Question 1

Activity-based costing is used by

Accepted Answer

A)  accounting firms. 
B)  law firms. 
C)  consulting firms. 
D)  all of the above. 
A)  accounting firms. 
B)  law firms. 
C)  consulting firms. 
D)  all of the above. D

Question 2

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. C

Question 3

A list of possible cost drivers is presented below:   
Instructions
For each of the following activity cost pools, select the most appropriate cost driver:

Accepted Answer

1. B 4. A
2. F 5. C
3. E 6. D

Question 4

Activity-based costing

Accepted Answer

A)  allocates overhead to activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers. 
B)  accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver. 
C)  assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools. 
D)  allocates overhead directly to products and services based on activity levels. 
A)  allocates overhead to activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers. 
B)  accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver. 
C)  assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools. 
D)  allocates overhead directly to products and services based on activity levels.

Question 5

Which of the following factors would suggest a switch to activity-based costing?

Accepted Answer

A)  Product lines similar in volume and manufacturing complexity. 
B)  Overhead costs constitute a significant portion of total costs. 
C)  The manufacturing process has been stable. 
D)  Production managers use data provided by the existing system. 
A)  Product lines similar in volume and manufacturing complexity. 
B)  Overhead costs constitute a significant portion of total costs. 
C)  The manufacturing process has been stable. 
D)  Production managers use data provided by the existing system.

Question 6

Current trends in manufacturing include less direct labor and more overhead.

Accepted Answer

A) True 
 B)False

Question 7

An activity that has a direct cause-effect relationship with the resources consumed is a(n)

Accepted Answer

A)  cost driver. 
B)  overhead rate. 
C)  cost pool. 
D)  product activity. 
A)  cost driver. 
B)  overhead rate. 
C)  cost pool. 
D)  product activity.

Question 8

ABC leads to enhanced control over overhead costs.

Accepted Answer

A) True 
 B)False

Question 9

Match between columns
                        Premises: Engineering design
Machine repair
Inventory storage
Machining
Assembly
Painting
Inspections
Packaging

Accepted Answer

The Answer of value-adding and non-value-adding is...

Question 10

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

Accepted Answer

A)  Product design 
B)  Engineering changes 
C)  Material handling 
D)  Inventory management 
A)  Product design 
B)  Engineering changes 
C)  Material handling 
D)  Inventory management

Question 11

To use activity-based costing, it is necessary to know the

Accepted Answer

A)  cost driver for each activity cost pool. 
B)  expected use of cost drivers per activity. 
C)  expected use of cost drivers per product. 
D)  all of the above. 
A)  cost driver for each activity cost pool. 
B)  expected use of cost drivers per activity. 
C)  expected use of cost drivers per product. 
D)  all of the above.

Question 12

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

Accepted Answer

A)  Plant management 
B)  Product design 
C)  Personnel administration 
D)  Training 
A)  Plant management 
B)  Product design 
C)  Personnel administration 
D)  Training

Question 13

Boswell Company manufactures two products, Regular and Supreme. Boswell's overhead costs consist of machining, $3,000,000; and assembling, $1,500,000. Information on the two products is:   Overhead applied to Supreme using traditional costing using direct labor hours is

Accepted Answer

A)  $1,290,000. 
B)  $1,800,000. 
C)  $2,700,000. 
D)  $3,210,000. 
A)  $1,290,000. 
B)  $1,800,000. 
C)  $2,700,000. 
D)  $3,210,000.

Question 14

Boswell Company manufactures two products, Regular and Supreme. Boswell's overhead costs consist of machining, $3,000,000; and assembling, $1,500,000. Information on the two products is:   Overhead applied to Supreme using activity-based costing is

Accepted Answer

A)  $1,290,000. 
B)  $1,800,000. 
C)  $2,700,000. 
D)  $3,210,000. 
A)  $1,290,000. 
B)  $1,800,000. 
C)  $2,700,000. 
D)  $3,210,000.

Question 15

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 overhead costs 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 overhead costs to products. 
D)  analyzing the activities performed to manufacture a product.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Delany Company uses a traditional costing system. Management is considering switching to an activity-based costing system. What steps must Delany take in initiating an activity-based costing system?

Accepted Answer

Delany Company must first identify the m

Question 18

Ben Gordon, Inc. manufactures 2 products, wheels and seats. The company has estimated its overhead in the assembling department to be $660,000. The company produces 300,000 wheels and 600,000 seats each year. Each wheel uses 2 parts, and each seat uses 3 parts. How much of the assembly overhead should be allocated to wheels?

Accepted Answer

A)  $165,000. 
B)  $220,000. 
C)  $264,000 
D)  $282,856. 
A)  $165,000. 
B)  $220,000. 
C)  $264,000 
D)  $282,856.

Question 19

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 20

One of Stine Company's activity cost pools is machine setups, with estimated overhead of $360,000. Stine produces sparklers (400 setups) and lighters (600 setups). How much of the machine setup cost pool should be assigned to sparklers?

Accepted Answer

A)  $360,000 
B)  $144,000 
C)  $180,000 
D)  $216,000 
A)  $360,000 
B)  $144,000 
C)  $180,000 
D)  $216,000

Exam 17: Activity-Based Costing

Activity-based costing is used by

The use of activity-based costing in service industries

A list of possible cost drivers is presented below: Instructions For each of the following activity cost pools, select the most appropriate cost driver:

Activity-based costing

Which of the following factors would suggest a switch to activity-based costing?

Current trends in manufacturing include less direct labor and more overhead.

An activity that has a direct cause-effect relationship with the resources consumed is a(n)

ABC leads to enhanced control over overhead costs.

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

To use activity-based costing, it is necessary to know the

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

Boswell Company manufactures two products, Regular and Supreme. Boswell's overhead costs consist of machining, $3,000,000; and assembling, $1,500,000. Information on the two products is: Overhead applied to Supreme using traditional costing using direct labor hours is

Boswell Company manufactures two products, Regular and Supreme. Boswell's overhead costs consist of machining, $3,000,000; and assembling, $1,500,000. Information on the two products is: Overhead applied to Supreme using activity-based costing is

A well-designed activity-based costing system starts with

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

Delany Company uses a traditional costing system. Management is considering switching to an activity-based costing system. What steps must Delany take in initiating an activity-based costing system?

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

One of Stine Company's activity cost pools is machine setups, with estimated overhead of $360,000. Stine produces sparklers (400 setups) and lighters (600 setups). How much of the machine setup cost pool should be assigned to sparklers?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations Perpetual Approach

Inventories Periodic Approach

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, and Stockholders Equity

Statement of Cash Flows

Financial Statement Analysis

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

Time Value of Money

Investments

Payroll Accounting

Subsidiary Ledgers and Special Journals

Other Significant Liabilities

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