Question 1

If a company overcosts one of its products, then it will undercost at least one of its other products.

Accepted Answer

A) True 
 B)False

Question 2

Answer the following questions using the information below:
Whitman Printing has contracts to complete weekly supplements required by forty-six customers. For the year 20X5, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.
For 2010 Whitman Printing decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:
   During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:
  
-It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that:

Accepted Answer

A) product costs will reflect their relative consumption of resources 
B) nonvalue-added costs can be eliminated 
C) there is less likelihood of cross subsidizing of product costs 
D) All of these answers are correct. 
A) product costs will reflect their relative consumption of resources 
B) nonvalue-added costs can be eliminated 
C) there is less likelihood of cross subsidizing of product costs 
D) All of these answers are correct.

Question 3

Answer the following questions using the information below:
Monster Vehicle Rental Corporation has two departments, Car Rental and Truck Rental. Central costs may be allocated to the two departments in various ways.
  
-If the facility lease expense of $350,000 is allocated on the basis of vehicles in the fleet, the amount allocated to the Truck Rental Department would be:

Accepted Answer

A) $245,000 
B) $105,000 
C) $200,000 
D) $150,000 
A) $245,000 
B) $105,000 
C) $200,000 
D) $150,000

Question 4

ABC systems attempt to trace more costs as indirect costs.

Accepted Answer

A) True 
 B)False

Question 5

Answer the following questions using the information below:
Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows:
   What is projected operating income if direct materials costs of T-Shirts increase to $4.00 per unit and direct labor costs of Sweatshirts increase to $8.20 per unit.
-Under the revised ABC system, overhead costs per unit for the Sweatshirts will be:

Accepted Answer

A) $1.39 per unit 
B) $1.60 per unit 
C) $2.19 per unit 
D) $2.47 per unit 
A) $1.39 per unit 
B) $1.60 per unit 
C) $2.19 per unit 
D) $2.47 per unit

Question 6

Answer the following questions using the information below:
Whitman Printing has contracts to complete weekly supplements required by forty-six customers. For the year 20X5, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.
For 2010 Whitman Printing decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers. The following information was gathered during the analysis:
   During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:
  
-Using the activity-cost driver rates determined in the previous question, what is the manufacturing overhead cost estimate for Hospital Systems during 2010?

Accepted Answer

A) $6,227.50 
B) $2,990.00 
C) $4,136.00 
D) $6,825.00 
A) $6,227.50 
B) $2,990.00 
C) $4,136.00 
D) $6,825.00

Question 7

Answer the following questions using the information below:
King Corporation has two departments, Small and Large. Central costs could be allocated to the two departments in various ways.
  
-If total payroll processing costs of $60,000 are allocated on the basis of number of employees, the amount allocated to the Large Department would be:

Accepted Answer

A) $42,000 
B) $18,000 
C) $45,000 
D) $50,000 
A) $42,000 
B) $18,000 
C) $45,000 
D) $50,000

Question 8

Information derived from an ABC analysis might be used to eliminate nonvalue-added activities.

Accepted Answer

A) True 
 B)False

Question 9

Answer the following questions using the information below:
Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:
   The accounting records show the Mossman Job consumed the following resources:
  
-Which method of allocation probably best estimates actual overhead costs used? Why?

Accepted Answer

A) Single direct labor-hours cost driver because it is best to allocate total costs uniformly to individual jobs. 
B) Single direct labor-hours cost driver because it is easiest to analyze and interpret. 
C) Three activity-cost drivers because they best reflect the relative consumption of resources. 
D) Three activity-cost drivers because product costs can be significantly cross-subsidized. 
A) Single direct labor-hours cost driver because it is best to allocate total costs uniformly to individual jobs. 
B) Single direct labor-hours cost driver because it is easiest to analyze and interpret. 
C) Three activity-cost drivers because they best reflect the relative consumption of resources. 
D) Three activity-cost drivers because product costs can be significantly cross-subsidized.

Question 10

What is activity-based management and how can it be used to improve the profitability of a company?

Accepted Answer

Activity-based management is a method of

Question 11

Answer the following questions using the information below:
Fey Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled:
    
-Assume a traditional costing system applies the $120,000 of overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to the deluxe model?

Accepted Answer

A) $49,600 
B) $70,400 
C) $75,000 
D) $45,000 
A) $49,600 
B) $70,400 
C) $75,000 
D) $45,000

Question 12

Answer the following questions using the information below:
King Corporation has two departments, Small and Large. Central costs could be allocated to the two departments in various ways.
  
-If total rent expense of $288,000 is allocated on the basis of square footage, the amount allocated to the Large Department would be:

Accepted Answer

A) $86,400 
B) $240,000 
C) $72,000 
D) $216,000 
A) $86,400 
B) $240,000 
C) $72,000 
D) $216,000

Question 13

Costing systems with multiple cost pools are considered ABC systems.

Accepted Answer

A) True 
 B)False

Question 14

Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called:

Accepted Answer

A) overcosting 
B) undercosting 
C) peanut-butter costing 
D) department costing 
A) overcosting 
B) undercosting 
C) peanut-butter costing 
D) department costing

Question 15

Answer the following questions using the information below:
King Corporation has two departments, Small and Large. Central costs could be allocated to the two departments in various ways.
  
-If total payroll processing costs of $96,000 are allocated on the basis of number of employees, the amount allocated to the Small Department would be:

Accepted Answer

A) $67,200 
B) $24,000 
C) $16,000 
D) $28,000 
A) $67,200 
B) $24,000 
C) $16,000 
D) $28,000

Question 16

For activity-based cost systems, activity costs are assigned to products in the proportion of the demand they place on activity resources.

Accepted Answer

A) True 
 B)False

Question 17

Each of the following statements is true EXCEPT:

Accepted Answer

A) traditional product costing systems seek to assign all manufacturing costs to products 
B) ABC product costing systems seek to assign all manufacturing costs to products 
C) traditional product costing systems are more refined than an ABC system 
D) cost distortions occur when a mismatch (incorrect association)occurs between the way indirect costs are incurred and the basis for their assignment to individual products 
A) traditional product costing systems seek to assign all manufacturing costs to products 
B) ABC product costing systems seek to assign all manufacturing costs to products 
C) traditional product costing systems are more refined than an ABC system 
D) cost distortions occur when a mismatch (incorrect association)occurs between the way indirect costs are incurred and the basis for their assignment to individual products

Question 18

________ costs support the organization as a whole.

Accepted Answer

A) Unit-level 
B) Batch-level 
C) Product-sustaining 
D) Facility-sustaining 
A) Unit-level 
B) Batch-level 
C) Product-sustaining 
D) Facility-sustaining

Question 19

An activity-based costing system is necessary for costing services that are similar.

Accepted Answer

A) True 
 B)False

Question 20

Products make diverse demands on resources because of differences in all of the following EXCEPT:

Accepted Answer

A) volume 
B) selling price 
C) batch size 
D) complexity 
A) volume 
B) selling price 
C) batch size 
D) complexity

If a company overcosts one of its products, then it will undercost at least one of its other products.

ABC systems attempt to trace more costs as indirect costs.

Information derived from an ABC analysis might be used to eliminate nonvalue-added activities.

What is activity-based management and how can it be used to improve the profitability of a company?

Costing systems with multiple cost pools are considered ABC systems.

Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called:

For activity-based cost systems, activity costs are assigned to products in the proportion of the demand they place on activity resources.

Each of the following statements is true EXCEPT:

________ costs support the organization as a whole.

An activity-based costing system is necessary for costing services that are similar.

Products make diverse demands on resources because of differences in all of the following EXCEPT:

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters

Exam 5: Activity-Based Costing and Activity-Based Management

If a company overcosts one of its products, then it will undercost at least one of its other products.

ABC systems attempt to trace more costs as indirect costs.

Information derived from an ABC analysis might be used to eliminate nonvalue-added activities.

What is activity-based management and how can it be used to improve the profitability of a company?

Costing systems with multiple cost pools are considered ABC systems.

Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called:

For activity-based cost systems, activity costs are assigned to products in the proportion of the demand they place on activity resources.

Each of the following statements is true EXCEPT:

________ costs support the organization as a whole.

An activity-based costing system is necessary for costing services that are similar.

Products make diverse demands on resources because of differences in all of the following EXCEPT:

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Management Control Systems, Transfer Pricing, and Multinational Considerations

Performance Measurement, Compensation, and Multinational Considerations

Filters