Question 1

What sometimes makes implementation of activity-based costing difficult in service industries is that a smaller proportion of overhead costs are company-wide costs.

Accepted Answer

A) True 
 B)False

Question 2

ABC usually results in less appropriate management decisions.

Accepted Answer

A) True 
 B)False

Question 3

ABC is particularly useful when product lines differ greatly in volume and manufacturing complexity.

Accepted Answer

A) True 
 B)False

Question 4

A major advantage in changing from a traditionally-based costing system to an activity-based costing system is:

Accepted Answer

A) A company's customers can benefit from any reduction in costs. 
B) Management will be able to identify the true cost of non-added-value activities. 
C) Direct labour and material costs will be reduced. 
D) Supplier costs will be reduced after the changeover. 
A) A company's customers can benefit from any reduction in costs. 
B) Management will be able to identify the true cost of non-added-value activities. 
C) Direct labour and material costs will be reduced. 
D) Supplier costs will be reduced after the changeover.

Question 5

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

Accepted Answer

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

Question 6

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 7

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 8

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

Question 9

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 10

Plant management is a batch-level activity.

Accepted Answer

A) True 
 B)False

Question 11

Traditionally, overhead is allocated based on direct labour cost or direct labour hours.

Accepted Answer

A) True 
 B)False

Question 12

The overall objective of installing ABC in service firms is no different than it is in a manufacturing company.

Accepted Answer

A) True 
 B)False

Question 13

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 traditional costing using direct labour hours is

Accepted Answer

A) $1,275,000. 
B) $1,536,000. 
C) $1,670,000. 
D) $1,700,000. 
A) $1,275,000. 
B) $1,536,000. 
C) $1,670,000. 
D) $1,700,000.

Question 14

To achieve accurate costing, a high degree of correlation must exist between the cost driver and the actual consumption of the activity cost pool.

Accepted Answer

A) True 
 B)False

Question 15

Low-volume products often require more special handling than high-volume products.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a value-added activity?

Accepted Answer

A) Engineering design 
B) Machinery repair 
C) Inventory storage 
D) Inspections 
A) Engineering design 
B) Machinery repair 
C) Inventory storage 
D) Inspections

Question 17

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.
-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 18

When overhead is properly assigned in ABC, it will usually decrease the unit cost of high-volume products.

Accepted Answer

A) True 
 B)False

Question 19

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

Question 20

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.

What sometimes makes implementation of activity-based costing difficult in service industries is that a smaller proportion of overhead costs are company-wide costs.

ABC usually results in less appropriate management decisions.

ABC is particularly useful when product lines differ greatly in volume and manufacturing complexity.

A major advantage in changing from a traditionally-based costing system to an activity-based costing system is:

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

Which of the following is a batch-level activity?

The first step in activity-based costing is to

Under a traditional costing approach based on direct labour hours, how much overhead would be assigned to the Downy product?

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

Plant management is a batch-level activity.

Traditionally, overhead is allocated based on direct labour cost or direct labour hours.

The overall objective of installing ABC in service firms is no different than it is in a manufacturing company.

To achieve accurate costing, a high degree of correlation must exist between the cost driver and the actual consumption of the activity cost pool.

Low-volume products often require more special handling than high-volume products.

Which of the following is a value-added activity?

When overhead is properly assigned in ABC, it will usually decrease the unit cost of high-volume products.

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

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

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

Exam 5: Activity-Based-Costing

What sometimes makes implementation of activity-based costing difficult in service industries is that a smaller proportion of overhead costs are company-wide costs.

ABC usually results in less appropriate management decisions.

ABC is particularly useful when product lines differ greatly in volume and manufacturing complexity.

A major advantage in changing from a traditionally-based costing system to an activity-based costing system is:

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

Which of the following is a batch-level activity?

The first step in activity-based costing is to

Under a traditional costing approach based on direct labour hours, how much overhead would be assigned to the Downy product?

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

Plant management is a batch-level activity.

Traditionally, overhead is allocated based on direct labour cost or direct labour hours.

The overall objective of installing ABC in service firms is no different than it is in a manufacturing company.

To achieve accurate costing, a high degree of correlation must exist between the cost driver and the actual consumption of the activity cost pool.

Low-volume products often require more special handling than high-volume products.

Which of the following is a value-added activity?

When overhead is properly assigned in ABC, it will usually decrease the unit cost of high-volume products.

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

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

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