Question 1

Which of the following statement is FALSE?

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) 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. 
D) Traditional product costing systems are more refined than an ABC system. 
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) 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. 
D) Traditional product costing systems are more refined than an ABC system.

Question 2

What factors are causing many companies to refine their costing systems to obtain more accurate measures of the costs of their products?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The first cause is increasing product di

Question 3

ABC systems do not include all resources consumed by cost objects.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

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

Question 5

ABC brings out the cause-and-effect relationships between activities and costs;activities cause resources to be consumed and so have an effect on costs.

Accepted Answer

A) True 
 B)False

Question 6

Indirect labour and distribution costs would most likely be in the same activity-cost pool.

Accepted Answer

A) True 
 B)False

Question 7

Managers and workers do not use activity analysis,value engineering and activity-based costing information to achieve target costs.

Accepted Answer

A) True 
 B)False

Question 8

From a purely product-costing standpoint,department rates and activity-cost-driver rates will give the same product costs if significant costs are incurred for different activities within a department but different outputs use resources from the different activities in the same proportions.

Accepted Answer

A) True 
 B)False

Question 9

The costs of all six value-chain functions should be included when determining:

Accepted Answer

A) the selling price of a service. 
B) whether to make or buy a component part from another manufacturer. 
C) whether to add a new product line. 
D) All of these answers are correct. 
A) the selling price of a service. 
B) whether to make or buy a component part from another manufacturer. 
C) whether to add a new product line. 
D) All of these answers are correct.

Question 10

Answer the following questions using the information below:
Dandenong Enterprises has identified three cost pools to allocate overhead costs.The following estimates are provided for the coming year:
 $$\begin{array}{l}
\begin{array} { l r l r } 
\text { Cost Pool } & \text { Overhead Costs } & \text { Cost Driver } & \text { Activity level } \
\text { Supervision of direct labour } & \$ 320000 & \text { Direct labour-hours } & 800000 \
\text { Machine maintenance } & \$ 120000 & \text { Machine-hours } & 960000 \
\text { Facility rent } & \$ 200000 & \text { Square metres of area } & 100000 \
\text { Total overhead costs } & \$ 640000 & &
\end{array}\\
\text { The accounting records show the Leongatha job consumed the following resources: }\\
\begin{array} { l c } 
\text { Cost Driver } & \text { Actual Level } \
\text { Direct labour-hours } & 300 \
\text { Machine-hours } & 2400 \
\text { Square metres of area } & 75
\end{array}
\end{array}$$
-Using the three cost pools to allocate overhead costs,what is the total amount of overhead costs to be allocated to the Leongatha job?

Accepted Answer

A) $170 
B) $570 
C) $675 
D) $200 
A) $170 
B) $570 
C) $675 
D) $200

Question 11

Answer the following questions using the information below:
Gold Coast Printing has contracts to provide fortnightly advertising supplements to 94 customers.For the year 2018,manufacturing overhead cost estimates total $600 000 for an annual production capacity of 24 million pages.
For 2018,Gold Coast Printing decided to evaluate the use of additional cost pools.After analysing manufacturing overhead costs,it was determined that number of design changes,set-ups and inspections are the primary manufacturing overhead cost drivers.The following information was gathered during the analysis:
 $\begin{array} { l r c } \text { Cost Pool } & \text { Manufacturing Overhead Costs } & \text { Activity Level } \ \text { Design changes } & \$ 80000 & 200 \text { design changes } \ \text { Set-ups } & 400000 & 4000 \text { set-1ps } \ \text { Inspections } & 120000 & 16000 \text { inspections } \ \text { Total manufacturing overhead costs } & \$ 600000 & \end{array}$

During 2018, two customers, Wealth Managers and Health Systems, are expected to use the following printing services:

$\begin{array} { l c c } \text { Activity } & \text { Wealth Managers } & \text { Health Systems } \ \text { Pages } & 60000 & 76000 \ \text { Design changes } & 10 & 2 \ \text { Set-ups } & 20 & 10 \ \text { Inspections } & 30 & 38 \end{array}$
-When costs are assigned using the single cost driver,number of pages printed,then Health Systems:

Accepted Answer

A) will likely seek to do business with competitors. 
B) is fairly billed because resources are allocated uniformly to all jobs. 
C) will contribute too little to profits and Gold Coast Printing will not want to accept additional work from the company. 
D) is grossly under-billed for the job,while other jobs will be unfairly over-billed. 
A) will likely seek to do business with competitors. 
B) is fairly billed because resources are allocated uniformly to all jobs. 
C) will contribute too little to profits and Gold Coast Printing will not want to accept additional work from the company. 
D) is grossly under-billed for the job,while other jobs will be unfairly over-billed.

Question 12

Answer the following questions using the information below:
Dandenong Enterprises has identified three cost pools to allocate overhead costs.The following estimates are provided for the coming year:
 $$\begin{array}{l}
\begin{array} { l r l r } 
\text { Cost Pool } & \text { Overhead Costs } & \text { Cost Driver } & \text { Activity level } \
\text { Supervision of direct labour } & \$ 320000 & \text { Direct labour-hours } & 800000 \
\text { Machine maintenance } & \$ 120000 & \text { Machine-hours } & 960000 \
\text { Facility rent } & \$ 200000 & \text { Square metres of area } & 100000 \
\text { Total overhead costs } & \$ 640000 & &
\end{array}\\
\text { The accounting records show the Leongatha job consumed the following resources: }\\
\begin{array} { l c } 
\text { Cost Driver } & \text { Actual Level } \
\text { Direct labour-hours } & 300 \
\text { Machine-hours } & 2400 \
\text { Square metres of area } & 75
\end{array}
\end{array}$$
-If Dandenong Enterprises uses the three activity cost pools to allocate overhead costs,what are the activity-cost driver rates for supervision of direct labour,machine maintenance and facility rent,respectively?

Accepted Answer

A) $1.25 per dlh,$0.25 per mh,$0.50 per sq mtr 
B) $0.60 per dlh,$0.025 per mh,$0.80 per sq mtr 
C) $0.40 per dlh,$0.05 per mh,$0.20 per sq mtr 
D) $0.40 per dlh,$0.125 per mh,$2 per sq mtr 
A) $1.25 per dlh,$0.25 per mh,$0.50 per sq mtr 
B) $0.60 per dlh,$0.025 per mh,$0.80 per sq mtr 
C) $0.40 per dlh,$0.05 per mh,$0.20 per sq mtr 
D) $0.40 per dlh,$0.125 per mh,$2 per sq mtr

Question 13

Answer the following questions using the information below:
Dandenong Enterprises has identified three cost pools to allocate overhead costs.The following estimates are provided for the coming year:
 $$\begin{array}{l}
\begin{array} { l r l r } 
\text { Cost Pool } & \text { Overhead Costs } & \text { Cost Driver } & \text { Activity level } \
\text { Supervision of direct labour } & \$ 320000 & \text { Direct labour-hours } & 800000 \
\text { Machine maintenance } & \$ 120000 & \text { Machine-hours } & 960000 \
\text { Facility rent } & \$ 200000 & \text { Square metres of area } & 100000 \
\text { Total overhead costs } & \$ 640000 & &
\end{array}\\
\text { The accounting records show the Leongatha job consumed the following resources: }\\
\begin{array} { l c } 
\text { Cost Driver } & \text { Actual Level } \
\text { Direct labour-hours } & 300 \
\text { Machine-hours } & 2400 \
\text { Square metres of area } & 75
\end{array}
\end{array}$$
-Using direct labour-hours as the only overhead cost driver,what is the amount of overhead costs allocated to the Leongatha job?

Accepted Answer

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

Question 14

All of the following illustrate purposes for allocating costs to cost objects EXCEPT to:

Accepted Answer

A) provide information for economic decisions. 
B) determine a selling price the market will bear. 
C) motivate managers and employees. 
D) measure income and assets for reporting to external parties. 
A) provide information for economic decisions. 
B) determine a selling price the market will bear. 
C) motivate managers and employees. 
D) measure income and assets for reporting to external parties.

Question 15

Production and distribution personnel use ABC systems to focus on how and where both to improve activities (and hence processes)and to reduce costs.

Accepted Answer

A) True 
 B)False

Question 16

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

Question 17

A well-designed ABC system allows managers to identify unused ________ in each major activity and to estimate its cost.

Accepted Answer

A) steps 
B) procedures 
C) processes 
D) capacity 
A) steps 
B) procedures 
C) processes 
D) capacity

Question 18

What are three criteria necessary for an ABC system to emerge?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The three criteria necessary f

Question 19

Answer the following questions using the information below:
Flinders Potters manufactures two sizes of ceramic paperweights,regular and jumbo.The following information applies to their expectations for the planning period:
 $$\begin{array} { l c l } 
\text { Cost Pool } & \text { Overhead Costs } & \text { Activity-cost Driver } \
\text { Materials handling } & \$ 50000 & 100000 \text { orders } \
\text { Machine maintenance } & \$ 300000 & 15000 \text { maintenance hours } \
\text { Set-ups } & \$ 270000 & 45000 \text { set-ups } \
\text { Inspections } & \$ 110000 & 22000 \text { inspections } \
\text { Total support costs } & \$ 730000 & \\
& { \text { Production Es timates } } \
 & \text { Production urits: } \
& \text { Regular } = 8000000 \text { units } \
& \text { Jumbo } = 16000000 \text { units } \
& \text { Machine-hours } = 200000 \mathrm { mh } \
&\text { Labour-hours } = 400000 \mathrm { dlh }
\end{array}$$ Flinders Potters uses an ABC system and assigns overhead costs based on the overhead activity information provided above.
-During October,Flinders produced 700 000 regular ceramic paperweights and Flinders' production manager counted 2000 orders;1000 maintenance-hours;2000 set-ups;and 2000 inspections for the regular product line.For October,Flinders' controller assigned ________ indirect costs to the regular product line.

Accepted Answer

A) $43 000 
B) $25 000 
C) $34 000 
D) None of these answers are correct. 
A) $43 000 
B) $25 000 
C) $34 000 
D) None of these answers are correct.

Question 20

ABC systems create:

Accepted Answer

A) activity-cost pools with a broad focus. 
B) homogenous activity-related cost pools. 
C) activity-cost pools containing many direct costs. 
D) one large cost pool. 
A) activity-cost pools with a broad focus. 
B) homogenous activity-related cost pools. 
C) activity-cost pools containing many direct costs. 
D) one large cost pool.

Which of the following statement is FALSE?

What factors are causing many companies to refine their costing systems to obtain more accurate measures of the costs of their products? _ _

ABC systems do not include all resources consumed by cost objects.

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

ABC brings out the cause-and-effect relationships between activities and costs;activities cause resources to be consumed and so have an effect on costs.

Indirect labour and distribution costs would most likely be in the same activity-cost pool.

Managers and workers do not use activity analysis,value engineering and activity-based costing information to achieve target costs.

From a purely product-costing standpoint,department rates and activity-cost-driver rates will give the same product costs if significant costs are incurred for different activities within a department but different outputs use resources from the different activities in the same proportions.

The costs of all six value-chain functions should be included when determining:

All of the following illustrate purposes for allocating costs to cost objects EXCEPT to:

Production and distribution personnel use ABC systems to focus on how and where both to improve activities (and hence processes)and to reduce costs.

A well-designed ABC system allows managers to identify unused ________ in each major activity and to estimate its cost.

What are three criteria necessary for an ABC system to emerge? _ _

ABC systems create:

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

Which of the following statement is FALSE?

ABC systems do not include all resources consumed by cost objects.

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

ABC brings out the cause-and-effect relationships between activities and costs;activities cause resources to be consumed and so have an effect on costs.

Indirect labour and distribution costs would most likely be in the same activity-cost pool.

Managers and workers do not use activity analysis,value engineering and activity-based costing information to achieve target costs.

From a purely product-costing standpoint,department rates and activity-cost-driver rates will give the same product costs if significant costs are incurred for different activities within a department but different outputs use resources from the different activities in the same proportions.

The costs of all six value-chain functions should be included when determining:

All of the following illustrate purposes for allocating costs to cost objects EXCEPT to:

Production and distribution personnel use ABC systems to focus on how and where both to improve activities (and hence processes)and to reduce costs.

A well-designed ABC system allows managers to identify unused ________ in each major activity and to estimate its cost.

What are three criteria necessary for an ABC system to emerge? _____________________________________________________________________________________________ _____________________________________________________________________________________________

ABC systems create:

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

What are three criteria necessary for an ABC system to emerge? _ _