Question 1

The cost of product liability claims is an example of a(n)________ cost.

Accepted Answer

A) appraisal 
B) internal failure 
C) external failure 
D) prevention 
A) appraisal 
B) internal failure 
C) external failure 
D) prevention

Question 2

Which of the following cost of quality categories represent the cost incurred to detect poor quality goods or services prior to consumer delivery in the marketplace?

Accepted Answer

A) Internal failure costs 
B) Value-added activity 
C) External failure costs 
D) Just-in-time production 
A) Internal failure costs 
B) Value-added activity 
C) External failure costs 
D) Just-in-time production

Question 3

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:   Information about the company's estimated manufacturing overhead for the year follows:
  Total estimated direct labor hours for the company for the year are 149,250 hours.
The company is evaluating whether it should use an activity-based costing system in place of its traditional costing system. Additional information about production needed for the activity-based costing system follows:
  The amount of manufacturing overhead that would be allocated to one unit of Dees using an activity-based costing system would be closest to (Round all answers to two decimal places.)

Accepted Answer

A) $94.79 
B) $107.24 
C) $66.32 
D) $40.98 
A) $94.79 
B) $107.24 
C) $66.32 
D) $40.98

Question 4

Beaver Company manufactures coffee tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each coffee tables consists of 20 separate parts totaling $190 in direct materials, and requires 3.0 hours of machine time to produce. Additional information follows:   What is the cost of machining per coffee table?

Accepted Answer

A) $9.00 
B) $40.00 
C) $10.80 
D) $72.00 
A) $9.00 
B) $40.00 
C) $10.80 
D) $72.00

Question 5

Beartowne Enterprises uses an activity-based costing system to assign costs in its auto-parts division.   The following units were produced in December with the following information:
  Total manufacturing costs for Part 002 is

Accepted Answer

A) $15,150 
B) $3900 
C) $8900 
D) $20,150 
A) $15,150 
B) $3900 
C) $8900 
D) $20,150

Question 6

Inspection of incoming raw materials and production loss caused by downtime are examples of prevention costs.

Accepted Answer

A) True 
 B)False

Question 7

Swiss Furniture Company manufactures bookshelves and uses an activity-based costing system. The following information is provided for the month of May:   Each bookshelf consists of 6 parts. The direct materials cost per bookshelf is $40.
What is the cost of materials handling and assembling per bookshelf?

Accepted Answer

A) $8.36 
B) $28.93 
C) $25.25 
D) $16.89 
A) $8.36 
B) $28.93 
C) $25.25 
D) $16.89

Question 8

Unit-level activities and costs are incurred for every single unit.

Accepted Answer

A) True 
 B)False

Question 9

What will the use of departmental overhead rates generally result in?

Accepted Answer

A) The use of a separate cost allocation base for each department in the factory 
B) The use of a single cost allocation base 
C) The use of a single overhead cost pool for the factory 
D) The use of separate cost allocation base for each activity in the factory 
A) The use of a separate cost allocation base for each department in the factory 
B) The use of a single cost allocation base 
C) The use of a single overhead cost pool for the factory 
D) The use of separate cost allocation base for each activity in the factory

Question 10

An example of a prevention cost is the cost of redesigning the product to reduce its complexity.

Accepted Answer

A) True 
 B)False

Question 11

Product-level activities and costs are incurred for a particular product, regardless of the number of units or batches of the product produced.

Accepted Answer

A) True 
 B)False

Question 12

Facility-level activities and costs are incurred no matter how many units, batches, or products are produced in the plant.

Accepted Answer

A) True 
 B)False

Question 13

Companies that use ABC trace direct materials and direct labor to cost objects just as would be done using traditional costing systems.

Accepted Answer

A) True 
 B)False

Question 14

Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1500 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plant-wide overhead rate to allocate its $7,705,000 of annual manufacturing overhead. Of this amount, $2,260,000 is associated with the Large Bag line, $3,418,000 is associated with the Medium Bag line, and $2,027,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 44,000 machine hours: 14,000 in the Large Bag line, 15,900 in the Medium Bag line, and 14,100 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs. The plant-wide manufacturing overhead rate would be closest to

Accepted Answer

A) $51.36 per machine hour. 
B) $161.43 per machine hour. 
C) $214.97 per machine hour. 
D) $175.11 per machine hour. 
A) $51.36 per machine hour. 
B) $161.43 per machine hour. 
C) $214.97 per machine hour. 
D) $175.11 per machine hour.

Question 15

Companies that use ABC allocate all costs including direct materials, direct labor and manufacturing overhead to the product based on an activity cost allocation rate.

Accepted Answer

A) True 
 B)False

Question 16

Costs incurred to avoid manufacturing poor-quality goods or services are considered to be

Accepted Answer

A) appraisal costs. 
B) activity-based costing. 
C) prevention costs. 
D) value engineering. 
A) appraisal costs. 
B) activity-based costing. 
C) prevention costs. 
D) value engineering.

Question 17

External failure costs occur when poor-quality goods or services are not detected until after delivery to customers.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following condition(s)favors using departmental overhead rates in place of a plantwide overhead rate?

Accepted Answer

A) Different departments incur different amounts and types of manufacturing overhead. 
B) Different jobs or products use the departments to a different extent. 
C) Both of the above. 
D) Neither of the above. 
A) Different departments incur different amounts and types of manufacturing overhead. 
B) Different jobs or products use the departments to a different extent. 
C) Both of the above. 
D) Neither of the above.

Question 19

Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 800 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plantwide overhead rate to allocate its $8,373,000 of annual manufacturing overhead. Of this amount, $2,160,000 is associated with the Large Bag line, $3,414,000 is associated with the Medium Bag line, and $2,799,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 41,000 machine hours: 12,700 in the Large Bag line, 16,300 in the Medium Bag line, and 12,000 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs. Which product line(s)have been overcosted or undercosted by using the plantwide manufacturing overhead rate?

Accepted Answer

A) Large Bags has been undercosted; Medium and Small have been overcosted. 
B) Large, Medium, and Small Bags have all been overcosted. 
C) Large, Medium, and Small Bags have all been undercosted. 
D) Large Bags has been overcosted; Medium and Small have been undercosted. 
A) Large Bags has been undercosted; Medium and Small have been overcosted. 
B) Large, Medium, and Small Bags have all been overcosted. 
C) Large, Medium, and Small Bags have all been undercosted. 
D) Large Bags has been overcosted; Medium and Small have been undercosted.

Question 20

Non-value added activities are activities that neither enhance the customer's image of the product or service nor provide a competitive advantage.

Accepted Answer

A) True 
 B)False

The cost of product liability claims is an example of a(n)________ cost.

Which of the following cost of quality categories represent the cost incurred to detect poor quality goods or services prior to consumer delivery in the marketplace?

Beartowne Enterprises uses an activity-based costing system to assign costs in its auto-parts division. The following units were produced in December with the following information: Total manufacturing costs for Part 002 is

Inspection of incoming raw materials and production loss caused by downtime are examples of prevention costs.

Unit-level activities and costs are incurred for every single unit.

What will the use of departmental overhead rates generally result in?

An example of a prevention cost is the cost of redesigning the product to reduce its complexity.

Product-level activities and costs are incurred for a particular product, regardless of the number of units or batches of the product produced.

Facility-level activities and costs are incurred no matter how many units, batches, or products are produced in the plant.

Companies that use ABC trace direct materials and direct labor to cost objects just as would be done using traditional costing systems.

Companies that use ABC allocate all costs including direct materials, direct labor and manufacturing overhead to the product based on an activity cost allocation rate.

Costs incurred to avoid manufacturing poor-quality goods or services are considered to be

External failure costs occur when poor-quality goods or services are not detected until after delivery to customers.

Which of the following condition(s)favors using departmental overhead rates in place of a plantwide overhead rate?

Non-value added activities are activities that neither enhance the customer's image of the product or service nor provide a competitive advantage.

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 Evalulation

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

The cost of product liability claims is an example of a(n)________ cost.

Which of the following cost of quality categories represent the cost incurred to detect poor quality goods or services prior to consumer delivery in the marketplace?

Beartowne Enterprises uses an activity-based costing system to assign costs in its auto-parts division. The following units were produced in December with the following information: Total manufacturing costs for Part 002 is

Inspection of incoming raw materials and production loss caused by downtime are examples of prevention costs.

Unit-level activities and costs are incurred for every single unit.

What will the use of departmental overhead rates generally result in?

An example of a prevention cost is the cost of redesigning the product to reduce its complexity.

Product-level activities and costs are incurred for a particular product, regardless of the number of units or batches of the product produced.

Facility-level activities and costs are incurred no matter how many units, batches, or products are produced in the plant.

Companies that use ABC trace direct materials and direct labor to cost objects just as would be done using traditional costing systems.

Companies that use ABC allocate all costs including direct materials, direct labor and manufacturing overhead to the product based on an activity cost allocation rate.

Costs incurred to avoid manufacturing poor-quality goods or services are considered to be

External failure costs occur when poor-quality goods or services are not detected until after delivery to customers.

Which of the following condition(s)favors using departmental overhead rates in place of a plantwide overhead rate?

Non-value added activities are activities that neither enhance the customer's image of the product or service nor provide a competitive advantage.

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 Evalulation

Standard Costs and Variances

Capital Investment Decisions and the Time Value of Money

Statement of Cash Flows

Financial Statement Analysis

Sustainability

Filters