Question 1

The selection of activity cost drivers requires making choices related to the usage of transaction drivers,duration drivers,and intensity drivers.

Accepted Answer

A) True 
 B)False

Question 2

Transaction drivers,duration drivers,and intensity drivers.
a.For machine maintenance,identify a transaction driver,a duration driver,and an intensity driver.
b.Explain when the intensity driver should be used.
c.Explain the conditions that are assumed when the duration driver is used.

Accepted Answer

a. Transaction drivers count how often a

Question 3

The best cost estimate for resources required to handle production runs is developed by using ________ as the denominator for activity cost driver calculations.

Accepted Answer

A) actual driver quantities of actual production runs 
B) estimated driver quantities of estimated production runs 
C) available capacity 
D) practical capacity 
A) actual driver quantities of actual production runs 
B) estimated driver quantities of estimated production runs 
C) available capacity 
D) practical capacity

Question 4

Provide at least two examples of types of costs that would be higher for factories producing a more varied and complex mix of products than for factories producing only a narrow range of products.

Accepted Answer

Specialized engineering drawings of prod

Question 5

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 account verification costs will be assigned to Department A?

Accepted Answer

A) $10,000 
B) $25,000 
C) $40,000 
D) $50,000 
A) $10,000 
B) $25,000 
C) $40,000 
D) $50,000

Question 6

With traditional costing systems,products manufactured in large batches and in large annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related cost drivers..

Accepted Answer

A) overcosted 
B) undercosted 
C) fairly costed 
D) ignored 
A) overcosted 
B) undercosted 
C) fairly costed 
D) ignored

Question 7

The goal of a properly constructed ABC system is to:

Accepted Answer

A) develop the best cost system by staying within the economizing constraints (relevant benefit versus cost tradeoff for the system). 
B) have the most accurate cost system. 
C) clone the ABC model processes. 
D) adapt the ABC model exactly to the organization. 
A) develop the best cost system by staying within the economizing constraints (relevant benefit versus cost tradeoff for the system). 
B) have the most accurate cost system. 
C) clone the ABC model processes. 
D) adapt the ABC model exactly to the organization.

Question 8

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:
 
-Which method of allocation probably best estimates actual overhead costs used for Blitzer Enterprises? Why?

Accepted Answer

A) Single direct labor-hours cost driver, because it is best to allocate total costs uniformly to individual jobs. 
B) Single direct labor-hours cost driver, because it is easiest to analyze and interpret. 
C) Three activity-cost drivers, because it best reflects the relative consumption of resources. 
D) Three activity-cost drivers,because product costs can be significantly cross-subsidized. 
A) Single direct labor-hours cost driver, because it is best to allocate total costs uniformly to individual jobs. 
B) Single direct labor-hours cost driver, because it is easiest to analyze and interpret. 
C) Three activity-cost drivers, because it best reflects the relative consumption of resources. 
D) Three activity-cost drivers,because product costs can be significantly cross-subsidized.

Question 9

At Deutschland Electronics,product lines are charged for call center overhead costs based on sales revenue.Last year's summary of call center operations revealed the following:
 
Deutschland Electronics currently allocates call center overhead costs using a rate of 0.5% of sales revenue.
a. Compute the amount of call center overhead costs allocated to each product line under the current system.
b. Assume Deutschland decides to use the average call length for information to assign last year's overhead costs.Does this allocation method seem more appropriate than percentage of sales? Why or why not?
c. Assume Deutschland decides to use the numbers of calls of both types to assign last year's overhead costs of $65,000. Compute the amount of call center overhead costs assigned to each product line under this revised ABC system.
d. Deutschland Electronics assigns bonuses based on departmental profits.How might the Specialty Products manager try to obtain higher profits for next year if overhead costs are assigned based on the average call length for information?
e.Discuss the barriers for implementing ABC for this call center.

Accepted Answer

a. Call center overhead costs allocated

Question 10

Designing an activity-based cost system includes:

Accepted Answer

A) classifying as many costs as indirect costs as is feasible. 
B) creating as many cost pools as possible. 
C) identifying the activities performed by the plant's resources. 
D) seeking a broader focus rather than detail. 
A) classifying as many costs as indirect costs as is feasible. 
B) creating as many cost pools as possible. 
C) identifying the activities performed by the plant's resources. 
D) seeking a broader focus rather than detail.

Question 11

A company produces three products; if one product is undercosted then:

Accepted Answer

A) one product is overcosted. 
B) one or two products are overcosted. 
C) two products are overcosted. 
D) no products are overcosted. 
A) one product is overcosted. 
B) one or two products are overcosted. 
C) two products are overcosted. 
D) no products are overcosted.

Question 12

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

Accepted Answer

Unit-related measures can distort custom

Question 13

Misleading product cost numbers are MOST likely the result of misallocating:

Accepted Answer

A) direct material costs. 
B) direct manufacturing labor costs. 
C) overhead costs. 
D) All of the above are correct. 
A) direct material costs. 
B) direct manufacturing labor costs. 
C) overhead costs. 
D) All of the above are correct.

Question 14

In general,service companies are ideal candidates for activity-based costing.

Accepted Answer

A) True 
 B)False

Question 15

MTM Manufacturing produces two types of pre-fabricated exterior walls: deluxe and standard.The assignment basis for overhead costs has been direct labor hours.For 2011,MTM compiled the following data for the two products:
   
Last year,MTM purchased an expensive robotics system to allow for more complex products in the deluxe line.The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign.She obtained the following ABC information for 2011:
   
a. Using the current cost system,what is the estimated:
1. total cost of manufacturing one unit for each type of wall; and
2. profit per unit for each type of wall?
b. Using the current cost system,estimated manufacturing overhead costs per unit are less for the deluxe wall ($1,800 per unit)than the standard wall ($2,400 per unit).What is a likely explanation for this?
c. Review the machine-related costs above.What is a likely explanation for machine-related costs being so high? What might explain why total machining hours for the deluxe walls (300,000 hours)are the same as for the standard walls (300,000 hours)?
d. Using the activity-based costing data presented above,
1. compute the cost driver rate for each overhead activity.
2. compute the revised manufacturing overhead cost per unit for the deluxe wall.
3. compute the revised total cost to manufacture one unit of the deluxe wall.
e. Is the deluxe wall as profitable as the original data estimated? Why or why not?
f. What considerations need to be examined when determining a sales mix strategy?

Accepted Answer

a. Currently estimated deluxe wall total

Question 16

How are cost drivers selected in activity-based costing systems?

Accepted Answer

The selection of activity cost drivers r

Question 17

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:
 
-When overhead costs are assigned using the single cost driver,number of pages printed,then

Accepted Answer

A) Baldwin Printers will want to retain this highly-profitable customer. 
B) Wellington Drugs will likely seek to do business with competitors in the future. 
C) Wellington Drugs is unfairly overbilled for its use of printing resources. 
D) Wellington Drugs is grossly underbilled for the job,while other jobs will be unfairly overbilled. 
A) Baldwin Printers will want to retain this highly-profitable customer. 
B) Wellington Drugs will likely seek to do business with competitors in the future. 
C) Wellington Drugs is unfairly overbilled for its use of printing resources. 
D) Wellington Drugs is grossly underbilled for the job,while other jobs will be unfairly overbilled.

Question 18

When the ABC system has a good model design,ABC can still overcome the barriers to implementation and provide an effective system.

Accepted Answer

A) True 
 B)False

Question 19

Advantages of the time-driven ABC model include all of the following except:

Accepted Answer

A) cost-driver rates change when there has been a shift in the efficiency of the activity. 
B) cost-driver rates can be easily updated. 
C) complex assumptions reflect the manufacturing environment. 
D) data used are easily observed. 
A) cost-driver rates change when there has been a shift in the efficiency of the activity. 
B) cost-driver rates can be easily updated. 
C) complex assumptions reflect the manufacturing environment. 
D) data used are easily observed.

Question 20

Prepackaged ABC software packages must be customized to the products,services and related activities of the company.

Accepted Answer

A) True 
 B)False

The selection of activity cost drivers requires making choices related to the usage of transaction drivers,duration drivers,and intensity drivers.

Transaction drivers,duration drivers,and intensity drivers. a.For machine maintenance,identify a transaction driver,a duration driver,and an intensity driver. b.Explain when the intensity driver should be used. c.Explain the conditions that are assumed when the duration driver is used.

The best cost estimate for resources required to handle production runs is developed by using ________ as the denominator for activity cost driver calculations.

Provide at least two examples of types of costs that would be higher for factories producing a more varied and complex mix of products than for factories producing only a narrow range of products.

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 account verification costs will be assigned to Department A?

With traditional costing systems,products manufactured in large batches and in large annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related cost drivers..

The goal of a properly constructed ABC system is to:

Designing an activity-based cost system includes:

A company produces three products; if one product is undercosted then:

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

Misleading product cost numbers are MOST likely the result of misallocating:

In general,service companies are ideal candidates for activity-based costing.

How are cost drivers selected in activity-based costing systems?

When the ABC system has a good model design,ABC can still overcome the barriers to implementation and provide an effective system.

Advantages of the time-driven ABC model include all of the following except:

Prepackaged ABC software packages must be customized to the products,services and related activities of the company.

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

The selection of activity cost drivers requires making choices related to the usage of transaction drivers,duration drivers,and intensity drivers.

Transaction drivers,duration drivers,and intensity drivers. a.For machine maintenance,identify a transaction driver,a duration driver,and an intensity driver. b.Explain when the intensity driver should be used. c.Explain the conditions that are assumed when the duration driver is used.

The best cost estimate for resources required to handle production runs is developed by using ________ as the denominator for activity cost driver calculations.

Provide at least two examples of types of costs that would be higher for factories producing a more varied and complex mix of products than for factories producing only a narrow range of products.

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 account verification costs will be assigned to Department A?

With traditional costing systems,products manufactured in large batches and in large annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related cost drivers..

The goal of a properly constructed ABC system is to:

Designing an activity-based cost system includes:

A company produces three products; if one product is undercosted then:

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

Misleading product cost numbers are MOST likely the result of misallocating:

In general,service companies are ideal candidates for activity-based costing.

How are cost drivers selected in activity-based costing systems?

When the ABC system has a good model design,ABC can still overcome the barriers to implementation and provide an effective system.

Advantages of the time-driven ABC model include all of the following except:

Prepackaged ABC software packages must be customized to the products,services and related activities of the company.

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 account verification costs will be assigned to Department A?