Question 1

The use of activity-based costing in service industries

Accepted Answer

A) has the same objective as in manufacturing. 
B) results in improved costing of services provided. 
C) uses cost pools to assign overhead. 
D) all of these. 
A) has the same objective as in manufacturing. 
B) results in improved costing of services provided. 
C) uses cost pools to assign overhead. 
D) all of these.

Question 2

Non-value-added activities increase the cost of a product but NOT its market value.

Accepted Answer

A) True 
 B)False

Question 3

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 4

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  $\underline{\text { Salamander} } \quad \underline{\text { Gold }}$
a)$\$28,000\quad\quad\$28,000$
b)$\$32,000\quad\quad\$24,000$
c)$\$26,000\quad\quad\$30,000$
d)$\$24,000\quad\quad\$32,000$

Accepted Answer

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

Question 5

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 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: $$\begin{array} { l r r } 
& \text { Mini A } & \ \text { Maxi B }  \
\text { Direct labour hours } & 15,000 & 25,000 \
\text { Machine setups } & 600 & 400 \
\text { Machine hours } & 24,000 & 26,000 \
\text { Inspections } & 800 & 700
\end{array}$$
-Overhead applied to 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

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 8

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: $$\begin{array} { l r r } 
& \text { Product One } & \text { Product Two } \
\text { Number of setups } & 10 & 40 \
\text { Machining hours } & 3,000 & 5,000 \
\text { Orders packed } & 110 & 90
\end{array}$$ 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 9

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: $$\begin{array} { l r r } 
& \text { Mini A } & \ \text { Maxi B }  \
\text { Direct labour hours } & 15,000 & 25,000 \
\text { Machine setups } & 600 & 400 \
\text { Machine hours } & 24,000 & 26,000 \
\text { Inspections } & 800 & 700
\end{array}$$
-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 10

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

Question 11

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: $$\begin{array} { l c r } 
\text { Department } & \text { Expected use of Driver } & \text { Cost } \
\hline \text { Processing } & 800 & \$ 500,000 \
\text { Packaging } & 200,000 & 500,000 \
\text { Testing } & 2,000 & 200,000
\end{array}$$ Production information for sludge is as follows: $$\begin{array} { l c } 
\text { Department } & \text { Expected use of Driver } \
\hline \text { Processing } & 500 \
\text { Packaging } & 80,000 \
\text { Testing } & 400
\end{array}$$ 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 12

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.

Question 13

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 14

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 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: $$\begin{array} { l r r } 
& \text { Mini A } & \ \text { Maxi B }  \
\text { Direct labour hours } & 15,000 & 25,000 \
\text { Machine setups } & 600 & 400 \
\text { Machine hours } & 24,000 & 26,000 \
\text { Inspections } & 800 & 700
\end{array}$$
-Overhead applied to Mini A using traditional costing and 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 16

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 17

Activity-based costing normally allocates overhead costs

Accepted Answer

A) to products only. 
B) more accurately than traditional costing systems. 
C) to services, where as traditional costing systems normally allocate overhead costs to products. 
D) based on no more than three cost drivers. 
A) to products only. 
B) more accurately than traditional costing systems. 
C) to services, where as traditional costing systems normally allocate overhead costs to products. 
D) based on no more than three cost drivers.

Question 18

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 19

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: $$\begin{array} { l r r } 
& \text { Audit } & \text { Tax }  \
\text { Direct labour cost } & \$ 50,000 & \$ 100,000 \
\text { CPU minutes } & 40,000 & 10,000 \
\text { Legal hours used } & 200 & 800
\end{array}$$ 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 20

ABC is generally more costly to implement than traditional costing.

Accepted Answer

A) True 
 B)False

The use of activity-based costing in service industries

Non-value-added activities increase the cost of a product but NOT its market value.

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

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

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

A well designed activity-based costing system starts with

Which of the following is a batch-level activity?

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

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

Activity-based costing normally allocates overhead costs

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

ABC is generally more costly to implement than traditional costing.

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 use of activity-based costing in service industries

Non-value-added activities increase the cost of a product but NOT its market value.

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

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

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

A well designed activity-based costing system starts with

Which of the following is a batch-level activity?

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

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

Activity-based costing normally allocates overhead costs

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

ABC is generally more costly to implement than traditional costing.

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