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(WIP) ACC 350 Exam 1 Study Material

Work in Process

2. For each activity,

2. For each activity, identify an activity driver and calculate the activity driver rates. 3. Calculate the cost of the two products using ABC. 4. How did the cost of the two products change and why? 5. Discuss how the company would go about improving profitability.

solutions ACC 350 In-Class Problems – Chapter 5 Problem #1 – Identify Activity Level The company below manufactures trucks and has the following activities: Activity Level 1. Work on assembly line Unit Labor hours Potential Activity Driver 2. Set-up production machinery Batch # of Setups/Setup hours 3. Operate production machines Unit Machine hours 4. Maintenance of production machinery Unit Machine hours 5. Inspect products Batch* # of Inspections/Inspection hours 6. Receive Raw Materials Batch # of Receipts 7. Factory heating, lighting & air conditioning 8. Set up an inventory part number in the information system. Facility Product Square footage # of different parts 9. Prepare a production order Batch # of production orders 10. Advertising the product Product # of different products 11. Customer returns Customer # of returns 12. Rent on manufacturing plant Facility Square Footage 13. Move materials Batch # of moves 14. Prepare an engineering change order Product # of different products 15. Provide a “help” line for ten largest customers. Customer # of calls/# of hours on the phone For each activity, identify the activity level (unit, batch, product, customer or facility) and list a potential activity driver. *This (as well as other batch activities) would be a unit-level activity if each unit required inspection.