Question 1

Which of the following statements is TRUE concerning product costing systems?

Accepted Answer

A) Companies that undercost products always sell products at a loss. 
B) Companies that overcost run the risk of losing customers. 
C) Undercosting or overcosting does not relate to product cost cross-subsidization. 
D) Peanut butter costing is another term for direct costing. 
E) Companies that overcost will make more profit by passing along higher prices to customers. 
A) Companies that undercost products always sell products at a loss. 
B) Companies that overcost run the risk of losing customers. 
C) Undercosting or overcosting does not relate to product cost cross-subsidization. 
D) Peanut butter costing is another term for direct costing. 
E) Companies that overcost will make more profit by passing along higher prices to customers.

Question 2

Answer the following questions using the information below:
Gregory Enterprises has identified three cost pools to allocate overhead costs.The following estimates are provided for the coming year:
   The accounting records show the Mossman Job consumed the following resources:
  
-When selling prices are based on costs assigned using the single cost driver, direct labour hours, then the Mossman job

Accepted Answer

A) is fairly billed because resources are allocated uniformly to all jobs. 
B) is grossly under billed for the job, while other jobs will be unfairly over billed. 
C) may increase overall sales as other jobs will be cross-subsidized. 
D) will contribute too little to profits, and Gregory Enterprises will not want to accept additional work from the company. 
E) will likely seek to do business with competitors. 
A) is fairly billed because resources are allocated uniformly to all jobs. 
B) is grossly under billed for the job, while other jobs will be unfairly over billed. 
C) may increase overall sales as other jobs will be cross-subsidized. 
D) will contribute too little to profits, and Gregory Enterprises will not want to accept additional work from the company. 
E) will likely seek to do business with competitors.

Question 3

A company manufactures household items sold at trade shows.The items, classified as either Trinkets or Widgets are manufactured on a common assembly line.Although different direct materials are used, the direct labour cost is the same for each product line.The plant-wide rate for allocating manufacturing overhead to its products is no longer acceptable.The production manager has heard about activity-based costing and has assembled some information for use in changing the cost system to a cost driver concept.With the help of the accounting department, the manager has been able to establish the following relationships between production costs and some of the indirect manufacturing activities for August, along with the production data for the two product lines:
   Direct costs:
   Required:
Using activity-based costing determine the total production cost of each of the two product lines for August and the cost per unit assuming all units started were completed.

Accepted Answer

@#IMG-DLM& Direct manufacturin

Question 4

Select the Implementing Activity-Based Costing sub-element from the right column that most closely relates to the main implementation step in the left column.
A)Create a steering committee
B)Organize elements of costs as material costs or activity costs
C)Provide training
D)Develop conversion strategy
E)Consider people issues like performance measures
F)Create cross-functional teams
-Design the ABC System

Accepted Answer

The answer of Select the Implementing Activity-Based Costing sub-element from...

Question 5

Activity-based costing is not adaptable to merchandising organizations.

Accepted Answer

A) True 
 B)False

Question 6

Output unit-level cost is identical to batch-level cost in a system that costs based on activities.

Accepted Answer

A) True 
 B)False

Question 7

Management can identify and evaluate new designs to improve performance by evaluating how product and process designs affect activities and costs.

Accepted Answer

A) True 
 B)False

Question 8

A product that consumes a relatively low level of resources but is reported to have a relatively high cost, is an example of

Accepted Answer

A) increased market share. 
B) product marketing. 
C) product undercosting. 
D) product overcosting. 
E) product sub-optimization. 
A) increased market share. 
B) product marketing. 
C) product undercosting. 
D) product overcosting. 
E) product sub-optimization.

Question 9

First Prize Trophy Inc.manufactures trophies for sporting events and other contests.Its' manufacturing plant has the capacity to produce 7,000 trophies each month; current production and sales are 3,000 per month.The company normally charges $18 per trophy.Cost information for the current activity level is as follows:
Variable costs (vary with units produced):
   Variable costs (vary with number of batches)*:
   Fixed costs:
   * Costs of $3,000 are based on 150 batches.The company has received an out of province special order for 1,500 trophies for $12 per trophy.Required:
Determine the incremental change in profit from accepting this order if the production batch size for the order is 30 units.Assume that current sales will not be affected.

Accepted Answer

The answer of First Prize Trophy Inc.manufactures trophies for sporting...

Question 10

With simple costing systems, products manufactured in small batches and in small annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related drivers.

Accepted Answer

A) overcosted 
B) fairly costed 
C) costed the same as in activity-based costing 
D) undercosted 
E) ignored 
A) overcosted 
B) fairly costed 
C) costed the same as in activity-based costing 
D) undercosted 
E) ignored

Question 11

Uniformly assigning the costs of resources to cost objects when those resources are actually used in a non-uniform way is called

Accepted Answer

A) activity-based costing. 
B) menu-based costing. 
C) full product-cost allocation. 
D) variable product-cost allocation. 
E) broad averaging or peanut butter costing. 
A) activity-based costing. 
B) menu-based costing. 
C) full product-cost allocation. 
D) variable product-cost allocation. 
E) broad averaging or peanut butter costing.

Question 12

Which of the following statements does not represent the logic of an ABC system?

Accepted Answer

A) Activity cost allocation bases are the activity cost drivers of costs in the activity cost pools. 
B) A strong cause-and-effect relationship between overhead costs and the cost allocation base is essential. 
C) The requirement to measure cost allocation bases of different activities used by different products is essential. 
D) The overhead used by different products is not important, as it is a fixed cost. 
E) A greater level of detailed information concerning costs will help organizations be more efficient. 
A) Activity cost allocation bases are the activity cost drivers of costs in the activity cost pools. 
B) A strong cause-and-effect relationship between overhead costs and the cost allocation base is essential. 
C) The requirement to measure cost allocation bases of different activities used by different products is essential. 
D) The overhead used by different products is not important, as it is a fixed cost. 
E) A greater level of detailed information concerning costs will help organizations be more efficient.

Question 13

Answer the following question(s)using the information below.Ernsting Printers has contracts to complete weekly supplements required by forty-six customers.For the year 2018, manufacturing overhead cost estimates total $420,000 for an annual production capacity of 12 million pages.For 2018 Ernsting Printers has decided to evaluate the use of additional cost pools.After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers.The following information was gathered during the analysis:
   During 2018, two customers, Wealth Managers and Health Systems, are expected to use the following printing services:
  
-Assuming activity-cost pools are used, what are the activity-cost driver rates for design changes, setups, and inspections cost pools?

Accepted Answer

A) $200 per change, $64 per setup, $5 per inspection 
B) $180 per change, $76 per setup, $4 per inspection 
C) $150 per change, $64 per setup, $4 per inspection 
D) $180 per change, $76 per setup, $5 per inspection 
E) $200 per change, $5 per setup, $64 per inspection 
A) $200 per change, $64 per setup, $5 per inspection 
B) $180 per change, $76 per setup, $4 per inspection 
C) $150 per change, $64 per setup, $4 per inspection 
D) $180 per change, $76 per setup, $5 per inspection 
E) $200 per change, $5 per setup, $64 per inspection

Question 14

Activity-based costing information

Accepted Answer

A) should be used when services place similar demands on resources. 
B) usually results in peanut butter costing. 
C) will yield inaccurate cost numbers when products are similar. 
D) helps management reduce costs along the value chain. 
E) is best used when overhead costs are minimal. 
A) should be used when services place similar demands on resources. 
B) usually results in peanut butter costing. 
C) will yield inaccurate cost numbers when products are similar. 
D) helps management reduce costs along the value chain. 
E) is best used when overhead costs are minimal.

Question 15

An ABC system is one building block of activity-based management (ABM).The second building block is

Accepted Answer

A) that senior management support is crucial. 
B) understanding the components of indirect cost pools. 
C) knowing the limitations of allocating indirect costs. 
D) the ability for managers to understand that the demand for output is central to profitability. 
E) automating the costing system. 
A) that senior management support is crucial. 
B) understanding the components of indirect cost pools. 
C) knowing the limitations of allocating indirect costs. 
D) the ability for managers to understand that the demand for output is central to profitability. 
E) automating the costing system.

Question 16

Answer the following questions using the information below:
Gregory Enterprises has identified three cost pools to allocate overhead costs.The following estimates are provided for the coming year:
   The accounting records show the Mossman Job consumed the following resources:
  
-If Gregory Enterprises uses an ABC system then what amount of indirect costs will be allocated to the Mossman job?

Accepted Answer

A) $240 
B) $420 
C) $80 
D) $160 
E) $380 
A) $240 
B) $420 
C) $80 
D) $160 
E) $380

Question 17

Answer the following question(s)using the information below.Ernsting Printers has contracts to complete weekly supplements required by forty-six customers.For the year 2018, manufacturing overhead cost estimates total $420,000 for an annual production capacity of 12 million pages.For 2018 Ernsting Printers has decided to evaluate the use of additional cost pools.After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers.The following information was gathered during the analysis:
   During 2018, two customers, Wealth Managers and Health Systems, are expected to use the following printing services:
  
-What is the cost driver rate if manufacturing overhead costs are considered one large cost pool and are assigned based on 12 million pages of production capacity?

Accepted Answer

A) $0.05 per page 
B) $0.035 per page 
C) $0.35 per page 
D) $0.025 per page 
E) $0.045 per page 
A) $0.05 per page 
B) $0.035 per page 
C) $0.35 per page 
D) $0.025 per page 
E) $0.045 per page

Question 18

Select the Implementing Activity-Based Costing sub-element from the right column that most closely relates to the main implementation step in the left column.
A)Create a steering committee
B)Organize elements of costs as material costs or activity costs
C)Provide training
D)Develop conversion strategy
E)Consider people issues like performance measures
F)Create cross-functional teams
-Formalize project plan

Accepted Answer

The answer of Select the Implementing Activity-Based Costing sub-element from...

Question 19

Answer the following question(s)using the information below.Products S5 and CP8 each are assigned $50.00 in indirect costs by a traditional costing system.An activity analysis revealed that although production requirements are identical, S5 requires 45 minutes less setup time than CP8.
-Compared to an activity-based cost system, CP8 is ________ under the traditional system.

Accepted Answer

A) undercosted 
B) overcosted 
C) fairly costed 
D) accurately costed 
E) costed the same 
A) undercosted 
B) overcosted 
C) fairly costed 
D) accurately costed 
E) costed the same

Question 20

Which of the following is NOT an activity under an ABC system?

Accepted Answer

A) an event 
B) a task 
C) a unit of work 
D) a process 
E) indirect cost 
A) an event 
B) a task 
C) a unit of work 
D) a process 
E) indirect cost

Which of the following statements is TRUE concerning product costing systems?

Activity-based costing is not adaptable to merchandising organizations.

Output unit-level cost is identical to batch-level cost in a system that costs based on activities.

Management can identify and evaluate new designs to improve performance by evaluating how product and process designs affect activities and costs.

A product that consumes a relatively low level of resources but is reported to have a relatively high cost, is an example of

With simple costing systems, products manufactured in small batches and in small annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related drivers.

Uniformly assigning the costs of resources to cost objects when those resources are actually used in a non-uniform way is called

Which of the following statements does not represent the logic of an ABC system?

Activity-based costing information

An ABC system is one building block of activity-based management (ABM).The second building block is

Which of the following is NOT an activity under an ABC system?

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 5: Activity-Based Costing and Management

Which of the following statements is TRUE concerning product costing systems?

Activity-based costing is not adaptable to merchandising organizations.

Output unit-level cost is identical to batch-level cost in a system that costs based on activities.

Management can identify and evaluate new designs to improve performance by evaluating how product and process designs affect activities and costs.

A product that consumes a relatively low level of resources but is reported to have a relatively high cost, is an example of

With simple costing systems, products manufactured in small batches and in small annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related drivers.

Uniformly assigning the costs of resources to cost objects when those resources are actually used in a non-uniform way is called

Which of the following statements does not represent the logic of an ABC system?

Activity-based costing information

An ABC system is one building block of activity-based management (ABM).The second building block is

Which of the following is NOT an activity under an ABC system?

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Analysis of Cost Behaviour

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters