Question 1

Traditional single-allocation-base systems tend to under cost high-volume products and over cost low- volume products.

Accepted Answer

A) True 
 B)False  False

Question 2

Activity-based costing minimizes cost distortions because:

Accepted Answer

A)  activity-based costing uses fewer cost pools. 
B)  activity-based costing allocates costs based on cause and effect. 
C)  activity-based costing uses fewer cost drivers. 
D)  activity-based costing only allocates product costs. 
A)  activity-based costing uses fewer cost pools. 
B)  activity-based costing allocates costs based on cause and effect. 
C)  activity-based costing uses fewer cost drivers. 
D)  activity-based costing only allocates product costs. B

Question 3

The cost of warranty work within the total quality management philosophy is a(n):

Accepted Answer

A)  appraisal cost. 
B)  internal failure cost. 
C)  external failure cost. 
D)  prevention cost. 
A)  appraisal cost. 
B)  internal failure cost. 
C)  external failure cost. 
D)  prevention cost. C

Question 4

Crump Manufacturing has provided the following information regarding its activity-based costing system:
Purchasing department costs are allocated based on purchase orders and the cost allocation rate is $52 per purchase order.
Assembly department costs are allocated based on the number of machine hours and the cost allocation rate is $27 per machine hour.
Inspection department costs are allocated based on the number of inspection hours and the allocation rate is $39 per inspection hour.
Each unit produced has a direct materials cost of $70 and a direct labor cost of $65. Crump has an
Order for 500 units which will require 40 purchase orders, 750 machine hours and 50 inspection hours. What is Crump's operating income from the order if the units are sold for $225 each?

Accepted Answer

A)  $22,670 
B)  $20,720 
C)  $45,000 
D)  $88,220 
A)  $22,670 
B)  $20,720 
C)  $45,000 
D)  $88,220

Question 5

The cost of product liability claims within the total quality management philosophy is a(n):

Accepted Answer

A)  appraisal cost. 
B)  prevention cost. 
C)  internal failure cost. 
D)  external failure cost. 
A)  appraisal cost. 
B)  prevention cost. 
C)  internal failure cost. 
D)  external failure cost.

Question 6

Which of the following pertains to a just-in-time production system?

Accepted Answer

A)  An individual does fewer tasks than under a traditional system. 
B)  Summary journal entries are made when units are completed. 
C)  Units are produced in larger batches than under a traditional system. 
D)  Costs are tracked separately as units move through production. 
A)  An individual does fewer tasks than under a traditional system. 
B)  Summary journal entries are made when units are completed. 
C)  Units are produced in larger batches than under a traditional system. 
D)  Costs are tracked separately as units move through production.

Question 7

Which of the following statements regarding total quality management (TQM) is incorrect?

Accepted Answer

A)  Most prevention costs occur in the research and development stage of the value chain. 
B)  TQM advocates investing at the front end of the value chain in research and development and design to produce a superior product. 
C)  Continuous improvement is the goal of TQM. 
D)  Most appraisal and internal failure costs occur in the research and development stage of the value chain. 
A)  Most prevention costs occur in the research and development stage of the value chain. 
B)  TQM advocates investing at the front end of the value chain in research and development and design to produce a superior product. 
C)  Continuous improvement is the goal of TQM. 
D)  Most appraisal and internal failure costs occur in the research and development stage of the value chain.

Question 8

Classic Manufacturing has provided the following information:
Expected production of product KB11 is estimated to be 12,000 units for the upcoming period. Each unit of KB11 takes three direct labor hours to produce and 1,000 material moves are expected.
Expected production of product JL22 is estimated to be 6,000 units for the upcoming period. Each unit of JL22 takes nine direct labor hours to produce and 300 material moves are expected.
Material handling costs are estimated to be $10,800 for the upcoming period and are allocated based on direct labor hours.
What is the material handling cost per unit of JL22?

Accepted Answer

A)  $1.08 
B)  $0.60 
C)  $0.42 
D)  $0.36 
A)  $1.08 
B)  $0.60 
C)  $0.42 
D)  $0.36

Question 9

The cost of training personnel within the total quality management philosophy is a(n):

Accepted Answer

A)  appraisal cost. 
B)  prevention cost. 
C)  internal failure cost. 
D)  external failure cost. 
A)  appraisal cost. 
B)  prevention cost. 
C)  internal failure cost. 
D)  external failure cost.

Question 10

In a just-in-time costing system, the entry to record actual conversion costs incurred would include which of the following?

Accepted Answer

A)  Credit to raw and in process inventory 
B)  Debit to raw and in process inventory 
C)  Debit to conversion costs 
D)  Credit to work in process inventory 
A)  Credit to raw and in process inventory 
B)  Debit to raw and in process inventory 
C)  Debit to conversion costs 
D)  Credit to work in process inventory

Question 11

Which of the following statements describes target costing?

Accepted Answer

A)  It generally computes the target cost to be higher than the full product cost of the product or service. 
B)  It starts with the target sales price and subtracts desired profit to attain the target cost. 
C)  It is based on traditional cost-based pricing. 
D)  It starts with the target cost and adds desired profit to attain the target sales price. 
A)  It generally computes the target cost to be higher than the full product cost of the product or service. 
B)  It starts with the target sales price and subtracts desired profit to attain the target cost. 
C)  It is based on traditional cost-based pricing. 
D)  It starts with the target cost and adds desired profit to attain the target sales price.

Question 12

Pitt Jones Company had the following activities, allocated costs, and allocation bases:
$$\begin{array} { | l | l | l | } 
\hline \text { Activities } & \text { Allocated Costs } & \text { Allocation Base } \
\hline \text { Account inquiry (hours) } & \$ 60,000 & 2,000 \text { hours } \
\hline \text { Account billing (lines) } & \$ 30,000 & 20,000 \text { lines } \
\hline \text { Account verification (accounts) } & \$ 15,000 & 20,000 \text { accounts } \
\hline \text { Correspondence (letters) } & \$ 10,000 & 1,000 \text { letters } \
\hline
\end{array}$$ The above activities are used by departments P and Q:
$$\begin{array} { | l | l | l | } 
\hline & \text { Department P } & \text { Department Q } \
\hline \text { Account inquiry (hours) } & 100 \text { hours } & 200 \text { hours } \
\hline \text { Account billing (lines) } & 10,000 \text { lines } & 7,000 \text { lines } \
\hline \text { Account verification (accounts) } & 1,000 \text { accounts } & 600 \text { accounts } \
\hline \text { Correspondence (letters) } & 50 \text { letters } & 100 \text { letters } \
\hline
\end{array}$$ What is the cost per driver unit for the account verification activity?

Accepted Answer

A)  $30.00 
B)  $0.50 
C)  $2.25 
D)  $0.75 
A)  $30.00 
B)  $0.50 
C)  $2.25 
D)  $0.75

Question 13

The lost profits from not retaining customers within the total quality management philosophy is a(n):

Accepted Answer

A)  prevention cost. 
B)  appraisal cost. 
C)  external failure cost. 
D)  internal failure cost. 
A)  prevention cost. 
B)  appraisal cost. 
C)  external failure cost. 
D)  internal failure cost.

Question 14

Companies that use activity-based costing do not need to trace direct materials and direct labor to cost objects as is done in traditional costing systems.

Accepted Answer

A) True 
 B)False

Question 15

A standard costing system that starts with output completed and works backward to apply manufacturing costs to units sold and to inventories is called what?

Accepted Answer

A)  Just-in-time costing 
B)  Traditional costing 
C)  Backflush costing 
D)  Value-added costing 
A)  Just-in-time costing 
B)  Traditional costing 
C)  Backflush costing 
D)  Value-added costing

Question 16

Backflush costing is a standard costing system that starts with output completed and then assigns manufacturing costs to units sold and to inventories.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is not applicable to target pricing?

Accepted Answer

A)  It is based on market research. 
B)  It is the amount customers are willing to pay for the product or service. 
C)  It is based on traditional cost-based pricing. 
D)  The total cost of the product is a function of its target price. 
A)  It is based on market research. 
B)  It is the amount customers are willing to pay for the product or service. 
C)  It is based on traditional cost-based pricing. 
D)  The total cost of the product is a function of its target price.

Question 18

A company would not use an activity-based costing system to:

Accepted Answer

A)  evaluate product profitability. 
B)  assist them in the budgeting process. 
C)  allocate nonmanufacturing related costs. 
D)  determine a product's selling price when target costing is being used. 
A)  evaluate product profitability. 
B)  assist them in the budgeting process. 
C)  allocate nonmanufacturing related costs. 
D)  determine a product's selling price when target costing is being used.

Question 19

Just-in-time inventory systems track the costs of products from raw materials inventory to work in process inventory to finished goods inventory, like traditional standard costing systems do.

Accepted Answer

A) True 
 B)False

Question 20

Pitt Jones Company had the following activities, allocated costs, and allocation bases:
$$\begin{array} { | l | l | l | } 
\hline \text { Activities } & \text { Allocated Costs } & \text { Allocation Base } \
\hline \text { Account inquiry (hours) } & \$ 60,000 & 2,000 \text { hours } \
\hline \text { Account billing (lines) } & \$ 30,000 & 20,000 \text { lines } \
\hline \text { Account verification (accounts) } & \$ 15,000 & 20,000 \text { accounts } \
\hline \text { Correspondence (letters) } & \$ 10,000 & 1,000 \text { letters } \
\hline
\end{array}$$ The above activities are used by departments P and Q:
$$\begin{array} { | l | l | l | } 
\hline & \text { Department P } & \text { Department Q } \
\hline \text { Account inquiry (hours) } & 100 \text { hours } & 200 \text { hours } \
\hline \text { Account billing (lines) } & 10,000 \text { lines } & 7,000 \text { lines } \
\hline \text { Account verification (accounts) } & 1,000 \text { accounts } & 600 \text { accounts } \
\hline \text { Correspondence (letters) } & 50 \text { letters } & 100 \text { letters } \
\hline
\end{array}$$ What is the cost per driver unit for the correspondence activity?

Accepted Answer

A)  $10.00 
B)  $30.50 
C)  $25.00 
D)  $.75 
A)  $10.00 
B)  $30.50 
C)  $25.00 
D)  $.75

Traditional single-allocation-base systems tend to under cost high-volume products and over cost low- volume products.

Activity-based costing minimizes cost distortions because:

The cost of warranty work within the total quality management philosophy is a(n):

The cost of product liability claims within the total quality management philosophy is a(n):

Which of the following pertains to a just-in-time production system?

Which of the following statements regarding total quality management (TQM) is incorrect?

The cost of training personnel within the total quality management philosophy is a(n):

In a just-in-time costing system, the entry to record actual conversion costs incurred would include which of the following?

Which of the following statements describes target costing?

The lost profits from not retaining customers within the total quality management philosophy is a(n):

Companies that use activity-based costing do not need to trace direct materials and direct labor to cost objects as is done in traditional costing systems.

A standard costing system that starts with output completed and works backward to apply manufacturing costs to units sold and to inventories is called what?

Backflush costing is a standard costing system that starts with output completed and then assigns manufacturing costs to units sold and to inventories.

Which of the following statements is not applicable to target pricing?

A company would not use an activity-based costing system to:

Just-in-time inventory systems track the costs of products from raw materials inventory to work in process inventory to finished goods inventory, like traditional standard costing systems do.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandising Inventory

Internal Control and Cash

Receivables

Plant Assets and Intangibles

Current Liabilities, Payroll, and Long-Term Liabilities

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Appendix: Process Costing

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Filters

Exam 17: Activity-Based Costing and Other Cost Management Tools

Traditional single-allocation-base systems tend to under cost high-volume products and over cost low- volume products.

Activity-based costing minimizes cost distortions because:

The cost of warranty work within the total quality management philosophy is a(n):

The cost of product liability claims within the total quality management philosophy is a(n):

Which of the following pertains to a just-in-time production system?

Which of the following statements regarding total quality management (TQM) is incorrect?

The cost of training personnel within the total quality management philosophy is a(n):

In a just-in-time costing system, the entry to record actual conversion costs incurred would include which of the following?

Which of the following statements describes target costing?

The lost profits from not retaining customers within the total quality management philosophy is a(n):

Companies that use activity-based costing do not need to trace direct materials and direct labor to cost objects as is done in traditional costing systems.

A standard costing system that starts with output completed and works backward to apply manufacturing costs to units sold and to inventories is called what?

Backflush costing is a standard costing system that starts with output completed and then assigns manufacturing costs to units sold and to inventories.

Which of the following statements is not applicable to target pricing?

A company would not use an activity-based costing system to:

Just-in-time inventory systems track the costs of products from raw materials inventory to work in process inventory to finished goods inventory, like traditional standard costing systems do.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandising Inventory

Internal Control and Cash

Receivables

Plant Assets and Intangibles

Current Liabilities, Payroll, and Long-Term Liabilities

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Appendix: Process Costing

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Filters