Question 1

External failure costs occur when the company detects and corrects poor-quality goods or services after delivery to customers.

Accepted Answer

A) True 
 B)False

Question 2

What type of costs are incurred to avoid poor quality goods or services in the first place?

Accepted Answer

A) Appraisal costs 
B) External costs 
C) Prevention costs 
D) Internal failure costs 
A) Appraisal costs 
B) External costs 
C) Prevention costs 
D) Internal failure costs

Question 3

ABC generally causes the least amount of cost distortion among products because indirect costs are allocated to the products based on

Accepted Answer

A) types of activities used by the product. 
B) the extent to which the activities are used. 
C) both A and B. 
D) none of the above. 
A) types of activities used by the product. 
B) the extent to which the activities are used. 
C) both A and B. 
D) none of the above.

Question 4

Telecom uses activity-based costing to allocate all manufacturing conversion costs.Telecom produces cellular telephones;each phone has $40.00 of direct materials,includes 30 parts and requires 3 hours of machine time.Additional information follows:
 
What is the cost of machining per phone?

Accepted Answer

A) $42.00 
B) $30.00 
C) $6.00 
D) $15.00 
A) $42.00 
B) $30.00 
C) $6.00 
D) $15.00

Question 5

The benefits of adopting ABC/ABM are higher for companies in competitive markets because

Accepted Answer

A) accounting/information system expertise is inexpensive to develop. 
B) ABM can pinpoint opportunities for cost savings. 
C) accurate product cost information is not as relevant for price setting. 
D) companies in competitive markets have low indirect costs. 
A) accounting/information system expertise is inexpensive to develop. 
B) ABM can pinpoint opportunities for cost savings. 
C) accurate product cost information is not as relevant for price setting. 
D) companies in competitive markets have low indirect costs.

Question 6

Cross Roads Manufacturing currently uses a traditional costing system.The company allocates overhead to its two products,Zips and Dees,using a predetermined manufacturing overhead rate based on direct labor hours.Here is data related to the company's two products:  
 
The amount of manufacturing overhead that would be allocated to one unit of Dees using an activity-based costing system would be closest to

Accepted Answer

A) $94.82. 
B) $64.46. 
C) $48.53. 
D) $13.20. 
A) $94.82. 
B) $64.46. 
C) $48.53. 
D) $13.20.

Question 7

Waste can be reduced by implementing shorter setup times.

Accepted Answer

A) True 
 B)False

Question 8

The benefits of adopting ABC/ABM are higher for companies in more competitive markets.

Accepted Answer

A) True 
 B)False

Question 9

Watson's Computer Company uses ABC to account for its manufacturing process.
 
Watson's Computer Company expects to produce 2,250 computers.Watson's Computer Company also expects to use 13,000 parts and have 20 setups.
The allocation rate for machine setups is

Accepted Answer

A) $7.01. 
B) $1,500. 
C) $488. 
D) $765. 
A) $7.01. 
B) $1,500. 
C) $488. 
D) $765.

Question 10

Which of the following cost of quality categories represent the cost incurred to "re-inspect a reworked blender?"

Accepted Answer

A) Prevention costs 
B) Internal failure costs 
C) Appraisal costs 
D) External failure costs 
A) Prevention costs 
B) Internal failure costs 
C) Appraisal costs 
D) External failure costs

Question 11

Non-value added activities are

Accepted Answer

A) also called waste activities. 
B) activities that neither enhance the customer's image of the product or service nor provide a competitive advantage. 
C) activities that could be reduced or removed from the process with no ill effect on the end product or service. 
D) All of the above. 
A) also called waste activities. 
B) activities that neither enhance the customer's image of the product or service nor provide a competitive advantage. 
C) activities that could be reduced or removed from the process with no ill effect on the end product or service. 
D) All of the above.

Question 12

Telecom uses activity-based costing to allocate all manufacturing conversion costs.Telecom produces cellular telephones;each phone has $40.00 of direct materials,includes 30 parts and requires 3 hours of machine time.Additional information follows:
 
What is the cost of materials handling per phone?

Accepted Answer

A) $42.00 
B) $6.00 
C) $15.00 
D) $30.00 
A) $42.00 
B) $6.00 
C) $15.00 
D) $30.00

Question 13

If a company uses departmental overhead allocation rates,then the amount of manufacturing overhead allocated to the job is equal to the plantwide overhead rate multiplied by the actual use of the cost allocation base.

Accepted Answer

A) True 
 B)False

Question 14

Alexander Inc.uses activity-based costing.The company produces two products: Snaps and Pops.The expected annual production of Snaps is 1,500 units,while the expected annual production of Pops is 2,200 units.There are three activity cost pools: Assembly,Testing,and Packing.The estimated costs and activities for each of these three activity pools follows:  
The overhead cost per unit of Pops would be closest to

Accepted Answer

A) $15.30. 
B) $5.32. 
C) $7.80. 
D) $31.00. 
A) $15.30. 
B) $5.32. 
C) $7.80. 
D) $31.00.

Question 15

Four basic steps are used in an ABC system.List the proper order of these steps,which are currently scrambled below:
A.Identify the primary activities and estimate a total cost pool for each.
B.Allocate the costs to the cost object using the activity cost allocation rates.
C.Select an allocation base for each activity.
D.Calculate an activity cost allocation rate for each activity.

Accepted Answer

A) c,a,b,d 
B) a,c,d,b 
C) b,a,c,d 
D) a,d,c,b 
A) c,a,b,d 
B) a,c,d,b 
C) b,a,c,d 
D) a,d,c,b

Question 16

The cost of inspecting and packaging each unit the company produces would be considered a facility-level activity cost.

Accepted Answer

A) True 
 B)False

Question 17

Vandalay Industries manufactures two products: toasters and blenders.The annual production and sales of toasters is 2,200 units,while 1,500 units of blenders are produced and sold.The company has traditionally used direct labor hours to allocate its overhead to products.Toasters require 1.25 direct labor hours per unit,while blenders require 1 direct labor hours per unit.The total estimated overhead for the period is $149,115.The company is looking at the possibility of changing to an activity-based costing system for its products.If the company used an activity-based costing system,it would have the following three activity cost pools:  
The cost pool activity rate for Engineering Costs would be closest to

Accepted Answer

A) $13.00 per engineering hour. 
B) $42.00 per engineering hour. 
C) $18.00 per engineering hour. 
D) $63.09 per engineering hour. 
A) $13.00 per engineering hour. 
B) $42.00 per engineering hour. 
C) $18.00 per engineering hour. 
D) $63.09 per engineering hour.

Question 18

Lean companies typically arrange production activities into self-contained cells.

Accepted Answer

A) True 
 B)False

Question 19

Benjamin Company manufactures a wide variety of products and uses an activity-based costing system.Data from its activity-based costing system for all products follows:  
What is the engineering cost pool rate per engineering hour?

Accepted Answer

A) $12 
B) $28 
C) $47 
D) $83 
A) $12 
B) $28 
C) $47 
D) $83

Question 20

Back Porch Company manufactures lawn chairs using an activity-based costing system to allocate all manufacturing conversion costs.The following information is provided for the month of June:
 
Each lawn chair consists of 8 parts;the total direct materials cost per lawn chair is $10.00.
What is the total cost of materials handling and assembling for each lawn chair?

Accepted Answer

A) $32.20 
B) $19.20 
C) $21.20 
D) $11.20 
A) $32.20 
B) $19.20 
C) $21.20 
D) $11.20

External failure costs occur when the company detects and corrects poor-quality goods or services after delivery to customers.

What type of costs are incurred to avoid poor quality goods or services in the first place?

ABC generally causes the least amount of cost distortion among products because indirect costs are allocated to the products based on

Telecom uses activity-based costing to allocate all manufacturing conversion costs.Telecom produces cellular telephones;each phone has $40.00 of direct materials,includes 30 parts and requires 3 hours of machine time.Additional information follows: What is the cost of machining per phone?

The benefits of adopting ABC/ABM are higher for companies in competitive markets because

Waste can be reduced by implementing shorter setup times.

The benefits of adopting ABC/ABM are higher for companies in more competitive markets.

Watson's Computer Company uses ABC to account for its manufacturing process. Watson's Computer Company expects to produce 2,250 computers.Watson's Computer Company also expects to use 13,000 parts and have 20 setups. The allocation rate for machine setups is

Which of the following cost of quality categories represent the cost incurred to "re-inspect a reworked blender?"

Non-value added activities are

Telecom uses activity-based costing to allocate all manufacturing conversion costs.Telecom produces cellular telephones;each phone has $40.00 of direct materials,includes 30 parts and requires 3 hours of machine time.Additional information follows: What is the cost of materials handling per phone?

If a company uses departmental overhead allocation rates,then the amount of manufacturing overhead allocated to the job is equal to the plantwide overhead rate multiplied by the actual use of the cost allocation base.

The cost of inspecting and packaging each unit the company produces would be considered a facility-level activity cost.

Lean companies typically arrange production activities into self-contained cells.

Benjamin Company manufactures a wide variety of products and uses an activity-based costing system.Data from its activity-based costing system for all products follows: What is the engineering cost pool rate per engineering hour?

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Process Costing

Cost Behavior

Cost-Volume-Profit Analysis

Relevant Costs for Short-Term Decisions

The Master Budget

Performance Evaluation

Standard Costs and Variances

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Sustainability

Filters

Exam 4: Activity-Based Costing, lean Operations, and the Costs of Quality

External failure costs occur when the company detects and corrects poor-quality goods or services after delivery to customers.

What type of costs are incurred to avoid poor quality goods or services in the first place?

ABC generally causes the least amount of cost distortion among products because indirect costs are allocated to the products based on

Telecom uses activity-based costing to allocate all manufacturing conversion costs.Telecom produces cellular telephones;each phone has $40.00 of direct materials,includes 30 parts and requires 3 hours of machine time.Additional information follows: What is the cost of machining per phone?

The benefits of adopting ABC/ABM are higher for companies in competitive markets because

Waste can be reduced by implementing shorter setup times.

The benefits of adopting ABC/ABM are higher for companies in more competitive markets.

Watson's Computer Company uses ABC to account for its manufacturing process. Watson's Computer Company expects to produce 2,250 computers.Watson's Computer Company also expects to use 13,000 parts and have 20 setups. The allocation rate for machine setups is

Which of the following cost of quality categories represent the cost incurred to "re-inspect a reworked blender?"

Non-value added activities are

Telecom uses activity-based costing to allocate all manufacturing conversion costs.Telecom produces cellular telephones;each phone has $40.00 of direct materials,includes 30 parts and requires 3 hours of machine time.Additional information follows: What is the cost of materials handling per phone?

If a company uses departmental overhead allocation rates,then the amount of manufacturing overhead allocated to the job is equal to the plantwide overhead rate multiplied by the actual use of the cost allocation base.

The cost of inspecting and packaging each unit the company produces would be considered a facility-level activity cost.

Lean companies typically arrange production activities into self-contained cells.

Benjamin Company manufactures a wide variety of products and uses an activity-based costing system.Data from its activity-based costing system for all products follows: What is the engineering cost pool rate per engineering hour?

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Process Costing

Cost Behavior

Cost-Volume-Profit Analysis

Relevant Costs for Short-Term Decisions

The Master Budget

Performance Evaluation

Standard Costs and Variances

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Sustainability

Filters