Textbook Question
Chapter 12, Problem 8E
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:
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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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.
Draper Bank uses activity-based costing to determine the cost of servicing customers. Thereare three activity pools: teller transaction processing, check processing, and ATM transactionprocessing. The activity rates associated with each activity pool are $3.50 per teller transaction,$0.12 per canceled check, and $0.10 per ATM transaction. Corner Cleaners Inc. (a customer ofDraper Bank) had 12 teller transactions, 100 canceled checks, and 20 ATM transactions duringthe month. Determine the total monthly activity-based cost for Corner Cleaners Inc. during themonth.
Advanced Products Corporation has supplied the following data from its activity-based costing system:
Overhead Costs
Wages and salaries
$
300,000
Other overhead costs
100,000
Total overhead costs
$
400,000
Activity Cost Pool
Activity Measure
Total Activity for the Year
Supporting direct labor
Number of direct labor-hours
20,000
DLHs
Order processing
Number of customer orders
400
orders
Customer support
Number of customers
200
customers
Other
This is an organization-sustaining activity
Not applicable
Distribution of Resource Consumption Across Activities
Supporting Direct Labor
Order Processing
Customer Support
Other
Total
Wages and salaries
40
%
30
%
20
%
10
%
100
%
Other overhead costs
30
%
10
%
20
%
40
%
100
%
During the year, Advanced Products completed one order for a new customer, Shenzhen Enterprises. This customer did not order any other products during the year. Data concerning that order follow:
Data…

Cornerstones of Cost Management (Cornerstones Series)
4th Edition
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. 8DQCh. 12 - Prob. 9DQCh. 12 - Prob. 10DQ
Ch. 12 - Prob. 11DQCh. 12 - Prob. 12DQCh. 12 - Prob. 13DQCh. 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. 7ECh. 12 - Thayne Company has 30 clerks that work in its...Ch. 12 - Prob. 9ECh. 12 - Refer to Exercise 12.8. Suppose that clerical...Ch. 12 - Prob. 11ECh. 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. 26PCh. 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.
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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.
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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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