Question 1

The primary benefit of ABC is it provides

Accepted Answer

A) faster management decisions. 
B) enhanced control over overhead costs. 
C) more cost pools. 
D) more accurate product costing. 
A) faster management decisions. 
B) enhanced control over overhead costs. 
C) more cost pools. 
D) more accurate product costing. D

Question 2

Sleep-Tight manufactures mattresses for the hotel industry.It has two products, Downy and Firm, and total overhead of $504,000.The company plans to manufacture 200 Downy mattresses and 300 Firm mattresses this year.In manufacturing the mattresses, the company must perform 700 material moves for the Downy and 300 for the Firm; it processes 114 purchase orders for the Downy and 90 for the Firm; and the company's employees work 2,800 direct labour hours on the Downy product and 3,500 on the Firm.Sleep-Tight's total material handling costs are $300,000 and its total purchasing costs are $204,000. Under a traditional costing approach based on direct labour hours, how much overhead would be assigned to the Downy product?

Accepted Answer

A) $224,000 
B) $252,000 
C) $280,000 
D) $336,000 
A) $224,000 
B) $252,000 
C) $280,000 
D) $336,000 A

Question 3

Which of the following is an example of batch-level activity in a company marketing cell phones?

Accepted Answer

A) internet advertising 
B) preparing monthly customer invoices 
C) rent for kiosks in shopping malls 
D) offering discounts on monthly payment plans 
A) internet advertising 
B) preparing monthly customer invoices 
C) rent for kiosks in shopping malls 
D) offering discounts on monthly payment plans B

Question 4

A cost driver is

Accepted Answer

A) any factor or activity that has a direct cause-effect relationship with the resources consumed. 
B) always based on time consumed by the activity. 
C) another name for cost pool. 
D) a term used only in traditional costing systems. 
A) any factor or activity that has a direct cause-effect relationship with the resources consumed. 
B) always based on time consumed by the activity. 
C) another name for cost pool. 
D) a term used only in traditional costing systems.

Question 5

Which of the following is a non-value-added activity?

Accepted Answer

A) engineering design 
B) machining 
C) inspection 
D) packaging 
A) engineering design 
B) machining 
C) inspection 
D) packaging

Question 6

Which of the following is true of activity-based costing?

Accepted Answer

A) more cost pools 
B) same base as traditional costing 
C) less costly to use 
D) eliminates arbitrary allocations 
A) more cost pools 
B) same base as traditional costing 
C) less costly to use 
D) eliminates arbitrary allocations

Question 7

All of the following statements are correct except that

Accepted Answer

A) activity-based costing has been widely adopted in service industries. 
B) the objective of installing ABC in service firms is different than it is in a manufacturing firm. 
C) a larger proportion of overhead costs are company-wide costs in service industries. 
D) the general approach to identifying activities and activity cost pools is the same in a service company as in a manufacturing company. 
A) activity-based costing has been widely adopted in service industries. 
B) the objective of installing ABC in service firms is different than it is in a manufacturing firm. 
C) a larger proportion of overhead costs are company-wide costs in service industries. 
D) the general approach to identifying activities and activity cost pools is the same in a service company as in a manufacturing company.

Question 8

Port Accounting performs two types of services, audit and tax.Port's overhead costs consist of computer support, $240,000; and legal support, $120,000.Information on the two services is: $$\begin{array} { l l l } 
&\underline{ \text { Audit } }&\underline { \text { Tax } } \
\text { Direct labour cost } &   \$ 50,000&  \$ 100,000  \
\text { CPU minutes } & 40,000 & 10,000 \
\text { Legal hours used } & 200 & 800
\end{array}$$ Overhead applied to audit services using ABC is

Accepted Answer

A) $120,000. 
B) $144,000. 
C) $216,000. 
D) $240,000. 
A) $120,000. 
B) $144,000. 
C) $216,000. 
D) $240,000.

Question 9

Which of the following is a batch-level activity?

Accepted Answer

A) sandpaper used to smooth the wood used in the manufacture of a chair 
B) the design of a chair 
C) the chairs in the staff cafeteria 
D) shipment of chairs to a customer 
A) sandpaper used to smooth the wood used in the manufacture of a chair 
B) the design of a chair 
C) the chairs in the staff cafeteria 
D) shipment of chairs to a customer

Question 10

Which of the following is a product-level activity?

Accepted Answer

A) regulatory approval of a new prescription drug 
B) an advertisement campaign that focuses on the large number of products the company produces 
C) equipment cleaning between batches 
D) material handling 
A) regulatory approval of a new prescription drug 
B) an advertisement campaign that focuses on the large number of products the company produces 
C) equipment cleaning between batches 
D) material handling

Question 11

Which of the following is a limitation of activity-based costing?

Accepted Answer

A) more cost pools 
B) less control over overhead costs 
C) poorer management decisions 
D) some arbitrary allocations continue 
A) more cost pools 
B) less control over overhead costs 
C) poorer management decisions 
D) some arbitrary allocations continue

Question 12

A relevant unit-level cost driver for a spa is

Accepted Answer

A) advertising the offerings in the spa. 
B) products used for facial care. 
C) training of new staff. 
D) hours patrons spend in the whirlpool. 
A) advertising the offerings in the spa. 
B) products used for facial care. 
C) training of new staff. 
D) hours patrons spend in the whirlpool.

Question 13

Which of the following is a unit-level activity?

Accepted Answer

A) cleaning the paint sprayer when switching from one colour of paint to another 
B) paint used in the manufacturing process 
C) test marketing to see which colour of paint customers prefer 
D) painting the executive offices 
A) cleaning the paint sprayer when switching from one colour of paint to another 
B) paint used in the manufacturing process 
C) test marketing to see which colour of paint customers prefer 
D) painting the executive offices

Question 14

Which of the following is an example of unit-level activity in a major automotive parts distribution company?

Accepted Answer

A) preparing cheques for suppliers 
B) promotional materials 
C) packing parts for shipment 
D) shipping costs of parts to dealers 
A) preparing cheques for suppliers 
B) promotional materials 
C) packing parts for shipment 
D) shipping costs of parts to dealers

Question 15

Jaime Inc.manufactures two products, sweaters and jackets.The company has estimated its overhead in the order-processing department to be $180,000.The company produces 50,000 sweaters and 80,000 jackets each year.Sweater production requires 25,000 machine hours, jacket production requires 50,000 machine hours.The company places raw materials orders 10 times per month, 2 times for raw materials for sweaters and the remainder for raw materials for jackets.How much of the order-processing overhead should be allocated to jackets?

Accepted Answer

A) $90,000 
B) $120,000 
C) $110,770 
D) $144,000 
A) $90,000 
B) $120,000 
C) $110,770 
D) $144,000

Question 16

All of the following are examples of a value-added activity in a service company except

Accepted Answer

A) delivering packages by a delivery service. 
B) ordering supplies. 
C) performing surgery. 
D) providing legal research for legal services. 
A) delivering packages by a delivery service. 
B) ordering supplies. 
C) performing surgery. 
D) providing legal research for legal services.

Question 17

Which of the following is a facility-level activity?

Accepted Answer

A) the Human Resources Department 
B) the Product Manager's salary 
C) insurance on the factory that is used exclusively to manufacture one of the company's seven products 
D) inspections 
A) the Human Resources Department 
B) the Product Manager's salary 
C) insurance on the factory that is used exclusively to manufacture one of the company's seven products 
D) inspections

Question 18

Port Accounting performs two types of services, audit and tax.Port's overhead costs consist of computer support, $240,000; and legal support, $120,000.Information on the two services is: $$\begin{array} { l l l } 
&\underline{ \text { Audit } }&\underline { \text { Tax } } \
\text { Direct labour cost } &   \$ 50,000&  \$ 100,000  \
\text { CPU minutes } & 40,000 & 10,000 \
\text { Legal hours used } & 200 & 800
\end{array}$$ Overhead applied to audit services using traditional costing is

Accepted Answer

A) $120,000. 
B) $144,000. 
C) $216,000. 
D) $240,000. 
A) $120,000. 
B) $144,000. 
C) $216,000. 
D) $240,000.

Question 19

Which of the following is an example of a facility-level activity in an airport?

Accepted Answer

A) wages for security screening personnel 
B) parking lot revenue and expenses 
C) airline landing fees 
D) salaries of air traffic controllers 
A) wages for security screening personnel 
B) parking lot revenue and expenses 
C) airline landing fees 
D) salaries of air traffic controllers

Question 20

A company incurs $1,200,000 of overhead each year in three departments, Processing, Packaging, and Testing.The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of oil and 600,000 drums of sludge.The following data are available: $$\begin{array} { c c c } 
\text { Department } & \text { Estimated use of Driver } & \text { Cost } \
\hline \text { Processing } & 800 & \$ 500,000 \
\text { Packaging } & 200,000 & 500,000 \
\text { Testing } & 2,000 & 200,000
\end{array}$$ Production information for oil is as follows:
$$\begin{array} { l c } 
\underline{\text { Department }} &\underline{ \text { Estimated use of Driver }} \
\text { Processing } & 300 \
\text { Packaging } & 120,000 \
\text { Testing } & 1,600
\end{array}$$ Calculate the amount of overhead assigned to oil.

Accepted Answer

A) $600,000 
B) $647,500 
C) $552,500 
D) $460,000 
A) $600,000 
B) $647,500 
C) $552,500 
D) $460,000

The primary benefit of ABC is it provides

Which of the following is an example of batch-level activity in a company marketing cell phones?

A cost driver is

Which of the following is a non-value-added activity?

Which of the following is true of activity-based costing?

All of the following statements are correct except that

Which of the following is a batch-level activity?

Which of the following is a product-level activity?

Which of the following is a limitation of activity-based costing?

A relevant unit-level cost driver for a spa is

Which of the following is a unit-level activity?

Which of the following is an example of unit-level activity in a major automotive parts distribution company?

All of the following are examples of a value-added activity in a service company except

Which of the following is a facility-level activity?

Which of the following is an example of a facility-level activity in an airport?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Alternative Inventory Costing Methods: a Decision-Making Perspective

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters

Exam 5: Activity-Based-Costing

The primary benefit of ABC is it provides

Which of the following is an example of batch-level activity in a company marketing cell phones?

A cost driver is

Which of the following is a non-value-added activity?

Which of the following is true of activity-based costing?

All of the following statements are correct except that

Which of the following is a batch-level activity?

Which of the following is a product-level activity?

Which of the following is a limitation of activity-based costing?

A relevant unit-level cost driver for a spa is

Which of the following is a unit-level activity?

Which of the following is an example of unit-level activity in a major automotive parts distribution company?

All of the following are examples of a value-added activity in a service company except

Which of the following is a facility-level activity?

Which of the following is an example of a facility-level activity in an airport?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Alternative Inventory Costing Methods: a Decision-Making Perspective

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters