Question 1

ABC systems are a further refinement of department-costing systems.

Accepted Answer

A) True 
 B)False

Question 2

Using multiple unit-level cost drivers generally constitutes an effective activity-based cost system.

Accepted Answer

A) True 
 B)False

Question 3

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 cost will be assigned to the Plowing Department?

Accepted Answer

A) $396,000 
B) $202.200 
C) $134,600 
D) $172,000 
A) $396,000 
B) $202.200 
C) $134,600 
D) $172,000

Question 4

A cost-allocation base is a necessary element when using a strategy that will refine a costing system.

Accepted Answer

A) True 
 B)False

Question 5

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 gas cost will be assigned to the Plowing Department?

Accepted Answer

A) $50,000 
B) $22,200 
C) $30,000 
D) None of these answers are correct. 
A) $50,000 
B) $22,200 
C) $30,000 
D) None of these answers are correct.

Question 6

Misleading cost numbers are most likely the result of misallocating:

Accepted Answer

A) direct material costs 
B) direct manufacturing labor costs 
C) indirect costs 
D) All of these answers are correct. 
A) direct material costs 
B) direct manufacturing labor costs 
C) indirect costs 
D) All of these answers are correct.

Question 7

ABC systems create heterogeneous cost pools linked to different activities.

Accepted Answer

A) True 
 B)False

Question 8

Unit-level cost drivers are most appropriate as an overhead assignment base when:

Accepted Answer

A) several complex products are manufactured 
B) only one product is manufactured 
C) direct labor costs are low 
D) factories produce a varied mix of products 
A) several complex products are manufactured 
B) only one product is manufactured 
C) direct labor costs are low 
D) factories produce a varied mix of products

Question 9

Answer the following questions using the information below:
Chess Woods Limited produces two products: wooden chess pieces and wooden inlaid chess boards. Under their traditional cost system using one cost driver (direct manufacturing labor hours), the cost of a set of wooden chess pieces is $325.00. An analysis of the activities and their costs revealed that three cost drivers would be used under a new ABC system. These cost drivers would be equipment usage, storage area for the material, and type of woods used. The new cost of a set of chess pieces was determined to be $298.00 per set.
-The total amount of indirect cost assigned to produce chess pieces using the traditional method is ________ the total amount assigned using ABC.

Accepted Answer

A) more than 
B) less than 
C) identical to 
D) None of these answers are correct. 
A) more than 
B) less than 
C) identical to 
D) None of these answers are correct.

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:
  
-Which of the following is NOT a sign that a "smoothing out" costing system exists?

Accepted Answer

A) Operations managers don't use the data originated by the cost system. 
B) Products that a company is well suited to make and sell show large profits. 
C) New product variations have been added, but the cost system has not been upgraded. 
D) The company loses bids they believe were priced competitively. 
A) Operations managers don't use the data originated by the cost system. 
B) Products that a company is well suited to make and sell show large profits. 
C) New product variations have been added, but the cost system has not been upgraded. 
D) The company loses bids they believe were priced competitively.

Question 11

An accelerated need for refined cost systems is due to:

Accepted Answer

A) global monopolies 
B) rising prices 
C) intense competition 
D) a shift toward increased direct costs 
A) global monopolies 
B) rising prices 
C) intense competition 
D) a shift toward increased direct costs

Question 12

ABC reveals opportunities to focus on value added activities.

Accepted Answer

A) True 
 B)False

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 gas cost will be assigned to the Lawn Department?

Accepted Answer

A) $4,800 
B) $20,000 
C) $9,000 
D) $22,200 
A) $4,800 
B) $20,000 
C) $9,000 
D) $22,200

Question 14

Different products consume different proportions of manufacturing overhead costs because of differences in all of the following EXCEPT:

Accepted Answer

A) selling prices 
B) customers' customization specifications 
C) setup times 
D) product design 
A) selling prices 
B) customers' customization specifications 
C) setup times 
D) product design

Question 15

The use of a single indirect-cost rate is more likely to:

Accepted Answer

A) undercost high-volume simple products 
B) undercost low-volume complex products 
C) undercost lower-priced products 
D) Both B and C are correct. 
A) undercost high-volume simple products 
B) undercost low-volume complex products 
C) undercost lower-priced products 
D) Both B and C are correct.

Question 16

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:
  
-Dalrymple Company produces a special spray nozzle. The budgeted indirect total cost of inserting the spray nozzle is $80,000. The budgeted number of nozzles to be inserted is 40,000. What is the budgeted indirect cost allocation rate for this activity?

Accepted Answer

A) $0.50 
B) $1.00 
C) $1.50 
D) $2.00 
A) $0.50 
B) $1.00 
C) $1.50 
D) $2.00

Question 17

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:
  
-A primary reason for assigning selling and distribution costs to products for analytical purposes is:

Accepted Answer

A) to justify a varied product mix 
B) that controllers are required to assign all costs when valuing inventories 
C) that different processes, products, and customers require different quantities of selling and distribution activities 
D) that all indirect costs must be assigned 
A) to justify a varied product mix 
B) that controllers are required to assign all costs when valuing inventories 
C) that different processes, products, and customers require different quantities of selling and distribution activities 
D) that all indirect costs must be assigned

Question 18

Which of the following statements about activity-based costing is NOT true?

Accepted Answer

A) Activity-based costing is useful for allocating marketing and distribution costs. 
B) Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. 
C) Activity-based costing seeks to distinguish batch-level, product-sustaining, and facility-sustaining costs, especially when they are not proportionate to one another. 
D) Activity-based costing differs from traditional costing systems in that products are not cross-subsidized. 
A) Activity-based costing is useful for allocating marketing and distribution costs. 
B) Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. 
C) Activity-based costing seeks to distinguish batch-level, product-sustaining, and facility-sustaining costs, especially when they are not proportionate to one another. 
D) Activity-based costing differs from traditional costing systems in that products are not cross-subsidized.

Question 19

ABC systems identify ________ costs used by products.

Accepted Answer

A) all 
B) short-term fixed 
C) short-term variable 
D) long-term fixed 
A) all 
B) short-term fixed 
C) short-term variable 
D) long-term fixed

Question 20

Rachel's Pet Supply Corporation manufactures two models of grooming stations, a standard and a deluxe model. The following activity and cost information has been compiled:
     Assume a traditional costing system applies the $160,000 of overhead costs based on direct labor hours.
a. What is the total amount of overhead costs assigned to the standard model?
b. What is the total amount of overhead costs assigned to the deluxe model?
Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.
c. What is the total amount of overhead costs assigned to the standard model?
d. What is the total amount of overhead costs assigned to the deluxe model?
e. Explain the difference between the costs obtained from the traditional costing system and the ABC system. Which system provides a better estimate of costs? Why?

Accepted Answer

a. [$160,000 / (650 + 150)] × 650 = $130

ABC systems are a further refinement of department-costing systems.

Using multiple unit-level cost drivers generally constitutes an effective activity-based cost system.

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 cost will be assigned to the Plowing Department?

A cost-allocation base is a necessary element when using a strategy that will refine a costing system.

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 gas cost will be assigned to the Plowing Department?

Misleading cost numbers are most likely the result of misallocating:

ABC systems create heterogeneous cost pools linked to different activities.

Unit-level cost drivers are most appropriate as an overhead assignment base when:

An accelerated need for refined cost systems is due to:

ABC reveals opportunities to focus on value added activities.

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 gas cost will be assigned to the Lawn Department?

Different products consume different proportions of manufacturing overhead costs because of differences in all of the following EXCEPT:

The use of a single indirect-cost rate is more likely to:

Which of the following statements about activity-based costing is NOT true?

ABC systems identify ________ costs used by products.

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 are a further refinement of department-costing systems.

Using multiple unit-level cost drivers generally constitutes an effective activity-based cost system.

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 cost will be assigned to the Plowing Department?

A cost-allocation base is a necessary element when using a strategy that will refine a costing system.

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 gas cost will be assigned to the Plowing Department?

Misleading cost numbers are most likely the result of misallocating:

ABC systems create heterogeneous cost pools linked to different activities.

Unit-level cost drivers are most appropriate as an overhead assignment base when:

An accelerated need for refined cost systems is due to:

ABC reveals opportunities to focus on value added activities.

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 gas cost will be assigned to the Lawn Department?

Different products consume different proportions of manufacturing overhead costs because of differences in all of the following EXCEPT:

The use of a single indirect-cost rate is more likely to:

Which of the following statements about activity-based costing is NOT true?

ABC systems identify ________ costs used by products.

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