Question 1

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 D

Question 2

A well-designed activity-based costing system starts with

Accepted Answer

A) identifying the activity-cost pools. 
B) computing the activity-based overhead rate. 
C) assigning manufacturing overhead costs for each activity cost pool to products. 
D) analyzing the activities performed to manufacture a product. 
A) identifying the activity-cost pools. 
B) computing the activity-based overhead rate. 
C) assigning manufacturing overhead costs for each activity cost pool to products. 
D) analyzing the activities performed to manufacture a product. D

Question 3

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 A

Question 4

A cost driver does not generally have a direct cause-effect relationship with the resources consumed.

Accepted Answer

A) True 
 B)False

Question 5

Use the following information to answer questions 
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.
-Using ABC, how much overhead would be assigned to the Downy product?

Accepted Answer

A) $504,000 
B) $324,000 
C) $252,000 
D) $180,000 
A) $504,000 
B) $324,000 
C) $252,000 
D) $180,000

Question 6

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:  
-Overhead applied to Mini A using activity-based costing is

Accepted Answer

A) $1,275,000. 
B) $1,536,000. 
C) $1,760,000. 
D) $1,920,000. 
A) $1,275,000. 
B) $1,536,000. 
C) $1,760,000. 
D) $1,920,000.

Question 7

Jaime Inc.manufactures 2 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 8

One of Astro Fireworks Company's activity cost pools is machine setups, with estimated overhead of $200,000.Astro produces sparklers (75 setups) and lighters (25 setups).How much of the machine setup cost pool should be assigned to sparklers?

Accepted Answer

A) $50,000 
B) $150,000 
C) $166,666 
D) $200,000 
A) $50,000 
B) $150,000 
C) $166,666 
D) $200,000

Question 9

A critical component of an activity-based accounting system is:

Accepted Answer

A) The ability to accurately measure activities that consume cost. 
B) Few areas in the facility that capture costs. 
C) The ability to eliminate non-value-added activities. 
D) Flexible job-order costing information. 
A) The ability to accurately measure activities that consume cost. 
B) Few areas in the facility that capture costs. 
C) The ability to eliminate non-value-added activities. 
D) Flexible job-order costing information.

Question 10

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 11

Canterra Co.incurs $160,000 of overhead costs each year in its three main departments, setup ($10,000), machining ($110,000), and packing ($40,000).The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year.Information about Canterra's 2 products is as follows:   Using ABC, how much overhead is assigned to Product Two each year?

Accepted Answer

A) $80,000 
B) $64,000 
C) $121,000 
D) $128,000 
A) $80,000 
B) $64,000 
C) $121,000 
D) $128,000

Question 12

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:   Calculate the amount of overhead assigned to Sludge.

Accepted Answer

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

Question 13

Not all activities labelled non-value-added are totally wasteful, nor can they be totally eliminated.

Accepted Answer

A) True 
 B)False

Question 14

Any activity that increases the cost of producing a product is a value-added activity.

Accepted Answer

A) True 
 B)False

Question 15

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 16

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:  
-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 17

ABC leads to enhanced control over overhead costs.

Accepted Answer

A) True 
 B)False

Question 18

In companies where there is good reason to change from a traditionally-based costing system to an activity-based costing system, management might expect:

Accepted Answer

A) Products or services with high volumes will have higher overhead costs. 
B) Products or services with high volumes will have lowered overhead costs. 
C) Products or services with low volumes will have lowered overhead costs. 
D) Products or services with high volumes are generally costed accurately. 
A) Products or services with high volumes will have higher overhead costs. 
B) Products or services with high volumes will have lowered overhead costs. 
C) Products or services with low volumes will have lowered overhead costs. 
D) Products or services with high volumes are generally costed accurately.

Question 19

Painting is a product-level activity.

Accepted Answer

A) True 
 B)False

Question 20

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.

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

A well-designed activity-based costing system starts with

Which of the following is a facility-level activity?

A cost driver does not generally have a direct cause-effect relationship with the resources consumed.

One of Astro Fireworks Company's activity cost pools is machine setups, with estimated overhead of $200,000.Astro produces sparklers (75 setups) and lighters (25 setups).How much of the machine setup cost pool should be assigned to sparklers?

A critical component of an activity-based accounting system is:

A cost driver is

Not all activities labelled non-value-added are totally wasteful, nor can they be totally eliminated.

Any activity that increases the cost of producing a product is a value-added activity.

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

ABC leads to enhanced control over overhead costs.

In companies where there is good reason to change from a traditionally-based costing system to an activity-based costing system, management might expect:

Painting is a product-level activity.

Value-added activities

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Variable Costing: a Decision-Making Perspective

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

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Exam 5: Activity-Based-Costing

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

A well-designed activity-based costing system starts with

Which of the following is a facility-level activity?

A cost driver does not generally have a direct cause-effect relationship with the resources consumed.

One of Astro Fireworks Company's activity cost pools is machine setups, with estimated overhead of $200,000.Astro produces sparklers (75 setups) and lighters (25 setups).How much of the machine setup cost pool should be assigned to sparklers?

A critical component of an activity-based accounting system is:

A cost driver is

Not all activities labelled non-value-added are totally wasteful, nor can they be totally eliminated.

Any activity that increases the cost of producing a product is a value-added activity.

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

ABC leads to enhanced control over overhead costs.

In companies where there is good reason to change from a traditionally-based costing system to an activity-based costing system, management might expect:

Painting is a product-level activity.

Value-added activities

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Variable Costing: a Decision-Making Perspective

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters