Question 1

The first step in activity-based costing is to assign overhead costs to products, using cost drivers.

Accepted Answer

A) True 
 B)False  False

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. C

Question 3

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 D

Question 4

Veronica Co.produces 3 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? \(\begin{array} {l r r r } 
\text { Rain } & \text { Snow } & \text { Wind } \

Accepted Answer

A)  \$ 140,000 & \$ 140,000 & \$ 140,000 \ 
B)  \$ 28,000 & \$ 21,000 & \$ 12,000 \ 
C)  \$ 90,000 & \$ 120,000 & \$ 210,000 \ 
D)  \$ 12,000 & \$ 21,000 & \$ 28,000
\end{array}\) 
A)  \$ 140,000 & \$ 140,000 & \$ 140,000 \ 
B)  \$ 28,000 & \$ 21,000 & \$ 12,000 \ 
C)  \$ 90,000 & \$ 120,000 & \$ 210,000 \ 
D)  \$ 12,000 & \$ 21,000 & \$ 28,000
\end{array}\)

Question 5

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

Activity-based management focuses on reducing costs and improving processes.

Accepted Answer

A) True 
 B)False

Question 7

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 8

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 9

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 10

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 11

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 12

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 13

Plant management is a batch-level activity.

Accepted Answer

A) True 
 B)False

Question 14

Traditional costing systems use multiple predetermined overhead rates.

Accepted Answer

A) True 
 B)False

Question 15

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 16

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 17

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

Accepted Answer

A) True 
 B)False

Question 18

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 19

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 20

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

The first step in activity-based costing is to assign overhead costs to products, using cost drivers.

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

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

Activity-based management focuses on reducing costs and improving processes.

A cost driver is

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

Which of the following is a product-level activity?

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?

The first step in activity-based costing is to

A critical component of an activity-based accounting system is

Plant management is a batch-level activity.

Traditional costing systems use multiple predetermined overhead rates.

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

Value-added activities

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

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

Which of the following is a value-added activity?

Which of the following is a unit-level activity?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job-Order Cost Accounting

Process Cost Accounting

Decision-Making: Costvolumeprofit

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 first step in activity-based costing is to assign overhead costs to products, using cost drivers.

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

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

Activity-based management focuses on reducing costs and improving processes.

A cost driver is

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

Which of the following is a product-level activity?

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?

The first step in activity-based costing is to

A critical component of an activity-based accounting system is

Plant management is a batch-level activity.

Traditional costing systems use multiple predetermined overhead rates.

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

Value-added activities

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

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

Which of the following is a value-added activity?

Which of the following is a unit-level activity?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job-Order Cost Accounting

Process Cost Accounting

Decision-Making: Costvolumeprofit

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