Question 1

A good cost driver should have a high correlation with

Accepted Answer

A) the actual number of units produced. 
B) the actual consumption of overhead costs. 
C) the actual number of products produced. 
D) the actual consumption of direct costs. 
A) the actual number of units produced. 
B) the actual consumption of overhead costs. 
C) the actual number of products produced. 
D) the actual consumption of direct costs.

Question 2

What sometimes makes implementation of activity-based costing difficult in service industries is

Accepted Answer

A) the labelling of activities as value-added. 
B) identifying activities, activity cost plus, and cost drivers. 
C) that a larger proportion of overhead costs are company-wide costs. 
D) attempting to reduce or eliminate non-value-added activities. 
A) the labelling of activities as value-added. 
B) identifying activities, activity cost plus, and cost drivers. 
C) that a larger proportion of overhead costs are company-wide costs. 
D) attempting to reduce or eliminate non-value-added activities.

Question 3

Which of the following factors would suggest a switch to activity-based costing?

Accepted Answer

A) product lines similar in volume and manufacturing complexity 
B) overhead costs constitute a significant portion of total costs 
C) the manufacturing process has been stable 
D) production managers use data provided by the existing system 
A) product lines similar in volume and manufacturing complexity 
B) overhead costs constitute a significant portion of total costs 
C) the manufacturing process has been stable 
D) production managers use data provided by the existing system

Question 4

A non-value-added activity in a service enterprise is

Accepted Answer

A) taking appointments. 
B) travelling. 
C) advertising. 
D) all of these 
A) taking appointments. 
B) travelling. 
C) advertising. 
D) all of these

Question 5

The first step in activity-based costing is to

Accepted Answer

A) assign manufacturing overhead costs for each activity cost pool to products. 
B) calculate the activity-based overhead rate per cost driver. 
C) identify and classify the major activities involved in the manufacture of specific products. 
D) identify the cost driver that has a strong correlation to the activity cost pool. 
A) assign manufacturing overhead costs for each activity cost pool to products. 
B) calculate the activity-based overhead rate per cost driver. 
C) identify and classify the major activities involved in the manufacture of specific products. 
D) identify the cost driver that has a strong correlation to the activity cost pool.

Question 6

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 7

In traditional costing systems, overhead is generally applied based on

Accepted Answer

A) direct labour for job-order costing, and machine hours for process-costing. 
B) direct material for job-order costing, and direct labour for process-costing. 
C) factory usage for both job-order costing and process-costing. 
D) units of production. 
A) direct labour for job-order costing, and machine hours for process-costing. 
B) direct material for job-order costing, and direct labour for process-costing. 
C) factory usage for both job-order costing and process-costing. 
D) units of production.

Question 8

What might be an impediment in changing from a traditionally based costing system to an activity-based costing system?

Accepted Answer

A) Management may not be in favour of a change. 
B) Excessive costs may be incurred to assist in capturing costs. 
C) Some costs would still have to be allocated arbitrarily after the changeover. 
D) All of the above are impediments. 
A) Management may not be in favour of a change. 
B) Excessive costs may be incurred to assist in capturing costs. 
C) Some costs would still have to be allocated arbitrarily after the changeover. 
D) All of the above are impediments.

Question 9

The presence of any of the following factors would suggest a switch to ABC except when

Accepted Answer

A) product lines differ greatly in volume. 
B) overhead costs constitute a minor portion of total costs. 
C) the manufacturing process has changed significantly. 
D) production managers are ignoring data provided by the existing system. 
A) product lines differ greatly in volume. 
B) overhead costs constitute a minor portion of total costs. 
C) the manufacturing process has changed significantly. 
D) production managers are ignoring data provided by the existing system.

Question 10

Veronica Co.produces three products, Products Rain, Snow, and Wind.Product Rain requires 15 machine setups, Product Snow requires 20 setups, and Product Wind requires 35 setups.Veronica has identified an activity cost pool with allocated overhead of $420,000 for which the cost driver is machine setups.How much overhead is assigned to each product?  $\quad $ $\quad $ $\quad $$\begin{array} { c c c c } 
 \underline{\text { Rain }} &  \underline{\text { Snow }} & \underline{\text { Wind }} \
\end{array}$
a)$\begin{array} { c c c c }  & \$ 140,000 & \$ 140,000 &\$140,000\\end{array}$
b)$\begin{array} { c c c c }&\$28,000&\$21,000&\$12,000\end{array}$
c)$\begin{array} { c c c c }&\$90,000&\$120,000&\$210,000\end{array}$
d)$\begin{array} { c c c c }&\$12,000&\$21,000&\$28,000\end{array}$

Accepted Answer

The answer of Veronica Co.produces three products, Products Rain, Snow,...

Question 11

Each of the following is a limitation of activity-based costing except that

Accepted Answer

A) it can be expensive to use. 
B) it is more complex than traditional costing. 
C) more cost pools are used. 
D) some arbitrary allocations continue. 
A) it can be expensive to use. 
B) it is more complex than traditional costing. 
C) more cost pools are used. 
D) some arbitrary allocations continue.

Question 12

Which of the following is not a benefit of activity-based costing?

Accepted Answer

A) more accurate product costing 
B) enhanced control over overhead costs 
C) better management decisions 
D) less costly to use 
A) more accurate product costing 
B) enhanced control over overhead costs 
C) better management decisions 
D) less costly to use

Question 13

When using a single cost driver to allocate overhead costs, the amount of overhead costs that are applied is

Accepted Answer

A) usually greater for low-volume products than for high-volume products. 
B) usually greater for high-volume products than for low-volume products. 
C) usually equal for both low and high-volume products. 
D) sometimes greater for higher-volume products, and sometimes greater for low-volume products. 
A) usually greater for low-volume products than for high-volume products. 
B) usually greater for high-volume products than for low-volume products. 
C) usually equal for both low and high-volume products. 
D) sometimes greater for higher-volume products, and sometimes greater for low-volume products.

Question 14

Value-added activities

Accepted Answer

A) should be reduced or eliminated. 
B) involve resource usage customers are willing to pay for. 
C) add cost to a product without affecting selling price. 
D) cannot be differentiated from non-value-added activities. 
A) should be reduced or eliminated. 
B) involve resource usage customers are willing to pay for. 
C) add cost to a product without affecting selling price. 
D) cannot be differentiated from non-value-added activities.

Question 15

Use the following information to answer questions 
Poodle Company manufactures two products, Mini A and Maxi B.Poodle's overhead costs consist of setting up machines, $800,000; machining, $2,000,000; and inspecting, $600,000.Information on the two products is:
 $\begin{array}{lll}
& \underline{\text { Mini A }}& \underline{\text { Maxi B}}  \
\text { Direct labour hours } & 15,000 & 25,000 \
\text { Machine setups } & 600 & 400 \
\text { Machine hours } & 24,000 & 26,000 \
\text { Inspections } & 800 & 700
\end{array}$

-Overhead applied to Maxi B using traditional costing and direct labour hours is

Accepted Answer

A) $1,280,000. 
B) $1,664,000. 
C) $1,700,000. 
D) $2,125,000. 
A) $1,280,000. 
B) $1,664,000. 
C) $1,700,000. 
D) $2,125,000.

Question 16

Canterra Co.incurs $540,000 of overhead costs each year in its three main departments, setup ($40,000), machining ($400,000), and packing ($100,000).The setup department performs 50 setups per year, the machining department works 8,000 hours per year, and the packing department packs 200 orders per year.Information about Canterra's 2 products is as follows: $\begin{array}{lll}
& \underline{\text { Product One }}& \underline{\text {Product Two }}\
\text { Number of setups } & 10 & 40 \
\text { Machining hours } & 3,000 & 5,000 \
\text { Orders packed } & 110 & 90
\end{array}$ Using ABC, how much overhead is assigned to Product One each year?

Accepted Answer

A) $540,000 
B) $327,000 
C) $270,000 
D) $213,000 
A) $540,000 
B) $327,000 
C) $270,000 
D) $213,000

Question 17

GoFish Inc.has an overhead rate for machine setups of $200 per machine setup, for a total of $56,000 of overhead.The company produces two products, Product Salamander and Product Gold, which require 120 and 160 setups each, respectively.The overhead assigned to each product is $\begin{array}{cc}\underline{\text {Salamander }}&\underline{\text {Gold }}\\end{array}$
a)$\begin{array}{llcc}
\$28,000&\$28,000
\end{array}$

b)$\begin{array}{llcc}
\$32,000&\$24,000
\end{array}$

c)$\begin{array}{llcc}
\$26,000&\$30,000
\end{array}$

d)$\begin{array}{llcc}
\$24,000&\$32,000
\end{array}$

Accepted Answer

The answer of GoFish Inc.has an overhead rate for machine...

Question 18

Use the following information to answer questions 
Poodle Company manufactures two products, Mini A and Maxi B.Poodle's overhead costs consist of setting up machines, $800,000; machining, $2,000,000; and inspecting, $600,000.Information on the two products is:
 $\begin{array}{lll}
& \underline{\text { Mini A }}& \underline{\text { Maxi B}}  \
\text { Direct labour hours } & 15,000 & 25,000 \
\text { Machine setups } & 600 & 400 \
\text { Machine hours } & 24,000 & 26,000 \
\text { Inspections } & 800 & 700
\end{array}$

-Overhead applied to Maxi B using activity-based costing is

Accepted Answer

A) $1,280,000. 
B) $1,640,000. 
C) $1,664,000. 
D) $2,125,000. 
A) $1,280,000. 
B) $1,640,000. 
C) $1,664,000. 
D) $2,125,000.

Question 19

Which of the following is a batch-level activity?

Accepted Answer

A) plant management 
B) product design 
C) equipment setups 
D) assembling 
A) plant management 
B) product design 
C) equipment setups 
D) assembling

Question 20

Which of the following is an example of a product-level activity in a refinery?

Accepted Answer

A) transportation of fuel to gas stations 
B) product testing for quality control 
C) advertising the benefits of the company's products 
D) maintenance activities in the refinery 
A) transportation of fuel to gas stations 
B) product testing for quality control 
C) advertising the benefits of the company's products 
D) maintenance activities in the refinery

A good cost driver should have a high correlation with

What sometimes makes implementation of activity-based costing difficult in service industries is

Which of the following factors would suggest a switch to activity-based costing?

A non-value-added activity in a service enterprise is

The first step in activity-based costing is to

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

In traditional costing systems, overhead is generally applied based on

What might be an impediment in changing from a traditionally based costing system to an activity-based costing system?

The presence of any of the following factors would suggest a switch to ABC except when

Each of the following is a limitation of activity-based costing except that

Which of the following is not a benefit of activity-based costing?

When using a single cost driver to allocate overhead costs, the amount of overhead costs that are applied is

Value-added activities

Which of the following is a batch-level activity?

Which of the following is an example of a product-level activity in a refinery?

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

A good cost driver should have a high correlation with

What sometimes makes implementation of activity-based costing difficult in service industries is

Which of the following factors would suggest a switch to activity-based costing?

A non-value-added activity in a service enterprise is

The first step in activity-based costing is to

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

In traditional costing systems, overhead is generally applied based on

What might be an impediment in changing from a traditionally based costing system to an activity-based costing system?

The presence of any of the following factors would suggest a switch to ABC except when

Each of the following is a limitation of activity-based costing except that

Which of the following is not a benefit of activity-based costing?

When using a single cost driver to allocate overhead costs, the amount of overhead costs that are applied is

Value-added activities

Which of the following is a batch-level activity?

Which of the following is an example of a product-level activity in a refinery?

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