Exam 5: Activity-Based Cost Systems

Practical capacity is used as the numerator for activity cost driver calculations to avoid distortions caused by the assignment of excess capacity costs to the products.

(True/False)

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Question 41

Capacity cost rates also change when the denominator,practical capacity,changes.

(True/False)

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Question 42

Transaction drivers count how often an activity is performed. Duration drivers represent the amount of time required to perform an activity. Intensity drivers directly charge for the resources used each time an activity is performed. Also,a weighted index approach might be used to simulate an intensity driver. a.Give an example of each of the four types of drivers described above. b.Explain when each of the four types of drivers should be used. c.For each of the first three types of drivers,explain the assumptions about the activity and the object of the activity. d.For each of the following activities identify a transaction driver,a duration driver,and an intensity driver. Machine maintenance Machine setup Quality control Material ordering Production scheduling Warehouse expense Engineering design

(Essay)

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Question 43

A PRIMARY reason for assigning selling and distribution costs to products and customers for analytical purposes is:

(Multiple Choice)

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Question 44

It ONLY makes sense to implement an ABC system when:

(Multiple Choice)

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Question 45

Tony's Skate Corporation manufactures two models of skate boards: a standard and a deluxe model. The following activity and cost information has been compiled. -Number of setups and number of components are identified as activity-cost drivers for overhead costs.Assuming an activity-based costing system is used,what is the total amount of overhead costs assigned to the standard model?

(Multiple Choice)

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Question 46

Webster Company provides the following $A B C$ costing information: The above activities are used by Departments $A$ and $B$ as follows: -How much of the account inquiry cost will be assigned to Department A?

(Multiple Choice)

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Question 47

Committed costs can change because demands for the capacity resource change or because of changes in efficiency in performing activities.

(True/False)

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Question 48

Overcosting a particular product may result in:

(Multiple Choice)

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Question 49

Time-driven ABC enables the model to reflect how particular order and activity characteristics cause processing times to vary.

(True/False)

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Question 50

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. -The total amount of overhead costs assigned to product PQ-6 using the traditional cost method is ________ the total amount assigned using ABC.

(Multiple Choice)

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Question 51

Undercosting of a product is MOST likely to result from:

(Multiple Choice)

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Question 52

Aggressive customers who demand low prices and customized services:

(Multiple Choice)

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Question 53

Activity-based management (ABM)includes decisions about all of the following EXCEPT:

(Multiple Choice)

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Question 54

For service organizations,activity-based cost systems clarify appropriate cost assignments to services and customers and help to identify the profitability of various products and customers.

(True/False)

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Question 55

Unused capacity should be treated as a general cost to be shared across all product lines.

(True/False)

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Question 56

Traditional cost systems are likely to overcost complex products with lower production volume.

(True/False)

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Question 57

It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that:

(Multiple Choice)

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Question 58

Advantages of a time-driven ABC system include:

(Multiple Choice)

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Question 59

Merrill, Inc. manufactures remote controls. Currently the company uses a plant-wide rate for allocating manufacturing overhead costs. The plant manager believes it is time to refine the method of cost allocation and has the accounting department identify the primary production activities and their cost drivers: The current traditional cost method allocates overhead costs based on direct labor hours using a rate of $ 400 per labor hour. -What are the manufacturing overhead costs per remote control assuming an activity-based costing method is used and a batch of 50 remote controls are produced? The batch requires 100 parts,6 direct manufacturing labor hours,and 2.5 minutes of inspection time.

(Multiple Choice)

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Question 60

Showing 41 - 60 of 113

Practical capacity is used as the numerator for activity cost driver calculations to avoid distortions caused by the assignment of excess capacity costs to the products.

Capacity cost rates also change when the denominator,practical capacity,changes.

A PRIMARY reason for assigning selling and distribution costs to products and customers for analytical purposes is:

It ONLY makes sense to implement an ABC system when:

Webster Company provides the following $A B C$ costing information: The above activities are used by Departments $A$ and $B$ as follows: -How much of the account inquiry cost will be assigned to Department A?

Committed costs can change because demands for the capacity resource change or because of changes in efficiency in performing activities.

Overcosting a particular product may result in:

Time-driven ABC enables the model to reflect how particular order and activity characteristics cause processing times to vary.

Undercosting of a product is MOST likely to result from:

Aggressive customers who demand low prices and customized services:

Activity-based management (ABM)includes decisions about all of the following EXCEPT:

For service organizations,activity-based cost systems clarify appropriate cost assignments to services and customers and help to identify the profitability of various products and customers.

Unused capacity should be treated as a general cost to be shared across all product lines.

Traditional cost systems are likely to overcost complex products with lower production volume.

It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that:

Advantages of a time-driven ABC system include:

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

Practical capacity is used as the numerator for activity cost driver calculations to avoid distortions caused by the assignment of excess capacity costs to the products.

Capacity cost rates also change when the denominator,practical capacity,changes.

A PRIMARY reason for assigning selling and distribution costs to products and customers for analytical purposes is:

It ONLY makes sense to implement an ABC system when:

Webster Company provides the following ABC A B C ABC costing information: The above activities are used by Departments A A A and B B B as follows: -How much of the account inquiry cost will be assigned to Department A?

Committed costs can change because demands for the capacity resource change or because of changes in efficiency in performing activities.

Overcosting a particular product may result in:

Time-driven ABC enables the model to reflect how particular order and activity characteristics cause processing times to vary.

Undercosting of a product is MOST likely to result from:

Aggressive customers who demand low prices and customized services:

Activity-based management (ABM)includes decisions about all of the following EXCEPT:

For service organizations,activity-based cost systems clarify appropriate cost assignments to services and customers and help to identify the profitability of various products and customers.

Unused capacity should be treated as a general cost to be shared across all product lines.

Traditional cost systems are likely to overcost complex products with lower production volume.

It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that:

Advantages of a time-driven ABC system include:

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

Webster Company provides the following $A B C$ costing information: The above activities are used by Departments $A$ and $B$ as follows: -How much of the account inquiry cost will be assigned to Department A?