Question 1

Managers often reap benefits by using ABC data in ABM to pinpoint opportunities to cut costs.

Accepted Answer

A) True 
 B)False

Question 2

The process of reevaluating activities to reduce costs while satisfying customers' needs is referred to as

Accepted Answer

A) design engineering. 
B) developmental engineering. 
C) total engineering. 
D) value engineering. 
A) design engineering. 
B) developmental engineering. 
C) total engineering. 
D) value engineering.

Question 3

Murphy's Machine Works manufactures custom equipment.Sector's Machine Works currently uses a plant-wide overhead rate,based on direct labour hours,to allocate its $2,500,000 of manufacturing overhead to individual jobs.
Murphy's plant completed Jobs 600 and 601 on July 15.Both jobs incurred a total of 9 DL hours throughout the entire production process.Job 600 incurred 5 MH in the Machining Department and 6 DL hours in the Assembly Department (the other 3 DL hour occurred in the Machining Department).Job 601 incurred 8 MH in the Machining Department and 7 DL hours in the Assembly Department (the other two DL hours occurred in the Machining Department).
Requirements
1.Compute the plant-wide overhead rate,assuming Murphy expects to incur 50,000 total DL hours during the year.
2.How much manufacturing overhead would be allocated to each job if Murphy uses the plant wide rate?

Accepted Answer

1.Plant wide rate = $2,500,000

Question 4

Vittoria Corporation manufactures two products-Carts and Wheelbarrows.The annual production and sales of Carts is 2,000 units,while 1,800 units of Wheelbarrows are produced and sold.The company has traditionally used direct labour hours to allocate its overhead to products.Carts require 1.0 direct labour hours per unit,while Wheelbarrows require 0.5 direct labour hours per unit.The total estimated overhead for the period is $117,500.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) $10.00 per engineering hour. 
B) $15.00 per engineering hour. 
C) $40.00 per engineering hour. 
D) $75.56 per engineering hour. 
A) $10.00 per engineering hour. 
B) $15.00 per engineering hour. 
C) $40.00 per engineering hour. 
D) $75.56 per engineering hour.

Question 5

Direct labour hours would be the most appropriate cost allocation base for a Machining Department that uses machine robotics extensively.

Accepted Answer

A) True 
 B)False

Question 6

The estimated total manufacturing overhead costs that will be incurred in each department in the coming year are often referred to as activity cost pools.

Accepted Answer

A) True 
 B)False

Question 7

When calculating the total amount of manufacturing overhead to allocate to a particular job,the company would multiply each departmental overhead rate by ________ and then ________ together the allocated amounts from each department.

Accepted Answer

A) the actual amount of the departmental allocation base used by the job;add 
B) the actual amount of the plant-wide allocation base used by the job;add 
C) the actual amount of the departmental allocation base used by the job;multiply 
D) the actual amount of the plant-wide allocation base used by the job;multiply 
A) the actual amount of the departmental allocation base used by the job;add 
B) the actual amount of the plant-wide allocation base used by the job;add 
C) the actual amount of the departmental allocation base used by the job;multiply 
D) the actual amount of the plant-wide allocation base used by the job;multiply

Question 8

General Products Company manufactures toaster ovens and uses an activity-based costing system.The following information is provided for the month of May:
 
Each toaster oven consists of 3 parts.The direct materials cost per toaster oven is $25.00.
What is the cost of materials handling and assembling per toaster oven?

Accepted Answer

A) $9.60 
B) $5.40 
C) $17.50 
D) $15.00 
A) $9.60 
B) $5.40 
C) $17.50 
D) $15.00

Question 9

Durable Engines Company uses ABC to account for it manufacturing process.
 
Durable Engines Company expects to produce 2,000 engines.Durable Engines Company also expects to use 12,000 parts and have 16 setups.
The allocation rate for packaging is

Accepted Answer

A) $5.28. 
B) $6.40. 
C) $9.60. 
D) $3.00. 
A) $5.28. 
B) $6.40. 
C) $9.60. 
D) $3.00.

Question 10

Pittinger Company manufactures cuckoo clocks and uses an activity-based costing system.Each cuckoo clock consists of 10 separate parts totaling $120 in direct materials,and requires 2.0 hours of machine time to produce.Additional information follows:
 
What is the cost of materials handling per cuckoo clock?

Accepted Answer

A) $3.00 
B) $5.00 
C) $4.50 
D) $12.50 
A) $3.00 
B) $5.00 
C) $4.50 
D) $12.50

Question 11

The allocation base selected for each department should be the cost driver of the costs in the departmental overhead pool.

Accepted Answer

A) True 
 B)False

Question 12

Machine set-up would be considered a batch-level cost.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following condition(s)favours using departmental overhead rates in place of a plant-wide overhead rate?

Accepted Answer

A) Manufacturing overhead represents a small proportion of total cost. 
B) Different jobs or products use the departments to a different extent. 
C) Departments use a similar amount of indirect costs. 
D) Products spend the same amount of time in each department. 
A) Manufacturing overhead represents a small proportion of total cost. 
B) Different jobs or products use the departments to a different extent. 
C) Departments use a similar amount of indirect costs. 
D) Products spend the same amount of time in each department.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Salcido,LLC provides a wide variety of legal services and uses an activity-based costing system.Data from its activity-based costing system for all services follows:
 
The cost pool activity rate for client meetings is

Accepted Answer

A) $105 per meeting hour. 
B) $42 per meeting hour. 
C) $64 per meeting hour. 
D) $25 per meeting hour. 
A) $105 per meeting hour. 
B) $42 per meeting hour. 
C) $64 per meeting hour. 
D) $25 per meeting hour.

Question 16

Kepple 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 labour 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 labour hours for the company for the year are 110,000 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:
 
Note: engineering hours and part types are equivalent.
The amount of manufacturing overhead that would be allocated to one unit of Zips using an activity-based costing system would be closest to

Accepted Answer

A) $32.86. 
B) $51.12. 
C) $64.81. 
D) $11.95. 
A) $32.86. 
B) $51.12. 
C) $64.81. 
D) $11.95.

Question 17

Rach & Johnson is an advertising agency.The firm uses an activity-based costing system to allocate overhead costs to its services.Information about the firm's activity cost pool rates follows:
 
Smythe Company is a client of Rach & Johnson.Recently,8 administrative assistant hours,2 new ad campaigns,and 6 meeting hours were incurred for the Smythe Company account.
Using the activity-based costing system,how much overhead cost would be allocated to the Smythe Company account?

Accepted Answer

A) $233 
B) $508 
C) $850 
D) $3,912 
A) $233 
B) $508 
C) $850 
D) $3,912

Question 18

A departmental overhead rate is calculated by multiplying the estimated total manufacturing overhead costs of the department by the estimated total quantity of the department's cost allocation base.

Accepted Answer

A) True 
 B)False

Question 19

The benefits are lower when ABC reports different product costs than reported under the old system.

Accepted Answer

A) True 
 B)False

Question 20

Value-added activities can be described as activities for which the customer is willing to pay.

Accepted Answer

A) True 
 B)False

Managers often reap benefits by using ABC data in ABM to pinpoint opportunities to cut costs.

The process of reevaluating activities to reduce costs while satisfying customers' needs is referred to as

Direct labour hours would be the most appropriate cost allocation base for a Machining Department that uses machine robotics extensively.

The estimated total manufacturing overhead costs that will be incurred in each department in the coming year are often referred to as activity cost pools.

When calculating the total amount of manufacturing overhead to allocate to a particular job,the company would multiply each departmental overhead rate by and then together the allocated amounts from each department.

Durable Engines Company uses ABC to account for it manufacturing process. Durable Engines Company expects to produce 2,000 engines.Durable Engines Company also expects to use 12,000 parts and have 16 setups. The allocation rate for packaging is

The allocation base selected for each department should be the cost driver of the costs in the departmental overhead pool.

Machine set-up would be considered a batch-level cost.

Which of the following condition(s)favours using departmental overhead rates in place of a plant-wide overhead rate?

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

Salcido,LLC provides a wide variety of legal services and uses an activity-based costing system.Data from its activity-based costing system for all services follows: The cost pool activity rate for client meetings is

A departmental overhead rate is calculated by multiplying the estimated total manufacturing overhead costs of the department by the estimated total quantity of the department's cost allocation base.

The benefits are lower when ABC reports different product costs than reported under the old system.

Value-added activities can be described as activities for which the customer is willing to pay.

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Process Costing

Cost Behaviour

Cost-Volume-Profit Analysis

Short-Term Business Decisions

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Capital Investment Decisions and the Time Value of Money

Filters

Exam 4: Activity Based Costing

Managers often reap benefits by using ABC data in ABM to pinpoint opportunities to cut costs.

The process of reevaluating activities to reduce costs while satisfying customers' needs is referred to as

Direct labour hours would be the most appropriate cost allocation base for a Machining Department that uses machine robotics extensively.

The estimated total manufacturing overhead costs that will be incurred in each department in the coming year are often referred to as activity cost pools.

When calculating the total amount of manufacturing overhead to allocate to a particular job,the company would multiply each departmental overhead rate by ________ and then ________ together the allocated amounts from each department.

Durable Engines Company uses ABC to account for it manufacturing process. Durable Engines Company expects to produce 2,000 engines.Durable Engines Company also expects to use 12,000 parts and have 16 setups. The allocation rate for packaging is

The allocation base selected for each department should be the cost driver of the costs in the departmental overhead pool.

Machine set-up would be considered a batch-level cost.

Which of the following condition(s)favours using departmental overhead rates in place of a plant-wide overhead rate?

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

Salcido,LLC provides a wide variety of legal services and uses an activity-based costing system.Data from its activity-based costing system for all services follows: The cost pool activity rate for client meetings is

A departmental overhead rate is calculated by multiplying the estimated total manufacturing overhead costs of the department by the estimated total quantity of the department's cost allocation base.

The benefits are lower when ABC reports different product costs than reported under the old system.

Value-added activities can be described as activities for which the customer is willing to pay.

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Process Costing

Cost Behaviour

Cost-Volume-Profit Analysis

Short-Term Business Decisions

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Capital Investment Decisions and the Time Value of Money

Filters

When calculating the total amount of manufacturing overhead to allocate to a particular job,the company would multiply each departmental overhead rate by and then together the allocated amounts from each department.