Question 1

The movement of parts is considered a value-added activity

Accepted Answer

A) True 
 B)False

Question 2

Facility-level activities and costs are incurred no matter how many units,batches,or products are produced in the plant.

Accepted Answer

A) True 
 B)False

Question 3

As a result of cost distortion,either all products will be overcosted,or all products will be undercosted.

Accepted Answer

A) True 
 B)False

Question 4

Internal failure costs occur when the company detects and corrects poor-quality goods or services after delivery to customers.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following can be used in conjunction with activity-based costing?

Accepted Answer

A) Job costing 
B) Process costing 
C) Neither A nor B 
D) Both A and B 
A) Job costing 
B) Process costing 
C) Neither A nor B 
D) Both A and B

Question 6

The cost of warranty work is an example of 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 7

Cost distortion results in the:

Accepted Answer

A) overcosting of all products. 
B) undercosting of all products. 
C) overcosting of some products and undercosting of other products. 
D) accurate costing of all products. 
A) overcosting of all products. 
B) undercosting of all products. 
C) overcosting of some products and undercosting of other products. 
D) accurate costing of all products.

Question 8

Silver Company manufactures several different products and uses an activity-based costing system.Information from its system for the year for all products follows: $$\begin{array} { | l | c  | r | l | } 
\hline \text { Activity cost pool } &  { \text { Total cast } } & { \text { Total activity } } \
\hline \text { Assembly } & \$ o 266,000 & 14,000 & \text { machine-hours } \
\hline \text { Pracessing arders } & \$ o 86,400 & 3,600 & \text { Orders } \
\hline \text { Inspection } & \$ o 18,630 & 2,300 & \text { inspection-hours } \
\hline
\end{array}$$ The annual production and sales of one of its products,the Zinger,are 1,000 units.The following data relate to the production and sales of Zingers in the most recent year:
11ea84ce_c55a_24b0_83dc_4b1929bba0c4 What is the average cost of one Zinger?

Accepted Answer

A) $ 19.96 
B) $195.16 
C) $226.30 
D) $155.24 
A) $ 19.96 
B) $195.16 
C) $226.30 
D) $155.24

Question 9

Red Stone Manufacturing,a manufacturer of a variety of products,uses an activity-based costing system.Information from its system for the year for all products follows:
 $$\begin{array} { | l | l | r | l | } 
\hline { \text { Artivity cast poul } } & { \text { Tatal cast } } & &{ \text { Tatal artivity } } \
\hline \text { Assembly } & \$ 552,000 & 30,000 & \text { machine-hours } \
\hline \text { Inspection } & \$ 324,700 & 8,500 & \text { inspection-hours } \
\hline \text { Packaging } & \$ 49,450 & 2,300 & \text { arders } \
\hline
\end{array}$$ Red Stone Manufacturing makeS400 of its product B34 a year,which requires a total of 52 machine hours,15 inspection hours,and 20 orders.Product B34 requires $75.50 in direct materials per unit and $68.80 in direct labor per unit.Product B34 sells for $180 per unit.
Required:
a.Calculate the cost pool activity rate for each of the three activities.
b.How much manufacturing overhead would be allocated to Product B34 in total?
c.What is the product margin in total for Product B34?

Accepted Answer

None

Question 10

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 labor hours.Here is data related to the company's two products: $\begin{array}{|l|r|r|}
\hline &\text { Zips } & \text { Dees } \
\hline \text { Direct materials per unit } & \$  140.00 & \$ 100.00 \
\hline \text { Direct labor per unit } & \$  55.00 & \$  50.00 \
\hline \text { Direct labor hours per unit } &  2.0 &  1.5 \
\hline \text { Annual production } &  25,000 &40,000 \
\hline
\end{array}$
 Information about the company's estimated manufacturing overhead for the year follows:
$\begin{array}{|l|l|l|}
\hline&&\text { Estimated }\
\text { Activities } & \text { Activity measures } & \text { overhead cost }\
\hline \text { Supervision and maintenance } & \text { Direct labor hours } & \$ 2,200,000 \
\hline \text { Batch costs } & \text { Number of batches } & \$ 212,500 \
\hline \text { Engineering changes } & \text { Number of engineering hours } & \$ 180,000\
\hline
\end{array}$

$\text { Total estimated manufacturing overhead for the year } \quad \quad \quad \quad\quad \$ 2.592 .500 $
 Total estimated direct labor 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:
$\begin{array} { | l | r | r | r | } 
\hline && { \text { Expected activity } } \
\hline &{ \text { Zips } } &  { \text { Dees } } &{ \text { Total } } \
\hline \text { Direct labor hours } & 50,000 & 60,000 & 110,000 \
\hline \text { Setups } & 2,000 & 500 & 2,500 \
\hline \text { Part types } & 1,800 & 1,200 & 3,000 \
\hline
\end{array}$ 
-  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 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

Which of the following terms best describes costs incurred to avoid poor quality goods or services?

Accepted Answer

A) Appraisal costs 
B) Activity-based costing 
C) Value engineering 
D) Prevention costs 
A) Appraisal costs 
B) Activity-based costing 
C) Value engineering 
D) Prevention costs

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

The four categories of activity costs in cost hierarchy are determined by the underlying factor that drives its costs.

Accepted Answer

A) True 
 B)False

Question 15

An example of an appraisal cost is the cost of automating the production process.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following describes how,in ABC,the activity allocation rate is computed?

Accepted Answer

A) The total estimated activity cost pool is divided by the total estimated activity allocation base. 
B) The total estimated activity allocation base is divided by the total estimated activity cost pool. 
C) The total estimated activity allocation base is multiplied by the total estimated activity cost pool. 
D) You take the total estimated activity allocation base and subtract the total estimated total activity cost pool. 
A) The total estimated activity cost pool is divided by the total estimated activity allocation base. 
B) The total estimated activity allocation base is divided by the total estimated activity cost pool. 
C) The total estimated activity allocation base is multiplied by the total estimated activity cost pool. 
D) You take the total estimated activity allocation base and subtract the total estimated total activity cost pool.

Question 17

A system that focuses on activities as the fundamental cost object and uses the costs for these activities to compile indirect costs of goods and services is:

Accepted Answer

A) appraisal costs. 
B) activity-based costing. 
C) value engineering. 
D) prevention costs. 
A) appraisal costs. 
B) activity-based costing. 
C) value engineering. 
D) prevention costs.

Question 18

The cost of training quality control supervisors 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 19

Which of the following is NOT likely to be a cost driver of activities associated with determining product cost?

Accepted Answer

A) Number of cost accountant's labor hours 
B) Number of material requisitions 
C) Number of product inspections 
D) Number of production orders 
A) Number of cost accountant's labor hours 
B) Number of material requisitions 
C) Number of product inspections 
D) Number of production orders

Question 20

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 units costs for all parts is:

Accepted Answer

A) $ 4.34. 
B) $ 6.06. 
C) $ 7.98. 
D) $13.48. 
A) $ 4.34. 
B) $ 6.06. 
C) $ 7.98. 
D) $13.48.

The movement of parts is considered a value-added activity

Facility-level activities and costs are incurred no matter how many units,batches,or products are produced in the plant.

As a result of cost distortion,either all products will be overcosted,or all products will be undercosted.

Internal failure costs occur when the company detects and corrects poor-quality goods or services after delivery to customers.

Which of the following can be used in conjunction with activity-based costing?

The cost of warranty work is an example of a(n):

Cost distortion results in the:

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

Which of the following terms best describes costs incurred to avoid poor quality goods or services?

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

The four categories of activity costs in cost hierarchy are determined by the underlying factor that drives its costs.

An example of an appraisal cost is the cost of automating the production process.

Which of the following describes how,in ABC,the activity allocation rate is computed?

A system that focuses on activities as the fundamental cost object and uses the costs for these activities to compile indirect costs of goods and services is:

The cost of training quality control supervisors would be classified as a(n):

Which of the following is NOT likely to be a cost driver of activities associated with determining product cost?

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 movement of parts is considered a value-added activity

Facility-level activities and costs are incurred no matter how many units,batches,or products are produced in the plant.

As a result of cost distortion,either all products will be overcosted,or all products will be undercosted.

Internal failure costs occur when the company detects and corrects poor-quality goods or services after delivery to customers.

Which of the following can be used in conjunction with activity-based costing?

The cost of warranty work is an example of a(n):

Cost distortion results in the:

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

Which of the following terms best describes costs incurred to avoid poor quality goods or services?

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

The four categories of activity costs in cost hierarchy are determined by the underlying factor that drives its costs.

An example of an appraisal cost is the cost of automating the production process.

Which of the following describes how,in ABC,the activity allocation rate is computed?

A system that focuses on activities as the fundamental cost object and uses the costs for these activities to compile indirect costs of goods and services is:

The cost of training quality control supervisors would be classified as a(n):

Which of the following is NOT likely to be a cost driver of activities associated with determining product cost?

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