Question 1

Effective implementation of activity-based costing (ABC)requires:

Accepted Answer

A) Normally the assistance of a consultant. 
B) A sophisticated and expensive computer system. 
C) Support of top management and key employees. 
D) Capturing properly the complexity of the data. 
E) ABC has no significant implementation issues. 
A) Normally the assistance of a consultant. 
B) A sophisticated and expensive computer system. 
C) Support of top management and key employees. 
D) Capturing properly the complexity of the data. 
E) ABC has no significant implementation issues.

Question 2

National Inc.manufactures two models of CMD that can be used as cell phones,MPX,and digital camcorders.  
National uses a volume-based costing system to apply factory overhead based on direct labor dollars.The unit prime costs of each product were as follows:  
National's controller had been researching activity-based costing and decided to switch to it.A special study determined National's two products have the following budgeted activities:  
Using activity-based costing,applied machinery overhead for the Great P model per unit is (rounded to the nearest cent):

Accepted Answer

A) $4.60. 
B) $9.45. 
C) $13.44. 
D) $15.12. 
E) $42.61. 
A) $4.60. 
B) $9.45. 
C) $13.44. 
D) $15.12. 
E) $42.61.

Question 3

Certo Health Products was formed two years ago to produce and distribute a newly-patented protein supplement.Two variations of the original supplement have since been developed and introduced for general sale.The three products are processed in essentially the same way,but Ann Marshall,the owner of Certo,anticipates that a half-dozen new products will be developed for sale in the next two years.These products will not be variations of the patented supplement,and will require a different production process other than the one currently used.Ann has asked you to review the current use of a single volume-based rate and explain the arguments for using departmental rates with activity-based drivers.

Accepted Answer

A single volume-based rate is appropriat

Question 4

Which of the following is a description of categorizing related customer costs into cost pools on the basis of cost drivers?

Accepted Answer

A) Customer revenue analysis. 
B) Customer cost analysis. 
C) Customer profitability analysis. 
D) Customer value assessment. 
E) Customer equity analysis. 
A) Customer revenue analysis. 
B) Customer cost analysis. 
C) Customer profitability analysis. 
D) Customer value assessment. 
E) Customer equity analysis.

Question 5

National Inc.manufactures two models of CMD that can be used as cell phones,MPX,and digital camcorders.  
National uses a volume-based costing system to apply factory overhead based on direct labor dollars.The unit prime costs of each product were as follows:  
National's controller had been researching activity-based costing and decided to switch to it.A special study determined National's two products have the following budgeted activities:  
Using activity-based costing,applied miscellaneous overhead for the Great P model per unit is (rounded to the nearest cent):

Accepted Answer

A) $4.60. 
B) $9.45. 
C) $13.44. 
D) $15.12. 
E) $42.61. 
A) $4.60. 
B) $9.45. 
C) $13.44. 
D) $15.12. 
E) $42.61.

Question 6

Wings Co.budgeted $555,600 manufacturing direct wages,2,315 direct labor hours and had the following manufacturing overhead:  
Requirements for Job #971 which manufactured 4 units of product:  
Using ABC,overhead cost assigned to Job #971 for machine setup is:

Accepted Answer

A) $2,300. 
B) $990. 
C) $6,500. 
D) $690. 
E) $1,020. 
A) $2,300. 
B) $990. 
C) $6,500. 
D) $690. 
E) $1,020.

Question 7

Everlast Co.manufactures a variety of drill bits.The company's plant is partially automated.The budget for the year includes $432,000 payroll for 4,800 direct labor-hours.Listed below is cost driver information used in the product-costing system:  
A current product order has the following requirements:  
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

An adaptation of ABC costing that simplifies ABC by assigning resource costs directly to cost objects is called:

Accepted Answer

A) Activity analysis 
B) Multistage ABC 
C) Time-Driven ABC 
D) Resource Consumption Accounting 
E) Customer profitability analysis 
A) Activity analysis 
B) Multistage ABC 
C) Time-Driven ABC 
D) Resource Consumption Accounting 
E) Customer profitability analysis

Question 9

Zeta Company is preparing its annual profit plan.As part of its analysis of the profitability of individual products,the controller estimates the amount of manufacturing overhead that should be assigned to the individual product lines from the information given below.  
Budgeted material-handling costs are $50,000.
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 10

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 11

A measure of frequency and intensity of demands placed on activities by cost objects 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

Customer equity 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 13

Engineering change orders,equipment maintenance,and product development costs are examples of:

Accepted Answer

A) Unit costs. 
B) Batch costs. 
C) Product-level costs. 
D) Facility-level costs. 
E) Unit,batch,and customer-sustaining costs,respectively. 
A) Unit costs. 
B) Batch costs. 
C) Product-level costs. 
D) Facility-level costs. 
E) Unit,batch,and customer-sustaining costs,respectively.

Question 14

National Inc.manufactures two models of CMD that can be used as cell phones,MPX,and digital camcorders.  
National uses a volume-based costing system to apply factory overhead based on direct labor dollars.The unit prime costs of each product were as follows:  
National's controller had been researching activity-based costing and decided to switch to it.A special study determined National's two products have the following budgeted activities:  
What is the overhead application rate using the firm's volume-based costing system (rounded to the nearest percent or cents)?

Accepted Answer

A) 350 percent of direct labor cost. 
B) $51.89 per direct labor-hour. 
C) 68 per cent of direct labor cost. 
D) 5,189 percent of direct labor cost. 
E) 5,110 percent of direct labor cost. 
A) 350 percent of direct labor cost. 
B) $51.89 per direct labor-hour. 
C) 68 per cent of direct labor cost. 
D) 5,189 percent of direct labor cost. 
E) 5,110 percent of direct labor cost.

Question 15

Which one of the following is not a unit-level cost driver?

Accepted Answer

A) Direct labor hours. 
B) Direct material dollars. 
C) Machine hours. 
D) Production orders. 
A) Direct labor hours. 
B) Direct material dollars. 
C) Machine hours. 
D) Production orders.

Question 16

Pasternik Company produces and sells two products,Alpha and Zeta.The following information is available relating to its setup activities:  
Use of activity-based costing would allocate the following amounts of setup cost to each unit (rounded to the nearest cent):

Accepted Answer

A) A 
B) B 
C) C 
D) D
General Calculations:
# of Alpha batches = 250/10 = 25
# of Zeta batches = 20,000/500 = 40
Total batches = 65 = 40 + 25
Alpha:
Total Set-up Cost = 25 x $2,000 = $50,000
$50,000/250 units = $200 per unit
Zeta:
Total Set-up Cost = 40 x $2,000 = $80,000
$80,000/20,000 = $4 per unit 
A) A 
B) B 
C) C 
D) D
General Calculations:
# of Alpha batches = 250/10 = 25
# of Zeta batches = 20,000/500 = 40
Total batches = 65 = 40 + 25
Alpha:
Total Set-up Cost = 25 x $2,000 = $50,000
$50,000/250 units = $200 per unit
Zeta:
Total Set-up Cost = 40 x $2,000 = $80,000
$80,000/20,000 = $4 per unit

Question 17

The relationship between activity-based costing (ABC)and strategic cost management could be described as:

Accepted Answer

A) Inconsistent. 
B) Proportional. 
C) Insignificant. 
D) Linked. 
E) Minimal. 
A) Inconsistent. 
B) Proportional. 
C) Insignificant. 
D) Linked. 
E) Minimal.

Question 18

Which of the following would likely be the most appropriate cost driver of electric power used by machines?

Accepted Answer

A) Number of units. 
B) Machine size. 
C) Number of machine hours. 
D) Number of production runs. 
E) Purchase cost of machines. 
A) Number of units. 
B) Machine size. 
C) Number of machine hours. 
D) Number of production runs. 
E) Purchase cost of machines.

Question 19

Nerrod Company sells its products at $500 per unit,net 30.The firm's gross margin ratio is 40 percent.The firm has estimated the following operating costs:  
Nerrod Company has gathered the following data pertaining to activities it performed for two of its customers:  
What is Nerrod's total customer unit-level cost applicable to XBT as a customer?

Accepted Answer

A) $50. 
B) $480. 
C) $4,120. 
D) $4,125. 
E) $6,300. 
A) $50. 
B) $480. 
C) $4,120. 
D) $4,125. 
E) $6,300.

Question 20

Shaver Co.manufactures a variety of electric razors for men and women.The company's plant is partially automated.Listed below is cost driver information used in the product-costing system:  
In addition,Shaver expects to spend $514,368 for 8,037 direct labor-hours.Two current product orders had the following requirements:  
Using ABC,how much product-level overhead is assigned to the current order for Men'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.

Effective implementation of activity-based costing (ABC)requires:

Which of the following is a description of categorizing related customer costs into cost pools on the basis of cost drivers?

Wings Co.budgeted $555,600 manufacturing direct wages,2,315 direct labor hours and had the following manufacturing overhead: Requirements for Job #971 which manufactured 4 units of product: Using ABC,overhead cost assigned to Job #971 for machine setup is:

An adaptation of ABC costing that simplifies ABC by assigning resource costs directly to cost objects is called:

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

A measure of frequency and intensity of demands placed on activities by cost objects is:

Customer equity is a type of analysis used to:

Engineering change orders,equipment maintenance,and product development costs are examples of:

Which one of the following is not a unit-level cost driver?

Pasternik Company produces and sells two products,Alpha and Zeta.The following information is available relating to its setup activities: Use of activity-based costing would allocate the following amounts of setup cost to each unit (rounded to the nearest cent):

The relationship between activity-based costing (ABC)and strategic cost management could be described as:

Which of the following would likely be the most appropriate cost driver of electric power used by machines?

Cost Management and Strategy

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

Profit Planning: Cost-Volume-Profit 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 and 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

Management Compensation, Business Analysis, and Business Valuation

Filters

Exam 5: Activity-Based Costing and Customer Profitability Analysis

Effective implementation of activity-based costing (ABC)requires:

Which of the following is a description of categorizing related customer costs into cost pools on the basis of cost drivers?

Wings Co.budgeted $555,600 manufacturing direct wages,2,315 direct labor hours and had the following manufacturing overhead: Requirements for Job #971 which manufactured 4 units of product: Using ABC,overhead cost assigned to Job #971 for machine setup is:

An adaptation of ABC costing that simplifies ABC by assigning resource costs directly to cost objects is called:

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

A measure of frequency and intensity of demands placed on activities by cost objects is:

Customer equity is a type of analysis used to:

Engineering change orders,equipment maintenance,and product development costs are examples of:

Which one of the following is not a unit-level cost driver?

Pasternik Company produces and sells two products,Alpha and Zeta.The following information is available relating to its setup activities: Use of activity-based costing would allocate the following amounts of setup cost to each unit (rounded to the nearest cent):

The relationship between activity-based costing (ABC)and strategic cost management could be described as:

Which of the following would likely be the most appropriate cost driver of electric power used by machines?

Cost Management and Strategy

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

Profit Planning: Cost-Volume-Profit 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 and 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

Management Compensation, Business Analysis, and Business Valuation

Filters