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Chapter 17: Activity Based Costing and Analysis

Financial & Managerial Accounting
Pages: 764 - 805

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70 Questions for Chapter 17: Activity Based Costing and Analysis

  1. Samsung is a manufacturer. "Activity based costing is only useful for manufacturing companies." Is this a true statement? Explain.

    Found on Page 787
  2. Identify each of the following activities as unit level (U), batch level (B), product level (P), or facility level (F) to indicate the way each is incurred with respect to production.

    Found on Page 795
  3. Wade Company makes two distinct products, with the following information available for each.

    Found on Page 799
  4. SP 17 After reading an article about activity-based costing in a trade journal for the furniture industry, Santana Rey wondered if it was time to critically analyze overhead costs at Business Solutions. In a recent month, Santana found that setup costs, inspection costs, and utility costs made up most of its overhead. Additional information about overhead follows.

    Found on Page 802
  5. Question: Compare Apple’s and Google’s income statements and answer the following.

    Found on Page 803
  6. Question: Midwest Paper produces cardboard boxes. The boxes require designing, cutting, and printing. (The boxes are shipped flat, and customers fold them as necessary.) Midwest has a reputation for providing high quality products and excellent service to customers, who are major U.S. manufacturers. Costs are assigned to products based on the number of machine hours required to produce them. Three years ago, a new marketing executive was hired. She suggested the company offer custom design and manufacturing services to small specialty manufacturers. These customers required boxes for their products and were eager to have Midwest as a supplier. Within one year, Midwest found that it was so busy with orders from small customers, it had trouble supplying boxes to all its customers on a timely basis. Large, long-time customers began to complain about slow service, and several took their business elsewhere. Within another 18 months, Midwest was in financial distress with a backlog of orders to be filled.

    Found on Page 800
  7. In conducting interviews and observing factory operations to implement an activity-based costing system, you determine that several activities are unnecessary or redundant. For example, warehouse personnel were inspecting purchased components as they were received at the loading dock. Later that day, the components were inspected again on the shop floor before being installed in the final product. Both of these activities caused costs to be incurred but were not adding value to the product. If you include this observation in your report, one or more employees who perform inspections will likely lose their jobs.

    Found on Page 803
  8. Ryan Foods produces gourmet gift baskets that it distributes online as well as from its small retail store. The following details about overhead costs are taken from its records.

    Found on Page 800
  9. The chief executive officer (CEO) of your company recently returned from a luncheon meeting

    Found on Page 804
  10. Mathwerks produces two electronic, handheld educational games: Fun with Fractions and Count Calculus. Data on these products follow.

    Found on Page 801

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