Question 1

Regarding activity-based costing systems, which of the following statements is true?

Accepted Answer

A) ABC systems accumulate overhead costs by departments. 
B) ABC costing systems are less complex and, therefore, less costly than traditional systems. 
C) ABC costing systems have separate indirect cost allocation rates for each activity. 
D) ABC costing systems can be used in manufacturing firms only. 
A) ABC systems accumulate overhead costs by departments. 
B) ABC costing systems are less complex and, therefore, less costly than traditional systems. 
C) ABC costing systems have separate indirect cost allocation rates for each activity. 
D) ABC costing systems can be used in manufacturing firms only.

Question 2

Platinum Company manufactures several different products and uses an activity-based costing system. Information from its system for the year for all products follows:   The annual production and sales of one of its products, the Zinger, are 800 units. The following data relate to the production and sales of Widgets in the most recent year:   What is the average cost of one Zinger?

Accepted Answer

A) $ 25.01 
B) $158.19 
C) $236.70 
D) $208.21 
A) $ 25.01 
B) $158.19 
C) $236.70 
D) $208.21

Question 3

Facility-level activities and costs are incurred no matter how many units, batches, or products are produced in the plant.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following does ABC take into account?

Accepted Answer

A) The types of manufacturing activities used by the product 
B) The extent to which the manufacturing activities are used by the product 
C) Both A and B 
D) Neither A nor B 
A) The types of manufacturing activities used by the product 
B) The extent to which the manufacturing activities are used by the product 
C) Both A and B 
D) Neither A nor B

Question 5

Swiss Furniture Company manufactures bookshelves and uses an activity-based costing system. The following information is provided for the month of May:   Each bookshelf consists of 4 parts. The direct materials cost per bookshelf is $30.00.
What is the cost of materials handling and assembling per bookshelf?

Accepted Answer

A) $ 8.00 
B) $24.80 
C) $22.00 
D) $14.00 
A) $ 8.00 
B) $24.80 
C) $22.00 
D) $14.00

Question 6

The Cosmo Corporation manufactures and assembles office chairs. Cosmo uses an activity-based costing system to allocate all manufacturing conversion costs. Each chair consists of 15 separate parts totaling $125 in direct materials, and requires 2.0 hours of machine time to produce. Additional information follows:   What is the cost of assembling per chair?

Accepted Answer

A) $4.00 
B) $5.50 
C) $7.50 
D) $26.25 
A) $4.00 
B) $5.50 
C) $7.50 
D) $26.25

Question 7

Which of the following is most likely to be the cost driver for the packaging and shipping activity?

Accepted Answer

A) Number of setups 
B) Number of orders shipped 
C) Number of units produced 
D) Hours of testing 
A) Number of setups 
B) Number of orders shipped 
C) Number of units produced 
D) Hours of testing

Question 8

Dursley & Marvolo, Attorneys at Law, provide a variety of legal services. The law firm uses an activity-based costing system and has developed the following activity pool cost rates:   Cost and activity data related to two clients is as follows:   How much overhead cost would be allocated to Client 82 using the activity-based costing system?

Accepted Answer

A) $ 709 
B) $ 9,626 
C) $ 2,721 
D) $ 32,614 
A) $ 709 
B) $ 9,626 
C) $ 2,721 
D) $ 32,614

Question 9

Kramer Company manufactures coffee tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each coffee tables consists of 20 separate parts totaling $240 in direct materials, and requires 5.0 hours of machine time to produce. Additional information follows:   What is the cost of assembling per coffee table?

Accepted Answer

A) $40.00 
B) $15.00 
C) $7.75 
D) $20.00 
A) $40.00 
B) $15.00 
C) $7.75 
D) $20.00

Question 10

Product testing is an appraisal cost.

Accepted Answer

A) True 
 B)False

Question 11

Telecom uses activity-based costing to allocate all manufacturing conversion costs. Telecom produces cellular telephones; each phone has $40.00 of direct materials, includes 30 parts and requires 3 hours of machine time. Additional information follows:   What is the cost of machining per phone?

Accepted Answer

A) $42.00 
B) $30.00 
C) $6.00 
D) $15.00 
A) $42.00 
B) $30.00 
C) $6.00 
D) $15.00

Question 12

To determine the amount of overhead allocated, the overhead rate is divided by the cost driver.

Accepted Answer

A) True 
 B)False

Question 13

Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2,200 units, while 1,500 units of blenders are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Toasters require 1.25 direct labor hours per unit, while blenders require 1 direct labor hours per unit. The total estimated overhead for the period is $149,115. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:   The overhead cost per blender using an activity-based costing system would be closest to

Accepted Answer

A) $ 27.72. 
B) $ 73.00. 
C) $ 99.41. 
D) $ 40.66. 
A) $ 27.72. 
B) $ 73.00. 
C) $ 99.41. 
D) $ 40.66.

Question 14

Kramer Company manufactures coffee tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each coffee table consists of 20 separate parts totaling $240 in direct materials, and requires 5.0 hours of machine time to produce. Additional information follows:   What is the number of finished coffee tables?

Accepted Answer

A) 20 
B) 100 
C) 250 
D) Cannot be determined from the information given 
A) 20 
B) 100 
C) 250 
D) Cannot be determined from the information given

Question 15

Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1,000 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plantwide overhead rate to allocate its $8,088,000 of annual manufacturing overhead. Of this amount, $2,210,000 is associated with the Large Bag line, $3,418,800 is associated with the Medium Bag line, and $2,459,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 40,000 machine hours: 13,000 in the Large Bag line, 15,400 in the Medium Bag line, and 11,600 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs. The departmental manufacturing overhead rate for the Small Bag line would be closest to

Accepted Answer

A) $202.20 per machine hour. 
B) $212.00 per machine hour. 
C) $170.00 per machine hour. 
D) $222.00 per machine hour. 
A) $202.20 per machine hour. 
B) $212.00 per machine hour. 
C) $170.00 per machine hour. 
D) $222.00 per machine hour.

Question 16

When overhead is allocated to every product using the same manufacturing overhead rate, this rate is called the departmental overhead rate.

Accepted Answer

A) True 
 B)False

Question 17

Using departmental overhead rates is generally less accurate than using a single plantwide overhead rate.

Accepted Answer

A) True 
 B)False

Question 18

The Cosmo Corporation manufactures and assembles office chairs. Cosmo uses an activity-based costing system to allocate all manufacturing conversion costs. Each chair consists of 15 separate parts totaling $125 in direct materials, and requires 2.0 hours of machine time to produce. Additional information follows:   What is the cost of materials handling per chair?

Accepted Answer

A) $26.25 
B) $7.50 
C) $5.50 
D) $4.00 
A) $26.25 
B) $7.50 
C) $5.50 
D) $4.00

Question 19

On a cost of quality report, which of the following cost items should be classified as an external failure cost?

Accepted Answer

A) Net cost of scrap 
B) Technical support provided to suppliers 
C) Customer returns of defective products 
D) Supplies used in the quality inspection program 
A) Net cost of scrap 
B) Technical support provided to suppliers 
C) Customer returns of defective products 
D) Supplies used in the quality inspection program

Question 20

The cost of warranty work is an example of what type of cost?

Accepted Answer

A) Prevention cost 
B) Appraisal cost 
C) External failure cost 
D) Internal failure cost 
A) Prevention cost 
B) Appraisal cost 
C) External failure cost 
D) Internal failure cost

Regarding activity-based costing systems, which of the following statements is true?

Facility-level activities and costs are incurred no matter how many units, batches, or products are produced in the plant.

Which of the following does ABC take into account?

Which of the following is most likely to be the cost driver for the packaging and shipping activity?

Product testing is an appraisal cost.

Telecom uses activity-based costing to allocate all manufacturing conversion costs. Telecom produces cellular telephones; each phone has $40.00 of direct materials, includes 30 parts and requires 3 hours of machine time. Additional information follows: What is the cost of machining per phone?

To determine the amount of overhead allocated, the overhead rate is divided by the cost driver.

When overhead is allocated to every product using the same manufacturing overhead rate, this rate is called the departmental overhead rate.

Using departmental overhead rates is generally less accurate than using a single plantwide overhead rate.

On a cost of quality report, which of the following cost items should be classified as an external failure cost?

The cost of warranty work is an example of what type of cost?

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Process Costing

Cost Behavior

Cost-Volume-Profit Analysis

Relevant Costs for Short-Term Decisions

The Master Budget

Performance Evaluation

Standard Costs and Variances

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Sustainability

Filters

Exam 4: Activity-Based Costing, Lean Operations, and the Costs of Quality

Regarding activity-based costing systems, which of the following statements is true?

Facility-level activities and costs are incurred no matter how many units, batches, or products are produced in the plant.

Which of the following does ABC take into account?

Which of the following is most likely to be the cost driver for the packaging and shipping activity?

Product testing is an appraisal cost.

Telecom uses activity-based costing to allocate all manufacturing conversion costs. Telecom produces cellular telephones; each phone has $40.00 of direct materials, includes 30 parts and requires 3 hours of machine time. Additional information follows: What is the cost of machining per phone?

To determine the amount of overhead allocated, the overhead rate is divided by the cost driver.

When overhead is allocated to every product using the same manufacturing overhead rate, this rate is called the departmental overhead rate.

Using departmental overhead rates is generally less accurate than using a single plantwide overhead rate.

On a cost of quality report, which of the following cost items should be classified as an external failure cost?

The cost of warranty work is an example of what type of cost?

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Process Costing

Cost Behavior

Cost-Volume-Profit Analysis

Relevant Costs for Short-Term Decisions

The Master Budget

Performance Evaluation

Standard Costs and Variances

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Sustainability

Filters