Question 1

Which of the following involves analyzing the market and estimating what consumers will be willing to pay for a product with specific features?

Accepted Answer

A) Just-in-time inventory 
B) Target costing 
C) Total quality management 
D) Value engineering 
A) Just-in-time inventory 
B) Target costing 
C) Total quality management 
D) Value engineering

Question 2

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 activity rate for Design.
b.Calculate the activity rate for Machining.
c.Calculate the activity rate for Inspection.
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.$1,500/Eng.hour = $1,500,000/(400 + 60

Question 3

Which of the following statements is correct about the differences between a volume-based cost system and an ABC system?

Accepted Answer

A) The only difference is how the methods assign indirect costs to products. 
B) The only difference is how the methods assign direct costs to products. 
C) The methods assign both direct and indirect costs differently to products. 
D) There is no difference in how the methods assign direct or indirect costs to products. 
A) The only difference is how the methods assign indirect costs to products. 
B) The only difference is how the methods assign direct costs to products. 
C) The methods assign both direct and indirect costs differently to products. 
D) There is no difference in how the methods assign direct or indirect costs to products.

Question 4

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 5

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 6

An activity that is performed to support a specific product line is a(n):

Accepted Answer

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

Question 7

Which of the following is not a type of quality cost?

Accepted Answer

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

Question 8

Chipman Inc.produces water pumps.Overhead costs have been identified as follows:
     Chipman makes 3 models of pumps with the following details:
   Required:
a.Calculate the activity rate for each activity.
b.Determine the amount of indirect costs assigned to each of the products.

Accepted Answer

a.
 @#IMG-DLM& b.
 @#IMG-DLM& Activity rate = Cost

Question 9

A volume-based allocation measure would vary proportionately with:

Accepted Answer

A) the number of activities. 
B) nonmanufacturing costs. 
C) the number of units produced. 
D) the number of cost drivers. 
A) the number of activities. 
B) nonmanufacturing costs. 
C) the number of units produced. 
D) the number of cost drivers.

Question 10

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 Machining activity is used by Product Z?

Accepted Answer

A) 25% 
B) 33% 
C) 67% 
D) 80% 
A) 25% 
B) 33% 
C) 67% 
D) 80%

Question 11

Sonora,Inc.is launching a new product that it estimates will sell for $25 per unit.Annual demand is estimated to be 70,000 units.Sonora estimates that using its current manufacturing technology,it can manufacture the units for $23 per unit,but if it purchases a new machine,the units can be manufactured for $22 per unit.Sonora has a target profit of 20% return on sales.Under target costing,what is the target cost for the new product?

Accepted Answer

A) $20 
B) $22 
C) $23 
D) $25 
A) $20 
B) $22 
C) $23 
D) $25

Question 12

A just-in-time (JIT)system is a demand-push system.

Accepted Answer

A) True 
 B)False

Question 13

Atlanta Systems produces two different products,Product A,which sells for $250 per unit,and Product B,which sells for $400 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:
   Atlanta manufactures 10,000 units of Product A and 7,500 units of Product B per month.Each unit of Product A uses $100 of direct materials and $45 of direct labor,while each unit of Product B uses $140 of direct materials and $75 of direct labor.
Required:
a.Calculate the activity rate for Design.
b.Calculate the activity rate for Machining.
c.Calculate the activity rate for Inspection.
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.$600/Eng.hour = $150,000/(100 + 150)
b

Question 14

Elmwood Company has identified seven activities as part of its manufacturing process and chosen corresponding activity drivers for each activity.The chart below lists the total cost of each activity,the amount of activity driver used for each of Elmwood's two products,the activity rate,and the activity cost assigned to each product.Fill in the blanks below:

Accepted Answer

a.$5.00 = $20,000/(1,600 + 2,400)
b.$8,0

Question 15

The cost of scrap and rework 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 16

Internal failure costs result from defects that are caught during the inspection process.

Accepted Answer

A) True 
 B)False

Question 17

An activity cost driver is:

Accepted Answer

A) a measure of the underlying activity that occurs in each activity cost pool. 
B) a measure of the volume of units produced or customers sold. 
C) a number of activities combined into one cost pool. 
D) the cost assigned to an activity. 
A) a measure of the underlying activity that occurs in each activity cost pool. 
B) a measure of the volume of units produced or customers sold. 
C) a number of activities combined into one cost pool. 
D) the cost assigned to an activity.

Question 18

Yuma,Inc.manufactures teddy bears and dolls.Currently,Yuma makes 2,000 teddy bears each month.Each teddy bear uses $2.00 in direct materials and $0.50 in direct labor.Yuma uses two activities in manufacturing the teddy bears: Sewing and Processing.The cost associated with Sewing is $15,000 a month,allocated on the basis of direct labor hours.The cost associated with Processing is $10,000 a month,allocated on the basis of batches.Teddy bears use 1/2 of the direct labor hours,and 35% of total batches.What is the total manufacturing cost for one teddy bear?

Accepted Answer

A) $2.50 
B) $4.50 
C) $7.00 
D) $8.00 
A) $2.50 
B) $4.50 
C) $7.00 
D) $8.00

Question 19

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 20

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

Which of the following involves analyzing the market and estimating what consumers will be willing to pay for a product with specific features?

Which of the following statements is correct about the differences between a volume-based cost system and an ABC system?

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

An activity that is performed to support a specific product line is a(n):

Which of the following is not a type of quality cost?

Chipman Inc.produces water pumps.Overhead costs have been identified as follows: Chipman makes 3 models of pumps with the following details: Required: a.Calculate the activity rate for each activity. b.Determine the amount of indirect costs assigned to each of the products.

A volume-based allocation measure would vary proportionately with:

A just-in-time (JIT)system is a demand-push system.

The cost of scrap and rework is an example of what type of quality cost?

Internal failure costs result from defects that are caught during the inspection process.

An activity cost driver is:

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

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

Which of the following involves analyzing the market and estimating what consumers will be willing to pay for a product with specific features?

Which of the following statements is correct about the differences between a volume-based cost system and an ABC system?

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

An activity that is performed to support a specific product line is a(n):

Which of the following is not a type of quality cost?

Chipman Inc.produces water pumps.Overhead costs have been identified as follows: Chipman makes 3 models of pumps with the following details: Required: a.Calculate the activity rate for each activity. b.Determine the amount of indirect costs assigned to each of the products.

A volume-based allocation measure would vary proportionately with:

A just-in-time (JIT)system is a demand-push system.

The cost of scrap and rework is an example of what type of quality cost?

Internal failure costs result from defects that are caught during the inspection process.

An activity cost driver is:

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

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