JWMI 530 knowlege check 6
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School
Sacramento City College *
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Course
530
Subject
Industrial Engineering
Date
Feb 20, 2024
Type
Pages
7
Uploaded by daniellexk91
Question 1
0.4 / 0.4 pts
Match each cost to its cost driver. Correct!
Baking pizzas Cost of wood for wood-burning pizza oven
Correct!
Running machine Cost of machine lubricants
Correct!
Producing Screws Cost of round steel bars
Correct!
Flying the airliner Cost of jet fuel for an airliner
Explanation: A cost driver is the activity that gives rise to (or causes to exist) the cost. You can recognize the cost driver because it's always a verb. For example, in this case there would be no need for wood to fuel the oven unless you were “baking” p
izzas in the oven. The cost driver is the word "baking." Likewise, in this case, there would be no reason for lubricating the machine unless you were "running" the machine. Even though the cost of lubricants is an indirect cost, in this case, it's still a cost of production. Again, in this case this cost would be allocated to the product using machine hours. Finally, there would be no reason to purchase round steel bars unless we were "producing" screws. Question 2
0 / 0.4 pts
All costs are fixed in the short-term, and all costs are variable in the long-term. Correct Answer
You Answered
TRUE Source: Finance for Nonfinancial Managers –
p. 126 Explanation: Costs are expired expenditures. For example, raw material inventory is an expenditure classified on the balance sheet as an asset. It becomes a cost once used and enters into product. The reason this statement is true is that, even in the long-term, a lease on a production facility will expire. That expiration transforms what was a fixed
cost into a variable cost again. Even direct costs, such as raw material, can be fixed in the short
term. This is true because we may have entered into a purchasing contract specifying the price of a raw material for a period of time.
Question 3
Correct!
Direct materials Metal sheets for stamping truck fenders
Correct!
Manufacturing Overhead Salary of Stamping Department Supervisor
Correct!
Direct Labor Stamping machine operator producing truck fenders
Source: Finance for Nonfinancial Managers –
Chapter 8 Explanation: Direct materials enter into the production of the product. In this case, the metal sheets for producing the truck fenders are direct materials. Manufacturing overhead represents a "pool" of shared costs related to a manufacturing process or department. In this case, the salary of the stamping department supervisor is such a pooled cost. Direct labor it represents wages and benefits paid to an individual directly related to producing a product. In this case, the stamping machine operator producing the truck fenders is direct labor.
Correct!
Question 4
0.2 / 0.4 pts
Match each term to its correct definition. Correct!
Job costing Collecting costs for a manufacturing process that's geared to producing products in individual lots and assigning cost to those jobs.
You Answered
Process costing A list of all the parts and components that go into manufacturing a product, including any raw material.
Correct Answer
Collecting all costs incurred in a continuous process, then averaging the costs over all units produced. You Answered
Bill of materials Collecting all costs incurred in a continuous process, then averaging the costs over all units produced.
Correct Answer
A list of all the parts and components that go into manufacturing a product, including any raw material. Correct!
Standard costing A management tool that estimates the overall cost of production, assuming normal operations.
Question 5
0.2 / 0.4 pts
Match each term to its corresponding definition. You Answered
Conversion costs Costs that increase in relation to sales but at a slower pace and have a combination of types of costs.
Correct Answer
The sum of all the direct labor and manufacturing overhead costs that belong to a department and process. Correct!
Variable costs Costs that increase in direct relation to sales volume.
Correct!
Fixed costs Costs that essentially remain unchanged even when sales increase.
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You Answered
Semi-fixed costs The sum of all the direct labor and manufacturing overhead costs that belong to a department and process.
Correct Answer
Costs that increase in relation to sales but at a slower pace and have a combination of types of costs. Question 6
0.4 / 0.4 pts
Bill Williams is an engine tech for a Ford dealership and is assigned to the service department. Here is a table of costs associated with the dealership and Bill’s engine repair job today: Engine Parts $ 675 Gasket, oil, and other fluids $ 113 Standard Labor Costs $ 700 Expensible Tools $ 48 Service Write Up Wages $ 1366 Radio Advertising $ 850 Parking lot paving project $ 9850 Quality Inspection Dept. $ 5248 Which is of the following is not true? Correct!
All of the parking lot paving costs will be allocated to each vehicle repaired in the facility today. Shared costs of $6,614 were incurred today.
The dealership is most likely using job costing. Direct costs on this job are $1,536. Source: Finance for Nonfinancial Managers –
Chapter 8 Explanation: The direct costs assigned to this engine repair job include engine parts, gaskets, oil and, other fluids, standard labor costs, and expensible tools for a total of $1,536. The dealership is almost assuredly using job costing because they're able to trace direct costs to each job itself. Shared costs include service write-up wages and the quality inspection department for total of $6,614. Finally, costs of the parking lot project will most likely be treated as a facility repair and maintenance expense and not allocated to anything. Source: Siciliano, p. 121, 125 Explanation: Parking Lot paving costs are long term assets that will be part of overhead and will be spread across products over a number of years. Question 7
0.4 / 0.4 pts
The ABC Company, maker of birdhouses is looking at different ways of allocating shared costs (overhead). The Cost Accountant has been provided the following data for the past month: Birdhouse Models Quantity Produced Total Machine Hours Total Labor Hours Basic 100 10 25 Standard 100 20 40 Deluxe 25 40 60 The Spend pools are provided as: Material: $3000 Direct Labor: $5000
Overhead: $2000 If Overhead is allocated based on the activity of Quantity Produced, how much of the $2,000 cost will be allocated to the Deluxe Birdhouse? Correct!
$222 $222 will be allocated if quantity produced is the cost driver: 25 / (100 + 100 + 25) * $2,000 .1111 * $2,000 $222 Question 8
0.4 / 0.4 pts
The ABC Company, maker of birdhouses is looking at different ways of allocating shared costs (overhead). The Cost Accountant has been provided the following data for the past month: Birdhouse Models Quantity Produced Total Machine Hours Total Labor Hours Basic 100 10 25 Standard 100 20 40 Deluxe 25 40 60 The Spend pools are provided as: Material: $3000 Direct Labor: $5000 Overhead: $2000 If Overhead is allocated based on the activity of Total Machine Hours, how much of the $2,000 cost will be allocated to the Deluxe Birdhouse? Correct!
$1142
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$1,142 will be allocated if total machine hours is the cost driver: 40 / (10 + 20 + 40) * $2,000 .57 * $2,000 $1,142 Question 9
0.4 / 0.4 pts
Standard costing and budgeting systems create variances which enables managers to use management by exception principles. Which of the following is true about management by exception? Correct!
Variances reduce the number of data points a manager must consider each day. Source: Finance for Nonfinancial Managers –
p. 133 and Chapter 8 Explanation: Management by exception is one of the most important concepts to emerge from large-scale manufacturing in United States during the 20th century. It is made possible by variances either from a budgeting or standard costing system. The reason it that it is so effective is that it significantly reduces the number of data points a manager must consider. For example, manufacturing plant or a modern call center could employ hundreds or even thousands of employees executing business processes. It is possible for a manager to oversee such a large operation without paying attention to a few key indicators. Variances, whether they arise from a budgeting system, standard cost system or call center control system enables the production of those variances. For example, in a high-volume call center, manager need only look at variations from prescribed daily behaviors in order to spot problems or bottlenecks. Question 10
0.4 / 0.4 pts
It’s a good idea to review fixed and variable costs during the budget preparation process.
Correct!
True