Question 1

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 A

Question 2

When target costing is used,the target cost is determined by:

Accepted Answer

A) finding the difference between the market price and the amount of profit needed to satisfy stakeholders. 
B) adding the cost of direct materials,direct labor,and activity costs of a product. 
C) subtracting all nonvalue-added costs from total manufacturing costs of a product. 
D) adding the manufacturing and nonmanufacturing costs of the product. 
A) finding the difference between the market price and the amount of profit needed to satisfy stakeholders. 
B) adding the cost of direct materials,direct labor,and activity costs of a product. 
C) subtracting all nonvalue-added costs from total manufacturing costs of a product. 
D) adding the manufacturing and nonmanufacturing costs of the product. A

Question 3

How is activity-based management related to activity-based costing?

Accepted Answer

A) Activity based management is another term for activity based costing. 
B) Activity based management is used when activity based costing is not feasible. 
C) Activity based management bases improvements to operations and reductions in costs on activity based costing data. 
D) Activity based management is not related to activity based costing. 
A) Activity based management is another term for activity based costing. 
B) Activity based management is used when activity based costing is not feasible. 
C) Activity based management bases improvements to operations and reductions in costs on activity based costing data. 
D) Activity based management is not related to activity based costing. C

Question 4

Target costing involves determining what the product price must be in order to meet the target cost and still provide a profit for the company's shareholders.

Accepted Answer

A) True 
 B)False

Question 5

Activity-based costing is not appropriate for service providers since they do not have manufacturing overhead that needs to be assigned to products.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

Hayden,Inc.produces two different products,Product A and Product B.Hayden uses a traditional volume-based costing system in which direct labor hours are the allocation base.Hayden is considering switching to an ABC system by splitting its manufacturing overhead cost across three activities: Engineering,Manufacturing,and Inspection.The cost of each activity and usage of the activity drivers are as follows:
   Hayden manufactures 10,000 units of Product A and 5,000 units of Product B per month.
Required:
a.Calculate the predetermined overhead rate under the traditional costing system.
b.Calculate the activity rate for Engineering.
c.Calculate the activity rate for Manufacturing.
d.Calculate the activity rate for Inspection.
e.Calculate the indirect manufacturing costs assigned to each unit of Product A under the traditional costing system.
f.Calculate the indirect manufacturing costs assigned to each unit of Product B under the traditional costing system.
g.Calculate the indirect manufacturing costs assigned to each unit of Product A under the ABC system.
h.Calculate the indirect manufacturing costs assigned to each unit of Product B under the ABC system.
i.Which product is under-costed and which is over-costed under the volume-based cost system compared to ABC?

Accepted Answer

a.$2.00 = ($600,000 + $800,000 + $200,00

Question 8

Activity-based management is a method of assigning indirect costs to products or services based on the activities they require.

Accepted Answer

A) True 
 B)False

Question 9

Sherman,Inc.manufactures chainsaws that sell for $58.Each chainsaw uses $10 in direct materials and $3 in direct labor per unit.Sherman has two activities: Machining,which is applied at the rate of $2 per machine hour,and Finishing,which is applied at the rate of $20 per batch.This month,Sherman made 200 chainsaws,using 1,000 machine hours in 40 batches.What is the gross profit for one chainsaw?

Accepted Answer

A) $13 
B) $27 
C) $31 
D) $47 
A) $13 
B) $27 
C) $31 
D) $47

Question 10

When is a volume-based cost system appropriate for a service company?

Accepted Answer

A) A volume-based cost system is always appropriate for a service company. 
B) A volume-based cost system is never appropriate for a service company. 
C) A volume-based cost system is appropriate for a service company when certain customers require more attention and a higher level of service than other customers. 
D) A volume-based cost system is appropriate for a service company when every customer places a similar demand on the company's resources. 
A) A volume-based cost system is always appropriate for a service company. 
B) A volume-based cost system is never appropriate for a service company. 
C) A volume-based cost system is appropriate for a service company when certain customers require more attention and a higher level of service than other customers. 
D) A volume-based cost system is appropriate for a service company when every customer places a similar demand on the company's resources.

Question 11

Fremont Systems produces two different products,Product A,which sells for $1,000 per unit,and Product B,which sells for $2,000 per unit,using three different activities: Design,which uses Engineering Hours as an activity driver;Machining,which uses machine hours as an activity driver;and Inspection,which uses number of batches as an activity driver.The cost of each activity and usage of the activity drivers are as follows:
   Fremont manufactures 10,000 units of Product A and 7,500 units of Product B per month.Each unit of Product A uses $500 of direct materials and $200 of direct labor,while each unit of Product B uses $750 of direct materials and $350 of direct labor.
Required:
a.Calculate the Design activity proportions for Products A and B.
b.Calculate the Machining activity proportions for Products A and B.
c.Calculate the Inspection activity proportions for Products A and B.
d.Determine the indirect costs assigned to Product A.
e.Determine the indirect costs assigned to Product B.
f.Determine the manufacturing cost per unit for Product A.
g.Determine the manufacturing cost per unit for Product B.
h.Determine the gross profit per unit for Product A.
i.Determine the gross profit per unit for Product B.

Accepted Answer

a.Product A: 40% = 400/(400 + 600);Produ

Question 12

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 13

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

Accepted Answer

A) An activity that is performed for a specific customer 
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 for a specific customer 
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 14

Pima,Inc.manufactures calculators that sell for $40 each.Each calculator uses $15 in direct materials and $5 in direct labor per unit.Pima has two activities: Machining,which is applied at the rate of $4 per machine hour,and Finishing,which is applied at the rate of $20 per batch.This month,Pima made 400 calculators,using 1,000 machine hours in 40 batches.What is the gross profit for one calculator?

Accepted Answer

A) $8 
B) $20 
C) $25 
D) $35 
A) $8 
B) $20 
C) $25 
D) $35

Question 15

When forming activity cost pools,the goal is to create as few cost pools as possible,while still capturing major activities.

Accepted Answer

A) True 
 B)False

Question 16

Pima,Inc.manufactures calculators that sell for $40 each.Each calculator uses $15 in direct materials and $5 in direct labor per unit.Pima has two activities: Machining,which is applied at the rate of $4 per machine hour,and Finishing,which is applied at the rate of $20 per batch.This month,Pima made 400 calculators,using 1,000 machine hours in 40 batches.What is the total manufacturing cost for one calculator?

Accepted Answer

A) $20 
B) $25 
C) $27 
D) $32 
A) $20 
B) $25 
C) $27 
D) $32

Question 17

Carter,Inc.uses a traditional volume-based costing system in which direct labor hours are the allocation base.Carter produces two different products: Product A,which uses 100,000 direct labor hours,and Product B,which uses 300,000 direct labor hours.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 cost of each activity and proportion of the activity drivers used by each product 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.$750,000

Question 18

Hayden,Inc.produces two different products,Product A and Product B.Hayden uses a traditional volume-based costing system in which direct labor hours are the allocation base.Hayden is considering switching to an ABC system by splitting its manufacturing overhead cost of $1,600,000 across three activities: Engineering,Manufacturing,and Inspection.Under the traditional volume-based costing system,the predetermined overhead rate is $2.00/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.$800,000 = $2.00 × 400,000
b.$800,000

Question 19

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 5?

Accepted Answer

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

Question 20

Jackson,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.Product 5 uses 20% of total machine hours and 75% of total batches.What is the total Machining cost assigned to Product Z?

Accepted Answer

A) $7,500 
B) $22,500 
C) $375,000 
D) $400,000 
A) $7,500 
B) $22,500 
C) $375,000 
D) $400,000

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

When target costing is used,the target cost is determined by:

How is activity-based management related to activity-based costing?

Target costing involves determining what the product price must be in order to meet the target cost and still provide a profit for the company's shareholders.

Activity-based costing is not appropriate for service providers since they do not have manufacturing overhead that needs to be assigned to products.

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

Activity-based management is a method of assigning indirect costs to products or services based on the activities they require.

When is a volume-based cost system appropriate for a service company?

The purpose of Stage 1 allocations is to:

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

When forming activity cost pools,the goal is to create as few cost pools as possible,while still capturing major activities.

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Behavior

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgetary Planning

Standard Costing and Variance Analysis

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters

Exam 4: Activity-Based Costing and Cost Management

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

When target costing is used,the target cost is determined by:

How is activity-based management related to activity-based costing?

Target costing involves determining what the product price must be in order to meet the target cost and still provide a profit for the company's shareholders.

Activity-based costing is not appropriate for service providers since they do not have manufacturing overhead that needs to be assigned to products.

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

Activity-based management is a method of assigning indirect costs to products or services based on the activities they require.

When is a volume-based cost system appropriate for a service company?

The purpose of Stage 1 allocations is to:

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

When forming activity cost pools,the goal is to create as few cost pools as possible,while still capturing major activities.

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost Behavior

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgetary Planning

Standard Costing and Variance Analysis

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Measuring and Evaluating Financial Performance

Filters