Question 1

All of the following statements regarding activity-based costing systems are true except they:

Accepted Answer

A) Can provide more accurate product costs. 
B) Identify more costs as indirect costs than do traditional volume-based systems. 
C) Are likely to be more time-consuming than volume-based systems. 
D) Are used in both manufacturing and non-manufacturing companies. 
E) Are likely to have more overhead rates than volume-based systems. 
A) Can provide more accurate product costs. 
B) Identify more costs as indirect costs than do traditional volume-based systems. 
C) Are likely to be more time-consuming than volume-based systems. 
D) Are used in both manufacturing and non-manufacturing companies. 
E) Are likely to have more overhead rates than volume-based systems.

Question 2

Which of the following would be the most appropriate cost driver to allocate factory electricity costs to products?

Accepted Answer

A) Machinery depreciation expense. 
B) Machinery maintenance work orders. 
C) Machinery down-time. 
D) Machine hours. 
E) Machine productivity. 
A) Machinery depreciation expense. 
B) Machinery maintenance work orders. 
C) Machinery down-time. 
D) Machine hours. 
E) Machine productivity.

Question 3

Multistage ABC is used when:

Accepted Answer

A) There are many departments in the organization. 
B) Management wants a higher level of accuracy from the ABC calculations. 
C) There are complex relationships among the activities. 
D) To simplify the ABC calculations. 
E) There is no such thing as Multistage ABC. 
A) There are many departments in the organization. 
B) Management wants a higher level of accuracy from the ABC calculations. 
C) There are complex relationships among the activities. 
D) To simplify the ABC calculations. 
E) There is no such thing as Multistage ABC.

Question 4

Using a volume-based overhead rate based on machine hours to assign manufacturing overhead to a product line that uses relatively few machine hours is likely to:

Accepted Answer

A) Overapply overhead to the product line. 
B) Underapply overhead to the product line. 
C) Understate direct labor costs. 
D) Overstate direct labor costs. 
E) Either over- or under-apply overhead to the product line depending on many other factors. 
A) Overapply overhead to the product line. 
B) Underapply overhead to the product line. 
C) Understate direct labor costs. 
D) Overstate direct labor costs. 
E) Either over- or under-apply overhead to the product line depending on many other factors.

Question 5

Which of the following is a batch-level cost driver?

Accepted Answer

A) Output units. 
B) Number of employees. 
C) Number of orders. 
D) Number of parts. 
E) Machine hours. 
A) Output units. 
B) Number of employees. 
C) Number of orders. 
D) Number of parts. 
E) Machine hours.

Question 6

Which of the following would likely be the most appropriate cost driver to allocate machine set-up costs to products?

Accepted Answer

A) Machine hours. 
B) Direct labor hours. 
C) Number of production runs. 
D) Number of products. 
E) Number of purchase orders. 
A) Machine hours. 
B) Direct labor hours. 
C) Number of production runs. 
D) Number of products. 
E) Number of purchase orders.

Question 7

An activity that is performed for each unit of production is a(n):

Accepted Answer

A) Product-level activity. 
B) Facility-level activity. 
C) Unit-level activity. 
D) Performance-level activity. 
E) Batch-level activity. 
A) Product-level activity. 
B) Facility-level activity. 
C) Unit-level activity. 
D) Performance-level activity. 
E) Batch-level activity.

Question 8

Moss Manufacturing has just completed a major change in its quality control (QC) process. Previously, products had been reviewed by QC inspectors at the end of each major process, and the company's ten QC inspectors were charged as direct labor to the operation or job. In an effort to improve efficiency and quality, a computerized video QC system was purchased for $250,000. The system consists of a minicomputer, 15 video cameras, other peripheral hardware, and software.
The new system used cameras stationed by QC engineers at key points in the production process. Each time an operation changes or there is a new operation, the cameras are moved, and a new master picture is loaded into the computer by a QC engineer. The camera takes pictures of the units in process, and the computer compares them to the picture of a "good" unit. Any differences are sent to a QC engineer who removes the bad units and discusses the flaws with the production supervisors. The new system has replaced the ten QC inspectors with two QC engineers.
The operating costs of the new QC system, including the salaries of the QC engineers, have been included as factory overhead in calculating the company's volume-based factory overhead rate which is based on direct labor dollars.
The company's president is confused. His vice president of production has told him how efficient the new system is, yet there is a large increase in the factory overhead rate. The computation of the rate before and after automation is shown below.   "Three hundred percent," lamented the president, "How can we compete with such a high factory overhead rate?"
Required:
1. a. Define factory overhead, and cite three examples of typical costs that would be included in factory overhead.
b. Explain why companies develop factory overhead rates.
2. Explain why the increase in the overhead rate should not have a negative financial impact on Moss Manufacturing.
3. Explain, in the greatest detail possible, how Moss Manufacturing could change its overhead accounting system to eliminate confusion over product costs.

Accepted Answer

Answer may vary
Feedback: 1. a. Factory

Question 9

Using ABC, how much facility-level overhead is assigned to the current order for Men's Razors?

Accepted Answer

A) $403.00. 
B) $310.00. 
C) $708.50. 
D) $545.00. 
E) $936.00. 
A) $403.00. 
B) $310.00. 
C) $708.50. 
D) $545.00. 
E) $936.00.

Question 10

General corporate sales expenditures are:

Accepted Answer

A) Customer unit-level costs. 
B) Customer batch-level costs. 
C) Customer-sustaining costs. 
D) Distribution-channel costs. 
E) Sales-sustaining costs. 
A) Customer unit-level costs. 
B) Customer batch-level costs. 
C) Customer-sustaining costs. 
D) Distribution-channel costs. 
E) Sales-sustaining costs.

Question 11

A measure of the quantity of resources consumed by an activity is:

Accepted Answer

A) Quantity driver. 
B) Resource consumption cost driver. 
C) Not a cost driver. 
D) Activity consumption cost driver. 
E) Consumption cost driver. 
A) Quantity driver. 
B) Resource consumption cost driver. 
C) Not a cost driver. 
D) Activity consumption cost driver. 
E) Consumption cost driver.

Question 12

Which of the following is a batch-level cost driver?

Accepted Answer

A) Output units. 
B) Number of engineering change orders. 
C) Number of materials handling transactions. 
D) Square feet of plant area occupied. 
E) Number of employees. 
A) Output units. 
B) Number of engineering change orders. 
C) Number of materials handling transactions. 
D) Square feet of plant area occupied. 
E) Number of employees.

Question 13

Procurement costs such as costs of placing orders for materials and paying suppliers are usually classified as:

Accepted Answer

A) Output-unit-level costs. 
B) Batch-level costs. 
C) Product-level costs. 
D) Facility-level costs. 
E) Vendor costs. 
A) Output-unit-level costs. 
B) Batch-level costs. 
C) Product-level costs. 
D) Facility-level costs. 
E) Vendor costs.

Question 14

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 components. 
C) Number of orders. 
D) Hours of testing. 
E) Number of production runs. 
A) Number of setups. 
B) Number of components. 
C) Number of orders. 
D) Hours of testing. 
E) Number of production runs.

Question 15

The material-handling cost per wall mirror under ABC is:

Accepted Answer

A) $0. 
B) $500. 
C) $1,000. 
D) $2,000. 
E) $5,000. 
A) $0. 
B) $500. 
C) $1,000. 
D) $2,000. 
E) $5,000.

Question 16

Which of the following is a benefit of activity-based costing?

Accepted Answer

A) Reduced overhead costs. 
B) More accurate measures of production volume. 
C) Facilitate better product pricing decisions. 
D) Having fewer cost drivers than volume-based costing systems. 
E) More streamlined manufacturing processes. 
A) Reduced overhead costs. 
B) More accurate measures of production volume. 
C) Facilitate better product pricing decisions. 
D) Having fewer cost drivers than volume-based costing systems. 
E) More streamlined manufacturing processes.

Question 17

Skateline Inc. designs and manufactures roller skates. The following data pertain to two of its major
customers: FantasticSkates and SkateToday.   Required: Compare the net proceeds from each customer to Skateline Inc. 30 days after sale. (rounded to nearest dollar for each step where applicable).

Accepted Answer

Answer may

Question 18

Customer lifetime value is a type of analysis used to:

Accepted Answer

A) Assess the ethical practices of each salesperson-customer relationship. 
B) Assess the current profit potential of a customer. 
C) Assess the long term profit potential of a customer. 
D) Assess the current profit potential of all the firm's customers. 
E) Assess the long term profit potential of all the firm's customers. 
A) Assess the ethical practices of each salesperson-customer relationship. 
B) Assess the current profit potential of a customer. 
C) Assess the long term profit potential of a customer. 
D) Assess the current profit potential of all the firm's customers. 
E) Assess the long term profit potential of all the firm's customers.

Question 19

Using activity-based costing, applied quality control factory overhead for the 1,000 laser printers order is:

Accepted Answer

A) $7,800. 
B) $10,000. 
C) $10,500. 
D) $150. 
E) $21,600. 
A) $7,800. 
B) $10,000. 
C) $10,500. 
D) $150. 
E) $21,600.

Question 20

Using ABC, how much total overhead is assigned to the order?

Accepted Answer

A) $42,160. 
B) $43,740. 
C) $44,268. 
D) $44,432. 
E) $45,993. 
A) $42,160. 
B) $43,740. 
C) $44,268. 
D) $44,432. 
E) $45,993.

All of the following statements regarding activity-based costing systems are true except they:

Which of the following would be the most appropriate cost driver to allocate factory electricity costs to products?

Multistage ABC is used when:

Using a volume-based overhead rate based on machine hours to assign manufacturing overhead to a product line that uses relatively few machine hours is likely to:

Which of the following is a batch-level cost driver?

Which of the following would likely be the most appropriate cost driver to allocate machine set-up costs to products?

An activity that is performed for each unit of production is a(n):

Using ABC, how much facility-level overhead is assigned to the current order for Men's Razors?

General corporate sales expenditures are:

A measure of the quantity of resources consumed by an activity is:

Which of the following is a batch-level cost driver?

Procurement costs such as costs of placing orders for materials and paying suppliers are usually classified as:

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

The material-handling cost per wall mirror under ABC is:

Which of the following is a benefit of activity-based costing?

Skateline Inc. designs and manufactures roller skates. The following data pertain to two of its major customers: FantasticSkates and SkateToday. Required: Compare the net proceeds from each customer to Skateline Inc. 30 days after sale. (rounded to nearest dollar for each step where applicable).

Customer lifetime value is a type of analysis used to:

Using activity-based costing, applied quality control factory overhead for the 1,000 laser printers order is:

Using ABC, how much total overhead is assigned to the order?

Short-Term Profit Planning: Cost-Volume-Profit CVP Analysis

Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map

Basic Cost Management Concepts

Job Costing

Process Costing

Cost Allocation: Departments, Joint Products, and By-Products

Cost Estimation

Short-Term Profit Planning: Cost-Volume-Profit Cvp Analysis

Strategy and the Master Budget

Decision Making With a Strategic Emphasis

Strategy and the Analysis of Capital Investments

Cost Planning for the Product Life Cycle: Target Costing, Theory of Constraints, and Strategic Pricing

Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management

Operational Performance Measurement: Further Analysis of Productivity and Sales

The Management and Control of Quality

Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Strategic Performance Measurement: Investment Centers and Transfer Pricing

Management Compensation, Business Analysis, and Business Valuation

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Exam 5: Activity-Based Costing and Customer Profitability Analysis

All of the following statements regarding activity-based costing systems are true except they:

Which of the following would be the most appropriate cost driver to allocate factory electricity costs to products?

Multistage ABC is used when:

Using a volume-based overhead rate based on machine hours to assign manufacturing overhead to a product line that uses relatively few machine hours is likely to:

Which of the following is a batch-level cost driver?

Which of the following would likely be the most appropriate cost driver to allocate machine set-up costs to products?

An activity that is performed for each unit of production is a(n):

Using ABC, how much facility-level overhead is assigned to the current order for Men's Razors?

General corporate sales expenditures are:

A measure of the quantity of resources consumed by an activity is:

Which of the following is a batch-level cost driver?

Procurement costs such as costs of placing orders for materials and paying suppliers are usually classified as:

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

The material-handling cost per wall mirror under ABC is:

Which of the following is a benefit of activity-based costing?

Skateline Inc. designs and manufactures roller skates. The following data pertain to two of its major customers: FantasticSkates and SkateToday. Required: Compare the net proceeds from each customer to Skateline Inc. 30 days after sale. (rounded to nearest dollar for each step where applicable).

Customer lifetime value is a type of analysis used to:

Using activity-based costing, applied quality control factory overhead for the 1,000 laser printers order is:

Using ABC, how much total overhead is assigned to the order?

Short-Term Profit Planning: Cost-Volume-Profit CVP Analysis

Implementing Strategy: The Value Chain, the Balanced Scorecard, and the Strategy Map

Basic Cost Management Concepts

Job Costing

Process Costing

Cost Allocation: Departments, Joint Products, and By-Products

Cost Estimation

Short-Term Profit Planning: Cost-Volume-Profit Cvp Analysis

Strategy and the Master Budget

Decision Making With a Strategic Emphasis

Strategy and the Analysis of Capital Investments

Cost Planning for the Product Life Cycle: Target Costing, Theory of Constraints, and Strategic Pricing

Operational Performance Measurement: Sales, Direct-Cost Variances, and the Role of Nonfinancial Performance Measures

Operational Performance Measurement: Indirect-Cost Variances and Resource-Capacity Management

Operational Performance Measurement: Further Analysis of Productivity and Sales

The Management and Control of Quality

Strategic Performance Measurement: Cost Centers, Profit Centers, and the Balanced Scorecard

Strategic Performance Measurement: Investment Centers and Transfer Pricing

Management Compensation, Business Analysis, and Business Valuation

Filters