Question 1

A well-designed,activity-based cost system helps managers make better decisions because information derived from an ABC analysis:

Accepted Answer

A) can be used to eliminate nonvalue-added activities. 
B) is easy to analyze and interpret. 
C) takes the choices and judgment challenges away from the managers. 
D) emphasizes how managers can achieve higher sales. 
A) can be used to eliminate nonvalue-added activities. 
B) is easy to analyze and interpret. 
C) takes the choices and judgment challenges away from the managers. 
D) emphasizes how managers can achieve higher sales.

Question 2

A manufacturing firm produces multiple families of products requiring various combinations of different types of parts.Of the following,the MOST appropriate cost driver for assigning materials handling costs to the various products is:

Accepted Answer

A) direct labor hours. 
B) number of units produced. 
C) number of parts used. 
D) number of suppliers involved. 
A) direct labor hours. 
B) number of units produced. 
C) number of parts used. 
D) number of suppliers involved.

Question 3

Schiff Company produces seven products. PQ-6 costs $240.00 per unit under their traditional cost system using one cost driver. An analysis of the activities and their costs revealed that three cost drivers would be used under the new ABC system. The new cost of PQ-6 was determined to be $190.00 per unit.
-Given this change in the cost:

Accepted Answer

A) PQ-6 costing results under the new system depend on the adequacy and quality of the estimated sales and sales revenue used by the system. 
B) PQ-6 will now command a higher sales price. 
C) PQ-6 will now command a lower sales price. 
D) Schiff's other products will be assigned a smaller share of overhead costs. 
A) PQ-6 costing results under the new system depend on the adequacy and quality of the estimated sales and sales revenue used by the system. 
B) PQ-6 will now command a higher sales price. 
C) PQ-6 will now command a lower sales price. 
D) Schiff's other products will be assigned a smaller share of overhead costs.

Question 4

Baldwin Printers has contracts to complete weekly supplements required by forty-two customers. For the year 2011, manufacturing overhead cost estimates total $1,840,000 for an annual production capacity of 20 million pages.
For 2011 Baldwin Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:  
During 2011, two customers, Wellington Drugs and Home Again, are expected to use the following printing services:
 
-Using the three cost pools to allocate overhead costs,what is the total manufacturing overhead cost estimate for Wellington Drugs during 2011?

Accepted Answer

A) $5,400 
B) $9,100 
C) $10,800 
D) $10,192 
A) $5,400 
B) $9,100 
C) $10,800 
D) $10,192

Question 5

The first step in designing an activity-based cost system is to develop an activity dictionary.

Accepted Answer

A) True 
 B)False

Question 6

Transaction drivers:

Accepted Answer

A) count the frequency of an activity. 
B) involve directly charging for the resources used each time an activity is performed. 
C) are the most expensive and accurate type of cost driver. 
D) often apply a weighted index approach by estimating the difficulty of the task for various types of situations. 
A) count the frequency of an activity. 
B) involve directly charging for the resources used each time an activity is performed. 
C) are the most expensive and accurate type of cost driver. 
D) often apply a weighted index approach by estimating the difficulty of the task for various types of situations.

Question 7

If products are alike,then for costing purposes:

Accepted Answer

A) a simple costing system will yield accurate cost numbers. 
B) an activity-based costing system should be used. 
C) multiple unit-level cost rates should be used. 
D) varying demands will be placed on resources. 
A) a simple costing system will yield accurate cost numbers. 
B) an activity-based costing system should be used. 
C) multiple unit-level cost rates should be used. 
D) varying demands will be placed on resources.

Question 8

Which of the following statements about activity-based costing is NOT true?

Accepted Answer

A) ABC is useful for allocating marketing and distribution costs. 
B) ABC is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. 
C) ABC seeks to distinguish batch-related, product-sustaining, and business-sustaining costs, especially when they are not proportionate to one another. 
D) ABC differs from traditional costing systems in that products are not cross-subsidized. 
A) ABC is useful for allocating marketing and distribution costs. 
B) ABC is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. 
C) ABC seeks to distinguish batch-related, product-sustaining, and business-sustaining costs, especially when they are not proportionate to one another. 
D) ABC differs from traditional costing systems in that products are not cross-subsidized.

Question 9

An activity-based costing system is meant to perform the role of operational control as well as to provide the basis for costing inventory for financial reporting.

Accepted Answer

A) True 
 B)False

Question 10

Traditional cost systems distort product costs because:

Accepted Answer

A) they do not know how to identify the appropriate units. 
B) excess capacity costs are ignored. 
C) they emphasize financial accounting requirements. 
D) they use unit-level cost drivers to allocate overhead costs to products. 
A) they do not know how to identify the appropriate units. 
B) excess capacity costs are ignored. 
C) they emphasize financial accounting requirements. 
D) they use unit-level cost drivers to allocate overhead costs to products.

Question 11

Do activity-based costing systems always provide more accurate product costs than conventional cost systems? Why or why not?

Accepted Answer

No. Traditional cost systems contain sma

Question 12

Provide a diagram of how the activity-based cost system model works and explain the two major components of the model.

Accepted Answer

The diagram would show:
Step #1 is to tr

Question 13

Baldwin Printers has contracts to complete weekly supplements required by forty-two customers. For the year 2011, manufacturing overhead cost estimates total $1,840,000 for an annual production capacity of 20 million pages.
For 2011 Baldwin Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:  
During 2011, two customers, Wellington Drugs and Home Again, are expected to use the following printing services:
 
-What is the cost driver rate if manufacturing overhead costs are considered one large cost pool and are assigned based on 20 million pages of production capacity?

Accepted Answer

A) $0.10 per page 
B) $0.07 per page 
C) $0.092 per page 
D) $1.84 per page 
A) $0.10 per page 
B) $0.07 per page 
C) $0.092 per page 
D) $1.84 per page

Question 14

Traditional cost systems use actual departments or cost centers for defining cost pools to accumulate and redistribute costs.

Accepted Answer

A) True 
 B)False

Question 15

In general,factories producing a more varied and complex mix of products have higher costs than factories producing only a narrow range of products.Explain why this is generally true.

Accepted Answer

Factories producing a more varied and co

Question 16

Different products consume different proportions of overhead costs because of differences in all of the following EXCEPT:

Accepted Answer

A) sales prices. 
B) customers' customization specifications. 
C) setup times. 
D) product design. 
A) sales prices. 
B) customers' customization specifications. 
C) setup times. 
D) product design.

Question 17

________ and ________ are typically the measures of volume of activity in traditional volume-based cost systems.

Accepted Answer

A) Practical capacity; products sold 
B) Direct labor hours; practical capacity 
C) Direct labor hours; machine hours 
D) Square footage; machine hours 
A) Practical capacity; products sold 
B) Direct labor hours; practical capacity 
C) Direct labor hours; machine hours 
D) Square footage; machine hours

Question 18

A key reason for using an ABC system rather than a conventional cost system is because ABC assigns overhead costs:

Accepted Answer

A) because they are indirect costs. 
B) more simply than a traditional cost system. 
C) based only on transaction drivers. 
D) to reflect differences required by different activities as well as customers. 
A) because they are indirect costs. 
B) more simply than a traditional cost system. 
C) based only on transaction drivers. 
D) to reflect differences required by different activities as well as customers.

Question 19

In general,the selection of activity cost drivers requires making trade-offs between accuracy and the cost of measurement.

Accepted Answer

A) True 
 B)False

Question 20

Under traditional costing systems,selling and administrative costs have been largely ignored because they:

Accepted Answer

A) are hard to quantify except at exorbitant cost of measurement. 
B) have been negligible in amount relative to total costs. 
C) in the past they have been inventoriable for financial reporting purposes under GAAP. 
D) relate to a varied mix of products. 
A) are hard to quantify except at exorbitant cost of measurement. 
B) have been negligible in amount relative to total costs. 
C) in the past they have been inventoriable for financial reporting purposes under GAAP. 
D) relate to a varied mix of products.

A well-designed,activity-based cost system helps managers make better decisions because information derived from an ABC analysis:

A manufacturing firm produces multiple families of products requiring various combinations of different types of parts.Of the following,the MOST appropriate cost driver for assigning materials handling costs to the various products is:

The first step in designing an activity-based cost system is to develop an activity dictionary.

Transaction drivers:

If products are alike,then for costing purposes:

Which of the following statements about activity-based costing is NOT true?

An activity-based costing system is meant to perform the role of operational control as well as to provide the basis for costing inventory for financial reporting.

Traditional cost systems distort product costs because:

Do activity-based costing systems always provide more accurate product costs than conventional cost systems? Why or why not?

Provide a diagram of how the activity-based cost system model works and explain the two major components of the model.

Traditional cost systems use actual departments or cost centers for defining cost pools to accumulate and redistribute costs.

In general,factories producing a more varied and complex mix of products have higher costs than factories producing only a narrow range of products.Explain why this is generally true.

Different products consume different proportions of overhead costs because of differences in all of the following EXCEPT:

and are typically the measures of volume of activity in traditional volume-based cost systems.

A key reason for using an ABC system rather than a conventional cost system is because ABC assigns overhead costs:

In general,the selection of activity cost drivers requires making trade-offs between accuracy and the cost of measurement.

Under traditional costing systems,selling and administrative costs have been largely ignored because they:

How Management Accounting Information Supports Decision Making

The Balanced Scorecard and Strategy Map

Using Costs in Decision Making

Accumulating and Assigning Costs to Products

Measuring and Managing Customer Relationships

Measuring and Managing Process Performance

Measuring and Managing Life-Cycle Costs

Behavioral and Organizational Issues in Management Accounting and Control Systems

Using Budgets for Planning and Coordination

Financial Control

Filters

Exam 5: Activity-Based Cost Systems

A well-designed,activity-based cost system helps managers make better decisions because information derived from an ABC analysis:

A manufacturing firm produces multiple families of products requiring various combinations of different types of parts.Of the following,the MOST appropriate cost driver for assigning materials handling costs to the various products is:

The first step in designing an activity-based cost system is to develop an activity dictionary.

Transaction drivers:

If products are alike,then for costing purposes:

Which of the following statements about activity-based costing is NOT true?

An activity-based costing system is meant to perform the role of operational control as well as to provide the basis for costing inventory for financial reporting.

Traditional cost systems distort product costs because:

Do activity-based costing systems always provide more accurate product costs than conventional cost systems? Why or why not?

Provide a diagram of how the activity-based cost system model works and explain the two major components of the model.

Traditional cost systems use actual departments or cost centers for defining cost pools to accumulate and redistribute costs.

In general,factories producing a more varied and complex mix of products have higher costs than factories producing only a narrow range of products.Explain why this is generally true.

Different products consume different proportions of overhead costs because of differences in all of the following EXCEPT:

________ and ________ are typically the measures of volume of activity in traditional volume-based cost systems.

A key reason for using an ABC system rather than a conventional cost system is because ABC assigns overhead costs:

In general,the selection of activity cost drivers requires making trade-offs between accuracy and the cost of measurement.

Under traditional costing systems,selling and administrative costs have been largely ignored because they:

How Management Accounting Information Supports Decision Making

The Balanced Scorecard and Strategy Map

Using Costs in Decision Making

Accumulating and Assigning Costs to Products

Measuring and Managing Customer Relationships

Measuring and Managing Process Performance

Measuring and Managing Life-Cycle Costs

Behavioral and Organizational Issues in Management Accounting and Control Systems

Using Budgets for Planning and Coordination

Financial Control

Filters

and are typically the measures of volume of activity in traditional volume-based cost systems.