Question : 11) Given this change in the cost structure ________. A) : 1212087

11) Given this change in the cost structure ________.

A) The costing results for chess pieces under the new system depend on the adequacy and quality of the estimated cost drivers and costs used by the system.

B) Chess pieces have benefited from the new system.

C) Chess pieces are definitely more accurately costed.

D) Chess will now have a lower sales price.

12) The goal of a properly constructed ABC system is to ________.

A) have the most accurate cost system

B) identify more indirect costs

C) develop the best cost system for an economically reasonable cost

D) have separate allocation rates for each department

13) As ABC systems get very detailed and more cost pools are created, more allocations are necessary to calculate activity costs for each cost pool, which increases the chances of misidentifying the costs of different activity cost pools.

14) ABC system is likely to provide high benefits to a company whose products that the company is well-suited to make and show small profits.

15) Implementing ABC system never demotivates employees.

16) Rachel’s Pet Supply Corporation manufactures two models of grooming stations, a standard and a deluxe model. The following activity and cost information has been compiled:

Number ofNumber ofNumber of

ProductSetupsComponentsDirect Labor Hours

Standard330650

Deluxe750150

Overhead costs$40,000$120,000

Assume a traditional costing system applies the $160,000 of overhead costs based on direct labor hours.

a.What is the total amount of overhead costs assigned to the standard model?

b.What is the total amount of overhead costs assigned to the deluxe model?

Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.

c.What is the total amount of overhead costs assigned to the standard model?

d.What is the total amount of overhead costs assigned to the deluxe model?

e.Explain the difference between the costs obtained from the traditional costing system and the ABC system. Which system provides a better estimate of costs? Why?

17) Luzent Company produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labor dollars. For 2015, Luzent compiled the following data for the two products:

DeluxeStandard

Sales units50,000400,000

Sales price per unit$650.00$475.00

Prime costs per unit$180.00$130.00

Direct materials cost per unit$95.00$75.00

Direct labor costs per unit$75.00$55.00

Manufacturing support costs per unit$ 80.00$120.00

Last year, Luzent Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information for 2015:

ActivityCost DriverCostTotalDeluxeStandard

Setupsof setups$ 500,000500400100

Machine-relatedof machine hours$44,000,000600,000300,000300,000

Packingof shipments$ 5,000,000250,00050,000200,000

Required:

a.Using the current system, what is the estimated

1.total cost of manufacturing one unit for each type of door?

2.profit per unit for each type of door?

b.Using the current system, estimated manufacturing overhead costs per unit are less for the deluxe door ($80 per unit) than the standard door ($120 per unit). What is a likely explanation for this?

c. “ABC systems may result in misallocation of indirect costs.” Do you agree? Give reasons for your answer.

d.What considerations need to be examined when determining a sales mix strategy?

e. While implementing an ABC system for the first time, achieving a significant change overnight is difficult and this may demotivate employees. How can managers overcome this problem?