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Classifying Activities According to Level, Determining Value-Added or Non-value-Added
Lindwood company manufactures coffee cups in several different sizes and has identified the following activities in its process:
• Storing Inventory
• Creating molds
• Pouring plaster
• Firing pots in kiln
• Sanding and finishing
• Painting
• Performing quality control
• Ordering materials
• Delivering an order to a large customer such as Home Depot
• Insuring the manufacturing facility
• Reconfiguring machinery between batches
Required:
1. Classify each activity listed as facility, product, batch, or unit level.
2. Identify the cost driver for each activity listed.
3. Indicate whether each activity is value-added or non-value-added.
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Chapter 4 Solutions
MANAGERIAL ACCOUNTING W/CONN+ F17
- For each of the following activities, select the most appropriate cost driver. Each cost driver may be used only once. Activity Cost Driver 1. Pay vendors Answer 2. Evaluate vendors Answer 3. Inspect raw materials Answer 4. Plan for purchases of raw materials Answer 5. Packaging Answer 6. Supervision Answer 7. Employee training Answer 8. Clean tables Answer 9. Machine maintenance Answer 10. Move in-process product from one work station to the next Answerarrow_forwardIdentifying just-in-time characteristics Consider the following characteristics of either a JIT production system or a traditional production system. Indicate whether each is characteristic of a JIT production system or a traditional production system. Products are produced in large batches. Large stocks of finished goods protect against lost sales if customer demand is higher than expected. Suppliers make frequent deliveries of small quantities of raw materials. Employees do a variety of jobs, including maintenance and setups as well as operating machines. Machines are grouped into self-contained production cells or production lines. Machines are grouped according to function. For example, all cutting machines are located in one area. The final operation in the production sequence “pulls” parts from the preceding operation. Each employee is responsible for inspecting his or her own work. The management works with suppliers to ensure defect-free raw materials.arrow_forwardIdentifying just-in-time characteristics Consider the following characteristics of either a JIT production system or a traditional production system. Indicate whether each is characteristic of a JIT production system or a traditional production system. a. Products are produced in large batches. b. Large stocks of finished goods protect against lost sales if customer demand is higher than expected. c. Suppliers make frequent deliveries of small quantities of raw materials. d. Employees do a variety of jobs, including maintenance and setups as well as operating machines. e. Machines are grouped into self-contained production cells or production lines. f. Machines are grouped according to function. For example, all cutting machines are located in one area. g. The final operation in the production sequence “pulls” parts from the preceding operation. h. Each employee is responsible for inspecting his or her own work. i. Management works with suppliers to ensure defect-free raw materials.arrow_forward
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- Activity-Based Costing and Customer Profitability Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate: Customer Service Activity Activity Base Activity Rate Bid preparation Number of bid requests $400 per request Shipment Number of shipments $ 80 per shipment Support standard items Number of standard items ordered $ 25 per std. item Support nonstandard items Number of nonstandard items ordered $150 per nonstd. item Assume that the company had the following gross profit information for three representative customers: Customer 1 Customer 2 Customer 3 Revenues $120,000 $200,000 $160,000 Cost of goods sold 76,800 110,000 83,200 Gross profit…arrow_forwardActivity-Based Costing and Customer Profitability Schneider Electric manufactures power distribution equipment for commercial customers, such as hospitals and manufacturers. Activity-based costing was used to determine customer profitability. Customer service activities were assigned to individual customers, using the following assumed customer service activities, activity base, and activity rate: Customer Service Activity Activity Base Activity Rate Bid preparation Number of bid requests $400 per request Shipment Number of shipments $ 80 per shipment Support standard items Number of standard items ordered $ 25 per std. item Support nonstandard items Number of nonstandard items ordered $150 per nonstd. item Assume that the company had the following gross profit information for three representative customers: Customer 1 Customer 2 Customer 3 Revenues $120,000 $200,000 $160,000 Cost of goods sold 76,800 110,000 83,200 Gross profit…arrow_forwardJuneau Company manufactures a variety of products in a single facility. Consultants hired by the companyto do an activity-based costing analysis have identified the following activities carried out in the companyon a routine basis:a. Machines are set up between batches of different products.b. The company’s grounds crew maintains planted areas surrounding the factory.c. A percentage of all completed goods are inspected on a random basis.d. Milling machines are used to make components for products.e. Employees are trained in general procedures.f. Purchase orders are issued for materials required in production.g. The maintenance crew does routine periodic maintenance on general-purpose equipment.h. The plant controller prepares periodic accounting reports.i. Material is received on the receiving dock and moved to the production area.j. The engineering department makes modifications in the designs of products.k. The human resources department screens and hires new employees.l. Production…arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub