Question 1

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

Accepted Answer

A)  It is based on the concept that a single cost driver can drive all overhead costs. 
B)  It is based on the concept that activities drive overhead costs. 
C)  It is based on the concept that unit-level costs drive all overhead costs. 
D)  It is based on the concept that either the number of direct labour or machine hours incurred drives all overhead costs. 
A)  It is based on the concept that a single cost driver can drive all overhead costs. 
B)  It is based on the concept that activities drive overhead costs. 
C)  It is based on the concept that unit-level costs drive all overhead costs. 
D)  It is based on the concept that either the number of direct labour or machine hours incurred drives all overhead costs.

Question 2

Which of the following would be a likely disadvantage of activity-based costing (ABC)?

Accepted Answer

A)  A decrease in a company's ability to accurately prepare budgets for the upcoming period 
B)  A decrease in a company's ability to find opportunities for continuous improvement 
C)  An increase in the accuracy of product cost information 
D)  An increase in the cost of obtaining accurate product cost information 
A)  A decrease in a company's ability to accurately prepare budgets for the upcoming period 
B)  A decrease in a company's ability to find opportunities for continuous improvement 
C)  An increase in the accuracy of product cost information 
D)  An increase in the cost of obtaining accurate product cost information

Question 3

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 to sustain the overall manufacturing process 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 4

Which of the following is not a benefit of activity-based costing (ABC)?

Accepted Answer

A)  Increased product cost information 
B)  Increased accuracy in the budgeting process 
C)  Increased implementation costs 
D)  Increased understanding of activities that drive overhead costs 
A)  Increased product cost information 
B)  Increased accuracy in the budgeting process 
C)  Increased implementation costs 
D)  Increased understanding of activities that drive overhead costs

Question 5

Activity-based costing is a method of cost allocation that is useful for assigning _______ costs to products or services.

Accepted Answer

A)  direct materials 
B)  direct labour 
C)  manufacturing overhead 
D)  direct materials and direct labour 
A)  direct materials 
B)  direct labour 
C)  manufacturing overhead 
D)  direct materials and direct labour

Question 6

Discuss how the shift from labour intensive manufacturing to automation has affected product costing.

Accepted Answer

When companies were more labour intensiv

Question 7

Which of the following statements is false regarding the identification of activities in activity-based costing (ABC)?

Accepted Answer

A)  The identification of activities that drive overhead costs is done before cost drivers are selected. 
B)  An activity can be thought of as a procedure or process that causes work to be accomplished. 
C)  Each type of overhead cost should be traced to only one activity. 
D)  An activity that drives overhead costs can occur outside the physical manufacturing facility. 
A)  The identification of activities that drive overhead costs is done before cost drivers are selected. 
B)  An activity can be thought of as a procedure or process that causes work to be accomplished. 
C)  Each type of overhead cost should be traced to only one activity. 
D)  An activity that drives overhead costs can occur outside the physical manufacturing facility.

Question 8

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 batch-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 9

The following overhead cost information is available for Henderson Inc.for 2006:
$\begin{array}{llc}
\text { Activity } & \text { Allocation Base } & \text { Overhead Cost } \
\hline \text { Purchasing } & \text { Number of purchase orders } & \$ 40000 \
\text { Receiving } & \text { Number of shipments received } & 25000 \
\text { Machine setups } & \text { Number of setups } & 30000 \
\text { Ouality control } & \text { Number of inspections } & 20000
\end{array}$
During the year,2000 purchase orders were issued;800 shipments were received;3000 machine setups were performed;and 2500 inspections were conducted.
If Job #101 required 3 purchase orders,4 shipments,4 machine setups,and 2 inspections to complete,how much overhead should be assigned to Job #101?

Accepted Answer

A)  $241.00 
B)  $ 69.25 
C)  $180.18 
D)  $ 13.86 
A)  $241.00 
B)  $ 69.25 
C)  $180.18 
D)  $ 13.86

Question 10

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

Accepted Answer

A)  Salaries related to purchasing and receiving 
B)  Quality control costs 
C)  Energy costs for factory machinery 
D)  Research and development costs for a new product line 
A)  Salaries related to purchasing and receiving 
B)  Quality control costs 
C)  Energy costs for factory machinery 
D)  Research and development costs for a new product line

Question 11

Which of the following is a key feature of activity-based costing?

Accepted Answer

A)  Overhead costs are assigned on the basis of volume. 
B)  Overhead costs are assigned on the basis of sales. 
C)  Overhead costs are assigned on the basis of direct labour hours. 
D)  Overhead costs are assigned on the basis of activities. 
A)  Overhead costs are assigned on the basis of volume. 
B)  Overhead costs are assigned on the basis of sales. 
C)  Overhead costs are assigned on the basis of direct labour hours. 
D)  Overhead costs are assigned on the basis of activities.

Question 12

Which of the following types of costs are usually not allocated to products?

Accepted Answer

A)  Unit-level costs 
B)  Batch-level costs 
C)  Facility-level costs 
D)  Product-level costs 
A)  Unit-level costs 
B)  Batch-level costs 
C)  Facility-level costs 
D)  Product-level costs

Question 13

Compton Corporation
The following overhead cost information is available for Compton Corporation for 2006:
$$\begin{array} { l l c } 
\text { Activity } & \text { Allocation Base } & \text { Overhead Cost } \
\hline \text { Purchasing } & \text { Number of purchase orders } & \$ 100000 \
\text { Receiving } & \text { Number of shipments received } & 60000 \
\text { Machine setups } & \text { Number of setups } & 150000 \
\text { Quality control } & \text { Number of inspections } & 50000
\end{array}$$
During the year, 5000 purchase orders were issued; 20 000 shipments were received; 3000 machine setups were performed; and 4000 inspections were conducted.
-What is the overhead rate for the receiving activity?

Accepted Answer

A)  $1.88 
B)  $6.00 
C)  $3.00 
D)  $ .33 
A)  $1.88 
B)  $6.00 
C)  $3.00 
D)  $ .33

Question 14

Johnson Manufacturing
Johnson Manufacturing anticipates incurring $500 000 in overhead costs this year. After implementing activity-based costing (ABC), the company’s controller identified the following related information:
$$\begin{array} { l l c } 
\text { Activity } & \text { Allocation Base } & \text { Proportion of Overhead Cost } \
\hline \text { Purchasing } & \text { Number of purchase orders } & 20 \% \
\text { Machine setups } & \text { Number of setups } & 15 \% \
\text { Production } & \text { Number of machine hours } & 65 \%
\end{array}$$
The number of activities expected is as follows:
$\begin{array}{llcc}
  \text { Total number of purchase orders } &4000\
 \text { Total number of setups } &2000\
 \text {  Total number of machine hours} &10000\
\end{array}$

-How much total overhead will be allocated to the production activity?

Accepted Answer

A)  $500 000 
B)  $325 000 
C)  $ 10 000 
D)  $312 500 
A)  $500 000 
B)  $325 000 
C)  $ 10 000 
D)  $312 500

Question 15

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 processing activity?

Accepted Answer

A)  $ .97 
B)  $2.00 
C)  $ .50 
D)  $1.00 
A)  $ .97 
B)  $2.00 
C)  $ .50 
D)  $1.00

Question 16

Which of the following statements regarding service companies and activity-based costing (ABC)is true?

Accepted Answer

A)  Service companies are not permitted to use ABC costing. 
B)  Service companies find it easier to use ABC costing than manufacturing companies. 
C)  Fewer repetitive activities make ABC costing more difficult to implement in service companies. 
D)  Service companies have proportionately less facility-level costs than manufacturing companies. 
A)  Service companies are not permitted to use ABC costing. 
B)  Service companies find it easier to use ABC costing than manufacturing companies. 
C)  Fewer repetitive activities make ABC costing more difficult to implement in service companies. 
D)  Service companies have proportionately less facility-level costs than manufacturing companies.

Question 17

Which of the following would be the least likely cost driver for an activity such as the repair and maintenance of factory equipment?

Accepted Answer

A)  Machine hours 
B)  Direct labour hours 
C)  Number of units produced 
D)  Number of new product designs 
A)  Machine hours 
B)  Direct labour hours 
C)  Number of units produced 
D)  Number of new product designs

Question 18

Which of the following items might cause activity-based costing (ABC)to be more difficult to implement in a service company than in a manufacturing company?

Accepted Answer

A)  The lack of direct labour 
B)  The lack of facility-level costs 
C)  The lack of repetitive activities 
D)  The lack of overhead costs 
A)  The lack of direct labour 
B)  The lack of facility-level costs 
C)  The lack of repetitive activities 
D)  The lack of overhead costs

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

Which of the following would be a likely disadvantage of activity-based costing (ABC)?

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 to sustain the overall manufacturing process is called a(n):

Which of the following is not a benefit of activity-based costing (ABC)?

Activity-based costing is a method of cost allocation that is useful for assigning _______ costs to products or services.

Discuss how the shift from labour intensive manufacturing to automation has affected product costing.

Which of the following statements is false regarding the identification of activities in activity-based costing (ABC)?

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 batch-level cost?

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

Which of the following is a key feature of activity-based costing?

Which of the following types of costs are usually not allocated to products?

Which of the following statements regarding service companies and activity-based costing (ABC)is true?

Which of the following would be the least likely cost driver for an activity such as the repair and maintenance of factory equipment?

Which of the following items might cause activity-based costing (ABC)to be more difficult to implement in a service company than in a manufacturing company?

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

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

Which of the following would be a likely disadvantage of activity-based costing (ABC)?

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 to sustain the overall manufacturing process is called a(n):

Which of the following is not a benefit of activity-based costing (ABC)?

Activity-based costing is a method of cost allocation that is useful for assigning _______ costs to products or services.

Discuss how the shift from labour intensive manufacturing to automation has affected product costing.

Which of the following statements is false regarding the identification of activities in activity-based costing (ABC)?

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 batch-level cost?

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

Which of the following is a key feature of activity-based costing?

Which of the following types of costs are usually not allocated to products?

Which of the following statements regarding service companies and activity-based costing (ABC)is true?

Which of the following would be the least likely cost driver for an activity such as the repair and maintenance of factory equipment?

Which of the following items might cause activity-based costing (ABC)to be more difficult to implement in a service company than in a manufacturing company?

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