Question 1

Output unit-level costs cannot be determined unless you know how many units are in a given batch.

Accepted Answer

A) True 
 B)False

Question 2

Brilliant Accents Company manufactures and sells three styles of kitchen faucets: Brass, Chrome, and White. Production takes 25, 25, and 10 machine hours to manufacture 1,000-unit batches of brass, chrome and white faucets, respectively. The following additional data apply:
   Required:
a. Using the traditional system, determine the operating profit per unit for the brass style of faucet.
b. Determine the activity cost driver rate for setup costs and inspection costs.
c. Using the ABC system, for the brass style of faucet:
   d. Explain the difference between the profits obtained from the traditional system and the ABC system. Which system provides a better estimate of profitability? Why?

Accepted Answer

a. Traditional system:
 @#IMG-DLM& b. Se

Question 3

Provided a single allocation base is used, jobs are typically overcosted if

Accepted Answer

A)  jobs consume proportionately less of the indirect activity but is reported to have higher cost. 
B)  jobs require more employees. 
C)  jobs consume proportionately more of the indirect activity and is reported to have higher cost. 
D)  jobs consume proportionately more of the indirect activity but is reported to have lower cost. 
E)  jobs cannot be overcosted; only products or service can be overcosted. 
A)  jobs consume proportionately less of the indirect activity but is reported to have higher cost. 
B)  jobs require more employees. 
C)  jobs consume proportionately more of the indirect activity and is reported to have higher cost. 
D)  jobs consume proportionately more of the indirect activity but is reported to have lower cost. 
E)  jobs cannot be overcosted; only products or service can be overcosted.

Question 4

The estimated total manufacturing overhead costs that will be incurred in each department in the coming year are often referred to as activity cost pools.

Accepted Answer

A) True 
 B)False

Question 5

A cost accounting system should be revised when

Accepted Answer

A)  the existing cost accounting system provides information that is representative of operations. 
B)  the existing cost accounting system could be updated, just to keep ahead. 
C)  the existing cost accounting system does not produce information that reflects the way various products use scarce resources. 
D)  management wants to change the system, even though the information is relevant and correct. 
E)  a new system would be easier to understand but would not be reliable. 
A)  the existing cost accounting system provides information that is representative of operations. 
B)  the existing cost accounting system could be updated, just to keep ahead. 
C)  the existing cost accounting system does not produce information that reflects the way various products use scarce resources. 
D)  management wants to change the system, even though the information is relevant and correct. 
E)  a new system would be easier to understand but would not be reliable.

Question 6

Inaccurate product costs can expose a company to the risk of losing market share to competitors.

Accepted Answer

A) True 
 B)False

Question 7

For each of the following activities identify an appropriate activity-cost driver.
a. machine maintenance
b. machine setup
c. quality control
d. material ordering
e. production scheduling
f. warehouse expense
g. engineering design

Accepted Answer

Any one of

Question 8

By defining activities and identifying the costs of performing each activity, ABC systems provide detailed information regarding how an organization utilizes its available resources.

Accepted Answer

A) True 
 B)False

Question 9

A well designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis

Accepted Answer

A)  can be used to improve the efficiency of activities. 
B)  is easy to analyze and interpret. 
C)  takes the choices and judgement challenges away from managers. 
D)  emphasizes how managers can achieve higher sales. 
E)  helps identify trends in the market place. 
A)  can be used to improve the efficiency of activities. 
B)  is easy to analyze and interpret. 
C)  takes the choices and judgement challenges away from managers. 
D)  emphasizes how managers can achieve higher sales. 
E)  helps identify trends in the market place.

Question 10

ABC provides a straightforward cost-benefit analysis of the unequally shared benefits of a support activity. The technique also clearly discloses the scope of business functions where cost control will have a positive effect.
Required:
Provide three benefits that the identification of the scope of cost control focused on different activity levels should lead to.

Accepted Answer

Any three of:
Increased reliability of t

Question 11

The new manager of the insurance division does not understand how the company can have so many overhead rates for assigning costs to the activities of the company's life insurance underwriters. There is one rate schedule for average assignable costs when agents write standard policies. There is another rate schedule which the agents must complete when they write special policies, and these policies are costed out differently from those that are categorized as standard policies.
Required:
a. Why might the company have different costing systems with different overhead rates for the standard and specialized policies?

Accepted Answer

a. Because the standard policies are wri

Question 12

The Marionettes Company is noted for an exceptionally impressive line of Mardi Gras masks. Marionettes has established the following selling and distribution support activity-cost pools and their corresponding activity drivers for the year 2012:
   Required:
a. Determine the activity cost driver rate for each of the four selling and distribution activities.
b. Under what circumstances is it appropriate to use each of the activity cost drivers?
c. Describe at least one possible negative behavioral consequence for each of the four activity cost drivers.

Accepted Answer

a. Activity cost driver rate for Marketi

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

At Deutschland Electronics, product lines are charged for call centre support costs based on sales revenue. Last year's summary of call centre operations revealed the following:
   Deutschland Electronics currently allocates call centre support costs using a rate of 0.5% of sales revenue.
Required:
a. Compute the amount of call centre support costs allocated to each product line under the current system.
b. Assume Deutschland decides to use the average call length for information to assign last year's support costs. Does this allocation method seem more appropriate than percentage of sales? Why or why not?
c. Assume Deutschland decides to use the numbers of calls for information and for warranties to assign last year's support costs of $65,000. Compute the amount of call centre support costs assigned to each product line under this revised ABC system.
d. Deutschland Electronics assigns bonuses based on departmental profits. How might the Specialty Products manager try to obtain higher profits for next year if support costs are assigned based on the average call length for information?
e. Discuss the barriers for implementing ABC for this call centre.

Accepted Answer

a. Call centre support costs allocated t

Question 15

When using activity-based costing in a manufacturing setting, its distinctive feature is the focus on

Accepted Answer

A)  activities as the fundamental cost objects. 
B)  minimizing the number of journal entries related to the manufacturing process. 
C)  minimizing manufacturing costs. 
D)  materials handling. 
E)  materials sorting. 
A)  activities as the fundamental cost objects. 
B)  minimizing the number of journal entries related to the manufacturing process. 
C)  minimizing manufacturing costs. 
D)  materials handling. 
E)  materials sorting.

Question 16

Answer the following question(s) using the information below.
Ernsting Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2012, manufacturing overhead cost estimates total $420,000 for an annual production capacity of 12 million pages.
For 2012 Ernsting Printers has 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 2012, two customers, Wealth Managers and Health Systems, are expected to use the following printing services:
  
-Using activity-based costing to allocate overhead costs, what is the total manufacturing overhead cost estimate for Wealth Managers during 2012?

Accepted Answer

A)  $6,850 
B)  $3,250 
C)  $4,020 
D)  $3,430 
E)  $5,096 
A)  $6,850 
B)  $3,250 
C)  $4,020 
D)  $3,430 
E)  $5,096

Question 17

Answer the following question(s) using the information below.
Wallace Printing has contracts to complete weekly supplements required by forty-six customers. For the year 2012, manufacturing overhead cost estimates total $420,000 for an annual production capacity of 10 million pages.
For 2012 Wallace 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 2012, two customers, Wayward Insurance and Hapless Systems, are expected to use the following printing services:
  
-Using activity-based costing to allocate overhead costs, what is the total manufacturing overhead cost estimate for Hapless Systems during 2012?

Accepted Answer

A)  $3,113.75 
B)  $1,495.00 
C)  $2,068.00 
D)  $3,412.50 
E)  $3,665.00 
A)  $3,113.75 
B)  $1,495.00 
C)  $2,068.00 
D)  $3,412.50 
E)  $3,665.00

Question 18

The list of representative cost drivers in the right column below are randomized with respect to the list of functions in the left column. That is, they do not match.
   Required:
Match each business function with its representative cost driver.

Accepted Answer

The answer of The list of representative cost drivers in...

Question 19

Direct cost tracing will accomplish which of the following?

Accepted Answer

A)  identify homogeneous costs 
B)  classify more costs as indirect 
C)  focus on the cause-and-effect criterion when choosing allocation bases 
D)  expand the number of indirect cost pools 
E)  classify as many of the costs as direct costs, as is economically feasible 
A)  identify homogeneous costs 
B)  classify more costs as indirect 
C)  focus on the cause-and-effect criterion when choosing allocation bases 
D)  expand the number of indirect cost pools 
E)  classify as many of the costs as direct costs, as is economically feasible

Question 20

Analyze the two costing systems below and determine which one is an ABC system, stating the reasons for your choice.

Accepted Answer

System A has the indications of a refine

Output unit-level costs cannot be determined unless you know how many units are in a given batch.

Provided a single allocation base is used, jobs are typically overcosted if

The estimated total manufacturing overhead costs that will be incurred in each department in the coming year are often referred to as activity cost pools.

A cost accounting system should be revised when

Inaccurate product costs can expose a company to the risk of losing market share to competitors.

For each of the following activities identify an appropriate activity-cost driver. a. machine maintenance b. machine setup c. quality control d. material ordering e. production scheduling f. warehouse expense g. engineering design

By defining activities and identifying the costs of performing each activity, ABC systems provide detailed information regarding how an organization utilizes its available resources.

A well designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis

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

When using activity-based costing in a manufacturing setting, its distinctive feature is the focus on

The list of representative cost drivers in the right column below are randomized with respect to the list of functions in the left column. That is, they do not match. Required: Match each business function with its representative cost driver.

Direct cost tracing will accomplish which of the following?

Analyze the two costing systems below and determine which one is an ABC system, stating the reasons for your choice.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Quantitative Analyses of Cost Functions

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters

Exam 5: Activity-Based Costing and Management

Output unit-level costs cannot be determined unless you know how many units are in a given batch.

Provided a single allocation base is used, jobs are typically overcosted if

The estimated total manufacturing overhead costs that will be incurred in each department in the coming year are often referred to as activity cost pools.

A cost accounting system should be revised when

Inaccurate product costs can expose a company to the risk of losing market share to competitors.

For each of the following activities identify an appropriate activity-cost driver. a. machine maintenance b. machine setup c. quality control d. material ordering e. production scheduling f. warehouse expense g. engineering design

By defining activities and identifying the costs of performing each activity, ABC systems provide detailed information regarding how an organization utilizes its available resources.

A well designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis

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

When using activity-based costing in a manufacturing setting, its distinctive feature is the focus on

The list of representative cost drivers in the right column below are randomized with respect to the list of functions in the left column. That is, they do not match. Required: Match each business function with its representative cost driver.

Direct cost tracing will accomplish which of the following?

Analyze the two costing systems below and determine which one is an ABC system, stating the reasons for your choice.

The Accountants Vital Role in Decision Making

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Master Budget and Responsibility Accounting

Flexible Budgets, Variances, and Management Control: I

Flexible Budgets, Variances, and Management Control: II

Income Effects of Denominator Level on Inventory Valuation

Quantitative Analyses of Cost Functions

Decision Making and Relevant Information

Pricing Decisions, Product Profitability Decisions, and Cost Management

Strategy, Balanced Scorecard, and Profitability Analysis

Period Cost Allocation

Cost Allocation: Joint Products and Byproducts

Revenue and Customer Profitability Analysis

Process Costing

Spoilage, Rework, and Scrap

Cost Management: Quality, Time, and the Theory of Constraints

Inventory Cost Management Strategies

Capital Budgeting: Methods of Investment Analysis

Capital Budgeting: a Closer Look

Transfer Pricing and Multinational Management Control Systems

Multinational Performance Measurement and Compensation

Filters