Chapter 12, Problem 8E

Textbook Question

Thayne Company has 30 clerks that work in its Accounts Payable Department. A study revealed the following activities and the relative time demanded by each activity:

Chapter 12, Problem 8E, Thayne Company has 30 clerks that work in its Accounts Payable Department. A study revealed the

Required:

Classify the four activities as value-added or non-value-added, and calculate the clerical cost of each activity. For non-value-added activities, indicate why they are non-value-added.

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Chapter 12, Problem 7E

Chapter 12, Problem 9E

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The Gray Company has a staff of five clerks in its general accounting department. Three clerks who work during the day perform sundry accounting tasks; the two clerks who work in the evening are responsible for (1) collecting the cost data for the various jobs in process, (2) verifying manufacturing material and labor reports, and (3) supplying production reports to the supervisors by the next morning. The salaries of these two clerks who work at night should be classified as: A) Period costs. B) Direct costs. C) Product costs. D) Indirect costs. E) Variable Costs.

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Cornerstones of Cost Management (Cornerstones Series)

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ISBN: 9781305970663

Author: Don R. Hansen, Maryanne M. Mowen

Publisher: Cengage Learning

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Cornerstones of Cost Management (Cornerstones Series)

Activity-based Management. 8E

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Chapter 12 Solutions

Cornerstones of Cost Management (Cornerstones Series)

Ch. 12 - What are the two dimensions of the activity-based...Ch. 12 - What is driver analysis? What role does it play in...Ch. 12 - What is activity analysis? Why is this approach...Ch. 12 - What are value-added activities? Value-added...Ch. 12 - What are non-value-added activities?...Ch. 12 - Identify and define four different ways to manage...Ch. 12 - What is a kaizen standard? Describe the kaizen and...Ch. 12 - Prob. 8DQ Ch. 12 - Prob. 9DQ Ch. 12 - Prob. 10DQ

Ch. 12 - Prob. 11DQ Ch. 12 - Prob. 12DQ Ch. 12 - Prob. 13DQ Ch. 12 - Describe a financial-based responsibility...Ch. 12 - Describe an activity-based responsibility...Ch. 12 - Cicleta Manufacturing has four activities:...Ch. 12 - Assume that at the beginning of 20x2, Cicleta...Ch. 12 - Gordon Company produces custom-made machine parts....Ch. 12 - Foy Company has a welding activity and wants to...Ch. 12 - Uchdorf Manufacturing just completed a study of...Ch. 12 - Harvey Company produces two models of blenders:...Ch. 12 - Prob. 7E Ch. 12 - Thayne Company has 30 clerks that work in its...Ch. 12 - Prob. 9E Ch. 12 - Refer to Exercise 12.8. Suppose that clerical...Ch. 12 - Prob. 11E Ch. 12 - For Situations 1 through 6, provide the following...Ch. 12 - Maquina Company produces custom-made machine...Ch. 12 - Sanford, Inc., has developed value-added standards...Ch. 12 - Refer to Exercise 12.14. Suppose that for 20x2,...Ch. 12 - Jane Erickson, manager of an electronics division,...Ch. 12 - For each of the following situations, two...Ch. 12 - Which of the following are examples of...Ch. 12 - A company is spending 70,000 per year for...Ch. 12 - Which of the following is likely to be used to...Ch. 12 - Activity-based management includes both process...Ch. 12 - The activity of moving materials uses four...Ch. 12 - Joseph Fox, controller of Thorpe Company, has been...Ch. 12 - Baker, Inc., supplies wheels for a large bicycle...Ch. 12 - Novo, Inc., wants to develop an activity flexible...Ch. 12 - Prob. 26P Ch. 12 - Tom Young, vice president of Dunn Company (a...Ch. 12 - Bienestar, Inc., has two plants that manufacture a...Ch. 12 - Kelly Gray, production manager, was upset with the...Ch. 12 - Douglas Davis, controller for Marston, Inc.,...

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A manufacturing company has two service and two production departments. Human Resources and Machine Repair are the service departments. The production departments are Grinding and Polishing. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The human resources department services all departments of the company, and its costs are allocated using the numbers of employees within each department, while machine repair costs are allocable to Grinding and Polishing on the basis of machine hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.

A manufacturing company has two service and two production departments. Building Maintenance and Factory Office are the service departments. The production departments are Assembly and Machining. The following data have been estimated for next years operations: The direct charges identified with each of the departments are as follows: The building maintenance department services all departments of the company, and its costs are allocated using floor space occupied, while factory office costs are allocable to Assembly and Machining on the basis of direct labor hours. 1. Distribute the service department costs, using the direct method. 2. Distribute the service department costs, using the sequential distribution method, with the department servicing the greatest number of other departments distributed first.

Big Mikes, a large hardware store, has gathered data on its overhead activities and associated costs for the past 10 months. Nizam Sanjay, a member of the controllers department, believes that overhead activities and costs should be classified into groups that have the same driver. He has decided that unloading incoming goods, counting goods, and inspecting goods can be grouped together as a more general receiving activity, since these three activities are all driven by the number of receiving orders. The 10 months of data shown below have been gathered for the receiving activity. Required: 1. Prepare a scattergraph, plotting the receiving costs against the number of purchase orders. Use the vertical axis for costs and the horizontal axis for orders. 2. Select two points that make the best fit, and compute a cost formula for receiving costs. 3. Using the high-low method, prepare a cost formula for the receiving activity. 4. Using the method of least squares, prepare a cost formula for the receiving activity. What is the coefficient of determination?

Bob Randall, cost accounting manager for Hemple Products, was asked to determine the costs of the activities performed within the companys Manufacturing Engineering Department. The department has the following activities: creating bills of materials (BOMs), studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tools. The general ledger accounts reveal the following expenditures for Manufacturing Engineering: The equipment is used for two activities: improving processes and designing tools. The equipments time is divided by two activities: 40 percent for improving processes and 60 percent for designing tools. The salaries are for nine engineers, one who earns 100,000 and eight who earn 50,000 each. The 100,000 engineer spends 40 percent of her time training employees in new processes and 60 percent of her time on improving processes. One engineer spends 100 percent of her time on designing tools, and another engineer spends 100 percent of his time on improving processes. The remaining six engineers spend equal time on all activities. Supplies are consumed in the following proportions: After determining the costs of the engineering activities, Bob was then asked to describe how these costs would be assigned to jobs produced within the factory. (The company manufactures machine parts on a job-order basis.) Bob responded by indicating that creating BOMs and designing tools were the only primary activities. The remaining were secondary activities. After some analysis, Bob concluded that studying manufacturing capabilities was an activity that enabled the other four activities to be realized. He also noted that all of the employees being trained are manufacturing workersemployees who work directly on the products. The major manufacturing activities are cutting, drilling, lathing, welding, and assembly. The costs of these activities are assigned to the various products using hours of usage (grinding hours, drilling hours, etc.). Furthermore, tools were designed to enable the production of specific jobs. Finally, the process improvement activity focused only on the five major manufacturing activities. Required: 1. What is meant by unbundling general ledger costs? Why is it necessary? 2. What is the difference between a general ledger database system and an activity-based database system? 3. Using the resource drivers and direct tracing, calculate the costs of each manufacturing engineering activity. What are the resource drivers? 4. Describe in detail how the costs of the engineering activities would be assigned to jobs using activity-based costing. Include a description of the activity drivers that might be used. Where appropriate, identify both a possible transaction driver and a possible duration driver.

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Golding Bank provided the following data about its resources and activities for its checking account process: Required: 1. Calculate the capacity cost rate for the checking account process. 2. Calculate the activity rates for the four activities. If the total number of statements issued was 20,000, calculate the cost of the issuing statements activity. 3. What if process improvements decreased the number of customer inquiries, leading to a 10 percent reduction in check processing hours and a 10,000 reduction in total resource costs? Update all the activity rates for these changes in operating conditions.

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Geneva, Inc., makes two products, X and Y, that require allocation of indirect manufacturing costs. The following data were compiled by the accountants before making any allocations: The total cost of purchasing and receiving parts used in manufacturing is 60,000. The company uses a job-costing system with a single indirect cost rate. Under this system, allocated costs were 48,000 and 12,000 for X and Y, respectively. If an activity-based system is used, what would be the allocated costs for each product?

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