Cost Management Problems & Exercises
Investments in manufacturing equipment in recent years have been to support two principal objectives: to increase capacity and to reduce costs. The cost reduction initiatives principally concerned material costs and reduced processing times. Over the years, Laurent has chosen to invest in machines that are similar to existing equipment in order to capitalize on the fact that the process is relatively simple and that products can, with relatively few exceptions, be processed on any machine in the plant.
The only major restriction is the number of colors that a machine can accommodate on a single pass. Future investment proposals now being considered are based on this rationale.
Questions
1.) What are the key strategic issues facing Laurent, and how can ABC costing assist in resolving these issues?
5-25
Activity Levels and Cost Drivers Shroeder Machine Shop has the following activities:
Machine operation
Machine setup
Production scheduling
Materials receiving
page 170Research and development
Machine maintenance
Product design
Parts administration
Final inspection of a sample of products
Materials handling
Questions
1.) Classify each of the activities as a unit-level, batch-level, product-level, or facility-level activity.
2.) Identify a potential cost driver for each activity in requirement 1.
5-26
Activity Levels and Cost Drivers Steve’s Slop Shop, a small hamburger shop, has identified the resources used in
its operations :
Bread
Hourly workers that cook hamburgers
Store rent
Ground beef
Catsu
