102. When different units that perform the same types of activities within the same organization are compared
to the unit with the best performance, this practice is called
103. A technique for improving performance of activities and processes that predicts activity costs as activity
output changes is called
104. Mattison Company has developed cost formulas for the drivers of the following production activities:
Driver
Activity
Fixed
Variable
Labor hours
Materials
$ -0-
$20
Labor hours
Labor
-0-
10
Machine hours
Maintenance
10,000
8
Machine hours
Machining
50,000
2
Number of setups
Inspections
30,000
200
Number of setups
Setups
-0-
300
Number of purchase orders
Purchasing
75,000
3
The budgeted inspection cost for 20 setups is
105. Mattison Company has developed cost formulas for the drivers of the following production activities:
Driver
Activity
Fixed
Variable
Labor hours
Materials
$ -0-
$20
Labor hours
Labor
-0-
10
Machine hours
Maintenance
10,000
8
Machine hours
Machining
50,000
2
Number of setups
Inspections
30,000
200
Number of setups
Setups
-0-
300
Number of purchase orders
Purchasing
75,000
3
The activity levels are projected to be as follows:
Labor hours
1,000
Machine hours
5,000
Setups
100
Purchase orders
50
What is budgeted for this projected activity level?
106. Mattison Company has developed cost formulas for the drivers of the following production activities:
Driver
Activity
Fixed
Variable
Labor hours
Materials
$ -0-
$20
Labor hours
Labor
-0-
10
Machine hours
Maintenance
10,000
8
Machine hours
Machining
50,000
2
Number of setups
Inspections
30,000
200
Number of setups
Setups
-0-
300
Number of purchase orders
Purchasing
75,000
3
If the actual activity was 20 setups and the actual fixed cost for inspections was $28,000 and the variable cost for inspections was $5,000, the total
variance for inspections is
107. Mattison Company has developed cost formulas for the drivers of the following production activities:
Driver
Activity
Fixed
Variable
Labor hours
Materials
$ -0-
$20
Labor hours
Labor
-0-
10
Machine hours
Maintenance
10,000
8
Machine hours
Machining
50,000
2
Number of setups
Inspections
30,000
200
Number of setups
Setups
-0-
300
Number of purchase orders
Purchasing
75,000
3
If the actual activity was 20 setups and the actual fixed cost for inspections was $28,000 and the variable cost for inspections was $5,000, the total
variance for inspections is due to
108. The capacity variance is composed of the unused capacity variance and
109. Livingston Company has developed capacity standards. Information is as follows:
Standard cost of the activity capacity acquired
$250,000
Standard cost of the activity capacity used
200,000
Standard cost of the actual activity used
220,000
The volume variance is
D. $30,000 unfavorable.
110. Livingston Company has developed capacity standards. Information about a non-value-added activity is as
follows:
Standard cost of the activity capacity acquired
$60,000
Standard cost of the activity capacity used
-0-
Standard cost of the actual activity used
50,000
The volume variance is
111. Livingston Company has developed capacity standards. Information is as follows:
Standard cost of the activity capacity acquired
$250,000
Standard cost of the activity capacity used
200,000
Standard cost of the actual activity used
220,000
The unused capacity variance is
112. The unused capacity variance is
113. A technique for improving performance of activities and processes that compares the number of times an
activity can be performed to the number actually performed is called
114. Salvador Company has developed capacity standards. Information is as follows for a value-added activity:
Activity capacity acquired
60
Activity capacity used
50
Actual activity usage
30
Standard fixed activity rate
$2,000
The volume variance is
115. Salvador Company has developed capacity standards. Information is as follows for a value-added activity:
Activity capacity acquired
60
Activity capacity used
50
Actual activity usage
30
Standard fixed activity rate
$2,000
The unused capacity variance is
116. Under what conditions would the activity capacity used be zero?
117. Activity-based management can be viewed as an information system with broad objectives. Which of the
following is NOT on of the broad objectives of ABM?
118. Which of the following is NOT an objective of activity-based management?
119. Which of the following is NOT a reason for ABM implementation failure?
120. Which of the following is NOT an objective of responsibility accounting?
121. Which of the following is NOT a common step in an ABM implementation model?
122. Which of the following is NOT an essential element of responsibility accounting?
123. The responsibility accounting system developed for operations in a continuous improvement environment
would be
124. Which of the following is descriptive of activity-based responsibility accounting?
125. Which of the following is descriptive of financial-based responsibility accounting?
126. Which of the following is NOT a necessary essential element of activity-based responsibility accounting?
127. The process which refers to the performance of a process in a new way to achieve major improvements is
called:
128. Process improvement can be defined as
129. The process which refers to incremental or continual increases in the efficiency of an existing product is
called:
130. The process which refers to the adoption of new processes to meet strategic objectives is called:
132. The term(s )which refer(s) to a global incentive that encourages employees to contribute to the overall
financial well-being is(are) called
133. The term(s) which refer(s) to an incentive that specifically relates to sharing the gains from improvements
in projects is(are) called
134. The following is(are) awards made when performance is maintained or exceeds a specific measure:
135. Describe how activity-based management and activity-based costing systems differ.
136. What is process value analysis?
137. What is Kaizen costing? How does activity analysis help reduce costs?
138. Given the following data:
Activity
Driver
SQ2014
AQ2014
SP2014
SQ2015
AQ2015
SP2015
Purchasing
Purchase Orders
2,000
3,000
$85
2,000
2,500
$85
Receiving
Receiving Orders
3,750
4,300
$60
3,750
4,000
$60
Moving
# of moves
0
300
$110
0
200
$110
Setups
# of setups
0
75
$210
0
50
$210
Required:
1.
Determine the value-added and non-value added costs for each category for 2014 and 2015.
2.
Prepare a trend report that compares 2014 and 2015.
20104
2014
2015
2015
Value Added
Non-value added
Value Added
Non-value added
Purchasing
$170,000
$85,000
$170,000
$42,500
Receiving
$225,000
$33,000
$225,000
$15,000
Moving
$33,000
$22,000
Setups
$15,750
$10,500
Trend analysis
2014
2015
Non-value added
Non-value added
Change
Purchasing
$85,000
$42,500
$42,500
F
Receiving
$33,000
$15,000
$18,000
F
Moving
$33,000
$22,000
$11,000
F
Setups
$15,750
$10,500
$5,250
F
139. Lionel, Inc., has developed ideal standards for four activities: labor, materials, inspection, and receiving.
Information is as follows:
Activity
Activity Driver
SQ
AQ
SP
Labor
Hours
500
550
$ 32
Materials
Pounds
2,000
2,500
48
Inspection
Inspection hours
0
375
22
Receiving
Orders
60
75
800
The actual prices paid per unit of each activity driver were equal to the standard prices.
Required:
Complete the following cost report.
Activity
Value-Added
Non-value-Added
Actual
Labor
$_____________
$_____________
$____________
Materials
_____________
_____________
____________
Inspection
_____________
_____________
____________
Receiving
_____________
_____________
____________
Totals
$_____________
$_____________
$____________
(SQ ´ SP)
(AQ – SQ) ´ SP
Activity
Value-Added
Non-value-Added
Actual
Labor
$16,000
$ 1,600
$ 17,600
Materials
96,000
24,000
120,000
Inspection
-0-
8,250
8,250
Receiving
48,000
12,000
60,000
Totals
$160,000
$45,850
$205,850
140. Goodyear,, Inc., has developed ideal standards for four activities: labor, materials, inspection, and
receiving.
Information is as follows:
Activity
Activity Driver
SQ
AQ
SP
Labor
Hours
30,000
38,000
$11
Materials
Pounds
110,000
160,000
10
Inspection
Inspection hours
0
50,000
7
Receiving
Orders
600
700
450
The actual prices paid per unit of each activity driver were equal to the standard prices.
Required:
Complete the following cost report.
Activity
Value-Added
Non-value-Added
Actual
Labor
$_____________
$_____________
$____________
Materials
_____________
_____________
____________
Inspection
_____________
_____________
____________
Receiving
_____________
_____________
____________
Totals
$_____________
$_____________
$____________
(SQ ´ SP)
(AQ – SQ) ´ SP
Activity
Value-Added
Non-value-Added
Actual
Labor
$ 330,000
$ 88,000
$ 418,000
Materials
1,100,000
500,000
1,600,000
Inspection
-0-
350,000
350,000
Receiving
270,000
45,000
315,000
Totals
$1,700,000
$983,000
$2,683,000
141. The Opportunist Company recorded the following activities.Determine the amount of value-added and
non-value-added costs.
a.
Opportunist keeps 7 days of materials inventory on hand to avoid shutdowns due to materials shortages. Carrying costs are $50,000 per
day.
b.
A time-and-motion study revealed that it should take 10 minutes to produce a product that now takes 50 minutes to produce. Labor is $18
per hour.
c.
Warranty work costs the firm $500,000 per year. Warranty costs for the industry average $100,000 per year.
a.
Value-added costs = $0
Value-added costs = ($18 ´ 10/60) = $3.00
Non-value-added costs = [(50 – 10)/60] ´ $18 = $12.00
c.
Value-added costs = $0
Non-value-added costs = $500,000
142. Suburbia, Inc., sells one of its products for $150 each. Sales volume averages 800 units per year. Recently,
its main competitor reduced the price of its product to $130. Suburbia expects sales to drop dramatically unless
it matches the competitor’s price. In addition, the current profit per unit must be maintained. Information about
the product (for production of 800) is as follows:
SQ
AQ
Actual Cost
Materials (pounds)
14,400
15,000
$30,000
Labor (hours)
2,000
2,400
18,000
Setups (hours)
0
1,400
8,000
Material handling (moves)
0
600
4,000
Warranties (number repaired)
0
400
20,000
Required:
a.
Calculate the target cost for maintaining current market share and profitability.
b.
Calculate the non-value-added cost per unit.
c.
If non-value-added costs can be reduced to zero, can the target cost be achieved?
a.
Current selling price
$150
Less: Current cost ($80,000/800)
100
Current profit per unit
$ 50
Selling price to maintain market share
$130
Less: Desired profit per unit
50
Target cost
$ 80
Non-value-Added Costs
Materials:
$30,000/15,000 = $2 per pound
(15,000 – 14,400) ´ $2
$ 1,200
Labor:
$18,000/2,400 = $7.50 per hour
(2,400 – 2,000) ´ $7.50
3,000
Setups
8,000
Material handling
4,000
Warranties
20,000
Non-value-added costs
$36,200
Non-value-added cost per unit ($36,200/800 units)
$ 45.25
($100 – $45.25), which is well below the target cost of $80.
143. Metropolitan, Inc., sells one of its products for $40 each. Sales volume averages 2,000 units per year.
Recently, its main competitor reduced the price of its product to $28. Metropolitan expects sales to drop
dramatically unless it matches the competitor’s price. In addition, the current profit per unit must be maintained.
Information about the product (for production of 2,000) is as follows:
SQ
AQ
Actual Cost
Materials (pounds)
4,900
5,000
$20,000
Labor (hours)
1,200
1,250
10,000
Setups (hours)
0
200
6,000
Material handling (moves)
0
350
2,000
Warranties (number repaired)
0
250
10,000
Required:
a.
Calculate the target cost for maintaining current market share and profitability.
b.
Calculate the non-value-added cost per unit.
c.
If non-value-added costs can be reduced to zero, can the target cost be achieved?
a.
Current selling price
Less: Current cost ($48,000/2,000)
Current profit per unit
Selling price to maintain market share
Less: Desired profit per unit
Target cost
Non-value-Added Costs
Materials:
$20,000/5,000 = $4 per pound
(5,000 – 4,900) ´ $4
$ 400
Labor:
$10,000/1,250 = $8 per hour
(1,250 – 1,200) ´ $8
400
Setups
6,000
Material handling
2,000
Warranties
10,000
Non-value-added costs
$18,800
Non-value-added cost per unit ($18,800/2,000 units)
$9.40
144. Buoungiorno Manufacturing has developed the following standards for its activities:
ACTIVITY
ACTIVITY DRIVER
SQ
AQ
SP
Materials usage
Yards
48,000
50,000
$5
Purchasing
Purchase orders
1,000
1,200
$40
Inspection
Inspection hours
0
6,000
$10
Assume the materials usage and purchasing costs correspond to flexible resources that acquired as needed and that inspections use resources that are
acquired in blocks of 2,000 hours. The actual prices paid for inputs equal the standard prices.
Required:
1. Assume that continuous improvement efforts reduce the demand for inspection by 30 percent during the year, which drops the actual
activity usage by 30 percent. Calculate the volume and unused capacity variances for inspection activity, materials usage and purchasing. Explain the
meaning of these variances.
2. Prepare a cost report that shows the value- and non-value-added costs.
3. Buoungiorno wants to reduce all non-value added costs by 30 percent. What Kaizen standards would be used to evaluate the company’s
progress? What would be the savings in resource spending?
COSTS
Value-added costs
Non-value added costs
Total
Materials use
$240,000 (48,000 ´ $5)
$10,000 [(48,000 – 50,000) ´ $5]
$250,000
Purchasing
$40,000 (1,000 ´ $40)
$8,000 [(1,000 – 1,200) ´ $40]
$ 48,000
Inspecting
$0
$60,000
$ 60,000
TOTAL
$280,000
$78,000
$358,000
Kaizen quantity
Kaizen cost
Materials use
50,000
600 (2,000 ´ .3)
49,400
$247,000
Purchasing
1,200
60 (200 ´ .3)
1,140
$ 45,600
Inspection
6,000
1,800(6000 ´.3)
4,200
$ 60,000
145. Describe how the activity-based management model combines the process and costing views. What are the
steps involved in each? What are the objectives of the activity-based management system?
146. What is responsibility accounting? Compare and contrast financial-based responsibility accounting with
activity-based responsibility accounting.