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Exam 10: Activity Analysis: Costing and Management

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Question 51

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Costs associated with developing an ABC system most likely include:

A) Reduced profits
B) Dissatisfied customers
C) Accounting and information system modifications
D) Increased wages for production line employees

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Question 52

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Activity-based costing information can be used to identify the relative cost of maintaining different customers. Managers can use that information, coupled with activity-based management techniques, to manage:

A) Customer quality
B) Customer profitability
C) Delivery times
D) Supplier satisfaction.

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Question 53

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Century Point is a modern business club in the inner city of Brisbane. It is owned by Silvera Property Holdings, which operates additional properties in Auckland, Christchurch and Singapore. Century Point has 6 separate areas each with corporate facilities for various membership groups. Also on premises is a gymnasium, restaurant, and pool. The business club is organised in 5 departments: front desk, housekeeping, food & beverage, and customer relations. As part of its operation, Century Point regularly incurs the following costs: General Manager's salary Cleaning and maintenance costs Utility costs Depreciation on gym equipment Advertising Food and beverage costs Depreciation on restaurant equipment Administration salaries for the Silvera is best described as a(n) :

In an activity-based costing system, both organisation-sustaining and facility-sustaining activities are assumed to be unaffected by the number of customers.

Activity-based costing extends the focus of costing to products and other types of cost objects.

No product warranties are likely to be associated with high customer service costs.

Swim4Life provides swimming classes and training in South East Queensland. Swim4Life offers four training levels: Learn to Swim Baby, Learn to Swim Junior, Learn to Swim Senior, Swim Squad. In November 2019, the firm's information system produced the following data $\begin{array} { | l | l | l | l | l | l | } \hline & \begin{array} { l } \text { No of Swirn } \\\text { Teachers }\end{array} & \text { No of Students } & \text { Area Occupied } & \begin{array} { l } \text { Number of } \\\text { Classes }\end{array} & \text { Direct Costs } \\\hline \text { Baby } & 4 & 20 & 10 \% & 108 & \$ 1,000 \\\hline \text { Jurior } & 3 & 24 & 40 \% & 94 & \$ 1,500 \\\hline \text { Serior } & 5 & 15 & 20 \% & 84 & \$ 3,000 \\\hline \text { Squad } & 3 & 9 & 30 \% & 48 & \$ 1,000 \\\hline\end{array}$ Regardless of level, students pay $15 per hour for lessons. Swim4Life also provides lessons to school students who come with their school during school hours. These lessons are provided at a discounted rate of $12 per child. However, during November no school's required lessons. Costs associated with the Swim4Life operations for November 2019 included: Facility rent $2,500 Provision of Life Savers $800 Utilities $1,100 Computer equipment depreciation $800 Advertising $400 Training $1,500 Assume Swim4Life allocates facility rent, and utilities on the basis of area occupied, computer equipment depreciation on the basis of number of students and training on the basis of number of swim teachers. Lifesaving is allocated based on the number of classes. Advertising is not allocated. What is the total amount of profit generated by senior classes (assume all classes were fully booked) during November?

Reasons that managers may wish to reduce environmental costs include:

Activity based management used information from ABC to identify opportunities for improvements in profitability, efficiency and quality.

Activity based costing cannot be used in service organisations.

Recent survey findings suggest that ABC:

Activity-based costing, compared to traditional costing, increases the accuracy of cost measurement by using multiple cost allocation bases for overhead.

Traditional costing systems were focused on product costing for service organisations.

Employees can restrict the success of an ABC implementation by:

Rhiannon is a customer of Inthenews Ltd. She consistently orders low-margin services, but requires extensive technical support from Inthenews Ltd. In employing ABM techniques to manage customer profitability, Inthenews' staff should:

The accuracy of estimates used in the denominator does not affect the cost accuracy in an ABC system.

Each cost pool in an ABC system has the same cost allocation rate.

Which of the steps listed below normally occurs last when assigning costs in an ABC system?

Swim4Life provides swimming classes and training in South East Queensland. Swim4Life offers four training levels: Learn to Swim Baby, Learn to Swim Junior, Learn to Swim Senior, Swim Squad. In November 2019, the firm's information system produced the following data $\begin{array} { | l | l | l | l | l | l | } \hline & \begin{array} { l } \text { No of Swirn } \\\text { Teachers }\end{array} & \text { No of Students } & \text { Area Occupied } & \begin{array} { l } \text { Number of } \\\text { Classes }\end{array} & \text { Direct Costs } \\\hline \text { Baby } & 4 & 20 & 10 \% & 108 & \$ 1,000 \\\hline \text { Jurior } & 3 & 24 & 40 \% & 94 & \$ 1,500 \\\hline \text { Serior } & 5 & 15 & 20 \% & 84 & \$ 3,000 \\\hline \text { Squad } & 3 & 9 & 30 \% & 48 & \$ 1,000 \\\hline\end{array}$ Regardless of level, students pay $15 per hour for lessons. Only 5 swimmers can be supervised by the teacher in each lesson. Swim4Life also provides lessons to school students who come with their school during school hours. These lessons are provided at a discounted rate of $12 per child. Costs associated with the Swim4Life operations for November 2019 included: Facility rent $2,500 Provision of Life Savers $800 Utilities $1,100 Computer equipment depreciation $800 Advertising $400 Training $1,500 Which of these groups of costs are most likely to have a common cost driver?

An activity is a: