Question 1

The costs that are easiest to trace directly to products are

Accepted Answer

A)  direct materials and direct labor. 
B)  direct labor and overhead. 
C)  direct materials and overhead. 
D)  none of the above; all three costs are equally easy to trace to the product. 
A)  direct materials and direct labor. 
B)  direct labor and overhead. 
C)  direct materials and overhead. 
D)  none of the above; all three costs are equally easy to trace to the product.

Question 2

Which of the following is a limitation of just-in-time processing?

Accepted Answer

A)  Significant reduction of manufacturing inventories 
B)  Less emphasis on product quality 
C)  Higher production costs 
D)  None of the above 
A)  Significant reduction of manufacturing inventories 
B)  Less emphasis on product quality 
C)  Higher production costs 
D)  None of the above

Question 3

ABC eliminates all arbitrary cost allocations.

Accepted Answer

A) True 
 B)False

Question 4

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. $\begin{array}{llrl}\text { Activity Cost Pool}&\text {  Cost Driver }&\text {Est. Overhead}&\text { Cost Driver Activity }\\hline
\text { Ordering and Receiving } & \text { Orders } & \$ 120,000 & 500 \text { orders } \
\text { Machine Setup } & \text { Setups } & 297,000 & 450 \text { setups } \
\text { Machining } & \text { Machine hours } & 1,500,000 & 125,000 \mathrm{MH} \
\text { Assembly } & \text { Parts } & 1,200,000 & 1,000,000 \text { parts } \
\text { Inspection } & \text { Inspections } & 300,000 & 500 \text { inspections }
\end{array}$ If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is

Accepted Answer

A)  $1.20 per direct labor hour. 
B)  $240 per order. 
C)  $0.12 per part. 
D)  $6,834 per order. 
A)  $1.20 per direct labor hour. 
B)  $240 per order. 
C)  $0.12 per part. 
D)  $6,834 per order.

Question 5

As compared to high-volume products, low-volume products

Accepted Answer

A)  require more special handling. 
B)  require less machine setups. 
C)  are frequently responsible for less overhead costs. 
D)  None of these answers are correct. 
A)  require more special handling. 
B)  require less machine setups. 
C)  are frequently responsible for less overhead costs. 
D)  None of these answers are correct.

Question 6

Activity-based costing uses

Accepted Answer

A)  one plantwide pool and a single cost driver. 
B)  departmental pools and a single cost driver. 
C)  numerous cost pools and numerous cost drivers. 
D)  one plantwide pool and numerous cost drivers 
A)  one plantwide pool and a single cost driver. 
B)  departmental pools and a single cost driver. 
C)  numerous cost pools and numerous cost drivers. 
D)  one plantwide pool and numerous cost drivers

Question 7

Inventory storage costs are reduced in just-in-time processing.

Accepted Answer

A) True 
 B)False

Question 8

In service industries

Accepted Answer

A)  activities cannot be labeled as value-added or non-value-added. 
B)  the overall objective of ABC is different than in manufacturing industries. 
C)  a larger proportion of overhead costs are company-wide costs. 
D)  activity cost pools cannot be identified. 
A)  activities cannot be labeled as value-added or non-value-added. 
B)  the overall objective of ABC is different than in manufacturing industries. 
C)  a larger proportion of overhead costs are company-wide costs. 
D)  activity cost pools cannot be identified.

Question 9

Which of the following is not a unit-level activity?

Accepted Answer

A)  Drilling 
B)  Cutting 
C)  Sanding 
D)  Inspecting 
A)  Drilling 
B)  Cutting 
C)  Sanding 
D)  Inspecting

Question 10

Hartley Company produces two products, Flower and Planter. Flower is a high-volume item totaling 20,000 units annually. Planter is a low-volume item totaling only 6,000 units per year. Flower requires one hour of direct labor for completion, while each unit of Planter requires 2 hours. Therefore, total annual direct labor hours are 32,000 (20,000 + 12,000). Expected annual manufacturing overhead costs are $960,000. Hartley uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of Planter would be assigned overhead of

Accepted Answer

A)  $30.00. 
B)  $36.91. 
C)  $60.00. 
D)  need more information to compute. 
A)  $30.00. 
B)  $36.91. 
C)  $60.00. 
D)  need more information to compute.

Question 11

Just-in-time processing

Accepted Answer

A)  is based on a just-in-case philosophy. 
B)  results in a push approach. 
C)  minimizes inventory storage and waiting time. 
D)  all of these. 
A)  is based on a just-in-case philosophy. 
B)  results in a push approach. 
C)  minimizes inventory storage and waiting time. 
D)  all of these.

Question 12

Which of the following is not typical of traditional costing systems?

Accepted Answer

A)  Use of a single predetermined overhead rate. 
B)  Use of direct labor hours or direct labor cost to assign overhead. 
C)  Assumption of correlation between direct labor and incurrence of overhead cost. 
D)  Use of multiple cost drivers to allocate overhead. 
A)  Use of a single predetermined overhead rate. 
B)  Use of direct labor hours or direct labor cost to assign overhead. 
C)  Assumption of correlation between direct labor and incurrence of overhead cost. 
D)  Use of multiple cost drivers to allocate overhead.

Question 13

Non-value-added activities increase the cost of a product but not its perceived value.

Accepted Answer

A) True 
 B)False

Question 14

Gant Accounting performs two types of services, Audit and Tax. Gant's overhead costs consist of computer support, $300,000; and legal support, $150,000. Information on the two services is: $$\begin{array} { l r r } 
& \text { Audit } & \text { Tax } \
\text { Direct labor cost } & \$ 50,000 & \$ 100,000 \
\text { CPU minutes } & 40,000 & 10,000 \
\text { Legal hours used } & 200 & 800
\end{array}$$ Overhead applied to tax services using traditional costing is

Accepted Answer

A)  $150,000. 
B)  $180,000. 
C)  $270,000. 
D)  $300,000. 
A)  $150,000. 
B)  $180,000. 
C)  $270,000. 
D)  $300,000.

Question 15

Gant Accounting performs two types of services, Audit and Tax. Gant's overhead costs consist of computer support, $300,000; and legal support, $150,000. Information on the two services is: $$\begin{array} { l r r } 
& \text { Audit } & \text { Tax } \
\text { Direct labor cost } & \$ 50,000 & \$ 100,000 \
\text { CPU minutes } & 40,000 & 10,000 \
\text { Legal hours used } & 200 & 800
\end{array}$$ Overhead applied to audit services using traditional costing is

Accepted Answer

A)  $150,000. 
B)  $180,000. 
C)  $270,000. 
D)  $300,000. 
A)  $150,000. 
B)  $180,000. 
C)  $270,000. 
D)  $300,000.

Question 16

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. $\begin{array}{llrl}\text { Activity Cost Pool}&\text {  Cost Driver }&\text {Est. Overhead}&\text { Cost Driver Activity }\\hline
\text { Ordering and Receiving } & \text { Orders } & \$ 120,000 & 500 \text { orders } \
\text { Machine Setup } & \text { Setups } & 297,000 & 450 \text { setups } \
\text { Machining } & \text { Machine hours } & 1,500,000 & 125,000 \mathrm{MH} \
\text { Assembly } & \text { Parts } & 1,200,000 & 1,000,000 \text { parts } \
\text { Inspection } & \text { Inspections } & 300,000 & 500 \text { inspections }
\end{array}$ If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is

Accepted Answer

A)  $9.60. 
B)  $12.00. 
C)  $15.00. 
D)  $34.17. 
A)  $9.60. 
B)  $12.00. 
C)  $15.00. 
D)  $34.17.

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

ABC leads to enhanced control over overhead costs.

Accepted Answer

A) True 
 B)False

Question 19

In the pull approach

Accepted Answer

A)  subassembly parts are manufactured and stored just in case they are needed later in the manufacturing process. 
B)  Finished goods are completed and stored just in case unexpected and rush customer orders are received. 
C)  the manufacturing process begins with a customer placing an order. 
D)  None of the above. 
A)  subassembly parts are manufactured and stored just in case they are needed later in the manufacturing process. 
B)  Finished goods are completed and stored just in case unexpected and rush customer orders are received. 
C)  the manufacturing process begins with a customer placing an order. 
D)  None of the above.

Question 20

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

Accepted Answer

A)  providing legal research. 
B)  delivering packages. 
C)  consulting. 
D)  bookkeeping. 
A)  providing legal research. 
B)  delivering packages. 
C)  consulting. 
D)  bookkeeping.

The costs that are easiest to trace directly to products are

Which of the following is a limitation of just-in-time processing?

ABC eliminates all arbitrary cost allocations.

As compared to high-volume products, low-volume products

Activity-based costing uses

Inventory storage costs are reduced in just-in-time processing.

In service industries

Which of the following is not a unit-level activity?

Just-in-time processing

Which of the following is not typical of traditional costing systems?

Non-value-added activities increase the cost of a product but not its perceived value.

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

ABC leads to enhanced control over overhead costs.

In the pull approach

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

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Financial Statement Analysis

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Exam 4: Activity-Based Costing

The costs that are easiest to trace directly to products are

Which of the following is a limitation of just-in-time processing?

ABC eliminates all arbitrary cost allocations.

As compared to high-volume products, low-volume products

Activity-based costing uses

Inventory storage costs are reduced in just-in-time processing.

In service industries

Which of the following is not a unit-level activity?

Just-in-time processing

Which of the following is not typical of traditional costing systems?

Non-value-added activities increase the cost of a product but not its perceived value.

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

ABC leads to enhanced control over overhead costs.

In the pull approach

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

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Financial Statement Analysis

Filters