Question 1

__________ are procedures or processes that cause work to be accomplished.

Accepted Answer

A)  Unit-level costs 
B)  Overhead costs 
C)  Activities 
D)  Batch-level costs 
A)  Unit-level costs 
B)  Overhead costs 
C)  Activities 
D)  Batch-level costs

Question 2

Herndon Brothers Inc.produces a variety of 'all natural' household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast.Which of the following types of costs would most likely be a product-level cost?

Accepted Answer

A)  A package product design cost 
B)  A machine setup cost 
C)  Depreciation on the factory building 
D)  Utility costs for factory machinery 
A)  A package product design cost 
B)  A machine setup cost 
C)  Depreciation on the factory building 
D)  Utility costs for factory machinery

Question 3

Which of the following is a likely advantage in activity-based costing (ABC)?

Accepted Answer

A)  A decrease in the need to maintain accurate cost driver information 
B)  A decrease in the need to maintain accurate overhead cost information 
C)  An increase in the ability to trace indirect costs to specific activities 
D)  As increase in the cost of accumulating,tracking,and assigning costs to products and services 
A)  A decrease in the need to maintain accurate cost driver information 
B)  A decrease in the need to maintain accurate overhead cost information 
C)  An increase in the ability to trace indirect costs to specific activities 
D)  As increase in the cost of accumulating,tracking,and assigning costs to products and services

Question 4

Give two examples for each of the four types of cost classifications.
$\begin{array}{llcc}
  \text {Unit-level:  } &1.\
&2.\\
 \text { Batch-level: } &1.\
&2.\\
 \text {Product-level:  } &1.\
&2.\\
 \text {Facility-level:  } &1.\
&2.\\
\end{array}$

Accepted Answer

Unit-level: @#LAT-DLM& 1. Sugplies far factary
@#LAT-DLM&@#LAT-DLM&@#LAT-DLM&@#LAT-DLM&@#LAT-DLM&2.

Question 5

Aunt Lucy’s Candies
Aunt Lucy’s Candies sells standard and premium chocolate confectionary through its catalogue business. Many of the confectionary are sold in bulk to other companies. Last year, the company incurred $300 000 in overhead costs. After implementing activity-based costing (ABC), the company’s controller identified the following information:
$$\begin{array} { l l c } 
\text { Activity } & \text { Allocation Base } & \text { Proportion of Overhead Cost } \
\hline \text { Purchasing } & \text { Number of purchase orders } & 30 \% \
\text { Processing } & \text { Number of units } & 50 \% \
\text { Sales } & \text { Number of sales orders } & 20 \%
\end{array}$$
The number of activities for standard and premium confectionary is as follows:
$\begin{array}{lrr}
&\underline{\text { Standard} } &\underline{ \text { Premium }} \
\text {Number of purchase orders}&4000& 2000 \
\text { Number of units }&200000 &  100000 \
\text {Number of sales orders}&3000 &  1000
\end{array}$
-If a single sales order for premium confectionary requires 2 purchase orders for a total of 500 pieces (units),how much overhead should be assigned to that order?

Accepted Answer

A)  $250.00 
B)  $ 45.00 
C)  $272.50 
D)  $295.00 
A)  $250.00 
B)  $ 45.00 
C)  $272.50 
D)  $295.00

Question 6

Which of the following is true regarding activity-based costing (ABC)?

Accepted Answer

A)  The benefits of using ABC always outweigh its limitations. 
B)  The lower the proportion of overhead costs as compared to direct materials and direct labour costs,the more likely a company will benefit by using ABC. 
C)  Companies with a high-proportion of non-unit-level costs should rarely use ABC. 
D)  High measurement costs associated with ABC may deter some companies from its use. 
A)  The benefits of using ABC always outweigh its limitations. 
B)  The lower the proportion of overhead costs as compared to direct materials and direct labour costs,the more likely a company will benefit by using ABC. 
C)  Companies with a high-proportion of non-unit-level costs should rarely use ABC. 
D)  High measurement costs associated with ABC may deter some companies from its use.

Question 7

Mountaineer Tents manufactures and sells heavy and light duty tents to various outdoor retailers.To better estimate costs,the company recently adopted an activity-based costing system.Last year,the company incurred $900 000 in overhead costs.Based on an intense study of their company,the following activities,allocation bases,and percentages of overhead costs were determined:
$\begin{array}{llc}
\text { Activity } & \text { Allocation Base } & \text { Proportion of Overhead cost } \
\hline \text { Purchasing } & \text { Number of purchase orders } & 55 \% \
\text { Inspections } & \text { Number of inspections } & 20 \% \
\text { Sales } & \text { Numher of sales nrders } & 25 \%
\end{array}$
 
The number of activities for heavy and light duty tents is as follows:
$\begin{array}{lrr}
& \underline{\text { Heavy-duty}}&
\underline{\text { Light-duty}}\
\text { Number of purchase orders } & 5000 & 4000 \
\text { Number of inspections } & 3000 & 1000 \
\text { Number of sales nrders } & 800 & 400
\end{array}$ 
Required:
A. Calculate the tatal cverhead that should be allacated to each of the three actrities.
B. Calculate the averhead rates for each of the three activities.
C. If a single sales arder requires 10 purchase arders and 30 inspections to fill how much cverhead should be agplied to the order?

Accepted Answer

None

Question 8

Which of the following statements regarding cost drivers is false?

Accepted Answer

A)  Cost drivers can have a motivational effect upon employees. 
B)  Cost drivers should generally be chosen based on a cause-and-effect relationship between the driver and the specific cost being considered. 
C)  Cost drivers are groups of overhead costs that are similar. 
D)  An activity could have more than one potential cost driver. 
A)  Cost drivers can have a motivational effect upon employees. 
B)  Cost drivers should generally be chosen based on a cause-and-effect relationship between the driver and the specific cost being considered. 
C)  Cost drivers are groups of overhead costs that are similar. 
D)  An activity could have more than one potential cost driver.

Question 9

Which of the following statements is true regarding cross-subsidies?

Accepted Answer

A)  They occur when factory workers are trained to work on many different machines. 
B)  They occur when high-volume products are assigned more than their fair share of overhead costs. 
C)  They occur when high-volume products have more direct material and direct labour costs than overhead costs. 
D)  They occur when more than one cost driver can be determined for a particular overhead cost item. 
A)  They occur when factory workers are trained to work on many different machines. 
B)  They occur when high-volume products are assigned more than their fair share of overhead costs. 
C)  They occur when high-volume products have more direct material and direct labour costs than overhead costs. 
D)  They occur when more than one cost driver can be determined for a particular overhead cost item.

Question 10

If Job #229 required 5 purchase orders,10 shipments,8 machine setups,and 4 inspections to fill,how much overhead should be assigned to Job #229?

Accepted Answer

A)  $ 4.06 
B)  $303.75 
C)  $580.00 
D)  $ 85.50 
A)  $ 4.06 
B)  $303.75 
C)  $580.00 
D)  $ 85.50

Question 11

Which of the following would most likely be a facility-level cost?

Accepted Answer

A)  Depreciation on factory equipment 
B)  Depreciation on factory building 
C)  Depreciation of engineering equipment 
D)  Depreciation of setup equipment 
A)  Depreciation on factory equipment 
B)  Depreciation on factory building 
C)  Depreciation of engineering equipment 
D)  Depreciation of setup equipment

Question 12

Which of the following statements is false regarding activities in an ABC system?

Accepted Answer

A)  As a business becomes more complex,more activities will probably need to be identified. 
B)  Two different manufacturing companies that make the same products may come up with different sets of activities and cost drivers. 
C)  The maximum number of activities that should be identified as batch-level is two. 
D)  Overhead costs may be allocated to more than one activity. 
A)  As a business becomes more complex,more activities will probably need to be identified. 
B)  Two different manufacturing companies that make the same products may come up with different sets of activities and cost drivers. 
C)  The maximum number of activities that should be identified as batch-level is two. 
D)  Overhead costs may be allocated to more than one activity.

Question 13

Aunt Lucy’s Candies
Aunt Lucy’s Candies sells standard and premium chocolate confectionary through its catalogue business. Many of the confectionary are sold in bulk to other companies. Last year, the company incurred $300 000 in overhead costs. After implementing activity-based costing (ABC), the company’s controller identified the following information:
$$\begin{array} { l l c } 
\text { Activity } & \text { Allocation Base } & \text { Proportion of Overhead Cost } \
\hline \text { Purchasing } & \text { Number of purchase orders } & 30 \% \
\text { Processing } & \text { Number of units } & 50 \% \
\text { Sales } & \text { Number of sales orders } & 20 \%
\end{array}$$
The number of activities for standard and premium confectionary is as follows:
$\begin{array}{lrr}
&\underline{\text { Standard} } &\underline{ \text { Premium }} \
\text {Number of purchase orders}&4000& 2000 \
\text { Number of units }&200000 &  100000 \
\text {Number of sales orders}&3000 &  1000
\end{array}$
-What is the overhead rate for the purchasing activity?

Accepted Answer

A)  $15.00 
B)  $ .07 
C)  $50.00 
D)  $ 1.07 
A)  $15.00 
B)  $ .07 
C)  $50.00 
D)  $ 1.07

Question 14

Troxler Inc.produces various types of floor rugs with many different designs.They typically produce at least 200 rugs with a single machine setup.A cost incurred each time a new rug design is developed is called a(n):

Accepted Answer

A)  product-level cost. 
B)  batch-level cost. 
C)  unit-level cost. 
D)  facility-level cost. 
A)  product-level cost. 
B)  batch-level cost. 
C)  unit-level cost. 
D)  facility-level cost.

Question 15

When comparing traditional product costing and activity-based costing (ABC),which kind(s)of costs are allocated to products in a similar manner and which kind(s)are allocated to products in a different manner? Explain your answers.

Accepted Answer

Both traditional and ABC allocate the co

Question 16

Which of the following types of companies would be most likely to benefit from activity-based costing?

Accepted Answer

A)  Companies with a low potential for cost distortions 
B)  Companies that have a large proportion of unit-level costs 
C)  Companies that have a relatively high proportion of overhead compared to direct materials and direct labour 
D)  None of these 
A)  Companies with a low potential for cost distortions 
B)  Companies that have a large proportion of unit-level costs 
C)  Companies that have a relatively high proportion of overhead compared to direct materials and direct labour 
D)  None of these

Question 17

What would one expect to occur when cross subsidies are eliminated with the use of activity-based costing (ABC)?

Accepted Answer

A)  Lower-volume products pick up more of their fair share of overhead costs. 
B)  Higher-volume products pick up more of their fair share of overhead costs. 
C)  Lower-volume products will be determined as being unprofitable. 
D)  Higher-volume products will be determined as being unprofitable. 
A)  Lower-volume products pick up more of their fair share of overhead costs. 
B)  Higher-volume products pick up more of their fair share of overhead costs. 
C)  Lower-volume products will be determined as being unprofitable. 
D)  Higher-volume products will be determined as being unprofitable.

Question 18

Which of the following would most likely be a batch-level cost?

Accepted Answer

A)  Factory rent 
B)  Quality control 
C)  Energy costs for factory machinery 
D)  Research and development costs for a new product line 
A)  Factory rent 
B)  Quality control 
C)  Energy costs for factory machinery 
D)  Research and development costs for a new product line

Question 19

As companies experience a shift from labour-intensive operations to machine-automated operations,which of the following costs becomes more difficult to trace to products?

Accepted Answer

A)  Administrative costs 
B)  Direct labour costs 
C)  Direct material costs 
D)  Overhead costs 
A)  Administrative costs 
B)  Direct labour costs 
C)  Direct material costs 
D)  Overhead costs

Question 20

What is meant by the term 'activity' in activity-based costing (ABC)? How are costs allocated in ABC?

Accepted Answer

An activity is a procedure or process th

__________ are procedures or processes that cause work to be accomplished.

Herndon Brothers Inc.produces a variety of 'all natural' household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast.Which of the following types of costs would most likely be a product-level cost?

Which of the following is a likely advantage in activity-based costing (ABC)?

Give two examples for each of the four types of cost classifications. Unit-level: 1. 2. Batch-level: 1. 2. Product-level: 1. 2. Facility-level: 1. 2.

Which of the following is true regarding activity-based costing (ABC)?

Which of the following statements regarding cost drivers is false?

Which of the following statements is true regarding cross-subsidies?

If Job #229 required 5 purchase orders,10 shipments,8 machine setups,and 4 inspections to fill,how much overhead should be assigned to Job #229?

Which of the following would most likely be a facility-level cost?

Which of the following statements is false regarding activities in an ABC system?

Troxler Inc.produces various types of floor rugs with many different designs.They typically produce at least 200 rugs with a single machine setup.A cost incurred each time a new rug design is developed is called a(n):

When comparing traditional product costing and activity-based costing (ABC),which kind(s)of costs are allocated to products in a similar manner and which kind(s)are allocated to products in a different manner? Explain your answers.

Which of the following types of companies would be most likely to benefit from activity-based costing?

What would one expect to occur when cross subsidies are eliminated with the use of activity-based costing (ABC)?

Which of the following would most likely be a batch-level cost?

As companies experience a shift from labour-intensive operations to machine-automated operations,which of the following costs becomes more difficult to trace to products?

What is meant by the term 'activity' in activity-based costing (ABC)? How are costs allocated in ABC?

Introduction to Managerial Accounting

Product Costing: Manufacturing Processes, cost Terminology and Cost Flows

Cost Behaviour

Job Costing and Overhead Costing Systems

Process Costing Systems

Service and Operations Costing

Departmental Overhead Costing

Cost-Volume-Profit Analysis

Relevant Costs and Product Planning Decisions

Long-Term Capital Investmentdecisions

Fixed and Rolling Budgets for Planning and Decision Making

Management Accounting for Cost Control and Performance Evaluation Flexible Budgets and Variance Analysis

Decentralisation and Modern Performance Management Systems the Balanced Scorecard

Accounting for Sustainability Social Reporting,environmental Reporting and Management Accounting

Filters

Exam 8: Activity-Based Costing

__________ are procedures or processes that cause work to be accomplished.

Herndon Brothers Inc.produces a variety of 'all natural' household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast.Which of the following types of costs would most likely be a product-level cost?

Which of the following is a likely advantage in activity-based costing (ABC)?

Give two examples for each of the four types of cost classifications. Unit-level: 1. 2. Batch-level: 1. 2. Product-level: 1. 2. Facility-level: 1. 2.

Which of the following is true regarding activity-based costing (ABC)?

Which of the following statements regarding cost drivers is false?

Which of the following statements is true regarding cross-subsidies?

If Job #229 required 5 purchase orders,10 shipments,8 machine setups,and 4 inspections to fill,how much overhead should be assigned to Job #229?

Which of the following would most likely be a facility-level cost?

Which of the following statements is false regarding activities in an ABC system?

Troxler Inc.produces various types of floor rugs with many different designs.They typically produce at least 200 rugs with a single machine setup.A cost incurred each time a new rug design is developed is called a(n):

When comparing traditional product costing and activity-based costing (ABC),which kind(s)of costs are allocated to products in a similar manner and which kind(s)are allocated to products in a different manner? Explain your answers.

Which of the following types of companies would be most likely to benefit from activity-based costing?

What would one expect to occur when cross subsidies are eliminated with the use of activity-based costing (ABC)?

Which of the following would most likely be a batch-level cost?

As companies experience a shift from labour-intensive operations to machine-automated operations,which of the following costs becomes more difficult to trace to products?

What is meant by the term 'activity' in activity-based costing (ABC)? How are costs allocated in ABC?

Introduction to Managerial Accounting

Product Costing: Manufacturing Processes, cost Terminology and Cost Flows

Cost Behaviour

Job Costing and Overhead Costing Systems

Process Costing Systems

Service and Operations Costing

Departmental Overhead Costing

Cost-Volume-Profit Analysis

Relevant Costs and Product Planning Decisions

Long-Term Capital Investmentdecisions

Fixed and Rolling Budgets for Planning and Decision Making

Management Accounting for Cost Control and Performance Evaluation Flexible Budgets and Variance Analysis

Decentralisation and Modern Performance Management Systems the Balanced Scorecard

Accounting for Sustainability Social Reporting,environmental Reporting and Management Accounting

Filters