Chapter 17: Q13DQ (page 787)
What is an activity cost driver?
Cost is driven by the activity cost driver.
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In the blank next to each of the following terms, place the letter A through D that corresponds to the description of that term. Some letters are used more than once.
Toyota embraces lean techniques, including lean accounting. What are the key components of lean accounting?
Following are activities in providing medical services at Healthsmart Clinic.
A. Registering patients E. Ordering medical equipment
B. Cleaning beds F. Heating the clinic
C. Stocking examination rooms G. Providing security services
D. Washing linens H. Filling prescriptions
Required
1. Classify each activity as unit level (U), batch level (B), product level (P), or facility level (F).
2. Identify an activity driver that might be used to measure these activities at the clinic.
Refer to the information in Exercise 17-1. Assume that the following information is available for the company’s two products for the first quarter of 2017.
Deluxe Model | Basic Model | |
Production volume | 10,000 units | 30,000 units |
Parts required | 20,000 parts | 30,000 parts |
Parts required | 250 batches | 100 batches |
Purchase orders | 50 orders | 20 orders |
Invoices | 50 invoices | 10 invoices |
Space occupied | 10,000 square feet | 7,000 square feet |
Models | 1 model | 1 model |
Required Compute activity rates for each activity and assign overhead costs to each product model using activity-based costing (ABC). What is the overhead cost per unit of each model?
Textra Plastics produces parts for a variety of small machine manufacturers. Most products go through two operations, molding and trimming, before they are ready for packaging. Expected costs and activities for the molding department and for the trimming department for 2017 follow.
Molding | Trimming | |
Direct labor hours | 52,000 DLH | 48,000 DLH |
Machine hours | 30,500 MH | 3,600 MH |
Overhead costs | \(730,000 | \)590,000 |
Data for two special order parts to be manufactured by the company in 2017 follow.
Part A27C | Part X82B | |
Number of units | 9,800 units | 54,500 units |
Machine hours | ||
Molding | 5,100 MH | 1,020 MH |
Trimming | 2,600 MH | 650 MH |
Direct labor hours | ||
Molding | 5,500 DLH | 2,150 DLH |
Trimming | 700 DLH | 3,500 DLH |
Required
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