Question 1

In target costing, the target cost should be determined:

Accepted Answer

A)  before manufacturing ever starts. 
B)  after initial manufacturing prototypes are created. 
C)  after customers provide feedback about critical features. 
D)  before goods are shipped to customers, but after manufacturing begins. 
A)  before manufacturing ever starts. 
B)  after initial manufacturing prototypes are created. 
C)  after customers provide feedback about critical features. 
D)  before goods are shipped to customers, but after manufacturing begins.

Question 2

Jefferson, Inc. produces two different products (Product 5 and Product Z) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. The activity drivers are used as follows:   What proportion of Inspection activity is used by Product Z?

Accepted Answer

A)  25% 
B)  33% 
C)  67% 
D)  75% 
A)  25% 
B)  33% 
C)  67% 
D)  75%

Question 3

Which of the following would not be directly related to a volume-based allocation measure?

Accepted Answer

A)  The number of activities. 
B)  The number of units produced. 
C)  The number of customers served. 
D)  Direct materials cost. 
A)  The number of activities. 
B)  The number of units produced. 
C)  The number of customers served. 
D)  Direct materials cost.

Question 4

Which of the following best defines a facility-level activity?

Accepted Answer

A)  An activity that is performed to support the entire company 
B)  An activity that is performed to support a specific product line 
C)  An activity that is performed for each individual unit 
D)  An activity that is performed for a group of units all at once 
A)  An activity that is performed to support the entire company 
B)  An activity that is performed to support a specific product line 
C)  An activity that is performed for each individual unit 
D)  An activity that is performed for a group of units all at once

Question 5

In a traditional volume-based cost system, total manufacturing costs are calculated by:

Accepted Answer

A)  adding manufacturing overhead cost, direct materials cost, and direct labor cost. 
B)  subtracting manufacturing overhead from selling price. 
C)  adding direct material cost and direct labor cost. 
D)  adding activity cost, direct material cost, and direct labor cost. 
A)  adding manufacturing overhead cost, direct materials cost, and direct labor cost. 
B)  subtracting manufacturing overhead from selling price. 
C)  adding direct material cost and direct labor cost. 
D)  adding activity cost, direct material cost, and direct labor cost.

Question 6

Firms that use JIT often rely on:

Accepted Answer

A)  Fewer suppliers that must adhere to very strict quality standards. 
B)  More suppliers that must adhere to very strict quality standards. 
C)  Fewer suppliers that have flexible quality standards. 
D)  More suppliers that have flexible quality standards. 
A)  Fewer suppliers that must adhere to very strict quality standards. 
B)  More suppliers that must adhere to very strict quality standards. 
C)  Fewer suppliers that have flexible quality standards. 
D)  More suppliers that have flexible quality standards.

Question 7

Parker Woodworks manufactures baseball bats and wooden tops. Currently, Parker makes 5,000 baseball bats each month. Each bat uses $1.00 in direct materials and $0.50 in direct labor. Parker uses two activities in manufacturing the baseball bats: Cutting and Finishing. The cost associated with Cutting is $7,500 a month, allocated on the basis of direct labor hours. The cost associated with Finishing is $12,000 a month, allocated on the basis of batches. The activity drivers are used as follows: Baseball bats
Wooden tops
Direct labor hours
100
200
Batches
4
6
What is the total manufacturing cost for one baseball bat?

Accepted Answer

A)  $1.46 
B)  $1.50 
C)  $2.96 
D)  $3.94 
A)  $1.46 
B)  $1.50 
C)  $2.96 
D)  $3.94

Question 8

Each individual indirect cost should be assigned to one activity when forming activity cost pools

Accepted Answer

A) True 
 B)False

Question 9

Hadley, Inc. manufactures a product that uses $15 in direct materials and $5 in direct labor per unit. Under the traditional costing system Hadley uses, manufacturing overhead applied to each unit is $12. However, Hadley is considering switching to an ABC system. Under the ABC system, the total activity cost would be $25. What is the total manufacturing cost per unit for Hadley under the ABC system?

Accepted Answer

A)  $20 
B)  $25 
C)  $32 
D)  $45 
A)  $20 
B)  $25 
C)  $32 
D)  $45

Question 10

The gross margin is calculated by subtracting total nonmanufacturing cost per unit from the unit sales price

Accepted Answer

A) True 
 B)False

Question 11

Cottonwood, Inc. produces two different products (Standard and Luxury) using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard uses 30% of total machine hours and 70% of total batches. What is the total activity cost assigned to Standard?

Accepted Answer

A)  $22,500 
B)  $125,000 
C)  $171,000 
D)  $359,000 
A)  $22,500 
B)  $125,000 
C)  $171,000 
D)  $359,000

Question 12

The cost of quality training is an example of what type of quality cost?

Accepted Answer

A)  Prevention costs 
B)  Appraisal or inspection costs 
C)  Internal failure costs 
D)  External failure costs 
A)  Prevention costs 
B)  Appraisal or inspection costs 
C)  Internal failure costs 
D)  External failure costs

Question 13

Carter, Inc. produces two different products, Product A and Product
B. Carter uses a traditional volume-based costing system in which direct labor hours are the allocation base. Carter is considering switching to an ABC system by splitting its manufacturing overhead cost of $1,000,000 across three activities: Design, Production, and Inspection. Under the traditional volume-based costing system, the predetermined overhead rate is $2.50/direct labor hour. Under the ABC system, the rate for each activity and usage of the activity drivers are as follows:
   Required:
a. Calculate the indirect manufacturing costs assigned to Product A under the traditional costing system.
b. Calculate the indirect manufacturing costs assigned to Product B under the traditional costing system
c. Calculate the indirect manufacturing costs assigned to Product A under the ABC system.
d. Calculate the indirect manufacturing costs assigned to Product B under the ABC system.
e. Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC?

Accepted Answer

a. $250,000 = $2.50 × 100,000
b. $750,00

Question 14

Managers who use activity-based management should begin by asking all of the following questions except:

Accepted Answer

A)  "What activities does the company perform?" 
B)  "How much does it cost to perform each activity?" 
C)  "How am I evaluated annually based on these activities?" 
D)  "Does the activity add value to the customer?" 
A)  "What activities does the company perform?" 
B)  "How much does it cost to perform each activity?" 
C)  "How am I evaluated annually based on these activities?" 
D)  "Does the activity add value to the customer?"

Question 15

Under activity based management, cost management is achieved by:

Accepted Answer

A)  managing the underlying activities. 
B)  reducing production volume. 
C)  eliminating value-added activities. 
D)  assigning indirect costs to products based on their activities. 
A)  managing the underlying activities. 
B)  reducing production volume. 
C)  eliminating value-added activities. 
D)  assigning indirect costs to products based on their activities.

Question 16

Monroe, Inc. randomly selects ten units from each production run to be inspected for quality, regardless of the size of the production run. The inspection of these units would most likely be classified as a:

Accepted Answer

A)  facility or companywide activity. 
B)  product-level activity. 
C)  batch-level activity. 
D)  unit-level activity. 
A)  facility or companywide activity. 
B)  product-level activity. 
C)  batch-level activity. 
D)  unit-level activity.

Question 17

The purpose of Stage 1 allocations is to:

Accepted Answer

A)  assign indirect manufacturing costs to activity cost pools. 
B)  assign the indirect costs of each activity to products and services. 
C)  assign direct manufacturing costs to activity cost pools. 
D)  assign the direct costs of each activity to products and services. 
A)  assign indirect manufacturing costs to activity cost pools. 
B)  assign the indirect costs of each activity to products and services. 
C)  assign direct manufacturing costs to activity cost pools. 
D)  assign the direct costs of each activity to products and services.

Question 18

An activity that is performed to benefit the organization as a whole is a(n):

Accepted Answer

A)  batch-level activity. 
B)  product-level activity. 
C)  facility-level activity. 
D)  unit-level activity. 
A)  batch-level activity. 
B)  product-level activity. 
C)  facility-level activity. 
D)  unit-level activity.

Question 19

Garfield Personal Training Services is owned by Gina Garfield. Gina provides personal training and coaching to individuals or small groups using the local fitness facility and pool. Gina rents the group training room at the local fitness facility or the pool for scheduled classes. For one-on-one training, she meets clients at the fitness facility where she is a member. Gina is currently learning Zumba and plans to offer a Zumba class in the group training room on Wednesday mornings starting next month. The development of Zumba is considered a ___________ activity for Garfield.

Accepted Answer

A)  facility-level 
B)  service-level 
C)  group-level 
D)  customer-level 
A)  facility-level 
B)  service-level 
C)  group-level 
D)  customer-level

Question 20

Which of the following is not true of activity cost drivers?

Accepted Answer

A)  They are measures of the underlying activity that occurs in each activity cost pool. 
B)  They ideally have a cause and effect relationship with underlying activities. 
C)  They are strictly volume-based allocation measures. 
D)  They are used in Stage 2 cost allocations. 
A)  They are measures of the underlying activity that occurs in each activity cost pool. 
B)  They ideally have a cause and effect relationship with underlying activities. 
C)  They are strictly volume-based allocation measures. 
D)  They are used in Stage 2 cost allocations.

In target costing, the target cost should be determined:

Which of the following would not be directly related to a volume-based allocation measure?

Which of the following best defines a facility-level activity?

In a traditional volume-based cost system, total manufacturing costs are calculated by:

Firms that use JIT often rely on:

Each individual indirect cost should be assigned to one activity when forming activity cost pools

The gross margin is calculated by subtracting total nonmanufacturing cost per unit from the unit sales price

The cost of quality training is an example of what type of quality cost?

Managers who use activity-based management should begin by asking all of the following questions except:

Under activity based management, cost management is achieved by:

Monroe, Inc. randomly selects ten units from each production run to be inspected for quality, regardless of the size of the production run. The inspection of these units would most likely be classified as a:

The purpose of Stage 1 allocations is to:

An activity that is performed to benefit the organization as a whole is a(n):

Which of the following is not true of activity cost drivers?

Introduction to Managerial Accounting

Job-Order Costing

Process Costing

Cost Behavior and Estimation

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgeting and Planning

Standard Costing and Variances

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 4: Activity-Based Cost Management

In target costing, the target cost should be determined:

Which of the following would not be directly related to a volume-based allocation measure?

Which of the following best defines a facility-level activity?

In a traditional volume-based cost system, total manufacturing costs are calculated by:

Firms that use JIT often rely on:

Each individual indirect cost should be assigned to one activity when forming activity cost pools

The gross margin is calculated by subtracting total nonmanufacturing cost per unit from the unit sales price

The cost of quality training is an example of what type of quality cost?

Managers who use activity-based management should begin by asking all of the following questions except:

Under activity based management, cost management is achieved by:

Monroe, Inc. randomly selects ten units from each production run to be inspected for quality, regardless of the size of the production run. The inspection of these units would most likely be classified as a:

The purpose of Stage 1 allocations is to:

An activity that is performed to benefit the organization as a whole is a(n):

Which of the following is not true of activity cost drivers?

Introduction to Managerial Accounting

Job-Order Costing

Process Costing

Cost Behavior and Estimation

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgeting and Planning

Standard Costing and Variances

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Financial Statement Analysis

Filters