Question 1

Which of the following statements is true of an activity-based costing system?

Accepted Answer

A) It uses separate predetermined overhead allocation rates for each activity. 
B) It is not as accurate or precise as traditional costing systems. 
C) It accumulates overhead costs by processing departments. 
D) It is not as complex or as costly as traditional systems. 
A) It uses separate predetermined overhead allocation rates for each activity. 
B) It is not as accurate or precise as traditional costing systems. 
C) It accumulates overhead costs by processing departments. 
D) It is not as complex or as costly as traditional systems.

Question 2

Fidelity Stereo Company has provided the following information regarding its activity-based costing system: • Purchasing department costs are allocated based on purchase orders,and the predetermined overhead allocation rate is $77 per purchase order.
• Assembly department costs are allocated based on the number of parts used,and the predetermined overhead allocation rate is $2 per part.
• Packaging department costs are allocated based on the number of units produced,and the predetermined overhead allocation rate is $4 per unit produced.
Each stereo produced has 50 parts,and the direct materials cost per unit is $60.There are no direct labor costs.Fidelity Stereo has an order for 1400 stereos,which will require 40 purchase orders in all.What is the total cost for the 1400 stereos?

Accepted Answer

A) $232,680 
B) $148,000 
C) $143,080 
D) $229,600 
A) $232,680 
B) $148,000 
C) $143,080 
D) $229,600

Question 3

How do just-in-time production systems differ from traditional production systems in their approach to raw materials and labor?

Accepted Answer

In traditional manufacturing systems,raw

Question 4

Companies using just-in-time management systems are far more vulnerable to production shutdowns if they receive poor-quality or defective raw materials.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following statements is true of the just-in-time costing system?

Accepted Answer

A) It increases the need for suppliers to deliver raw materials on time. 
B) It records summary journal entries before the units are purchased. 
C) It results in increased inventory storage costs. 
D) It increases the risk of the inventory becoming obsolete or unsalable. 
A) It increases the need for suppliers to deliver raw materials on time. 
B) It records summary journal entries before the units are purchased. 
C) It results in increased inventory storage costs. 
D) It increases the risk of the inventory becoming obsolete or unsalable.

Question 6

Traditional costing provides more detailed information on costs of activities and the drivers of these costs than activity-based costing.

Accepted Answer

A) True 
 B)False

Question 7

In service companies,activity-based management ________.

Accepted Answer

A) results in more accurate cost per service information 
B) follows different steps than in a manufacturing environment 
C) is used to estimate total direct costs 
D) uses one predetermined overhead allocation rate for all service activities 
A) results in more accurate cost per service information 
B) follows different steps than in a manufacturing environment 
C) is used to estimate total direct costs 
D) uses one predetermined overhead allocation rate for all service activities

Question 8

________ is the maximum cost to develop,produce,and deliver a product or service and earn the desired net profit.

Accepted Answer

A) Marginal cost 
B) Target cost 
C) Variable cost 
D) Sunk cost 
A) Marginal cost 
B) Target cost 
C) Variable cost 
D) Sunk cost

Question 9

Under the just-in-time costing system,a credit purchase of raw materials is recorded by ________.

Accepted Answer

A) debiting the Raw Materials Inventory account 
B) crediting the Conversion Costs account 
C) debiting the Raw and In-Process Inventory account 
D) crediting the Cash account 
A) debiting the Raw Materials Inventory account 
B) crediting the Conversion Costs account 
C) debiting the Raw and In-Process Inventory account 
D) crediting the Cash account

Question 10

Activity-based costing refines the cost allocation process even more than traditional allocation costing systems.

Accepted Answer

A) True 
 B)False

Question 11

A furniture corporation manufactures two models of furniture-Standard and Deluxe.The total estimated manufacturing overhead costs are $64,200.The following estimates are available: $$\begin{array} { | l | r | r | } 
\hline & \text { Standard } & \text { Deluxe } \
\hline \text { Direct materials cost per unit } & \$ 250 & \$ 290 \
\hline \text { Direct labor cost per unit } & \$ 125 & \$ 140 \
\hline \text { Number of units } & 240 & 600 \
\hline
\end{array}$$ The company uses direct labor costs as the base to allocate manufacturing overhead.Calculate the predetermined overhead rate.(Round your answer to two decimal places.)

Accepted Answer

A) 27.44% 
B) 29.23% 
C) 191.07% 
D) 56.32% 
A) 27.44% 
B) 29.23% 
C) 191.07% 
D) 56.32%

Question 12

Hearthstone,Inc.,a home healthcare firm,has been using a single predetermined overhead allocation rate with direct labor hours as the allocation base to allocate overhead costs.The direct labor rate is $200 per hour.Clients are billed at 190% of direct labor cost.Sofi Acosta,the president of Hearthstone,decided to develop an ABC system to more accurately allocate the indirect costs.She identified two activities related to the total indirect costs-travel and information technology (IT)support.The other relevant details are given below: $$\begin{array} { | l | l | l | l | } 
\hline \text { Activity } & \text { Allocation base } & \text { Estimated costs } & \begin{array} { l } 
\text { Estimated quantity } \
\text { of allocation base }
\end{array} \
\hline \text { Travel } & \text { Miles driven } & \$ 85,000 & 3000 \text { miles } \
\hline \text { IT Support } & \text { Direct labor hours } & \underline{60,000} & 1300 \mathrm {~ DLH } \
\hline \text { Total } & & \underline{\$ 145,000} & \
\hline
\end{array}$$ The predetermined overhead allocation rate for travel will be ________.(Round your answer to the nearest cent.)

Accepted Answer

A) $46.15 per mile 
B) $28.33 per mile 
C) $65.38 per mile 
D) $48.33 per mile 
A) $46.15 per mile 
B) $28.33 per mile 
C) $65.38 per mile 
D) $48.33 per mile

Question 13

Activity-based costing focuses on a single predetermined overhead rate for cost analysis.

Accepted Answer

A) True 
 B)False

Question 14

Bag Ladies,Inc.manufactures two kinds of bags-totes and satchels.The company allocates manufacturing overhead using a single plantwide rate with direct labor cost as the allocation base.Estimated overhead costs for the year are $25,500.Additional estimated information is given below. $$\begin{array} { | l | r | r | } 
\hline & \text { Totes } & \text { Satchels } \
\hline \text { Direct materials cost per unit } & \$ 33 & \$ 40 \
\hline \text { Direct labor cost per unit } & \$ 53 & \$ 61 \
\hline \text { Number of units } & 530 & 360 \
\hline
\end{array}$$ Calculate the amount of overhead to be allocated to Totes.(Round any percentages to two decimal places and your final answer to the nearest dollar.)

Accepted Answer

A) $481 
B) $327 
C) $11,189 
D) $14,312 
A) $481 
B) $327 
C) $11,189 
D) $14,312

Question 15

Whirlwind Fan Company manufactures ceiling fans and uses an activity-based costing system.Each ceiling fan has 20 separate parts.The direct material cost is $90,and each ceiling fan requires 2.50 hours of machine time to manufacture.Additional information is as follows: $$\begin{array} { | l | l | r | } 
\hline \text { Activity } & \text { Allocation Base } & \begin{array} { c } 
\text { Predetermined Overhead } \
\text { Allocation Rate }
\end{array} \
\hline \text { Materials handling } & \text { Number of parts } & \$ 0.04 \
\hline \text { Machining } & \text { Machine hours } & 6.00 \
\hline \text { Assembling } & \text { Number of parts } & 0.20 \
\hline \text { Packaging } & \text { Number of finished units } & 2.50 \
\hline
\end{array}$$ What is the cost of materials handling per ceiling fan? (Round any intermediate calculations and your final answer to two decimal places.)

Accepted Answer

A) $0.80 
B) $6.00 
C) $2.50 
D) $6.25 
A) $0.80 
B) $6.00 
C) $2.50 
D) $6.25

Question 16

Quality management systems (QMS)are systems that help managers improve the business's performance by providing quality products and services.

Accepted Answer

A) True 
 B)False

Question 17

A cost management system in which a company produces just in time to satisfy customer needs is known as just-in-time management.

Accepted Answer

A) True 
 B)False

Question 18

Skipper Company manufactures toy boats and uses an activity-based costing system.The following information is provided for the month of May: $$\begin{array} { | l | c | c | c | } 
\hline \text { Activity } & \begin{array} { c } 
\text { Estimated Indirect } \
\text { Activity Costs }
\end{array} & \text { Allocation Base } & \begin{array} { c } 
\text { Estimated } \
\text { Quantity of } \
\text { Allocation Base }
\end{array} \
\hline \text { Materials handling } & \$ 3000 & \text { Number of parts } & 3000 \text { parts } \
\hline \text { Assembling } & \$ 5200 & \text { Number of parts } & 3000 \text { parts } \
\hline \text { Packaging } & \$ 5650 & \text { Number of boats } & 1200 \text { boats } \
\hline
\end{array}$$ Each boat consists of four parts,and the direct materials cost per boat is $7.21.There is no direct labor.What is the total manufacturing cost per boat? (Round any intermediate calculations and your final answer to the nearest cent.)

Accepted Answer

A) $15.63 
B) $22.84 
C) $4.43 
D) $18.13 
A) $15.63 
B) $22.84 
C) $4.43 
D) $18.13

Question 19

Which of the following is an example of appraisal costs?

Accepted Answer

A) employee training cost 
B) product testing cost 
C) warranty costs 
D) equipment maintenance costs 
A) employee training cost 
B) product testing cost 
C) warranty costs 
D) equipment maintenance costs

Question 20

Treasurers,Inc.,a manufacturer of gift articles,uses a single plantwide rate to allocate indirect costs with machine hours as the allocation base.Estimated overhead costs for the year are $6,000,000.Estimated machine hours are 29,000.During the year,the actual machine hours used were 50,000.Calculate the predetermined overhead allocation rate.(Round your answer to the nearest dollar.)

Accepted Answer

A) $120 
B) $88 
C) $207 
D) $63 
A) $120 
B) $88 
C) $207 
D) $63

Which of the following statements is true of an activity-based costing system?

How do just-in-time production systems differ from traditional production systems in their approach to raw materials and labor?

Companies using just-in-time management systems are far more vulnerable to production shutdowns if they receive poor-quality or defective raw materials.

Which of the following statements is true of the just-in-time costing system?

Traditional costing provides more detailed information on costs of activities and the drivers of these costs than activity-based costing.

In service companies,activity-based management ________.

________ is the maximum cost to develop,produce,and deliver a product or service and earn the desired net profit.

Under the just-in-time costing system,a credit purchase of raw materials is recorded by ________.

Activity-based costing refines the cost allocation process even more than traditional allocation costing systems.

Activity-based costing focuses on a single predetermined overhead rate for cost analysis.

Quality management systems (QMS)are systems that help managers improve the business's performance by providing quality products and services.

A cost management system in which a company produces just in time to satisfy customer needs is known as just-in-time management.

Which of the following is an example of appraisal costs?

Accounting Information Systems

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Filters

Exam 19: Cost Management Systems: Activity-Based, just-In-Time, and Quality Management Systems

Which of the following statements is true of an activity-based costing system?

How do just-in-time production systems differ from traditional production systems in their approach to raw materials and labor?

Companies using just-in-time management systems are far more vulnerable to production shutdowns if they receive poor-quality or defective raw materials.

Which of the following statements is true of the just-in-time costing system?

Traditional costing provides more detailed information on costs of activities and the drivers of these costs than activity-based costing.

In service companies,activity-based management ________.

________ is the maximum cost to develop,produce,and deliver a product or service and earn the desired net profit.

Under the just-in-time costing system,a credit purchase of raw materials is recorded by ________.

Activity-based costing refines the cost allocation process even more than traditional allocation costing systems.

Activity-based costing focuses on a single predetermined overhead rate for cost analysis.

Quality management systems (QMS)are systems that help managers improve the business's performance by providing quality products and services.

A cost management system in which a company produces just in time to satisfy customer needs is known as just-in-time management.

Which of the following is an example of appraisal costs?

Accounting Information Systems

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Variable Costing

Master Budgets

Flexible Budgets and Standard Cost Systems

Responsibility Accounting and Performance Evaluation

Short-Term Business Decisions

Capital Investment Decisions

Filters