Question 1

ABC systems seek a cost allocation base that has a cause-and-effect relationship with costs in the cost pool.

Accepted Answer

A) True 
 B)False

Question 2

The most likely example of a batch-level cost is:

Accepted Answer

A) utility costs 
B) machine repairs 
C) product-designing costs 
D) setup costs 
A) utility costs 
B) machine repairs 
C) product-designing costs 
D) setup costs

Question 3

Activity-based management refers to the use of information derived from ABC analysis to analyze and improve operations.

Accepted Answer

A) True 
 B)False

Question 4

To set realistic selling prices:

Accepted Answer

A) all costs should be allocated to products 
B) costs should only be allocated when there is a strong cause-and-effect relationship 
C) only unit-level costs and batch-level costs should be allocated 
D) only unit-level costs should be allocated 
A) all costs should be allocated to products 
B) costs should only be allocated when there is a strong cause-and-effect relationship 
C) only unit-level costs and batch-level costs should be allocated 
D) only unit-level costs should be allocated

Question 5

Answer the following questions using the information below:
Mertens Company provides the following ABC costing information:
   The above activities are used by Departments A and B as follows:
  
-How much of the total costs will be assigned to Department B?

Accepted Answer

A) $79,000 
B) $40,000 
C) $112,000 
D) $440,000 
A) $79,000 
B) $40,000 
C) $112,000 
D) $440,000

Question 6

Explain how a top-selling product may actually result in losses for the company.

Accepted Answer

If indirect costs are not properly alloc

Question 7

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:
  
-Using direct labor-hours as the only overhead cost driver, what is the amount of overhead costs allocated to the Mossman Job?

Accepted Answer

A) $160 
B) $120 
C) $240 
D) $125 
A) $160 
B) $120 
C) $240 
D) $125

Question 8

Availability of reliable data and measures should be considered when choosing a cost-allocation base.

Accepted Answer

A) True 
 B)False

Question 9

ABC assumes all costs are ________ because over the long run management can adjust the amount of resources employed.

Accepted Answer

A) fixed 
B) variable 
C) committed 
D) nondiscretionary 
A) fixed 
B) variable 
C) committed 
D) nondiscretionary

Question 10

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:
  
-Smaller cost distortions occur when the traditional systems' single indirect-cost rate and the activity-cost-driver rates:

Accepted Answer

A) use the same total costs for computations 
B) are similar in proportion to each other 
C) are more different than alike 
D) use the same cost driver units 
A) use the same total costs for computations 
B) are similar in proportion to each other 
C) are more different than alike 
D) use the same cost driver units

Question 11

Activity-based costing helps identify various activities that explain why costs are incurred.

Accepted Answer

A) True 
 B)False

Question 12

Come-On-In Manufacturing produces two types of entry doors: Deluxe and Standard. The assignment basis for support costs has been direct labor dollars. For 2010, Come-On-In compiled the following data for the two products:
     Last year, Come-On-In Manufacturing purchased an expensive robotics system to allow for more decorative door products in the deluxe product line. The CFO suggested that an ABC analysis could be valuable to help evaluate a product mix and promotion strategy for the next sales campaign. She obtained the following ABC information for 2010:
   Required:
a. Using the current system, what is the estimated
   b. Using the current system, estimated manufacturing overhead costs per unit are less for the deluxe door ($80 per unit)than the standard door ($120 per unit). What is a likely explanation for this?
c. Review the machine-related costs above. What is a likely explanation for machine-related costs being so high? What might explain why total machining hours for the deluxe doors (300,000 hours)are the same as for the standard doors (300,000 hours)?
d. Using the activity-based costing data presented above,
   e. Is the deluxe door as profitable as the original data estimated? Why or why not?
f. What considerations need to be examined when determining a sales mix strategy?

Accepted Answer

a. Currently estimated deluxe-entry door

Question 13

Answer the following questions using the information below:
Happy Valley Land and Snow Company provides the following ABC costing information:
   The above activities used by their three departments are:
  
-How much of the total costs will be assigned to the Lawn Department?

Accepted Answer

A) $100,000 
B) $49,200 
C) $200,000 
D) $134,600 
A) $100,000 
B) $49,200 
C) $200,000 
D) $134,600

Question 14

How can the need for a more refined costing system be identified?

Accepted Answer

Signs that there is a need for a more re

Question 15

Design costs are an example of:

Accepted Answer

A) unit-level costs 
B) batch-level costs 
C) product-sustaining costs 
D) facility-sustaining costs 
A) unit-level costs 
B) batch-level costs 
C) product-sustaining costs 
D) facility-sustaining costs

Question 16

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 administrative expense of $62,500 is allocated on the basis of number of employees, the amount allocated to the Car Rental Department would be:

Accepted Answer

A) $37,500 
B) $62,500 
C) $46,875 
D) $15,625 
A) $37,500 
B) $62,500 
C) $46,875 
D) $15,625

Question 17

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:
  
-Activity-based costing systems provide better product costs when they:

Accepted Answer

A) employ more activity-cost drivers 
B) employ fewer activity-cost drivers 
C) identify and cost more indirect cost differences among products 
D) always yield more accurate product costs than traditional systems 
A) employ more activity-cost drivers 
B) employ fewer activity-cost drivers 
C) identify and cost more indirect cost differences among products 
D) always yield more accurate product costs than traditional systems

Question 18

Answer the following questions using the information below:
Products S5 and CP8 each are assigned $100.00 in indirect costs by a traditional costing system. An activity analysis revealed that although production requirements are identical, S5 requires 45 minutes less setup time than CP8.
-According to an ABC system, S5 uses a disproportionately:

Accepted Answer

A) smaller amount of unit-level costs 
B) larger amount of unit-level costs 
C) smaller amount of batch-level costs 
D) larger amount of batch-level costs 
A) smaller amount of unit-level costs 
B) larger amount of unit-level costs 
C) smaller amount of batch-level costs 
D) larger amount of batch-level costs

Question 19

It is usually difficult to find good cause-and-effect relationships between ________ and a cost allocation base.

Accepted Answer

A) unit-level costs 
B) batch-level costs 
C) product-sustaining costs 
D) facility-sustaining costs 
A) unit-level costs 
B) batch-level costs 
C) product-sustaining costs 
D) facility-sustaining costs

Question 20

Unit-level measures can distort product costing because the demand for overhead resources may be driven by batch-level or product-sustaining activities.

Accepted Answer

A) True 
 B)False

ABC systems seek a cost allocation base that has a cause-and-effect relationship with costs in the cost pool.

The most likely example of a batch-level cost is:

Activity-based management refers to the use of information derived from ABC analysis to analyze and improve operations.

To set realistic selling prices:

Answer the following questions using the information below: Mertens Company provides the following ABC costing information: The above activities are used by Departments A and B as follows: -How much of the total costs will be assigned to Department B?

Explain how a top-selling product may actually result in losses for the company.

Availability of reliable data and measures should be considered when choosing a cost-allocation base.

ABC assumes all costs are ________ because over the long run management can adjust the amount of resources employed.

Activity-based costing helps identify various activities that explain why costs are incurred.

Answer the following questions using the information below: Happy Valley Land and Snow Company provides the following ABC costing information: The above activities used by their three departments are: -How much of the total costs will be assigned to the Lawn Department?

How can the need for a more refined costing system be identified?

Design costs are an example of:

It is usually difficult to find good cause-and-effect relationships between ________ and a cost allocation base.

Unit-level measures can distort product costing because the demand for overhead resources may be driven by batch-level or product-sustaining activities.

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

ABC systems seek a cost allocation base that has a cause-and-effect relationship with costs in the cost pool.

The most likely example of a batch-level cost is:

Activity-based management refers to the use of information derived from ABC analysis to analyze and improve operations.

To set realistic selling prices:

Answer the following questions using the information below: Mertens Company provides the following ABC costing information: The above activities are used by Departments A and B as follows: -How much of the total costs will be assigned to Department B?

Explain how a top-selling product may actually result in losses for the company.

Availability of reliable data and measures should be considered when choosing a cost-allocation base.

ABC assumes all costs are ________ because over the long run management can adjust the amount of resources employed.

Activity-based costing helps identify various activities that explain why costs are incurred.

Answer the following questions using the information below: Happy Valley Land and Snow Company provides the following ABC costing information: The above activities used by their three departments are: -How much of the total costs will be assigned to the Lawn Department?

How can the need for a more refined costing system be identified?

Design costs are an example of:

It is usually difficult to find good cause-and-effect relationships between ________ and a cost allocation base.

Unit-level measures can distort product costing because the demand for overhead resources may be driven by batch-level or product-sustaining activities.

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