Question 1

Managers implementing ABC systems for the first time always start by analyzing budgeted costs to identify activity-cost pools.

Accepted Answer

A) True 
 B)False

Question 2

Dartmouth Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled:
 
Assume a traditional costing system applies the overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to the deluxe model?

Accepted Answer

A)  $31,828 
B)  $67,441 
C)  $35,613 
D)  $78,400 
A)  $31,828 
B)  $67,441 
C)  $35,613 
D)  $78,400

Question 3

Which of the following has accelerated need for refined cost systems?

Accepted Answer

A)  global monopolies 
B)  rising prices 
C)  intense competition 
D)  a shift toward increased direct costs 
A)  global monopolies 
B)  rising prices 
C)  intense competition 
D)  a shift toward increased direct costs

Question 4

Over time, the cost of design activities depend largely on the time designers spend on designing and modifying the product not on the number of products made or the number of batches produced.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is true of ABC systems?

Accepted Answer

A)  ABC system will always result in higher product costs. 
B)  ABC system employs multiple activity-cost drivers. 
C)  ABC system is least suited for service companies. 
D)  ABC system is simpler compared to traditional systems. 
A)  ABC system will always result in higher product costs. 
B)  ABC system employs multiple activity-cost drivers. 
C)  ABC system is least suited for service companies. 
D)  ABC system is simpler compared to traditional systems.

Question 6

Xylon Corp. has contracts to complete weekly supplements required by forty-six customers. For the year 2018, manufacturing overhead cost estimates total $940,000 for an annual production capacity of 10 million pages.
For 2018, Xylon 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 2018, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:
 
Under ABC costing, what is the inspection cost allocated to Hospital Systems?

Accepted Answer

A)  $704 
B)  $80 
C)  $286 
D)  $6,574 
A)  $704 
B)  $80 
C)  $286 
D)  $6,574

Question 7

For a company with diverse products, undercosting overhead of a product will lead to product-cross -subsidization which means that:

Accepted Answer

A)  direct labor costs of the product are misallocated 
B)  direct material costs of the product are misallocated 
C)  indirect costs of another product are misallocated 
D)  direct costs of another product are misallocated 
A)  direct labor costs of the product are misallocated 
B)  direct material costs of the product are misallocated 
C)  indirect costs of another product are misallocated 
D)  direct costs of another product are misallocated

Question 8

Extreme Manufacturing Company provides the following ABC costing information:
 
The above activities are used by Departments A and B as follows:
 
How much of the total costs will be assigned to Department A?

Accepted Answer

A)  $88,825 
B)  $118,825 
C)  $120,000 
D)  $85,075 
A)  $88,825 
B)  $118,825 
C)  $120,000 
D)  $85,075

Question 9

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

Accepted Answer

A)  total costs reflect market price 
B)  value-added costs can be eliminated 
C)  there is high likelihood of cross-subsidizing of product costs 
D)  product-pricing errors are minimal 
A)  total costs reflect market price 
B)  value-added costs can be eliminated 
C)  there is high likelihood of cross-subsidizing of product costs 
D)  product-pricing errors are minimal

Question 10

Which of the following cost and cost allocation base have a strong cause and effect relationship?

Accepted Answer

A)  administration costs and cubic feet 
B)  setup costs and square feet 
C)  quality control costs and the number of inspections 
D)  machine maintenance and setup hours 
A)  administration costs and cubic feet 
B)  setup costs and square feet 
C)  quality control costs and the number of inspections 
D)  machine maintenance and setup hours

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 systems contain smaller

Question 12

Product-cost cross-subsidization is very common when costs are uniformly spread across various products.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is true with activity based cost accounting?

Accepted Answer

A)  Activity-based costing ignores the allocation of marketing and distribution costs. 
B)  Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. 
C)  The focus is on activities that account for a sizable fraction of indirect costs . 
D)  Chances of product-cost cross-subsidization are higher in activity-based costing compared to traditional costing systems. 
A)  Activity-based costing ignores the allocation of marketing and distribution costs. 
B)  Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. 
C)  The focus is on activities that account for a sizable fraction of indirect costs . 
D)  Chances of product-cost cross-subsidization are higher in activity-based costing compared to traditional costing systems.

Question 14

Extreme Manufacturing Company provides the following ABC costing information:
 
The above activities are used by Departments A and B as follows:
 
How much of correspondence costs will be assigned to Department A?

Accepted Answer

A)  $22,000 
B)  $49,500 
C)  $11,000 
D)  $11,242 
A)  $22,000 
B)  $49,500 
C)  $11,000 
D)  $11,242

Question 15

Using department indirect-cost rates to allocate costs will result in results similar to ABC if:

Accepted Answer

A)  a single activity accounts for a sizable portion of the costs of the department 
B)  several activities cause a sizable portion of the costs of the department 
C)  a single activity accounts for a small portion of the costs of the department 
D)  several activities cause a small portion of the costs of the department 
A)  a single activity accounts for a sizable portion of the costs of the department 
B)  several activities cause a sizable portion of the costs of the department 
C)  a single activity accounts for a small portion of the costs of the department 
D)  several activities cause a small portion of the costs of the department

Question 16

Service-sustaining costs are the costs of activities that managers cannot trace to individual services but that support the organization as a whole.

Accepted Answer

A) True 
 B)False

Question 17

The cost data produced by an ABC system for either a service or a product are only derived from indirect costs.

Accepted Answer

A) True 
 B)False

Question 18

Managers should look for evidence of cause-and-effect when choosing a cost driver with the driver being the cause and the effect being the cost incurred.

Accepted Answer

A) True 
 B)False

Question 19

Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2018, manufacturing overhead cost estimates total $1,500,000 for an annual production capacity of 10 million pages.
For 2018 Velshi 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 2018, two customers, Money Managers and Hospital Systems, 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 10 million pages of production capacity?

Accepted Answer

A)  $0.01 per page 
B)  $0.15 per page 
C)  $0.14 per page 
D)  $0.13 per page 
A)  $0.01 per page 
B)  $0.15 per page 
C)  $0.14 per page 
D)  $0.13 per page

Question 20

What are the factors that are causing many companies to refine their costing systems to obtain more accurate measures of the costs of their products?

Accepted Answer

The first cause is increasing product di

Managers implementing ABC systems for the first time always start by analyzing budgeted costs to identify activity-cost pools.

Which of the following has accelerated need for refined cost systems?

Over time, the cost of design activities depend largely on the time designers spend on designing and modifying the product not on the number of products made or the number of batches produced.

Which of the following statements is true of ABC systems?

For a company with diverse products, undercosting overhead of a product will lead to product-cross -subsidization which means that:

Extreme Manufacturing Company provides the following ABC costing information: The above activities are used by Departments A and B as follows: How much of the total costs will be assigned to Department A?

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

Which of the following cost and cost allocation base have a strong cause and effect relationship?

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

Product-cost cross-subsidization is very common when costs are uniformly spread across various products.

Which of the following is true with activity based cost accounting?

Extreme Manufacturing Company provides the following ABC costing information: The above activities are used by Departments A and B as follows: How much of correspondence costs will be assigned to Department A?

Using department indirect-cost rates to allocate costs will result in results similar to ABC if:

Service-sustaining costs are the costs of activities that managers cannot trace to individual services but that support the organization as a whole.

The cost data produced by an ABC system for either a service or a product are only derived from indirect costs.

Managers should look for evidence of cause-and-effect when choosing a cost driver with the driver being the cause and the effect being the cost incurred.

What are the factors that are causing many companies to refine their costing systems to obtain more accurate measures of the costs of their products?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 5: Activity-Based Costing and Activity-Based Management

Managers implementing ABC systems for the first time always start by analyzing budgeted costs to identify activity-cost pools.

Which of the following has accelerated need for refined cost systems?

Over time, the cost of design activities depend largely on the time designers spend on designing and modifying the product not on the number of products made or the number of batches produced.

Which of the following statements is true of ABC systems?

For a company with diverse products, undercosting overhead of a product will lead to product-cross -subsidization which means that:

Extreme Manufacturing Company provides the following ABC costing information: The above activities are used by Departments A and B as follows: How much of the total costs will be assigned to Department A?

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

Which of the following cost and cost allocation base have a strong cause and effect relationship?

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

Product-cost cross-subsidization is very common when costs are uniformly spread across various products.

Which of the following is true with activity based cost accounting?

Extreme Manufacturing Company provides the following ABC costing information: The above activities are used by Departments A and B as follows: How much of correspondence costs will be assigned to Department A?

Using department indirect-cost rates to allocate costs will result in results similar to ABC if:

Service-sustaining costs are the costs of activities that managers cannot trace to individual services but that support the organization as a whole.

The cost data produced by an ABC system for either a service or a product are only derived from indirect costs.

Managers should look for evidence of cause-and-effect when choosing a cost driver with the driver being the cause and the effect being the cost incurred.

What are the factors that are causing many companies to refine their costing systems to obtain more accurate measures of the costs of their products?

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality and Time

Inventory Management, Just-in-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters