Consider the following actions associated with a cost management information sys

Question

Consider the following actions associated with a cost management information system: a. Eliminating a non-value-added activity b. Determining how much it costs to perform a heart transplant c. Calculating the cost of inspecting components from an outside supplier d. Developing and using a budgeted income statement for a division e. Eliminating the need to inspect by improving the quality of products and processes f. Determining whether selling a product at split-off is more profitable than processing itfurther before selling it g. Calculating the cost of producing an e-book h.Using a trend report on quality costs to assess the effectiveness of a quality improvement program i. Determining the units that must be sold to break even j. Calculating the cost to perform a tooth extraction k. Determining the total cost of moving goods L. Using JIT purchasing and manufacturing to significantly reduce inventories m. Using unit product cost to help deverop a bid price Required Classify the above actions as being associated with one of the following objectives of a cost management information system: 1.Costing of products, services, and other objects of interest 2. Planning and control 3. Decision making

Explanation / Answer

a. Solution: Planning and control

Explanation: As a non-value added activity has to be eliminated thus a proper plan is required

b. Solution: Costing of service

Explanation: Because cost of a service has to be computed thus it’s costing of service.

c. Solution: Costing of products/activity

Explanation: As cost is allocated when inspecting activity occurs thus it’s costing of product.

d. Solution: Planning and control

Explanation: Planning and control for the development and usage of income statement for a division

e. Solution: Planning and control

Explanation: It’s planning and control because it needs to improve the quality in the future.

f. Solution: Decision making

Explanation: Because decision has to be taken, it’s a decision making

g. Solution: Costing of products

Explanation: Because it need to compute cost of producing a product thus it is costing of product

h. Solution: Planning and control

Explanation: Because of improvement it’s categorised as planning and control

i. Solution: Decision making

Explanation: Because number of units need to be computed thus it’s decision making

j. Solution: Costing of services

Explanation: Since it perform a tooth extraction is a kind of servic thus is costing of service

k. Solution: Costing of an activity

Explanation: As moving of goods is an activity, thus it’s costing of an activity

l. Solution: Planning and control.

Explanation: A plan is needed for reduce inventories, therefore it's categorised as planning and control

m. Solution: Decision making

Explanation: Because decision is to be made on bid price thus is it’s decision making

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