Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
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Textbook Question
Chapter 3, Problem 9E
Classify the following costs of activity inputs as variable, fixed, or mixed. Identify the activity and the associated activity driver that allow you to define the cost behavior. For example, assume that the resource input is “cloth in a shirt.” The activity would be “sewing shirts,” the cost behavior “variable,” and the activity driver “units produced.” Prepare your answers in the following format:
- a. Flu vaccine
- b. Salaries, equipment, and materials used for moving materials in a factory
- c. Forms used to file insurance claims
- d. Salaries, forms, and postage associated with purchasing
- e. Printing and postage for advertising circulars
- f. Equipment, labor, and parts used to repair and maintain production equipment
- g. Power to operate sewing machines in a clothing factory
- h. Wooden cabinets enclosing audio speakers
- i. Advertising
- j. Sales commissions
- k. Fuel for a delivery van
- l. Depreciation on a warehouse
- m. Depreciation on a forklift used to move partially completed goods
- n. X-ray film used in the radiology department of a hospital
- o. Rental car provided for a client
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Classify the following costs of activity inputs as variable, fixed, or mixed. Identify the activity andthe associated activity driver that allow you to define the cost behavior. For example, assume thatthe resource input is “cloth in a shirt.” The activity would be “sewing shirts,” the cost behavior“variable,” and the activity driver “units produced.” Prepare your answers in the following format:
Activity Cost Behavior Activity DriverSewing shirts Variable Units produced
a. Flu vaccineb. Salaries, equipment, and materials used for moving materials in a factoryc. Forms used to file insurance claimsd. Salaries, forms, and postage associated with purchasinge. Printing and postage for advertising circularsf. Equipment, labor, and parts used to repair and maintain production equipmentg. Power to operate sewing machines in a clothing factoryh. Wooden cabinets enclosing audio speakers
i. Advertisingj. Sales commissionsk. Fuel for a delivery vanl. Depreciation on a warehousem. Depreciation on…
Which of the following is NOT true about a resource cost driver under Activity based costing?
O a. Sales orders are used to assign the cost of machines
O b. Resource cost driver is used to assign the cost of the resource to an activity
OC. Number of purchased orders placed will determine the cost of purchasing the materials
O d. Number of times machines are set up will determine their cost of setting up
What I Know
Before we begin this lesson, let us check first your prior knowledge on this
module. After taking and checking this short test, take note of the items that you are
not able to answer correctly and look for the right answer as you go through this
module.
Direction: Encircle the letter of the correct answer.
1. What type of cost includes product ingredients and materials?
а.
fixed
b.
revenue
с.
total
d.
variable
2. What type of cost includes the rental of space?
а.
fixed
b.
revenue
c.
total
d.
variable
3. What type of cost is the product of the price and the quantity sold?
а.
fixed
b.
revenue
с.
total
d.
variable
4. What concept is being described when the business will neither earn a profit
nor suffer a loss?
а.
break-even
b.
loss
с.
profit
d.
summit
5. What type of analysis shows equal revenue and total cost?
а.
break-even
b.
cost of variable
c. profit-loss
d. volume of sales
Chapter 3 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 3 - Why is knowledge of cost behavior important for...Ch. 3 - How does the length of the time horizon affect the...Ch. 3 - Prob. 3DQCh. 3 - What is the relationship between flexible...Ch. 3 - What is the relationship between committed...Ch. 3 - Describe the difference between a variable cost...Ch. 3 - Why do mixed costs pose a problem when it comes to...Ch. 3 - Why is a scattergraph a good first step in...Ch. 3 - What are the advantages of the scatterplot method...Ch. 3 - Prob. 10DQ
Ch. 3 - What is meant by the best-fitting line? Is the...Ch. 3 - When is multiple regression required to explain...Ch. 3 - Explain the meaning of the learning curve. How do...Ch. 3 - Assume you are the manager responsible for...Ch. 3 - Some firms assign mixed costs to either the fixed...Ch. 3 - Callies Gym is a complete fitness center. Owner...Ch. 3 - Corazon Manufacturing Company has a purchasing...Ch. 3 - Darnell Poston, owner of Poston Manufacturing,...Ch. 3 - Dohini Manufacturing Company had the following 12...Ch. 3 - Refer to Cornerstone Exercise 3.4 for data on...Ch. 3 - The controller for Dohini Manufacturing Company...Ch. 3 - Prob. 7CECh. 3 - State Universitys football team just received a...Ch. 3 - Classify the following costs of activity inputs as...Ch. 3 - SmokeCity, Inc., manufactures barbeque smokers....Ch. 3 - Cashion Company produces chemical mixtures for...Ch. 3 - For the following activities and their associated...Ch. 3 - Prob. 13ECh. 3 - Vargas, Inc., produces industrial machinery....Ch. 3 - Penny Davis runs the Shear Beauty Salon near a...Ch. 3 - Shirrell Blackthorn is the accountant for several...Ch. 3 - Deepa Dalal opened a free-standing radiology...Ch. 3 - Prob. 18ECh. 3 - The controller of the South Charleston plant of...Ch. 3 - Lassiter Company used the method of least squares...Ch. 3 - Sweet Dreams Bakery was started five years ago by...Ch. 3 - Ginnian and Fitch, a regional accounting firm,...Ch. 3 - Bordner Company manufactures HVAC (heating,...Ch. 3 - Sharon Glessing, controller for Janson Company,...Ch. 3 - The graphs below represent cost behavior patterns...Ch. 3 - Starling Co. manufactures one product with a...Ch. 3 - Alard Manufacturing Company has a billing...Ch. 3 - Prob. 28ECh. 3 - Prob. 29ECh. 3 - Natur-Gro, Inc., manufactures composters. Based on...Ch. 3 - Rolertyme Company manufactures roller skates. With...Ch. 3 - St. Teresas Medical Center (STMC) offers a number...Ch. 3 - Big Mikes, a large hardware store, has gathered...Ch. 3 - Kimball Company has developed the following cost...Ch. 3 - The management of Wheeler Company has decided to...Ch. 3 - DeMarco Company is developing a cost formula for...Ch. 3 - Weber Valley Regional Hospital has collected data...Ch. 3 - Friendly Bank is attempting to determine the cost...Ch. 3 - Randy Harris, controller, has been given the...Ch. 3 - The Lockit Company manufactures door knobs for...Ch. 3 - Harriman Industries manufactures engines for the...Ch. 3 - Thames Assurance Company sells a variety of life...
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- When materials and supplies are used in a product that will be sold to customers, the usage of the materials and supplies is described as: a. Opportunity cost. b. Cost incurrence. c. Locked-in cost. d. Designed-in cost.arrow_forwardWhich of the following is not a step involved in activity-based costing? Select one O a Compute a cost rate per cost driver unit or transaction. O bidentify the activities that consume resources and assign costs to those activities -O CAssign costs to products by multiplying the cost driver rate by the volume of cost driver units consumed by the product o d Determine how to reduce the costs of making products by cutting activitiesarrow_forwardInterview questions are asked to determine a. what activities are being performed. b. who performs the activities. c. the relative amount of time spent on each activity by individual workers. d. possible activity drivers for assigning costs to products. e. All of these.arrow_forward
- What is the proper order of tasks In an ABC system? identify the cost drivers, assign the costs to the products, calculate the overhead application rate for each cost pool, identify the cost pools assign the costs to the products, identify the cost drivers, calculate the overhead application rate for each cost pool, identify the cost pools identify the cost drivers, identify the cost pools, calculate the overhead application rate for each cost pool, assign the costs to the products identify the cost pools, identify the cost drivers, calculate the overhead application rate for each cost pool, assign the costs to the productsarrow_forwardWhich is not a step In activity-based costing? A. identify the activities performed by the organization B. identify the cost driver(s) associated with each activity C. compute a cost rate per production D. assign costs to products by multiplying the cost driver rate by the volume of the cost driver units consumed by the productarrow_forwardWhich is not a task typically associated with ABC systems? A. calculating the overhead application rate for each cost pool B. applying a single cost rate C. identifying a cost driver D. more correctly allocating overhead costsarrow_forward
- Which is not a step in analyzing the cost driver for manufacturing overhead? A. Identify the cost B. identify non-value-added costs C. analyze the effect on manufacturing overhead D. identify the correlation between the potential driver and manufacturing overheadarrow_forwardIdentify appropriate cost drivers for these cost pools: A. material cost pool B. machine cost pooi C. painting cost pool D. maintenance cost poolarrow_forwardWhich of these costs would be the most difficult to estimate when you know exactly how many units will be produced? Group of answer choices rent insurance utilities materials used in the productarrow_forward
- Overhead application to costs is a critical issue for the costing of your products. We are studying several ways to handle this situation. What would cause an overhead to be overapplied, or underapplied. Discuss the results to your decision making and the financial statements for each of those two situations.arrow_forwardIn the blank next to the following terms, place the letter A through D corresponding to the best description of that term. 1. Activity 2. Activity driver 3. Cost pool 4. Cost object A. Measurement associated with an activity. B. A group of costs that have the same activity drivers. C. Anything to which costs will be assigned. D. A task that causes a cost to be incurred.arrow_forward5. Match the following cost pools and activities with the most appropriate cost driver. Group of answer choices a. number of parts b. square feet c. direct labor hours d. number of tests required e. machine hours f. machine setups g. number of orders received 1. setup cost pool? 2. assembly cost pool? 3. supervising cost pool? 4. testing cost pool? 5. ordering cost pool? 6. fringe…arrow_forward
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