Question 1

Which would be a cost driver for a facility-level activity?

Accepted Answer

A)  Number of setups 
B)  Number of product designs 
C)  Square footage 
D)  Number of purchase orders 
A)  Number of setups 
B)  Number of product designs 
C)  Square footage 
D)  Number of purchase orders

Question 2

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 3

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 4

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

Accepted Answer

A)  Engineering changes 
B)  Equipment setups 
C)  Inspection 
D)  Materials handling 
A)  Engineering changes 
B)  Equipment setups 
C)  Inspection 
D)  Materials handling

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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:   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 7

Match the items in the two columns below by entering the appropriate code letter in the space provided.
A. Pull approach 
B. Cost driver 
C. Facility-level activity
D. Unit-level activity 
E. Activity-based costing 
F. Just-in-time processing
G. Batch-level activity
 H. Product-level activity
I. Non-value-added activity
J. Value-added activity
_____ 1. Allocates overhead to multiple activity cost pools, then assigns the activity cost pools to products.
_____ 2. An activity that has a direct cause-effect relationship with the resources consumed.
_____ 3. Increases the worth of a product or service to customers.
_____ 4. Should be eliminated or reduced.
_____ 5. Plant management.
_____ 6. Engineering changes.
_____ 7. Equipment setups.
_____ 8. Assembling.
_____ 9. Primary objective is to eliminate all manufacturing inventories.
_____ 10. Used to initiate manufacturing under JIT processing.

Accepted Answer

1. E 6. H
2. B 7. G

Question 8

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

Accepted Answer

A)  the labeling 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 labeling 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.

Question 9

Sutton Industries produces two models of televisions, Standard and Luxury. It sells 100,000 Standard televisions and 15,000 Luxury televisions annually. Sutton switched from traditional costing to activity-based costing and discovered that the cost allocated to Luxury televisions increased so dramatically that the Luxury was now only marginally profitable.
Instructions
Give a probable explanation for this shift.

Accepted Answer

Low-volume products often require more s

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

Reynoso Corporation manufactures titanium and aluminum tennis racquets. Reynoso's total overhead costs consist of assembly costs and inspection costs. The following information is available:   Reynoso is considering switching from one overhead rate based on labor hours to activity-based costing.
Total overhead costs assigned to titanium racquets, using a single overhead rate, are

Accepted Answer

A)  $80,000. 
B)  $84,000. 
C)  $100,000. 
D)  $112,000. 
A)  $80,000. 
B)  $84,000. 
C)  $100,000. 
D)  $112,000.

Question 12

Merando Manufacturing Company manufactures small tools. Classify each of the following activity costs of the tool company as either unit-level, batch-level, product-level, or facility-level:
1. Plant management
2. Drilling
3. Painting
4. Machine setups
5. Product design
6. Cutting
7. Inspection
8. Inventory management

Accepted Answer

1. Facility 5. Produ

Question 13

Activity-based costing has been found to be useful in each of the following service industries except

Accepted Answer

A)  airlines. 
B)  railroads. 
C)  hotels. 
D)  ABC has been useful in all of these industries. 
A)  airlines. 
B)  railroads. 
C)  hotels. 
D)  ABC has been useful in all of these industries.

Question 14

Foxx Company incurs $480,000 overhead costs each year in its three main departments, setup ($30,000), machining ($330,000), and packing ($120,000). The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year. Information about Foxx's two products is as follows:
If machining hours are used as a base under traditional casting, how much overhead is assigned to Product A1 each year?

Accepted Answer

A)  $96,000 
B)  $240,000 
C)  $165,000 
D)  $144,000 
A)  $96,000 
B)  $240,000 
C)  $165,000 
D)  $144,000

Question 15

Value-added activities

Accepted Answer

A)  should be minimized or eliminated. 
B)  involve those activities that are essential to a company's operations. 
C)  add cost to a product without affecting selling price. 
D)  cannot be differentiated from non-value-added activities. 
A)  should be minimized or eliminated. 
B)  involve those activities that are essential to a company's operations. 
C)  add cost to a product without affecting selling price. 
D)  cannot be differentiated from non-value-added activities.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Greer Company provides architectural services for mall development companies. The following data are available for 2016.   
Instructions
Compute the activity-based overhead rates.

Accepted Answer

The answer of Greer Company provides architectural services for mall...

Question 18

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 19

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 20

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

Accepted Answer

A)  Less cost pools 
B)  Same base as traditional costing 
C)  More costly to use 
D)  Eliminates arbitrary allocations 
A)  Less cost pools 
B)  Same base as traditional costing 
C)  More costly to use 
D)  Eliminates arbitrary allocations

Exam 17: Activity-Based Costing

Which would be a cost driver for a facility-level activity?

Which of the following is a value-added activity?

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

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

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

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: Overhead applied to tax services using traditional costing is

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

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

Activity-based costing has been found to be useful in each of the following service industries except

Value-added activities

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

Greer Company provides architectural services for mall development companies. The following data are available for 2016. Instructions Compute the activity-based overhead rates.

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

The costs that are easiest to trace directly to products are

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

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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