Question 1

The cost of maintaining testing equipment would be classified as a(n):

Accepted Answer

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

Question 2

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 labor hours to allocate its overhead to products.Carts require 1.0 direct labor hours per unit,while Wheelbarrows require 0.5 direct labor 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 overhead cost per Wheelbarrow using an activity-based costing system would be closest to:

Accepted Answer

A) $ 27.50. 
B) $ 65.00. 
C) $ 65.28. 
D) $ 24.75. 
A) $ 27.50. 
B) $ 65.00. 
C) $ 65.28. 
D) $ 24.75.

Question 3

A system in which companies purchase raw materials only when needed is called:

Accepted Answer

A) ABC. 
B) external failure costs. 
C) internal failure costs. 
D) JIT production. 
A) ABC. 
B) external failure costs. 
C) internal failure costs. 
D) JIT production.

Question 4

The cost allocation rate for each activity is equal to the estimated total manufacturing overhead costs of the activity multiplied by the estimated total quantity of the cost allocation base.

Accepted Answer

A) True 
 B)False

Question 5

The goal of value-engineering is to eliminate all waste in the system by making the company's processes as effective and efficient as possible.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is TRUE about a lean production system?

Accepted Answer

A) Customer orders drive the production process. 
B) Inventory levels are maintained at high levels. 
C) Raw materials are purchased in large quantities. 
D) Finished goods are produced ahead of customers' orders to protect against running out of finished goods inventory. 
A) Customer orders drive the production process. 
B) Inventory levels are maintained at high levels. 
C) Raw materials are purchased in large quantities. 
D) Finished goods are produced ahead of customers' orders to protect against running out of finished goods inventory.

Question 7

Hinckley & Granger Company had the following activities,estimated indirect activity costs,and allocation bases: $\begin{array} { | l | r | r | } 
\hline \text { Activities } & \text { Indirect Activity Costs } & \text { Allocation Base } \
\hline \text { Account inquiry (hours) } & \$ 75,000 & 2,500 \
\hline \text { Account billing (lines) } & \$ 45,000 & 30,000 \
\hline \text { Account verification (accounts) } & \$ 18,000 & 24,000 \
\hline \text { Correspondence (letters) } & \$ 40,000 & 4,000 \
\hline
\end{array}$ Hinckley & Granger uses activity based costing.
The above activities are used by Departments P and Q as follows:
$\begin{array} { | l | r | r | } 
\hline & \text { Department P } & \text { Department Q } \
\hline \text { Account inquiry (hours) } & 300 & 600 \
\hline \text { Account billing (lines) } & 8,000 & 6,000 \
\hline \text { Account verification (accounts) } & 5,000 & 4,500 \
\hline \text { Correspondence (letters) } & 500 & 600 \
\hline
\end{array}$
-  How much of the correspondence cost will be assigned to Department P?

Accepted Answer

A) $5,000 
B) $6,000 
C) $ 375 
D) $3,750 
A) $5,000 
B) $6,000 
C) $ 375 
D) $3,750

Question 8

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 labor hours to allocate its overhead to products.Carts require 1.0 direct labor hours per unit,while Wheelbarrows require 0.5 direct labor 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 overhead cost per Wheelbarrow using the traditional costing system would be closest to:

Accepted Answer

A) $ 65.28. 
B) $ 40.52. 
C) $ 20.26. 
D) $ 18.01. 
A) $ 65.28. 
B) $ 40.52. 
C) $ 20.26. 
D) $ 18.01.

Question 9

Molding and sanding each unit of product would most likely be classified as a

Accepted Answer

A) unit-level activity. 
B) batch-level activity. 
C) product-level activity. 
D) facility-level activity. 
A) unit-level activity. 
B) batch-level activity. 
C) product-level activity. 
D) facility-level activity.

Question 10

Using departmental overhead rates is generally more accurate than using a single plantwide overhead rate.

Accepted Answer

A) True 
 B)False

Question 11

The use of departmental overhead rates will generally result in the use of a:

Accepted Answer

A) single cost allocation base. 
B) separate cost allocation base for each department in the factory. 
C) single overhead cost pool for the factory. 
D) separate cost allocation base for each activity in the factory. 
A) single cost allocation base. 
B) separate cost allocation base for each department in the factory. 
C) single overhead cost pool for the factory. 
D) separate cost allocation base for each activity in the factory.

Question 12

To determine the amount of overhead allocated,the overhead rate is divided by the cost driver.

Accepted Answer

A) True 
 B)False

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Traditional single-allocation-base cost systems tend to over-cost high-volume products and under-cost low-volume products.

Accepted Answer

A) True 
 B)False

Question 15

Traditions Home Accessories Company manufactures pillows using an activity-based costing system to allocate all manufacturing conversion costs.The following information is provided for the month of June: $$\begin{array} { | l | r | l | r | } 
\hline \text { Activity } & \begin{array} { l } 
\text { Estimated Indirect } \
\text { Activity Costs }
\end{array} & \text { Allocation Base } & \begin{array} { l } 
\text { Estimated Quantity of } \
\text { Allocation Buse }
\end{array} \
\hline \text { Materials handling } & \$ 3,000 & \text { Number of parts } & \text { 6,000 parts } \
\hline \text { Assembling } & \$ 7,200 & \text { Number of parts } & 6,000 \text { parts } \
\hline \text { Packaging } & \$ 4,000 & \text { Number of pillows } & 2,000 \text { pillows } \
\hline
\end{array}$$ Each pillow consists of 3 parts; the total direct materials cost per pillow is $8.00.
-
What is the total cost of packaging per pillow?

Accepted Answer

A) $ 2.00 
B) $10.00 
C) $ 1.50 
D) $ 3.60 
A) $ 2.00 
B) $10.00 
C) $ 1.50 
D) $ 3.60

Question 16

Sparrow Manufacturing manufactures small parts and uses an activity-based costing system. $\begin{array}{|l|r|l|l|}
\hline \text { Activity } & \begin{array}{l}
\text { Est. Indirect Activity } \
\text { Costs }
\end{array} & \text { Allocation base } & \text { Cost allocation rate } \
\hline \text { Materials } & \$ 70,000 & \text { Material moves } & \$ 2.00 / \text { move } \
\hline \text { Assembling } & \$ 240,000 & \text { Direct labor hours } & \$ 8.00 / \text { dir. labor hour } \
\hline \text { Packaging } & \$ 80,000 & \text { \# of finished units } & \$ 0.80 / \text { finished unit } \
\hline
\end{array}$
 The following parts were produced in October with the following information:
$\begin{array} { | l | r | r | r | r | } 
\hline \text { Part } & \text { \# Produced } & \text { Materials Costs } & \text { \# Moves } & \text { Dir. Labor Hrs. } \
\hline \text { A } & 2,500 & \$ 2,500 & 800 & 200 \
\hline \text { B } & 3,500 & \$ 7,000 & 1,500 & 300 \
\hline \text { C } & 4,500 & \$ 11,250 & 2,200 & 1,000 \
\hline
\end{array}$
- Total manufacturing costs for part A is:

Accepted Answer

A) $ 7,700. 
B) $ 3,200. 
C) $ 5,200. 
D) $ 5,700. 
A) $ 7,700. 
B) $ 3,200. 
C) $ 5,200. 
D) $ 5,700.

Question 17

Franklin Corporation manufactures a wide variety of products and uses an activity-based costing system.Data from its activity-based costing system for all products follows: $\begin{array}{|l|r|r|l|}
\hline \text { Activity cost pool } & \text { Total cost } & \text { Total activity }\
\hline \text { Engineering costs } & \$ 149,500 & 6,500 & \text { engineering hours } \
\hline \text { Setup costs } & \$ 34,000 & 2,000 & \text { number of batches } \
\hline \text { Assembling products } & \$ 667,000 & 7,250 & \text { direct labor hours } \
\hline
\end{array}$
 What is the engineering cost pool rate per engineering hour?

Accepted Answer

A) $ 17 
B) $ 92 
C) $ 52 
D) $ 23 
A) $ 17 
B) $ 92 
C) $ 52 
D) $ 23

Question 18

Value-engineering is accomplished by eliminating,reducing,or simplifying all non-value added activities,and examining whether value-added activities could be improved.

Accepted Answer

A) True 
 B)False

Question 19

The use of which of the following costing systems is most likely to reduce cost distortion to a minimum?

Accepted Answer

A) Plantwide overhead rate 
B) Departmental overhead allocation rates 
C) Activity-based costing 
D) Traditional costing system 
A) Plantwide overhead rate 
B) Departmental overhead allocation rates 
C) Activity-based costing 
D) Traditional costing system

Question 20

If a company's plantwide overhead rate is allocated based on direct labor hours,then each job will be allocated manufacturing overhead based on the total direct labor hours incurred on the job,regardless of the manufacturing department in which those hours were incurred.

Accepted Answer

A) True 
 B)False

The cost of maintaining testing equipment would be classified as a(n):

A system in which companies purchase raw materials only when needed is called:

The cost allocation rate for each activity is equal to the estimated total manufacturing overhead costs of the activity multiplied by the estimated total quantity of the cost allocation base.

The goal of value-engineering is to eliminate all waste in the system by making the company's processes as effective and efficient as possible.

Which of the following is TRUE about a lean production system?

Molding and sanding each unit of product would most likely be classified as a

Using departmental overhead rates is generally more accurate than using a single plantwide overhead rate.

The use of departmental overhead rates will generally result in the use of a:

To determine the amount of overhead allocated,the overhead rate is divided by the cost driver.

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

Traditional single-allocation-base cost systems tend to over-cost high-volume products and under-cost low-volume products.

Value-engineering is accomplished by eliminating,reducing,or simplifying all non-value added activities,and examining whether value-added activities could be improved.

The use of which of the following costing systems is most likely to reduce cost distortion to a minimum?

If a company's plantwide overhead rate is allocated based on direct labor hours,then each job will be allocated manufacturing overhead based on the total direct labor hours incurred on the job,regardless of the manufacturing department in which those hours were incurred.

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Process Costing

Cost Behavior

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

Statement of Cash Flows

Financial Statement Analysis

Filters

Exam 4: Activity-Based Costing, lean Production, and the Costs of Quality

The cost of maintaining testing equipment would be classified as a(n):

A system in which companies purchase raw materials only when needed is called:

The cost allocation rate for each activity is equal to the estimated total manufacturing overhead costs of the activity multiplied by the estimated total quantity of the cost allocation base.

The goal of value-engineering is to eliminate all waste in the system by making the company's processes as effective and efficient as possible.

Which of the following is TRUE about a lean production system?

Molding and sanding each unit of product would most likely be classified as a

Using departmental overhead rates is generally more accurate than using a single plantwide overhead rate.

The use of departmental overhead rates will generally result in the use of a:

To determine the amount of overhead allocated,the overhead rate is divided by the cost driver.

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

Traditional single-allocation-base cost systems tend to over-cost high-volume products and under-cost low-volume products.

Value-engineering is accomplished by eliminating,reducing,or simplifying all non-value added activities,and examining whether value-added activities could be improved.

The use of which of the following costing systems is most likely to reduce cost distortion to a minimum?

If a company's plantwide overhead rate is allocated based on direct labor hours,then each job will be allocated manufacturing overhead based on the total direct labor hours incurred on the job,regardless of the manufacturing department in which those hours were incurred.

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Job Costing

Process Costing

Cost Behavior

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

Statement of Cash Flows

Financial Statement Analysis

Filters