Question 1

Activity-based costing creates more precise matching of indirect costs with products.

Accepted Answer

A) True 
 B)False

Question 2

Alpha Company manufactures breadboxes and uses an activity-based costing system. The following information is provided for the month of May:   Each breadbox consists of 4 parts, and the direct materials cost per breadbox is $7.00. What is the cost of materials handling and assembling per breadbox?

Accepted Answer

A) $4.60 
B) $17.00 
C) $14.40 
D) $12.40 
A) $4.60 
B) $17.00 
C) $14.40 
D) $12.40

Question 3

Nemesis Company manufactures water skis. Nemesis pursues a target pricing strategy. Please review the data below:   Which of the following represents the target price?

Accepted Answer

A) $143 
B) $180 
C) $110 
D) $135 
A) $143 
B) $180 
C) $110 
D) $135

Question 4

Pitt Jones Company had the following activities, allocated costs, and allocation bases:   The above activities are carried out at two of their regional offices.
  What is the cost per unit for the account inquiry activity?

Accepted Answer

A) $0.75 
B) $30.00 
C) $10.00 
D) $1.50 
A) $0.75 
B) $30.00 
C) $10.00 
D) $1.50

Question 5

Just-in-time production gains economic advantage by purchasing inventory in large batches in order to get volume discounts and achieve lower manufacturing costs.

Accepted Answer

A) True 
 B)False

Question 6

Sleep Tight Company manufactures pillows using an activity-based costing system. The following information is provided for the month of June:   Each pillow consists of 4 parts and the total direct materials cost per pillow is $3.50. There is no direct labor. What is the total manufacturing cost per pillow?

Accepted Answer

A) $16.20 
B) $22.30 
C) $18.50 
D) $26.50 
A) $16.20 
B) $22.30 
C) $18.50 
D) $26.50

Question 7

A-1 Sports Vehicles Manufacturing produces a specialty racing bicycle. There is stiff foreign competition, and the company is forced to pursue target pricing. The competitive market price of the bicycle is $2,000. Currently the manufacturing cost for this product at A-1 is $1,550 and the associated non-manufacturing costs are $270. A-1's owners insist on achieving a profit of 12% of sales price. How much is the desired cost reduction? (Please round all amounts to the nearest whole dollar.)

Accepted Answer

A) $60 
B) $50 
C) $40 
D) $0 
A) $60 
B) $50 
C) $40 
D) $0

Question 8

Pollenti Company has just merged with another industrial firm whose business had been failing. Pollenti immediately conducted a thorough study of the new company's work processes, and produced a report including the data shown below: • A new inspection process is recommended to minimize defective raw materials. It would cost $12,000 to implement.
• Shoddy business practices are resulting in excessive warranty costs$15,000 more than normal due mainly to material failure.
• Reengineering of the assembly line will increase productivity. It would cost $18,000 to implement.
• Inefficient workplace design is costing $5,000 in unnecessary rework costs.
• Estimated amount of lost profits due to dissatisfied customers who turn to the competition is $80,000.
Based on the above, what is the amount of external failure costs, if any, included here?

Accepted Answer

A) $5,000 
B) $12,000 
C) $95,000 
D) Zero 
A) $5,000 
B) $12,000 
C) $95,000 
D) Zero

Question 9

Which of the following statements is FALSE?

Accepted Answer

A) Many traditional costing systems can distort product costs and profitability. 
B) Activity-based costing systems tend to be more costly than traditional costing systems. 
C) Many traditional costing systems tend to combine various costs into a single cost pool. 
D) Activity-based costing systems tend to use fewer cost pools than does a traditional costing system. 
A) Many traditional costing systems can distort product costs and profitability. 
B) Activity-based costing systems tend to be more costly than traditional costing systems. 
C) Many traditional costing systems tend to combine various costs into a single cost pool. 
D) Activity-based costing systems tend to use fewer cost pools than does a traditional costing system.

Question 10

Johnson Production Company uses just-in-time production and accounting methods. On June 1, Johnson completed 400 units of product and moved the products to finished goods. Each unit included $8.00 of direct materials cost and $2.00 of conversion costs. Which of the following journal entries correctly records this transaction?

Accepted Answer

A) Debit $4,000 to Finished goods, credit $4,000 to Raw and in-process inventory. 
B) Debit $4,000 to Finished goods, credit $3,200 to Raw and in-process, credit $800 to Conversion costs. 
C) Debit $3,200 to Conversion costs, debit $800 to Materials inventory, credit $4,000 to Finished goods. 
D) Debit $4,000 to Cost of goods sold, credit $3,200 to Materials inventory, credit $800 to Conversion costs. 
A) Debit $4,000 to Finished goods, credit $4,000 to Raw and in-process inventory. 
B) Debit $4,000 to Finished goods, credit $3,200 to Raw and in-process, credit $800 to Conversion costs. 
C) Debit $3,200 to Conversion costs, debit $800 to Materials inventory, credit $4,000 to Finished goods. 
D) Debit $4,000 to Cost of goods sold, credit $3,200 to Materials inventory, credit $800 to Conversion costs.

Question 11

Activity-based costing systems combine many various elements of overhead into a single cost pool.

Accepted Answer

A) True 
 B)False

Question 12

Two main benefits of activity-based costing are more accurate product cost information and more detailed information on costs of activities and the drivers of these costs.

Accepted Answer

A) True 
 B)False

Question 13

Archetype Fabrication makes pre-stressed concrete forms for the building industry. They use just-in-time production and accounting methodology. At the beginning of January, selected account balances are shown in the T-accounts below.   During January, the following 5 transactions take place:
  Use the T-accounts shown above to record the transactions, and then answer the following question:
After transaction number 4, what was the balance in the Finished goods inventory account?

Accepted Answer

A) $28,600 
B) $18,600 
C) $23,400 
D) $26,900 
A) $28,600 
B) $18,600 
C) $23,400 
D) $26,900

Question 14

JC Manufacturing produces products that use a variety of components. Which of the following cost drivers would be the MOST applicable for assigning material handling costs to the finished products?

Accepted Answer

A) Direct labor hours 
B) Direct labor cost 
C) Number of units produced 
D) Number of components used 
A) Direct labor hours 
B) Direct labor cost 
C) Number of units produced 
D) Number of components used

Question 15

Clark Manufacturing makes blank CDs; it is a very competitive market and the company follows a target pricing strategy. Currently the market price for a unit of product (one unit equals a package of 100 CDs)is $18.00. Clark's production costs are shown below:       The company's objective is to earn 5% profit on the sales price of the product. Based on the above data, what is the company's target cost per unit?

Accepted Answer

A) $18.40 
B) $14.32 
C) $17.10 
D) $17.52 
A) $18.40 
B) $14.32 
C) $17.10 
D) $17.52

Question 16

Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of 20 separate parts totaling $95 in direct materials and requires 2.5 hours of machine time to produce. Additional information follows:   What is the cost of materials handling per ceiling fan?

Accepted Answer

A) $1.60 
B) $7.20 
C) $6.00 
D) $5.00 
A) $1.60 
B) $7.20 
C) $6.00 
D) $5.00

Question 17

Pitt Jones Company had the following activities, allocated costs, and allocation bases:   The above activities are carried out at two of their regional offices.
  How much of the correspondence cost will be assigned to the Northeast Office?

Accepted Answer

A) $500 
B) $1,200 
C) $2,500 
D) $800 
A) $500 
B) $1,200 
C) $2,500 
D) $800

Question 18

Johnson Production Company uses just-in-time production and accounting methods. On June 1, Johnson sold 200 units of product for $12.00 per unit. Each unit included $8.00 of direct materials cost and $2.00 of conversion costs. Johnson recorded the revenues of $2,400 in one entry, and then recorded the cost of goods sold in a second entry. Which of the following correctly records the cost of goods sold?

Accepted Answer

A) Debit $2,000 to Cost of goods sold, credit $2,000 to Finished goods inventory. 
B) Debit $2,000 to Finished goods, credit $1,600 to Raw and in-process, credit $400 to Conversion costs. 
C) Debit $1,600 to Conversion costs, debit $400 to Materials inventory, credit $2,000 to Cost of goods sold. 
D) Debit $2,000 to Cost of goods sold, credit $2,000 to Raw and in-process inventory. 
A) Debit $2,000 to Cost of goods sold, credit $2,000 to Finished goods inventory. 
B) Debit $2,000 to Finished goods, credit $1,600 to Raw and in-process, credit $400 to Conversion costs. 
C) Debit $1,600 to Conversion costs, debit $400 to Materials inventory, credit $2,000 to Cost of goods sold. 
D) Debit $2,000 to Cost of goods sold, credit $2,000 to Raw and in-process inventory.

Question 19

Costs spent to detect poor-quality goods are considered appraisal costs.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following categories includes costs incurred when poor quality goods or services are detected before delivery to customers?

Accepted Answer

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

Activity-based costing creates more precise matching of indirect costs with products.

Alpha Company manufactures breadboxes and uses an activity-based costing system. The following information is provided for the month of May: Each breadbox consists of 4 parts, and the direct materials cost per breadbox is $7.00. What is the cost of materials handling and assembling per breadbox?

Nemesis Company manufactures water skis. Nemesis pursues a target pricing strategy. Please review the data below: Which of the following represents the target price?

Pitt Jones Company had the following activities, allocated costs, and allocation bases: The above activities are carried out at two of their regional offices. What is the cost per unit for the account inquiry activity?

Just-in-time production gains economic advantage by purchasing inventory in large batches in order to get volume discounts and achieve lower manufacturing costs.

Which of the following statements is FALSE?

Activity-based costing systems combine many various elements of overhead into a single cost pool.

Two main benefits of activity-based costing are more accurate product cost information and more detailed information on costs of activities and the drivers of these costs.

JC Manufacturing produces products that use a variety of components. Which of the following cost drivers would be the MOST applicable for assigning material handling costs to the finished products?

Pitt Jones Company had the following activities, allocated costs, and allocation bases: The above activities are carried out at two of their regional offices. How much of the correspondence cost will be assigned to the Northeast Office?

Costs spent to detect poor-quality goods are considered appraisal costs.

Which of the following categories includes costs incurred when poor quality goods or services are detected before delivery to customers?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandising Inventory

Internal Control and Cash

Receivables

Plant Assets and Intangibles

Current Liabilities and Payroll

Long-Term Liabilities, Bonds Payable, and Classification of Liabilities on the Balance Sheet

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Filters

Exam 18: Activity-Based Costing and Other Cost Management Tools

Activity-based costing creates more precise matching of indirect costs with products.

Alpha Company manufactures breadboxes and uses an activity-based costing system. The following information is provided for the month of May: Each breadbox consists of 4 parts, and the direct materials cost per breadbox is $7.00. What is the cost of materials handling and assembling per breadbox?

Nemesis Company manufactures water skis. Nemesis pursues a target pricing strategy. Please review the data below: Which of the following represents the target price?

Pitt Jones Company had the following activities, allocated costs, and allocation bases: The above activities are carried out at two of their regional offices. What is the cost per unit for the account inquiry activity?

Just-in-time production gains economic advantage by purchasing inventory in large batches in order to get volume discounts and achieve lower manufacturing costs.

Which of the following statements is FALSE?

Activity-based costing systems combine many various elements of overhead into a single cost pool.

Two main benefits of activity-based costing are more accurate product cost information and more detailed information on costs of activities and the drivers of these costs.

JC Manufacturing produces products that use a variety of components. Which of the following cost drivers would be the MOST applicable for assigning material handling costs to the finished products?

Pitt Jones Company had the following activities, allocated costs, and allocation bases: The above activities are carried out at two of their regional offices. How much of the correspondence cost will be assigned to the Northeast Office?

Costs spent to detect poor-quality goods are considered appraisal costs.

Which of the following categories includes costs incurred when poor quality goods or services are detected before delivery to customers?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandising Inventory

Internal Control and Cash

Receivables

Plant Assets and Intangibles

Current Liabilities and Payroll

Long-Term Liabilities, Bonds Payable, and Classification of Liabilities on the Balance Sheet

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Filters