Question 1

Answer the following questions using the information below:
Products S5 and CP8 each are assigned $50.00 in indirect costs by a traditional costing system.An activity analysis revealed that although production requirements are identical,S5 requires 45 minutes less set-up time than CP8.
-ABC systems are useful in manufacturing,but not in the merchandising or service industries.

Accepted Answer

The statement is false. ABC (Activity-Based Costing) systems can be used in various industries, including manufacturing, merchandising, and service industries.

Question 2

Explain how traditional cost systems,using a single unit-level cost rate,may distort product costs.
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Accepted Answer

The answer of Explain how traditional cost systems,using a single...

Question 3

Answer the following questions using the information below:
Products S5 and CP8 each are assigned $50.00 in indirect costs by a traditional costing system.An activity analysis revealed that although production requirements are identical,S5 requires 45 minutes less set-up time than CP8.
-Once an ABC system has been set up,these calculations are routine and the management accountant,as a member of the management team,can computerise them with relatively little effort.

Accepted Answer

The information states that once an ABC system has been set up, the calculations are routine and can be computerized with relatively little effort. This implies that the management accountant can easily perform the calculations using the ABC system. Therefore, the statement is true.

Question 4

Answer the following questions using the information below:
Products S5 and CP8 each are assigned $50.00 in indirect costs by a traditional costing system.An activity analysis revealed that although production requirements are identical,S5 requires 45 minutes less set-up time than CP8.
-ABC is not complex in concept.

Accepted Answer

The information provided in the given scenario is simple and can be easily incorporated into an activity-based costing system. Therefore, ABC is not complex in this scenario.

Question 5

Answer the following questions using the information below:
Products S5 and CP8 each are assigned $50.00 in indirect costs by a traditional costing system.An activity analysis revealed that although production requirements are identical,S5 requires 45 minutes less set-up time than CP8.
-Managers might be inclined to shy away from ABC systems because of their apparent complexity and the perceived potential for the costs of these systems to exceed the benefits derived.

Accepted Answer

The information provided only mentions a potential reason why managers might shy away from ABC systems, but not that the costs of these systems actually exceed the benefits derived. Therefore, the statement is true.

Question 6

Discuss what managers need to consider in implementing an ABC system.
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Accepted Answer

The answer of Discuss what managers need to consider in...

Question 7

At Deutschland Electronics,product lines are charged for call centre support costs based on sales revenue.Last year's summary of call centre operations revealed the following:
 $$\begin{array} { l r r } 
& \text { Surveillance Products } & \text { Specialty Products } \
\text { Number of calls for information } & 1000 & 4000 \
\text { Average call length for information } & 3 \text { minutes } & 8 \text { minutes } \
\text { Number of calls for warranties } & 300 & 1200 \
\text { Average call length for warranties } & 7 \text { minutes } & 15 \text { minutes } \
\text { Sales revenue } & \$ 8000000 & \$ 5000000
\end{array}$$ 
Deutschland Electronics currently allocates call centre support costs using a rate of 0.5% of sales revenue.
Required:
a.Compute the amount of call centre support costs allocated to each product line under the current system.
b.Assume Deutschland decides to use the average call length for information to assign last year's support costs.Does this allocation method seem more appropriate than percentage of sales? Why or why not?
c.Assume Deutschland decides to use the numbers of calls for information and for warranties to assign last year's support costs of $65 000.Compute the amount of call centre support costs assigned to each product line under this revised ABC system.
d.Deutschland Electronics assigns bonuses based on departmental profits.How might the Specialty Products manager try to obtain higher profits for next year if support costs are assigned based on the average call length for information?
e.Discuss the barriers for implementing ABC for this call centre.
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Accepted Answer

The answer of At Deutschland Electronics,product lines are charged for...

Question 8

The Marionettes Company is noted for an exceptionally impressive line of Mardi Gras masks.Marionettes has established the following selling and distribution support activity-cost pools and their corresponding activity drivers for the year 2018:
 $\begin{array}{lrr}
\text { Activity } & \text { Cost } & \text { Cost Driver } \
\text { Marketing } & \$ 30000 & \$ 500 \text { 000 of sales } \
\text { Customer service } & 10000 & 5000 \text { customer } \
\text { Order execution } & 5000 & 100 \text { orders } \
\text { Warehousing } & 5000 & 50 \text { product lines }
\end{array}$ 
Required:
a.Determine the activity-cost-driver rate for each of the four selling and distribution activities.
b.Under what circumstances is it appropriate to use each of the activity-cost drivers?
c.Describe at least one possible negative behavioural consequence for each of the four activity-cost drivers.
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Accepted Answer

The answer of The Marionettes Company is noted for an...

Question 9

Answer the following questions using the information below:
Products S5 and CP8 each are assigned $50.00 in indirect costs by a traditional costing system.An activity analysis revealed that although production requirements are identical,S5 requires 45 minutes less set-up time than CP8.
-Although ABC calls for more cost pools,more cost drivers and more calculations,the procedures are similar to those used in traditional systems.

Accepted Answer

Activity-based costing (ABC) considers the variations in setup times, and as per the given information, S5 requires 45 minutes less set-up time, which means it incurs fewer setup-related costs than CP8. Therefore, ABC would allocate lower indirect costs to S5 than to CP8, unlike traditional costing systems that allocate indirect costs based on arbitrary cost drivers. However, despite having more cost pools, more cost drivers, and more calculations, the procedure for ABC is similar to traditional costing systems in terms of allocating costs.

Question 10

How are cost drivers selected in activity-based costing systems?
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Accepted Answer

The answer of How are cost drivers selected in activity-based...

Quiz 8: Activity-Based Management and Activity-Based Costing

Explain how traditional cost systems,using a single unit-level cost rate,may distort product costs. _ _

Discuss what managers need to consider in implementing an ABC system. _ _

How are cost drivers selected in activity-based costing systems? _ _

Quiz 8: Activity-Based Management and Activity-Based Costing

Explain how traditional cost systems,using a single unit-level cost rate,may distort product costs. _____________________________________________________________________________________________ _____________________________________________________________________________________________

Discuss what managers need to consider in implementing an ABC system. _____________________________________________________________________________________________ _____________________________________________________________________________________________

How are cost drivers selected in activity-based costing systems? _____________________________________________________________________________________________ _____________________________________________________________________________________________

Explain how traditional cost systems,using a single unit-level cost rate,may distort product costs. _ _

Discuss what managers need to consider in implementing an ABC system. _ _

How are cost drivers selected in activity-based costing systems? _ _