Question 1

In general,duration drivers are more accurate measures of the consumption of resources than transaction drivers.

Accepted Answer

A) True 
 B)False

Question 2

Grogam Catering uses activity-based costing for its overhead costs. The company has provided the following data concerning the activity rates in its activity-based costing system:
 
The number of meals served is the measure of activity for the Preparing Meals activity cost pool. The number of functions catered is used as the activity measure for the Arranging Functions activity cost pool.

Management would like to know whether the company made any money on a recent function at which 100 meals were served. The company catered the function for a fixed price of $21.00 per meal. The cost of the raw ingredients for the meals was $8.25 per meal. This cost is in addition to the costs of wages, supplies, and other expenses detailed above.

For the purposes of preparing action analyses, management has assigned ease of adjustment codes to the costs as follows: wages are classified as a Yellow cost, supplies and raw ingredients as a Green cost, and other expenses as a Red cost.

-(Appendix 5A)In an action analysis report prepared for the function mentioned above,what would be the "yellow margin" in the report,rounded to the nearest whole dollar?

Accepted Answer

A)  $635. 
B)  $710. 
C)  $760. 
D)  $815. 
A)  $635. 
B)  $710. 
C)  $760. 
D)  $815.

Question 3

Huish Awnings makes custom awnings for homes and businesses.The company uses an activity-based costing system for its overhead costs.The company has provided the following data concerning its annual overhead costs and its activity cost pools:
Overhead Costs:
 
The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows:
 
Required:

a) Prepare the first-stage allocation of overhead costs to the activity cost pools by filling in the table below:

b) Compute the activity rates (i.e., cost per unit of activity) for the Making Awnings and Job Support activity cost pools by filling in the table below:
 
c) (Appendix 5A) Prepare an action analysis report in good form of a job that involves making 80 yards of awnings and has direct materials and direct labour cost of $3,000. The sales revenue from this job is $4,000. For purposes of this action analysis report, direct materials and direct labour should be classified as a Green cost, production overhead as a Red cost, and office expense as a Yellow cost.

Accepted Answer

a) First-s

Question 4

(Appendix 5A)Which of the following best describes a cost object,such as a product or customer,that has a positive red margin?

Accepted Answer

A)  Its green margin will be positive. 
B)  Its green margin may be positive,negative,or zero. 
C)  Its green margin will be negative. 
D)  Its green margin will be zero. 
A)  Its green margin will be positive. 
B)  Its green margin may be positive,negative,or zero. 
C)  Its green margin will be negative. 
D)  Its green margin will be zero.

Question 5

Testing a prototype of a new product is an example of an activity at which of the following levels?

Accepted Answer

A)  Unit-level activity. 
B)  Batch-level activity. 
C)  Product-level activity. 
D)  Organization-sustaining activity. 
A)  Unit-level activity. 
B)  Batch-level activity. 
C)  Product-level activity. 
D)  Organization-sustaining activity.

Question 6

Arthur Company has two products: S and D. The company uses activity-based costing and has prepared the following analysis, showing the estimated total cost and expected activity for each of its three activity cost pools:
 
The annual production and sales of Product S is 4,547 units. The annual production and sales of Product D is 7,913.
-The activity rate under the activity-based costing system for Activity 3 is closest to which of the following?

Accepted Answer

A)  $29.32. 
B)  $30.00. 
C)  $33.33. 
D)  $41.53. 
A)  $29.32. 
B)  $30.00. 
C)  $33.33. 
D)  $41.53.

Question 7

Acton Company has two products: A and B. The annual production and sales of Product A is 800 units and of Product B is 500 units. The company has traditionally used direct labour hours as the basis for applying all manufacturing overhead to products. Product A requires 0.3 direct labour hours per unit, and Product B requires 0.2 direct labour hours per unit. The total estimated overhead for next period is $92,023.

The company is considering switching to an activity-based costing system for the purpose of computing unit product costs for external reports. The new activity-based costing system would have three overhead activity cost pools—Activity 1, Activity 2, and General Factory—with estimated overhead costs and expected activity as follows:
 
(Note: The General Factory activity cost pool's costs are allocated on the basis of direct labour hours.)

-The predetermined overhead rate under the traditional costing system is closest to which of the following?

Accepted Answer

A)  $13.17. 
B)  $21.60. 
C)  $37.46. 
D)  $270.66. 
A)  $13.17. 
B)  $21.60. 
C)  $37.46. 
D)  $270.66.

Question 8

Kebort Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labour-hours (DLHs). The company has two products, U86Y and M91F, about which it has provided the following data:

The company's estimated total manufacturing overhead for the year is $2,541,760 and the company's estimated total direct labour-hours for the year is 47,000.

The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:

-(Appendix 5B)The unit product cost of product U86Y under the company's traditional costing system is closest to:

Accepted Answer

A)  $71.15 
B)  $55.50 
C)  $75.86 
D)  $38.00 
A)  $71.15 
B)  $55.50 
C)  $75.86 
D)  $38.00

Question 9

Setting up equipment is an example of an activity at which of the following levels?

Accepted Answer

A)  Unit-level activity. 
B)  Batch-level activity. 
C)  Product-level activity. 
D)  Organization-sustaining activity. 
A)  Unit-level activity. 
B)  Batch-level activity. 
C)  Product-level activity. 
D)  Organization-sustaining activity.

Question 10

Foster Florist specializes in large floral bouquets for hotels and other commercial spaces. The company has provided the following data concerning its annual overhead costs and its activity-based costing system:

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows:
 
-What would be the total overhead cost per delivery according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Deliveries activity cost pool?

Accepted Answer

A)  $24.00. 
B)  $26.50. 
C)  $27.00. 
D)  $30.00. 
A)  $24.00. 
B)  $26.50. 
C)  $27.00. 
D)  $30.00.

Question 11

Arranging for a shipment of a number of different products to a customer is an example of an activity at which of the following levels?

Accepted Answer

A)  Unit-level activity. 
B)  Batch-level activity. 
C)  Customer-level activity. 
D)  Organization-sustaining activity. 
A)  Unit-level activity. 
B)  Batch-level activity. 
C)  Customer-level activity. 
D)  Organization-sustaining activity.

Question 12

Grodt Catering uses activity-based costing for its overhead costs. The company has provided the following data concerning the activity rates in its activity-based costing system:
 
The number of meals served is the measure of activity for the Preparing Meals activity cost pool. The number of functions catered is used as the activity measure for the Arranging Functions activity cost pool.

Management would like to know whether the company made any money on a recent function at which 60 meals were served. The company catered the function for a fixed price of $19.00 per meal. The cost of the raw ingredients for the meals was $8.60 per meal. This cost is in addition to the costs of wages, supplies, and other expenses detailed above.

For the purposes of preparing action analyses, management has assigned ease of adjustment codes to the costs as follows: wages are classified as a Yellow cost, supplies and raw ingredients as a Green cost, and other expenses as a Red cost.

-(Appendix 5A)In an action analysis report prepared for the function mentioned above,what would be the "yellow margin" in the report,rounded to the nearest whole dollar?

Accepted Answer

A)  $123. 
B)  $198. 
C)  $248. 
D)  $303. 
A)  $123. 
B)  $198. 
C)  $248. 
D)  $303.

Question 13

Escau Company is a wholesale distributor that uses activity-based costing for all of its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity-based costing system:

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The activity measures for the activity cost pools for the year are as follows:

-What would be the total overhead cost per customer according to the activity-based costing system,rounded to the nearest whole dollar? In other words,what would be the overall activity rate for the Customer Support activity cost pool?

Accepted Answer

A)  $10,800. 
B)  $12,600. 
C)  $13,650. 
D)  $14,400. 
A)  $10,800. 
B)  $12,600. 
C)  $13,650. 
D)  $14,400.

Question 14

Dideda Company uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity-based costing system:

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. You have been asked to complete the first-stage allocation of costs to the activity cost pools.
-How much cost,in total,would be allocated in the first-stage allocation to the Customer Support activity cost pool?

Accepted Answer

A)  $120,000. 
B)  $255,000. 
C)  $282,000. 
D)  $390,000. 
A)  $120,000. 
B)  $255,000. 
C)  $282,000. 
D)  $390,000.

Question 15

Binegar Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labour-hours (DLHs). The company has two products, R58G and R09O, about which it has provided the following data:
 
The company's estimated total manufacturing overhead for the year is $1,617,600 and the company's estimated total direct labour-hours for the year is 24,000.

The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:

-(Appendix 5B)The manufacturing overhead that would be applied to a unit of product R09O under the activity-based costing system is closest to:

Accepted Answer

A)  $113.46 
B)  $255.00 
C)  $141.54 
D)  $17.28 
A)  $113.46 
B)  $255.00 
C)  $141.54 
D)  $17.28

Question 16

Koszyk Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labour-hours (DLHs). The company has two products, P85G and C43S, about which it has provided the following data:
 
The company's estimated total manufacturing overhead for the year is $2,264,000 and the company's estimated total direct labour-hours for the year is 40,000.

The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below:

-(Appendix 5B)The total cost of a unit of product P85G under the company's traditional costing system is closest to:

Accepted Answer

A)  $146.97 
B)  $102.58 
C)  $101.69 
D)  $80.50 
A)  $146.97 
B)  $102.58 
C)  $101.69 
D)  $80.50

Question 17

Worker recreational facilities are examples of costs that would ordinarily be considered to be incurred at which of the following activity levels?

Accepted Answer

A)  Unit-level activity. 
B)  Batch-level activity. 
C)  Product-level activity. 
D)  Organization-sustaining activity. 
A)  Unit-level activity. 
B)  Batch-level activity. 
C)  Product-level activity. 
D)  Organization-sustaining activity.

Question 18

Human resource management is an example of an activity at which of the following levels?

Accepted Answer

A)  Unit-level activity. 
B)  Product-level activity. 
C)  Batch-level activity. 
D)  Organization-sustaining activity. 
A)  Unit-level activity. 
B)  Product-level activity. 
C)  Batch-level activity. 
D)  Organization-sustaining activity.

Question 19

Why may departmental overhead rates NOT correctly assign overhead costs?

Accepted Answer

A)  Because of the use of direct labour hours in allocating overhead costs to products rather than machine time or quantity of materials. 
B)  Because of the high correlation between direct labour hours and the incurrence of overhead costs. 
C)  Because of the over-reliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced,lot size,or complexity of production. 
D)  Because of the difficulties associated with identifying cost pools for the first stage of the allocation process. 
A)  Because of the use of direct labour hours in allocating overhead costs to products rather than machine time or quantity of materials. 
B)  Because of the high correlation between direct labour hours and the incurrence of overhead costs. 
C)  Because of the over-reliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced,lot size,or complexity of production. 
D)  Because of the difficulties associated with identifying cost pools for the first stage of the allocation process.

Question 20

Davis Company uses an activity-based costing system in which there are three activity cost pools. The company has provided the following data concerning its costs and its activity-based costing system:

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. You have been asked to complete the first-stage allocation of the costs to the activity cost pools.
-How much cost,in total should not be allocated to orders and products in the second stage of the allocation process if the activity-based costing system is used for internal decision making?

Accepted Answer

A)  $0. 
B)  $60,000. 
C)  $80,000. 
D)  $120,000. 
A)  $0. 
B)  $60,000. 
C)  $80,000. 
D)  $120,000.

In general,duration drivers are more accurate measures of the consumption of resources than transaction drivers.

(Appendix 5A)Which of the following best describes a cost object,such as a product or customer,that has a positive red margin?

Testing a prototype of a new product is an example of an activity at which of the following levels?

Setting up equipment is an example of an activity at which of the following levels?

Arranging for a shipment of a number of different products to a customer is an example of an activity at which of the following levels?

Worker recreational facilities are examples of costs that would ordinarily be considered to be incurred at which of the following activity levels?

Human resource management is an example of an activity at which of the following levels?

Why may departmental overhead rates NOT correctly assign overhead costs?

Managerial Accounting and the Business Environment

Cost Terms, Concepts, and Classifications

Systems Design: Job-Order Costing

Systems Design: Process Costing

Cost Behaviour: Analysis and Use

Cost-Volume-Profit Relationships

Variable Costing: A Tool for Management

Budgeting

Standard Costs and Overhead Analysis

Reporting for Control

Relevant Costs for Decision Making

Capital Budgeting Decisions

Financial Statement Analysis

Filters

Exam 5: Activity-Based Costing: A Tool to Aid Decision Making

In general,duration drivers are more accurate measures of the consumption of resources than transaction drivers.

(Appendix 5A)Which of the following best describes a cost object,such as a product or customer,that has a positive red margin?

Testing a prototype of a new product is an example of an activity at which of the following levels?

Setting up equipment is an example of an activity at which of the following levels?

Arranging for a shipment of a number of different products to a customer is an example of an activity at which of the following levels?

Worker recreational facilities are examples of costs that would ordinarily be considered to be incurred at which of the following activity levels?

Human resource management is an example of an activity at which of the following levels?

Why may departmental overhead rates NOT correctly assign overhead costs?

Managerial Accounting and the Business Environment

Cost Terms, Concepts, and Classifications

Systems Design: Job-Order Costing

Systems Design: Process Costing

Cost Behaviour: Analysis and Use

Cost-Volume-Profit Relationships

Variable Costing: A Tool for Management

Budgeting

Standard Costs and Overhead Analysis

Reporting for Control

Relevant Costs for Decision Making

Capital Budgeting Decisions

Financial Statement Analysis

Filters