Question 1

According to an ABC system,M5 uses a disproportionately:

Accepted Answer

A) smaller amount of unit-level costs. 
B) larger amount of unit-level costs. 
C) smaller amount of batch-level costs. 
D) larger amount of batch-level costs. 
A) smaller amount of unit-level costs. 
B) larger amount of unit-level costs. 
C) smaller amount of batch-level costs. 
D) larger amount of batch-level costs.

Question 2

Logical cost allocation bases for overhead costs include:

Accepted Answer

A) cubic feet of packages moved to measure distribution activity. 
B) machine hours to measure setup activity. 
C) direct manufacturing labor hours to measure product designing activity. 
D) All of the above are correct. 
A) cubic feet of packages moved to measure distribution activity. 
B) machine hours to measure setup activity. 
C) direct manufacturing labor hours to measure product designing activity. 
D) All of the above are correct.

Question 3

ABC systems:

Accepted Answer

A) reveal activities that can be eliminated. 
B) help control nonfinancial items such as number of setup hours. 
C) help identify new designs to reduce costs. 
D) All of the above are correct. 
A) reveal activities that can be eliminated. 
B) help control nonfinancial items such as number of setup hours. 
C) help identify new designs to reduce costs. 
D) All of the above are correct.

Question 4

The use of unit-related measures to assign overhead costs is more likely to:

Accepted Answer

A) undercost high-volume products. 
B) undercost specialty low-volume products. 
C) undercost complex products. 
D) undercost specialty low-volume and complex products. 
A) undercost high-volume products. 
B) undercost specialty low-volume products. 
C) undercost complex products. 
D) undercost specialty low-volume and complex products.

Question 5

Design of an activity-based cost system requires that:

Accepted Answer

A) the job bid process be redesigned. 
B) resource costs be linked to the activities performed. 
C) the cost of activities be linked to cost objects. 
D) resource costs be linked to the activities performed and the cost of activities be linked to cost objects. 
A) the job bid process be redesigned. 
B) resource costs be linked to the activities performed. 
C) the cost of activities be linked to cost objects. 
D) resource costs be linked to the activities performed and the cost of activities be linked to cost objects.

Question 6

Brilliant Accents Company manufactures and sells three styles of kitchen faucets: brass,chrome,and white. Production takes 25,25,and 10 machine hours to manufacture 1000-unit batches of brass,chrome,and white faucets,respectively. The following additional data apply:
   
a. Using the traditional cost system,determine the operating profit per unit for each style of faucet.
b. Determine the activity cost driver rates for setup overhead costs and inspection overhead costs.
c. Using the ABC system,for each style of faucet:
1. compute the estimated overhead costs per unit; and
2. compute the estimated operating profit per unit.
d. Explain the differences between the profits obtained from the traditional cost system and the ABC system.Which system provides a better estimate of profitability? Why?

Accepted Answer

a. Traditional cost system:
Operating pr

Question 7

Blitzer Enterprises has identified three cost pools and three corresponding cost drivers to allocate overhead costs. The following estimates are provided for the coming year: 
 
The accounting records show the Gergen Job consumed the following resources:
 
-Using the three cost pools to allocate overhead costs,what is the total amount of overhead costs to be allocated to the Gergen Job?

Accepted Answer

A) $1,434 
B) $1,400 
C) $1,350 
D) $1,074 
A) $1,434 
B) $1,400 
C) $1,350 
D) $1,074

Question 8

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 the traditional cost method is used and a batch of 500 remote controls are produced? The batch requires 1,000 parts,10 direct labor hours,and 15 minutes of inspection time.

Accepted Answer

A) $4,000.00 per remote control 
B) $0.50 per remote control 
C) $4.00 per remote control 
D) $8.00 per remote control 
A) $4,000.00 per remote control 
B) $0.50 per remote control 
C) $4.00 per remote control 
D) $8.00 per remote control

Question 9

The Troubadours Company is noted for an exceptionally impressive line of Mardi Gras masks.Troubadours has established the following selling and distribution overhead activity cost pools and their corresponding activity drivers for the year 2011:
 
a. Determine the activity cost driver rate for each of the four selling and distribution activities.
b. Under what circumstances would it be appropriate to use each of the activity cost drivers to
determine the cost of the Mardi Gras masks?
c. Describe at least one possible negative behavioral consequence for each of the four activity cost drivers.

Accepted Answer

a. Activity cost driver rate for Marketi

Question 10

The most successful ABC projects occur when a clear business purpose exists for building the ABC model.

Accepted Answer

A) True 
 B)False

Question 11

When a company manufactures a variety of complex products,several unit-level cost drivers can capture the complexity and diversity of the production processes:

Accepted Answer

A) always. 
B) frequently. 
C) infrequently. 
D) never. 
A) always. 
B) frequently. 
C) infrequently. 
D) never.

Question 12

Specialized engineering drawings of products,product quality specifications and quality control testing,inventoried raw materials,and material control systems are examples of activities that equate to greater overhead costs.

Accepted Answer

A) True 
 B)False

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:
 
-Using pages printed as the only overhead cost driver,what is the manufacturing overhead cost estimate for Wellington Drugs during 2011?

Accepted Answer

A) $5,000 
B) $8,280 
C) $11,200 
D) $18,500 
A) $5,000 
B) $8,280 
C) $11,200 
D) $18,500

Question 14

Greater manufacturing overhead costs are associated with:

Accepted Answer

A) specialized engineering drawings of new products. 
B) quality specifications for products and quality control testing. 
C) inventoried materials and material control systems. 
D) All of the above are correct. 
A) specialized engineering drawings of new products. 
B) quality specifications for products and quality control testing. 
C) inventoried materials and material control systems. 
D) All of the above are correct.

Question 15

Reducing the number of production runs provides an economic benefit even though resources remain at the same level.

Accepted Answer

A) True 
 B)False

Question 16

Smaller cost distortions occur when the traditional cost systems' unit-level assignments and the alternative activity cost driver assignments:

Accepted Answer

A) are different in proportion to each other. 
B) are similar in proportion to each other. 
C) are more different than alike. 
D) use the same cost driver units. 
A) are different in proportion to each other. 
B) are similar in proportion to each other. 
C) are more different than alike. 
D) use the same cost driver units.

Question 17

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.
 
-Assume a traditional costing system applies the $120,000 of overhead costs based on direct labor hours.What is the total amount of overhead costs assigned to the standard model?

Accepted Answer

A) $40,000 
B) $75,000 
C) $50,000 
D) $70,500 
A) $40,000 
B) $75,000 
C) $50,000 
D) $70,500

Question 18

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:
 
-Assuming activity-cost pools are used,what are the activity-cost driver rates for design changes,setups,and inspections cost pools?

Accepted Answer

A) $1,300 per design change, $130.00per setup, $20 per inspection 
B) $360 per design change, $3.20per setup, $6.40 per inspection 
C) $1,680 per design change, $5.38 per setup, $42 per inspection 
D) $286 per design change,$15.38 per setup,$20 per inspection 
A) $1,300 per design change, $130.00per setup, $20 per inspection 
B) $360 per design change, $3.20per setup, $6.40 per inspection 
C) $1,680 per design change, $5.38 per setup, $42 per inspection 
D) $286 per design change,$15.38 per setup,$20 per inspection

Question 19

The major reason for using practical capacity as the denominator for activity driver calculations is to:

Accepted Answer

A) avoid distortions induced by the assignment of unused capacity costs to the products produced or customer served. 
B) simplify the calculations of the activity cost drivers. 
C) reduce the cost of unused capacity. 
D) place less emphasis on the cost of unused capacity. 
A) avoid distortions induced by the assignment of unused capacity costs to the products produced or customer served. 
B) simplify the calculations of the activity cost drivers. 
C) reduce the cost of unused capacity. 
D) place less emphasis on the cost of unused capacity.

Question 20

Explain how traditional cost systems,using only unit level cost drivers,distort product costs.

Accepted Answer

Unit-related measures can distort produc

According to an ABC system,M5 uses a disproportionately:

Logical cost allocation bases for overhead costs include:

ABC systems:

The use of unit-related measures to assign overhead costs is more likely to:

Design of an activity-based cost system requires that:

The most successful ABC projects occur when a clear business purpose exists for building the ABC model.

When a company manufactures a variety of complex products,several unit-level cost drivers can capture the complexity and diversity of the production processes:

Specialized engineering drawings of products,product quality specifications and quality control testing,inventoried raw materials,and material control systems are examples of activities that equate to greater overhead costs.

Greater manufacturing overhead costs are associated with:

Reducing the number of production runs provides an economic benefit even though resources remain at the same level.

Smaller cost distortions occur when the traditional cost systems' unit-level assignments and the alternative activity cost driver assignments:

The major reason for using practical capacity as the denominator for activity driver calculations is to:

Explain how traditional cost systems,using only unit level cost drivers,distort product costs.

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

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Exam 5: Activity-Based Cost Systems

According to an ABC system,M5 uses a disproportionately:

Logical cost allocation bases for overhead costs include:

ABC systems:

The use of unit-related measures to assign overhead costs is more likely to:

Design of an activity-based cost system requires that:

The most successful ABC projects occur when a clear business purpose exists for building the ABC model.

When a company manufactures a variety of complex products,several unit-level cost drivers can capture the complexity and diversity of the production processes:

Specialized engineering drawings of products,product quality specifications and quality control testing,inventoried raw materials,and material control systems are examples of activities that equate to greater overhead costs.

Greater manufacturing overhead costs are associated with:

Reducing the number of production runs provides an economic benefit even though resources remain at the same level.

Smaller cost distortions occur when the traditional cost systems' unit-level assignments and the alternative activity cost driver assignments:

The major reason for using practical capacity as the denominator for activity driver calculations is to:

Explain how traditional cost systems,using only unit level cost drivers,distort product costs.

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