Question 1

The use of activity-based costing is most appropriate for:

Accepted Answer

A) Firms that manufacture multiple product lines. 
B) Firms that have very low manufacturing overhead costs relative to other costs of production. 
C) Firms with high levels of production activity. 
D) Firms that are labor intensive. 
E) Firms that manufacture a small number of product lines. 
A) Firms that manufacture multiple product lines. 
B) Firms that have very low manufacturing overhead costs relative to other costs of production. 
C) Firms with high levels of production activity. 
D) Firms that are labor intensive. 
E) Firms that manufacture a small number of product lines.

Question 2

Time-driven ABC provides a direct way to measure:

Accepted Answer

A) Production efficiency. 
B) Unused capacity. 
C) Product line profitability. 
D) Value-adding activities. 
E) Customer value. 
A) Production efficiency. 
B) Unused capacity. 
C) Product line profitability. 
D) Value-adding activities. 
E) Customer value.

Question 3

Which of the following is an example of a high-value-added activity?

Accepted Answer

A) Shipping the customer's order. 
B) Scheduling the customer order for production. 
C) Inspecting goods to ensure the right quantity is being shipped. 
D) E-mailing a customer to assure that a complaint will be resolved expeditiously. 
E) More than one of the above activities is high-value-added. 
A) Shipping the customer's order. 
B) Scheduling the customer order for production. 
C) Inspecting goods to ensure the right quantity is being shipped. 
D) E-mailing a customer to assure that a complaint will be resolved expeditiously. 
E) More than one of the above activities is high-value-added.

Question 4

Demski Company has used a two-stage cost allocation system for many years. In the first stage, plant overhead costs are allocated to two production departments, P1 and P2, based on machine hours. In the second stage, Demski uses direct labor hours to assign overhead costs from the production departments to individual products A andB.
Budgeted factory overhead costs for the year are $300,000. Both the budgeted and actual machine hours in P1 and P2 are 12,000 and 28,000 hours, respectively.
After attending a seminar to learn the potential benefits of adopting an activity-based costing system (ABC), Ted Demski, the president of Demski Company, is considering implementing an ABC system. Upon his request, the controller at Demski Company has compiled the following information for analysis:
   Demski manufactures two types of product, A and B, for which the following information is available:
   Required:
1. Determine the unit cost for each of the two products using the traditional two-stage allocation method. Round calculations to 2 decimal places.
2. Determine the unit cost for each of the two products using the proposed ABC system.
3. Compare the unit manufacturing costs for product A and product B computed in requirements 1 and 2.
(a) Why do two the cost systems differ in their total cost for each product?
(b) Why might these differences be important to the Demski Company? 
Answer may vary
Feedback: 1. Unit cost for each of two products using the traditional two-stage allocation method:

Accepted Answer

Answer may vary
Feedback: 1. Unit cost f

Question 5

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

Accepted Answer

A) $218.00. 
B) $250.70. 
C) $331.20. 
D) $284.00. 
E) $288.00. 
A) $218.00. 
B) $250.70. 
C) $331.20. 
D) $284.00. 
E) $288.00.

Question 6

Costs at the unit-level of activity should be allocated to products using cost drivers that are:

Accepted Answer

A) Customer-oriented. 
B) Design-related. 
C) Volume-related. 
D) Product-related. 
E) Order-related. 
A) Customer-oriented. 
B) Design-related. 
C) Volume-related. 
D) Product-related. 
E) Order-related.

Question 7

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

Accepted Answer

A) $8,000. 
B) $9,960. 
C) $11,108. 
D) $19,200. 
E) $45,933. 
A) $8,000. 
B) $9,960. 
C) $11,108. 
D) $19,200. 
E) $45,933.

Question 8

What is the total manufacturing overhead assigned to the current order for Men's Razors if the firm uses a volume-based plant wide overhead rate based on direct labor dollars?

Accepted Answer

A) $112.50. 
B) $150.00. 
C) $243.75. 
D) $7,200.00. 
E) $15,600.00. 
A) $112.50. 
B) $150.00. 
C) $243.75. 
D) $7,200.00. 
E) $15,600.00.

Question 9

ABC costing helps an organization implement its strategy through all of the following means except:

Accepted Answer

A) Providing accurate cost information. 
B) Identifying the most profitable products and customers. 
C) Helping improve cycle time. 
D) Identifying value added and non-value added activities. 
E) Providing a basis for effective utilization of capacity. 
A) Providing accurate cost information. 
B) Identifying the most profitable products and customers. 
C) Helping improve cycle time. 
D) Identifying value added and non-value added activities. 
E) Providing a basis for effective utilization of capacity.

Question 10

Customer Profitability Analysis Spring Company collected the following data pertaining to its activities with selected customers.
   Spring Company mails monthly statements on or before the first day of each month. HS pays all of its account payables within the payment discount periods. Adventix does not take the early payment discounts. In fact, the company pays half of its accounts on the date that these accounts are due and pays the remainder at the end of the following month. Baldwin also does not take advantage of discounts for early payments. However, it pays its accounts on the specified due date. Cost of goods sold is sixty percent of gross sales price. Joan Lieberman, the controller of Spring Company, has estimated that the cost of working capital is approximately 2 percent per month.
Lieberman also gathered the following cost data:   Required:
Prepare and interpret a customer profitability analysis for Spring Company. How does it help Spring Company become more competitive and profitable?

Accepted Answer

Answer may vary
Feedback: @#IMG-DLM& @#IMG-DLM& @#IMG-DLM& There are m

Question 11

In regard to selling activities, which one of the following would be a cost driver for selling expense?

Accepted Answer

A) Number of invoices. 
B) Number of sales calls. 
C) Number of production runs. 
D) Number of shipments. 
E) All of the above. 
A) Number of invoices. 
B) Number of sales calls. 
C) Number of production runs. 
D) Number of shipments. 
E) All of the above.

Question 12

Invoicing cost is an example of a:

Accepted Answer

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

Question 13

The controller for Ocean Sailboats Inc., a company which uses an automated process to make sailboats, established the following overhead cost pools and cost drivers:   A recent order for sailboats used:   Required:
1. What is the overhead rate per machine hour if the number of machine hours is used as a single cost driver under traditional costing system?
2. Utilizing traditional costing, how much overhead is assigned to the order based on machine hours as a single cost driver?
3. Utilizing ABC, how much total overhead is assigned to the order?

Accepted Answer

Answer may vary
Feed

Question 14

Which of the following is not normally associated with activity-based costing?

Accepted Answer

A) Activity cost pools. 
B) Multiple cost drivers. 
C) Reduction of non-value-adding costs. 
D) High direct labor costs relative to manufacturing overhead costs. 
E) Improved decision-making and pricing. 
A) Activity cost pools. 
B) Multiple cost drivers. 
C) Reduction of non-value-adding costs. 
D) High direct labor costs relative to manufacturing overhead costs. 
E) Improved decision-making and pricing.

Question 15

Using activity-based costing, applied engineering and design factory overhead for the High F model per unit is (rounded to the nearest cent):

Accepted Answer

A) $6.13. 
B) $11.86. 
C) $16.28. 
D) $32.46. 
E) $66.73. 
A) $6.13. 
B) $11.86. 
C) $16.28. 
D) $32.46. 
E) $66.73.

Question 16

Swenson Company manufactures 4,000 units of Deluxe Product and 20,000 units of Regular Product each year. The company currently uses direct labor-hours to assign overhead cost to products. The pre-determined overhead rate is:     Suppose, however, that factory overhead costs are actually caused by the five activities listed below:   Also suppose the following transaction data has been collected:   Required:
Using the activity-based costing method to calculate unit costs of Deluxe and Regular products, and compare them with the current direct labor hours-based costing system.

Accepted Answer

Answer may vary
Feedback: Overhead rates

Question 17

Activity-based costing for manufacturing operations is used to assign:

Accepted Answer

A) Direct material and direct labor costs to products. 
B) Direct labor and manufacturing overhead costs to products. 
C) Manufacturing overhead costs to products. 
D) Selling and general administrative overhead costs to products. 
E) Selling and general administrative overhead and manufacturing overhead costs to products. 
A) Direct material and direct labor costs to products. 
B) Direct labor and manufacturing overhead costs to products. 
C) Manufacturing overhead costs to products. 
D) Selling and general administrative overhead costs to products. 
E) Selling and general administrative overhead and manufacturing overhead costs to products.

Question 18

Customer Profitability Analysis Boston Depot sells office supplies to area corporations and organizations. Tom Delayne, founder and CEO, has been disappointed with the operating results and the profit margin for the last two years. Business forms are mostly a "commodity" business with low profit margins. To increase profit margins and gain competitive advantages, Delayne introduced "Desk-Top Delivery" service. The business seems to be as busy as ever. Yet, the operating income has been declining. To help identify the root cause of declining profits, he decided to analyze the profitability of two of the firm's major customers: Omega International (OI) and City of Albion (CA).
According to the customer profitability analysis that Boston Depot conducts regularly, Boston Depot has the same amount of total sales with both OI and CA. However, the firm earns a higher gross margin and gross margin ratio from CA than those from the sales to OI, as demonstrated here:
   Boston Depot adds a flat 17.5 percent to all sales for expenses incurred in such activities as handling customers' requests, pick-packing, order delivery, warehousing, and data entry. However, not all customers require the same level of services. Operation Manager, Jamie Steel, points out that CA has been a much heavier service user than OI. She shows the following data to support her belief:   Controller Rod Jay has been investigating ways to determine the costs of performing various activities. He summarized his findings:   Steel points out that activities cost money. Two customers who request different service activities most likely are not costing the firm the same.
Required:
1. Using activity-based costing, compute the charges per unit of service activities.
2. Using activity-based costing, compute the total distribution costs for each of the customers.
3. Is the City of Albion a more profitable customer?
4. Is Omega International a better customer for Boston Depot?

Accepted Answer

Answer may vary
Feedback: 1. Service cos

Question 19

What is the total manufacturing overhead for the current product order if the firm assigns overhead costs based on machine hours?

Accepted Answer

A) $9,960. 
B) $30,240. 
C) $43,741. 
D) $44,268. 
E) $109,352. 
A) $9,960. 
B) $30,240. 
C) $43,741. 
D) $44,268. 
E) $109,352.

Question 20

Which of the following has the weakest linkage between activity and cost driver?

Accepted Answer

A) Option A 
B) Option B 
C) Option C 
D) Option D 
E) Option E 
A) Option A 
B) Option B 
C) Option C 
D) Option D 
E) Option E

The use of activity-based costing is most appropriate for:

Time-driven ABC provides a direct way to measure:

Which of the following is an example of a high-value-added activity?

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

Costs at the unit-level of activity should be allocated to products using cost drivers that are:

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

What is the total manufacturing overhead assigned to the current order for Men's Razors if the firm uses a volume-based plant wide overhead rate based on direct labor dollars?

ABC costing helps an organization implement its strategy through all of the following means except:

In regard to selling activities, which one of the following would be a cost driver for selling expense?

Invoicing cost is an example of a:

Which of the following is not normally associated with activity-based costing?

Using activity-based costing, applied engineering and design factory overhead for the High F model per unit is (rounded to the nearest cent):

Activity-based costing for manufacturing operations is used to assign:

What is the total manufacturing overhead for the current product order if the firm assigns overhead costs based on machine hours?

Which of the following has the weakest linkage between activity and cost driver?

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

Exam 5: Activity-Based Costing and Customer Profitability Analysis

The use of activity-based costing is most appropriate for:

Time-driven ABC provides a direct way to measure:

Which of the following is an example of a high-value-added activity?

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

Costs at the unit-level of activity should be allocated to products using cost drivers that are:

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

What is the total manufacturing overhead assigned to the current order for Men's Razors if the firm uses a volume-based plant wide overhead rate based on direct labor dollars?

ABC costing helps an organization implement its strategy through all of the following means except:

In regard to selling activities, which one of the following would be a cost driver for selling expense?

Invoicing cost is an example of a:

Which of the following is not normally associated with activity-based costing?

Using activity-based costing, applied engineering and design factory overhead for the High F model per unit is (rounded to the nearest cent):

Activity-based costing for manufacturing operations is used to assign:

What is the total manufacturing overhead for the current product order if the firm assigns overhead costs based on machine hours?

Which of the following has the weakest linkage between activity and cost driver?

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