Question 1

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 2

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 batch-level overhead is assigned to the current order for Women's Razors based on pounds of raw materials?

Accepted Answer

A) $6,000. 
B) $6,880. 
C) $5,332. 
D) $8,175. 
E) $9,374.
($1,078,000/134,750)x 750 = $6,000 
A) $6,000. 
B) $6,880. 
C) $5,332. 
D) $8,175. 
E) $9,374.
($1,078,000/134,750)x 750 = $6,000

Question 3

Which of the following activities is a facility-level activity?

Accepted Answer

A) Plant management salaries. 
B) Production scheduling. 
C) Direct labor. 
D) Product design. 
E) Materials handling. 
A) Plant management salaries. 
B) Production scheduling. 
C) Direct labor. 
D) Product design. 
E) Materials handling.

Question 4

Volume-Based Costing Versus ABC: Gorden Company produces a variety of electronic products.One of its plants produces two laser printers,Speedy and Deluxe.At the beginning of 2010,the following data were prepared for this plant:

Accepted Answer

@#IMG-DLM& 
The unit overhead cost is calculated u

Question 5

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 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.

Question 6

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 machine setup overhead is assigned to the order?

Accepted Answer

A) $19,200. 
B) $8,000. 
C) $11,108. 
D) $9,960. 
E) $7,272. 
A) $19,200. 
B) $8,000. 
C) $11,108. 
D) $9,960. 
E) $7,272.

Question 7

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:  
What is the total manufacturing overhead assigned to the current order for Men's Razors if the firm uses a volume-based plantwide overhead rate based on the 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 8

Volume-based rates produce inaccurate product cost when:

Accepted Answer

A) A large share of factory overhead cost is volume-based. 
B) Firms produce a diverse mix of products. 
C) Large volumes of a product are manufactured. 
D) Firms have a small number of homogeneous products. 
A) A large share of factory overhead cost is volume-based. 
B) Firms produce a diverse mix of products. 
C) Large volumes of a product are manufactured. 
D) Firms have a small number of homogeneous products.

Question 9

Activity-based costing (ABC)differs from other costing approaches in that it more accurately measures the cost of activities:

Accepted Answer

A) Not proportional to the volume of outputs produced. 
B) Directly proportional to the volume of outputs produced. 
C) Inversely proportional to the volume of outputs produced. 
D) That are non-value adding. 
E) At a significantly lower cost in time and money. 
A) Not proportional to the volume of outputs produced. 
B) Directly proportional to the volume of outputs produced. 
C) Inversely proportional to the volume of outputs produced. 
D) That are non-value adding. 
E) At a significantly lower cost in time and money.

Question 10

Sheen Co.manufacturers laser printers.It has outlined the following overhead cost drivers:  
Sheen Co.has an order for 1,000 laser printers that has the following production requirements:  
Using activity-based costing,applied materials handling factory overhead for the 1000 laser printer 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 11

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-sustaining cost applicable to Ninto?

Accepted Answer

A) $400. 
B) $600. 
C) $4,000. 
D) $6,300. 
E) $6,420. 
A) $400. 
B) $600. 
C) $4,000. 
D) $6,300. 
E) $6,420.

Question 12

Orange,Inc.has identified the following cost drivers for its expected overhead costs for the year:  
Total direct labor hours budgeted = 2,000 hours.
The following data applies to Product X,one of the products completed during the year  
If the activity-based cost drivers are used to allocate overhead cost,the total overhead cost of Product X will be:

Accepted Answer

A) $1,500. 
B) $1,560. 
C) $2,000. 
D) $2,400. 
E) $2,560. 
A) $1,500. 
B) $1,560. 
C) $2,000. 
D) $2,400. 
E) $2,560.

Question 13

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 14

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:  
What is the total manufacturing overhead for the current product order if the firm uses a plantwide rate based on direct labor-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 15

Customer profitability analysis:

Accepted Answer

A) Always shows that the company with the highest total sales generates the highest net customer profit. 
B) Always shows that the company with the lowest total sales generates the lowest net customer profit. 
C) Produces the same results as a Pareto analysis. 
D) Helps identify actions to improve customer profitability. 
A) Always shows that the company with the highest total sales generates the highest net customer profit. 
B) Always shows that the company with the lowest total sales generates the lowest net customer profit. 
C) Produces the same results as a Pareto analysis. 
D) Helps identify actions to improve customer profitability.

Question 16

Pasternik Company produces and sells two products,Alpha and Zeta.The following information is available relating to its setup activities:  
Assume the cost per setup remains at $2,000 but that the batch size for product Alpha is changed from 10 to 25 units per batch.Using activity-based costing and a volume-based overhead costing that uses direct labor-hours to assign overhead,the amount of setup cost applied to each unit of product Alpha would be (rounded to the nearest cent):

Accepted Answer

A) A 
B) B 
C) C 
D) D
General Calculations:
# of Alpha batches = 250/25 = 10
# of Zeta batches = 20,000/500 = 40
Total number of batches = 50 = 10 + 40
Total Set-up Cost = $2,000 x 50 batches = $100,000
Set-up cost per direct labor hour = $100,000/40,000 total direct labor hours = $2.50 per direct labor hour
Alpha Activity-Based:
Total Set-up Cost = 10 x $2,000 = $20,000
$20,000/250 units = $80 per unit
Alpha Volume-Based:
Set-up cost for Alpha = $2.50 x 1,000 Alpha direct labor hours = $2,500
Total Alpha Units Produced = 250 units
Alpha overhead cost per unit = $2,500/250 units = $10 
A) A 
B) B 
C) C 
D) D
General Calculations:
# of Alpha batches = 250/25 = 10
# of Zeta batches = 20,000/500 = 40
Total number of batches = 50 = 10 + 40
Total Set-up Cost = $2,000 x 50 batches = $100,000
Set-up cost per direct labor hour = $100,000/40,000 total direct labor hours = $2.50 per direct labor hour
Alpha Activity-Based:
Total Set-up Cost = 10 x $2,000 = $20,000
$20,000/250 units = $80 per unit
Alpha Volume-Based:
Set-up cost for Alpha = $2.50 x 1,000 Alpha direct labor hours = $2,500
Total Alpha Units Produced = 250 units
Alpha overhead cost per unit = $2,500/250 units = $10

Question 17

Pasternik Company produces and sells two products,Alpha and Zeta.The following information is available relating to its setup activities:  
With a volume-based costing system that applies overhead based on direct labor hours,the setup cost portion of overhead for each unit is (rounded to the nearest cent):

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

Question 18

A volume-based rate is an appropriate overhead application base when:

Accepted Answer

A) Several well-differentiated products are manufactured. 
B) Direct labor costs are large. 
C) Direct material costs are large relative to direct labor costs incurred. 
D) Only one product is manufactured. 
E) Manufacturing is process-based. 
A) Several well-differentiated products are manufactured. 
B) Direct labor costs are large. 
C) Direct material costs are large relative to direct labor costs incurred. 
D) Only one product is manufactured. 
E) Manufacturing is process-based.

Question 19

Diamond Cleats Co.manufactures cleats for baseball shoes.It has outlined the following overhead cost drivers:  
Diamond Cleats Co.has an order for cleats that has the following production requirements:  
Using activity-based costing,applied miscellaneous factory overhead for the baseball cleat order based on direct labor hours is:

Accepted Answer

A) $8,745. 
B) $10,312. 
C) $10,489. 
D) $9,912. 
E) $8,456. 
A) $8,745. 
B) $10,312. 
C) $10,489. 
D) $9,912. 
E) $8,456.

Question 20

Successful activity-based costing (ABC)implementation depends upon the firm:

Accepted Answer

A) Having support of consultants with appropriate expertise. 
B) Having a thorough activity analysis. 
C) Starting with a relatively simple system. 
D) Having well-trained managers. 
E) Having adequate computer resources. 
A) Having support of consultants with appropriate expertise. 
B) Having a thorough activity analysis. 
C) Starting with a relatively simple system. 
D) Having well-trained managers. 
E) Having adequate computer resources.

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

Which of the following activities is a facility-level activity?

Volume-Based Costing Versus ABC: Gorden Company produces a variety of electronic products.One of its plants produces two laser printers,Speedy and Deluxe.At the beginning of 2010,the following data were prepared for this plant:

Volume-based rates produce inaccurate product cost when:

Activity-based costing (ABC)differs from other costing approaches in that it more accurately measures the cost of activities:

Sheen Co.manufacturers laser printers.It has outlined the following overhead cost drivers: Sheen Co.has an order for 1,000 laser printers that has the following production requirements: Using activity-based costing,applied materials handling factory overhead for the 1000 laser printer order is:

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:

Customer profitability analysis:

A volume-based rate is an appropriate overhead application base when:

Successful activity-based costing (ABC)implementation depends upon the firm:

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

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

Which of the following activities is a facility-level activity?

Volume-Based Costing Versus ABC: Gorden Company produces a variety of electronic products.One of its plants produces two laser printers,Speedy and Deluxe.At the beginning of 2010,the following data were prepared for this plant:

Volume-based rates produce inaccurate product cost when:

Activity-based costing (ABC)differs from other costing approaches in that it more accurately measures the cost of activities:

Sheen Co.manufacturers laser printers.It has outlined the following overhead cost drivers: Sheen Co.has an order for 1,000 laser printers that has the following production requirements: Using activity-based costing,applied materials handling factory overhead for the 1000 laser printer order is:

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:

Customer profitability analysis:

A volume-based rate is an appropriate overhead application base when:

Successful activity-based costing (ABC)implementation depends upon the firm:

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