Question 1

ABC is particularly useful when overhead costs are an insignificant portion of total costs.

Accepted Answer

A) True 
 B)False

Question 2

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:   Using ABC, how much overhead is assigned to Product A1 each year?

Accepted Answer

A)  $240,000 
B)  $363,000 
C)  $ 96,000 
D)  $117,000 
A)  $240,000 
B)  $363,000 
C)  $ 96,000 
D)  $117,000

Question 3

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 Regular 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 4

When product lines differ greatly in volume and manufacturing complexity, a switch from traditional costing to ___________________ is indicated.

Accepted Answer

activity-b

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Assigning overhead using ABC will usually

Accepted Answer

A)  decrease the cost per unit for low volume products as compared to a traditional overhead allocation. 
B)  increase the cost per unit for low volume products as compared to a traditional overhead allocation. 
C)  provide less accurate cost per unit for low volume products than will traditional costing. 
D)  result in the same cost per unit for low volume products as does traditional costing. 
A)  decrease the cost per unit for low volume products as compared to a traditional overhead allocation. 
B)  increase the cost per unit for low volume products as compared to a traditional overhead allocation. 
C)  provide less accurate cost per unit for low volume products than will traditional costing. 
D)  result in the same cost per unit for low volume products as does traditional costing.

Question 7

As compared to a high-volume product, a low-volume product

Accepted Answer

A)  usually requires less special handling. 
B)  is usually responsible for more overhead costs per unit. 
C)  requires relatively fewer machine setups. 
D)  requires use of direct labor hours as the primary cost driver to ensure proper allocation of overhead. 
A)  usually requires less special handling. 
B)  is usually responsible for more overhead costs per unit. 
C)  requires relatively fewer machine setups. 
D)  requires use of direct labor hours as the primary cost driver to ensure proper allocation of overhead.

Question 8

Milner Services is considering the installation of activity-based costing. The following activities are performed daily by staff consultants: (1) consulting with clients, (2) staff meetings, (3) on-site supervision, (4) meals, (5) entertaining prospective clients, and (6) training client personnel.
Instructions
Classify these activities as value-added or non-value-added.

Accepted Answer

Value-Added Activities: (1) Consulting w

Question 9

Which of the following is not a benefit of activity-based costing?

Accepted Answer

A)  More accurate product costing 
B)  Enhanced control over overhead costs 
C)  Better management decisions 
D)  Less costly to use 
A)  More accurate product costing 
B)  Enhanced control over overhead costs 
C)  Better management decisions 
D)  Less costly to use

Question 10

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 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 11

Match between columns
                        Premises: Taking appointments
Reception
Meeting with clients
Bookkeeping
Court time
Meeting with opposing attorneys
Billing
Advertising

Accepted Answer

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

Question 12

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year.   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 13

One of Matheny Company's activity cost pools is inspecting, with estimated overhead of $200,000. Matheny produces throw rugs (700 inspections) and area rugs (1,300 inspections). How much of the inspecting cost pool should be assigned to throw rugs?

Accepted Answer

A)  $70,000. 
B)  $100,000. 
C)  $107,692. 
D)  $200,000. 
A)  $70,000. 
B)  $100,000. 
C)  $107,692. 
D)  $200,000.

Question 14

Kiner Co. computed an overhead rate for machining costs ($500,000) of $5 per machine hour. Machining costs are driven by machine hours. If computed based on direct labor hours, the overhead rate for machining costs would be $10 per direct labor hour. The company produces two products, Cape and Chap. Cape requires 60,000 machine hours and 20,000 direct labor hours, while Chap requires 40,000 machine hours and 30,000 direct labor hours. Using activity-based costing, machining costs assigned to each product is

Accepted Answer

The answer of Kiner Co. computed an overhead rate for...

Question 15

ABC usually results in less appropriate management decisions.

Accepted Answer

A) True 
 B)False

Question 16

Parton and Sons is a law firm that uses activity-based costing. Classify these activities as value-added or non-value-added:
1. Taking appointments
2. Reception
3. Meeting with clients
4. Bookkeeping
5. Court time
6. Meeting with opposing attorneys
7. Billing
8. Advertising

Accepted Answer

1. Non-value-added 5. Value-ad

Question 17

Which of the following is not an example of an activity cost pool?

Accepted Answer

A)  Setting up machines 
B)  Machining 
C)  Inspecting 
D)  Machine hours 
A)  Setting up machines 
B)  Machining 
C)  Inspecting 
D)  Machine hours

Question 18

The overall objective of installing ABC in service firms is no different than it is in a manufacturing company.

Accepted Answer

A) True 
 B)False

Question 19

Each of the following is a limitation of activity-based costing except that

Accepted Answer

A)  it can be expensive to use. 
B)  it is more complex than traditional costing. 
C)  more cost pools are used. 
D)  some arbitrary allocations continue. 
A)  it can be expensive to use. 
B)  it is more complex than traditional costing. 
C)  more cost pools are used. 
D)  some arbitrary allocations continue.

Question 20

Zimmerman Company manufactures two products, Board 12 and Case 165. Zimmerman's overhead costs consist of setting up machines, $2,400,000; machining, $5,400,000; and inspecting, $1,800,000. Information on the two products is:   Overhead applied to Board 12 using traditional costing using direct labor hours is

Accepted Answer

A)  $3,600,000. 
B)  $4,608,000. 
C)  $5,010,000. 
D)  $5,760,000. 
A)  $3,600,000. 
B)  $4,608,000. 
C)  $5,010,000. 
D)  $5,760,000.

Exam 17: Activity-Based Costing

ABC is particularly useful when overhead costs are an insignificant portion of total costs.

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 Regular using activity-based costing is

When product lines differ greatly in volume and manufacturing complexity, a switch from traditional costing to ___________________ is indicated.

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

Assigning overhead using ABC will usually

As compared to a high-volume product, a low-volume product

Which of the following is not a benefit of activity-based costing?

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 audit services using traditional costing is

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is

One of Matheny Company's activity cost pools is inspecting, with estimated overhead of $200,000. Matheny produces throw rugs (700 inspections) and area rugs (1,300 inspections). How much of the inspecting cost pool should be assigned to throw rugs?

ABC usually results in less appropriate management decisions.

Parton and Sons is a law firm that uses activity-based costing. Classify these activities as value-added or non-value-added: 1. Taking appointments 2. Reception 3. Meeting with clients 4. Bookkeeping 5. Court time 6. Meeting with opposing attorneys 7. Billing 8. Advertising

Which of the following is not an example of an activity cost pool?

The overall objective of installing ABC in service firms is no different than it is in a manufacturing company.

Each of the following is a limitation of activity-based costing except that

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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