Horngren's Financial & Managerial Accounting, The Managerial Chapters (6th Edition)
6th Edition
ISBN: 9780134486857
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Chapter 19, Problem 6QC
To determine
Find out the statement that is true for a service company.
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Which of the following would be true for a service company?
a. ABC helps the company make more informed decisions about services.
b. Service companies use only a few activities, so a plantwide overhead allocation is always appropriate.
c. Most of the company’s costs are for direct materials and direct labor. Indirect costs are a small proportion of total costs.
d. All of the above are true.
APPLY THE CONCEPTS: Determine the total fixed cost
Costs that are not tied to changes in production level across the relevant range are known as "fixed costs." These costs are indirectly assigned to units of production, and many factory overhead costs fall into this category. The business must ensure that all costs are assigned to the product. By assigning fixed costs, business costs are not directly tied to any one unit of production. This is important because it affects both pricing and profits.
A machine on the production line at an auto company requires a periodic retooling that costs $150,000 annually. Calculate the total fixed cost per unit at different levels along the relevant range of 100,000 to 400,000 units. If required, round the per unit amounts to two decimal places.
Number of Units Produced
Fixed Cost per unit
100,000
$
200,000
$
300,000
$
400,000
$
What is the activity base for each business and its associated costs? The first one is completed as an…
APPLY THE CONCEPTS: Determine the total fixed cost
Costs that are not tied to changes in production level across the relevant range are known as "fixed costs." These costs are indirectly assigned to units of production, and many factory overhead costs fall into this category. The business must ensure that all costs are assigned to the product. By assigning fixed costs, business costs are not directly tied to any one unit of production. This is important because it affects both pricing and profits.
A machine on the production line at an auto company requires a periodic retooling that costs $150,000 annually. Calculate the total fixed cost per unit at different levels along the relevant range of 100,000 to 400,000 units. If required, round the per unit amounts to two decimal places.
I tried using $150,000 in each place but that didn't work
Number of Units Produced
Fixed Cost per unit
100,000
$________
200,000
$________
300,000
$________
400,000
$________
Chapter 19 Solutions
Horngren's Financial & Managerial Accounting, The Managerial Chapters (6th Edition)
Ch. 19 - The Santos Shirt Company manufactures shirts in...Ch. 19 - Prob. 2TICh. 19 - Prob. 3TICh. 19 - Prob. 4TICh. 19 - Prob. 5TICh. 19 - Prob. 6TICh. 19 - Prob. 7TICh. 19 - Prob. 8TICh. 19 - Prob. 9TICh. 19 - Prob. 10TI
Ch. 19 - Prob. 11TICh. 19 - Prob. 12TICh. 19 - Which statement is false? a. Using a single...Ch. 19 - Compute It uses activity-based costing. Two of...Ch. 19 - Compute It uses activity-based costing. Two of...Ch. 19 - Compute It uses activity-based costing. Two of...Ch. 19 - Compute It can use ABC information for what...Ch. 19 - Prob. 6QCCh. 19 - Companies enjoy many benefits from using JIT....Ch. 19 - Which account is not used in JIT costing? a....Ch. 19 - The cost of lost future sales after a customer...Ch. 19 - Spending on testing a product before shipment to...Ch. 19 - What is the formula to compute the predetermined...Ch. 19 - How is the predetermined overhead allocation rate...Ch. 19 - Describe how a single plantwide overhead...Ch. 19 - Why is using a single plantwide overhead...Ch. 19 - Why is the use of departmental overhead allocation...Ch. 19 - What is activity-based management? How is it...Ch. 19 - How many cost pools are in an activity-based...Ch. 19 - What are the four steps to developing an...Ch. 19 - Why is ABC usually considered more accurate than...Ch. 19 - List two ways managers can use ABM to make...Ch. 19 - Define value engineering. How is it used to...Ch. 19 - Explain the difference between target price and...Ch. 19 - How can ABM be used by service companies?Ch. 19 - What is a just-in-time management system?Ch. 19 - Explain how the work cell manufacturing layout...Ch. 19 - What are the inventory accounts used in JIT...Ch. 19 - How is the Conversion Costs account used in JIT...Ch. 19 - Prob. 18RQCh. 19 - Which accounts are adjusted for the underallocated...Ch. 19 - Prob. 20RQCh. 19 - Prob. 21RQCh. 19 - Prevention is much cheaper than external failure....Ch. 19 - What are quality improvement programs?Ch. 19 - Prob. 24RQCh. 19 - Prob. 1SECh. 19 - The Oakman (Company (see Short Exercise S19-1) has...Ch. 19 - Activity-based costing requires four steps. List...Ch. 19 - Prob. 4SECh. 19 - Darby Corp. is considering the use of...Ch. 19 - The following information is provided for Orbit...Ch. 19 - Jaunkas Corp. manufactures mid-fi and hi-fi stereo...Ch. 19 - Spectrum Corp. makes two products: C and D. The...Ch. 19 - Refer to Short Exercise S19-8. Spectrum Corp....Ch. 19 - Haworth Company is a management consulting firm....Ch. 19 - Refer to Short Exercise S19-10. Haworth desires a...Ch. 19 - Prob. 12SECh. 19 - Prime Products uses a JIT management system to...Ch. 19 - Stegall, Inc. manufactures motor scooters. For...Ch. 19 - Koehler makes handheld calculators in two models:...Ch. 19 - Koehler (see Exercise E19-15) makes handheld...Ch. 19 - Koehler (see Exercise E19-15 and Exercise E19-16)...Ch. 19 - Franklin, Inc. uses activity-based costing to...Ch. 19 - Turbo Champs Corp. uses activity-based costing to...Ch. 19 - Eason Company manufactures wheel rims. The...Ch. 19 - Refer to Exercise E19-20. For 2019, Easons...Ch. 19 - Refer to Exercises E19-20 and E19-21. Controller...Ch. 19 - Treat Dog Collars uses activity-based costing....Ch. 19 - Western, Inc. is a technology consulting firm...Ch. 19 - Refer to Exercise E19-24. The president of Western...Ch. 19 - Prob. 26ECh. 19 - Refer to Exercise E19-26. Western desires a 20%...Ch. 19 - Lally, Inc. produces universal remote controls....Ch. 19 - Prob. 29ECh. 19 - Darrel Co. makes electronic components. Chris...Ch. 19 - Prob. 31ECh. 19 - Prob. 32ECh. 19 - Willitte Pharmaceuticals manufactures an...Ch. 19 - The Alright Manufacturing Company in Rochester,...Ch. 19 - Oscar, Inc. manufactures bookcases and uses an...Ch. 19 - Blanchette Plant Service completed a special...Ch. 19 - Low Range produces fleece jackets. The company...Ch. 19 - Stella, Inc. is using a costs-of-quality approach...Ch. 19 - Harcourt Pharmaceuticals manufactures an...Ch. 19 - The Alexander Manufacturing Company in Rochester,...Ch. 19 - Martin, Inc. manufactures bookcases and uses an...Ch. 19 - Rennie Plant Service completed a special...Ch. 19 - High Mountain produces fleece jackets. The company...Ch. 19 - Roxi, Inc. is using a costs-of-quality approach to...Ch. 19 - Download an Excel template for this problem online...Ch. 19 - This problem continues the Piedmont Computer...Ch. 19 - Prob. 1TIATCCh. 19 - Harris Systems specializes in servers for...Ch. 19 - Harris Systems has decided to adopt ABC. To remain...Ch. 19 - Prob. 1EICh. 19 - Anu Ghai was a new production analyst at RHI,...
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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
- Which of the following statements regarding service organisations is incorrect?Select onea. Many techniques used in manufacturing firms can be adapted to suit service industriesb.Service costing is relevant for assessing service profitability.c.Direct materials are frequently a comparatively small part of the total cost.d. Resources used in all service firms are predominantly variable.arrow_forwardWhat is a good response to? Activity-based costing (ABC) has transformed how organizations measure and manage costs by breaking overhead costs into cost pools based on activity (Kenton, 2024). ABC allocates overhead costs based on a particular activity instead of spreading it out evenly. This gives management clear information to determine which activities benefit the company and which may need to be altered or discontinued. An example of a company using ABC could be electrical costs. If the electrical costs fluctuate based on labor hours, management could use the labor hours as a cost driver. They could determine the cost driver rate by dividing the electric costs for the year by the annual labor hours. Once they determine the cost rate, they can multiply that by the electrical hours used for an activity to calculate the cost. In the example given, it would be pretty easy to implement; however, there are several overhead costs to calculate, which would require a lot of record-keeping,…arrow_forwardIf you have limitations, please answer the first few partsarrow_forward
- Which one of the following is not a step in allocating the support department cost to the production department? Select one: a. Trace all the overhead cost b. Divide the departments in to support and producing departments c. Undertake a breakeven analysis d. Divide the company in departmentsarrow_forwardWhich of the following is most likely to be true of the manufacturing overhead costs assigned to a product with relatively low volume and high complexity? O a. An ABC system will assign the same manufacturing overhead costs to the product as a volume- based system. O b. Avolume-based system will assign more manufacturing overhead costs to the product than an ABC system. O c. An ABC system will assign more manufacturing overhead costs to the product than a volume-based system. O d. An ABC system will assign manufacturing overhead costs to the product, while a volume-based system will not. e to search W 11:35 A D A dx ENG 22-05-2021 hp 141 brt se delete home end 96 - backspace num ask lock T 7V 8A 94 home Dg up K enter 5 0 pause ↑ shift 11 end alt ctrl SUtarrow_forwardWhich of the following statements is true of activity-based costing? O a. ABC ignores the allocation of storage costs. O b. Activities are the cost objects of the second stage of ABC. Ос. An activity cost pool collects costs related to the same activity. O d. ABC is more likely to result in big differences from a traditional costing system if the business makes only one product rather than multiple products.arrow_forward
- vi.2arrow_forwardWhich of the following statements is true? 1. Departmental overhead rates will correctly assign overhead costs in situations where a company has a range of products that differ in volume, lot size, or complexity of production. 2. When a company implements activity-based costing, manufacturing overhead cost is often shifted from low volume products to high volume products, with a higher unit cost resulting for the high volume products. 3. Organization-sustaining activities are carried out regardless of which customers are served, which products are produced, how many batches are run, or how many units are made.arrow_forwardiv. How else might FCA use the information available from its department-by-departmentanalysis of manufacturing overhead costs? v. FCA’s managers are wondering if they should further refine the department-by department costing system into an ABC system by identifying different activities within each department. Discuss the two (2) advantages and two (2) disadvantages of an ABC system, if it is to be implemented in this context?arrow_forward
- Please explain thoroughly with examples. Which statement(s) is True/False and why? If none are true, please restate them to be true. 1. When a company implements activity-based costing, manufacturing overhead cost is often shifted from low volume products to high volume products, with a higher unit cost resulting for the high volume products. 2. When a company implements activity-based costing, manufacturing overhead cost is often shifted from low volume products to high volume products, with a higher unit cost resulting for the low volume products. 3. When a company implements activity-based costing, manufacturing overhead cost is often shifted from high volume products to low volume products, with a higher unit cost resulting for the high volume products. 4. When a company implements activity-based costing, manufacturing overhead cost is often shifted from high volume products to low volume products, with a higher unit cost resulting for the low volume products.arrow_forwardYou have been asked by management to classify the costs associated with the start-up of this new product line. Using the cost information provided below, classify each cost under the appropriate heading according to the chart provided below. Note that some costs may be classified under more than one heading. For example, a cost may be a fixed cost and a period cost. Name of cost Variable Cost Fixed Cost Direct Materials Direct Labor Factory Overhead Period Cost Prime Cost Conversion Cost Carlson “New Product” Cost Information Cost Amount Cost Type Depreciation on Building (annual) $ 10,000 Direct Labor Cost (per unit) $ 75 Direct Materials Cost (per unit) $ 60 Factory Utilities (per unit) $ 8 Indirect Materials (per unit) $ 4 Interest on Investments (annual) $3,000 Machinery Rental (monthly) $ 6,000 Marketing (annual) $ 35,000 Rent from Tenant (annual) $40,000…arrow_forwardWhich of the following statements is true of activity-based costing? O a. Activities are the cost objects of the second stage of ABC. O b. ABC ignores the allocation of storage costs. O c. ABC is more likely to result in big differences from a traditional costing system if the business makes only one product rather than multiple products. O d. An activity cost pool collects costs related to the same activity. DUS PAGE NEXT PAGE e here to search 11:38 O a dx ENG 22-05-2021 hp రు 144 ort sc delete end home 4 7\ - backspace num lock E 8. home F K enter pause M ↑ shift end alt ctrlarrow_forward
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