Answer the following questions using the information below: Trustme Vehicle Rental Corporation has two departments,Car Rental and Truck Rental.Central costs may be allocated to the two departments in various ways. \[\begin{array} { l r r } & \text { Car Rental } & \text { Truck Rental } \\ \text { Number of vehicles in fleet } & 700 & 300 \\ \text { Number of employees } & 150 & 50 \\ \text { Sales } & \$ 1500000 & \$ 750000 \end{array}\] -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:

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

Exam 8: Activity-Based Management and Activity-Based Costing

________ focuses on observing and analysing activities as a basis for making a range of decisions,including pricing outputs,deciding on output mix,how to reduce costs,how to improve processes,product design,profitability and customer satisfaction.

(Multiple Choice)

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Question 201

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

(True/False)

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Question 202

Do activity-based costing systems always provide more accurate product costs than conventional cost systems? Why or why not? _ _

(Essay)

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Question 203

In which of the following situations does it make sense to implement an ABC system?

(Multiple Choice)

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Question 204

Explain how traditional cost systems,using a single unit-level cost rate,may distort product costs. _ _

(Essay)

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Question 205

ABC systems include all resources consumed by cost ________,irrespective of whether the costs are variable or fixed in the short run.

(Multiple Choice)

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Question 206

When designing an ABC system,managers must decide on the level of detail required.

(True/False)

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Question 207

Why is there an accelerated need for refined cost systems?

(Multiple Choice)

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Question 208

Answer the following questions using the information below: Products S5 and CP8 each are assigned $50.00 in indirect costs by a traditional costing system.An activity analysis revealed that although production requirements are identical,S5 requires 45 minutes less set-up time than CP8. -ABC is not complex in concept.

(True/False)

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Question 209

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: Surveillance Products Specialty Products Number of calls for information 1000 4000 Average call length for information 3 minutes 8 minutes Number of calls for warranties 300 1200 Average call length for warranties 7 minutes 15 minutes Sales revenue \ 8000000 \ 5000000 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. _ _

(Essay)

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Question 210

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

(True/False)

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Question 211

Using activity-cost rates rather than department indirect-cost rates to allocate costs results in different product costs when:

(Multiple Choice)

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Question 212

The MOST likely example of an output unit-level cost is:

(Multiple Choice)

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Question 213

________ cause resources to be consumed and so have an effect on costs.

(Multiple Choice)

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Question 214

Managers are able to apply ABC not only within the organisation but also beyond Organisational boundaries to the:

(Multiple Choice)

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Question 215

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

(Essay)

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Question 216

In earlier times,when organisations produced a limited variety of products and indirect costs were a relatively small percentage of total costs,managers found that traditional costing systems were reasonably accurate and both easy and inexpensive to use.

(True/False)

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Question 217

Answer the following questions using the information below: Trustme Vehicle Rental Corporation has two departments,Car Rental and Truck Rental.Central costs may be allocated to the two departments in various ways. Car Rental Truck Rental Number of vehicles in fleet 700 300 Number of employees 150 50 Sales \ 1500000 \ 750000 -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:

(Multiple Choice)

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Question 218

Even by analysing activities,managers cannot uncover information that helps them to make the decisions.

(True/False)

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Question 219

What do homogeneous cost pools lead to?

(Multiple Choice)

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Question 220

________ focuses on observing and analysing activities as a basis for making a range of decisions,including pricing outputs,deciding on output mix,how to reduce costs,how to improve processes,product design,profitability and customer satisfaction.

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

Do activity-based costing systems always provide more accurate product costs than conventional cost systems? Why or why not? _ _

In which of the following situations does it make sense to implement an ABC system?

Explain how traditional cost systems,using a single unit-level cost rate,may distort product costs. _ _

ABC systems include all resources consumed by cost ________,irrespective of whether the costs are variable or fixed in the short run.

When designing an ABC system,managers must decide on the level of detail required.

Why is there an accelerated need for refined cost systems?

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

Using activity-cost rates rather than department indirect-cost rates to allocate costs results in different product costs when:

The MOST likely example of an output unit-level cost is:

________ cause resources to be consumed and so have an effect on costs.

Managers are able to apply ABC not only within the organisation but also beyond Organisational boundaries to the:

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

In earlier times,when organisations produced a limited variety of products and indirect costs were a relatively small percentage of total costs,managers found that traditional costing systems were reasonably accurate and both easy and inexpensive to use.

Even by analysing activities,managers cannot uncover information that helps them to make the decisions.

What do homogeneous cost pools lead to?

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Measuring and Reporting Sustainability

Filters

Exam 8: Activity-Based Management and Activity-Based Costing

________ focuses on observing and analysing activities as a basis for making a range of decisions,including pricing outputs,deciding on output mix,how to reduce costs,how to improve processes,product design,profitability and customer satisfaction.

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

In which of the following situations does it make sense to implement an ABC system?

Explain how traditional cost systems,using a single unit-level cost rate,may distort product costs. _____________________________________________________________________________________________ _____________________________________________________________________________________________

ABC systems include all resources consumed by cost ________,irrespective of whether the costs are variable or fixed in the short run.

When designing an ABC system,managers must decide on the level of detail required.

Why is there an accelerated need for refined cost systems?

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

Using activity-cost rates rather than department indirect-cost rates to allocate costs results in different product costs when:

The MOST likely example of an output unit-level cost is:

________ cause resources to be consumed and so have an effect on costs.

Managers are able to apply ABC not only within the organisation but also beyond Organisational boundaries to the:

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

In earlier times,when organisations produced a limited variety of products and indirect costs were a relatively small percentage of total costs,managers found that traditional costing systems were reasonably accurate and both easy and inexpensive to use.

Even by analysing activities,managers cannot uncover information that helps them to make the decisions.

What do homogeneous cost pools lead to?

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Measuring and Reporting Sustainability

Filters

Explain how traditional cost systems,using a single unit-level cost rate,may distort product costs. _ _

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