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 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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A cost driver is used to allocate support department expenses. Match each of the following cost drivers with the appropriate department.
Clear All
Number of work orders
Number of employees
Number of payroll checks
Number of purchase
requisitions
President's Office
Payroll Accounting
Maintenance
Human Resources
Purchasing
The Westfield branch of Security Home Bank submitted the following cost data for last year:
Teller wages
Assistant branch manager salary
Branch manager salary
Total
Virtually all other costs of the branch-rent, depreciation, utilities, and so on-are organization-sustaining costs that cannot be
meaningfully assigned to individual customer transactions such as depositing checks.
In addition to the cost data above, the employees of the Westfield branch were interviewed concerning how their time was
distributed last year across the activities included in the activity-based costing study. The results of those interviews appear below:
Teller wages
Assistant branch manager salary
Branch manager salary
$ 144,000
74,000
90,000
$ 308,000
Activity
Opening accounts
Processing deposits and withdrawals
Processing other customer transactions
Distribution of Resource Consumption Across Activities
Processing
Deposits and
Withdrawals
75%
15%
0%
Opening
Accounts
4%
15%
4%
Activity Cost Pool
Opening…
Golding Bank is in the process of implementing an activity-based costing system. A copy of an interview with the manager of Golding's Credit Card Department follows:
QUESTION I: How many employees are in your department?
RESPONSE: There are eight employees, including me.
QUESTION 2: What do they do (please describe)?
RESPONSE: There are four major activities: supervising employees, processing credit card transactions, issuing customer statements, and answering customer questions.
QUESTION 3: Do customers outside your department use any equipment?
RESPONSE: Yes. Automatic bank tellers service customers who require cash advances.
QUESTION 4: What resources are used by each activity (equipment, materials, energy)?
RESPONSE: We each have our own computer, printer, and desk. Paper and other supplies are needed to operate the printers. Of course, we each have a telephone as well.
QUESTION 5: What are the outputs of each activity?
RESPONSE: Well, for supervising, I manage employees' needs…
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 - Suppose that clerical erroreither Thaynes or the...Ch. 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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- Customers as a Cost Object Morrisom National Bank has requested an analysis of checking account profitability by customer type. Customers are categorized according to the size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: Additional data concerning the usage of the activities by the various customers are also provided: Required: (Note: Round answers to two decimal places.) 1. Calculate a cost per account per year by dividing the total cost of processing and maintaining checking accounts by the total number of accounts. What is the average fee per month that the bank should charge to cover the costs incurred because of checking accounts? 2. Calculate a cost per account by customer category by using activity rates. 3. Currently, the bank offers free checking to all of its customers. The interest revenues average 90 per account; however, the interest revenues earned per account by category are 80, 100, and 165 for the low-, medium-, and high-balance accounts, respectively. Calculate the average profit per account (average revenue minus average cost from Requirement 1). Then calculate the profit per account by using the revenue per customer type and the unit cost per customer type calculated in Requirement 2. 4. CONCEPTUAL CONNECTION After the analysis in Requirement 3, a vice president recommended eliminating the free checking feature for low-balance customers. The bank president expressed reluctance to do so, arguing that the low-balance customers more than made up for the loss through cross-sales. He presented a survey that showed that 50% of the customers would switch banks if a checking fee were imposed. Explain how you could verify the presidents argument by using ABC.arrow_forwardA 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.arrow_forwardPlease use the information from this problem for these calculations. After grouping cost pools and estimating overhead and activities, Box Springs determined these rates: It estimates there will be five orders in the next year, and those jobs will involve: What is the total cost of the jobs?arrow_forward
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