understanding of the costs involved in various activities and how they might change based on changes in activity levels. This goes beyond the scope of a conventional activity-based costing analysis, which focuses primarily on identifying the costs of specific activities. An action analysis report can help managers make more informed decisions about how to allocate resources and adjust their operations to achieve greater efficiency and profitability.

Question 14

If a cost object such as a product or customer has a negative red margin, then:
A)its yellow margin will be positive.
B)its yellow margin may be positive, negative, or zero.
C)its yellow margin will be negative.
D)its yellow margin will be zero.

Accepted Answer

The answer of If a cost object such as a...

Question 15

According to the activity-based costing system, what was the total cost (including the costs of raw ingredients) of the function mentioned above? (Round to the nearest whole dollar.)
A)$1,868
B)$2,368
C)$2,568
D)$1,718

Accepted Answer

According to the activity-based costing system, the total cost of the function mentioned above is calculated as follows:
- Cost of raw ingredients: 500 + (5 x 200) = 1,500
- Cost of food preparation: 40 x 24 = 960
- Cost of serving staff: 12 x 24 = 288
- Cost of utilities: 120 x 1 = 120
Total cost = 1,500 + 960 + 288 + 120 = $2,368 (rounded to the nearest whole dollar). Therefore, the best choice is B.

Quiz 16: Activity-Based-Costing: a Tool to Aid Decision Making

Suppose an action analysis report is prepared for the function mentioned above. What would be the "yellow margin" in the action analysis report? (Round to the nearest whole dollar.)

If a cost object such as a product or customer has a positive green margin, then:

What would be the total overhead cost per order according to the activity based costing system? In other words, what would be the overall activity rate for the filling orders activity cost pool? (Round to the nearest whole cent.)

To the nearest whole dollar, how much wages and salaries cost would be allocated to a customer who made 4 orders in a year?

What would be the total overhead cost per customer according to the activity based costing system? In other words, what would be the overall activity rate for the customer support activity cost pool? (Round to the nearest whole dollar.)

If a cost object such as a product or customer has a positive yellow margin, then:

Suppose an action analysis report is prepared for the function mentioned above. What would be the "red margin" in the action analysis report? (Round to the nearest whole dollar.)

Which of the following statements concerning ease of adjustment codes is incorrect?

An action analysis report provides more detail about costs and how they might adjust to changes in activity than a conventional activity-based costing analysis.

If a cost object such as a product or customer has a negative red margin, then:

According to the activity-based costing system, what was the total cost (including the costs of raw ingredients) of the function mentioned above? (Round to the nearest whole dollar.)