Question 1

Misleading cost numbers are larger when only unit-level cost drivers are used for allocating overheads of multiple complex products.

Accepted Answer

A) True 
 B)False  True

Question 2

It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that ________.

Accepted Answer

A)  total costs reflect market price 
B)  value-added costs can be eliminated 
C)  there is high likelihood of cross-subsidizing of product costs 
D)  product-pricing errors are minimal 
A)  total costs reflect market price 
B)  value-added costs can be eliminated 
C)  there is high likelihood of cross-subsidizing of product costs 
D)  product-pricing errors are minimal D

Question 3

Which of the following is a disadvantage of an activity-based costing system?

Accepted Answer

A)  It classifies some indirect costs as direct costs. 
B)  It assumes all costs as direct costs. 
C)  It needs activity-cost rates to be updated regularly. 
D)  It ignores direct costs of a product. 
A)  It classifies some indirect costs as direct costs. 
B)  It assumes all costs as direct costs. 
C)  It needs activity-cost rates to be updated regularly. 
D)  It ignores direct costs of a product. C

Question 4

For service organizations,activity-based cost systems may be used to clarify appropriate cost assignments.

Accepted Answer

A) True 
 B)False

Question 5

An effective activity-based cost system always ignores facility-sustaining cost drivers.

Accepted Answer

A) True 
 B)False

Question 6

ABC systems and department costing systems use totally different approaches towards indirect cost allocation and can never be used together.

Accepted Answer

A) True 
 B)False

Question 7

What are the factors that 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 8

Answer the following questions using the information below:
Comfort Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled:
 $\begin{array}{lrrr}
&\text { Number of }&\text { Number of }&\text { Number of } \
\text { Product }&\text { Setups }&\text { Components }&\text { Direct Labor Hours }\
\text { Standard } & 12 & 8 & 255 \
\text { Deluxe } & 28 & 12 & 245 \
\text { Overhead costs } & \$ 52,000 & \$ 78,000 
\end{array}$
-Number of setups and number of components are identified as activity-cost drivers for overhead.Assuming an activity-based costing system is used,what is the total amount of overhead costs assigned to the standard model?

Accepted Answer

A)  $49,200 
B)  $45,600 
C)  $46,800 
D)  $47,400 
A)  $49,200 
B)  $45,600 
C)  $46,800 
D)  $47,400

Question 9

An activity-based costing system with many activities can become overly detailed and unwieldy to operate.

Accepted Answer

A) True 
 B)False

Question 10

Activity-based costing information can be used for ________.

Accepted Answer

A)  product-mix decisions 
B)  pricing decisions 
C)  advertisement decisions 
D)  inventory valuation 
A)  product-mix decisions 
B)  pricing decisions 
C)  advertisement decisions 
D)  inventory valuation

Question 11

Quality-inspection costs is an example of batch-level costs.

Accepted Answer

A) True 
 B)False

Question 12

Trintal Corporation manufactures two models of motorized go-carts, a standard and a deluxe model. The following activity and cost information has been compiled:
 $\begin{array}{lrrr}
&\text { Number of }&\text { Number of }&\text { Number of } \
\text { Product }&\text { Setups }&\text { Components }&\text { Direct Labor Hours }\
\text { Standard } & 15 & 10 & 750 \
\text { Del uxe } & 35 & 15 & 500 \
\text { Overhead costs } & \$ 16,500 & \$ 23,500 
\end{array}$
-Assume a traditional costing system applies the $40,000 of overhead costs based on direct labor hours.What is the total amount of overhead cost assigned to the deluxe model?

Accepted Answer

A)  $16,000 
B)  $24,000 
C)  $25,000 
D)  $15,000 
A)  $16,000 
B)  $24,000 
C)  $25,000 
D)  $15,000

Question 13

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 material costs are low 
D)  prime costs are low 
A)  several complex products are manufactured 
B)  only one product is manufactured 
C)  direct material costs are low 
D)  prime costs are low

Question 14

________ is an example of an output unit-level cost in the cost hierarchy.

Accepted Answer

A)  Factory rent expense 
B)  Building security costs 
C)  Top management compensation costs 
D)  Machine depreciation 
A)  Factory rent expense 
B)  Building security costs 
C)  Top management compensation costs 
D)  Machine depreciation

Question 15

One reason for assigning selling and distribution costs to products for analytical purposes is ________.

Accepted Answer

A)  to justify a varied product-mix 
B)  that these costs should be included in the cost of goods sold in the income statement 
C)  to ensure that all costs are considered 
D)  that all direct costs must be assigned 
A)  to justify a varied product-mix 
B)  that these costs should be included in the cost of goods sold in the income statement 
C)  to ensure that all costs are considered 
D)  that all direct costs must be assigned

Question 16

Which of the following statements is true of ABC systems?

Accepted Answer

A)  ABC system will always result in higher product costs. 
B)  ABC system employs multiple activity-cost drivers. 
C)  ABC system is least suited for service companies. 
D)  ABC system is simpler compared to traditional systems. 
A)  ABC system will always result in higher product costs. 
B)  ABC system employs multiple activity-cost drivers. 
C)  ABC system is least suited for service companies. 
D)  ABC system is simpler compared to traditional systems.

Question 17

Answer the following questions using the information below:
Stark Corporation has two departments, Car Rental and Truck Rental. Central costs may be allocated to the two departments in various ways.
 $\begin{array}{lrr}&\text { Car Rental }&\text { Truck Rental }\
\text { Number of Vehicles in fleet } & 850 & 430 \
\text { Number of employees } & 125 & 75 \
\text { Sales } & \$ 750,000 & \$ 375,000
\end{array}$
-If administrative expense of $77,500 is allocated on the basis of number of employees,the amount allocated to the Car Rental Department would be ________.

Accepted Answer

A)  $47,387.50 
B)  $48,437.50 
C)  $46,877.50 
D)  $49,247.50 
A)  $47,387.50 
B)  $48,437.50 
C)  $46,877.50 
D)  $49,247.50

Question 18

As product diversity and indirect costs increase,it is usually best to switch away from a broad averaging system to an activity-based cost system.

Accepted Answer

A) True 
 B)False

Question 19

Answer the following questions using the information below:
Stark Corporation has two departments, Car Rental and Truck Rental. Central costs may be allocated to the two departments in various ways.
 $\begin{array}{lrr}&\text { Car Rental }&\text { Truck Rental }\
\text { Number of Vehicles in fleet } & 850 & 430 \
\text { Number of employees } & 125 & 75 \
\text { Sales } & \$ 750,000 & \$ 375,000
\end{array}$
-If advertising expense of $125,000 is allocated on the basis of sales,the amount allocated to the Car Rental Department would be ________.

Accepted Answer

A)  $83,333.33 
B)  $87,777.67 
C)  $86,666.67 
D)  $85,467.33 
A)  $83,333.33 
B)  $87,777.67 
C)  $86,666.67 
D)  $85,467.33

Question 20

Managers implementing ABC systems for the first time always start by analyzing budgeted costs to identify activity-cost pools.

Accepted Answer

A) True 
 B)False

Misleading cost numbers are larger when only unit-level cost drivers are used for allocating overheads of multiple complex products.

It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that ________.

Which of the following is a disadvantage of an activity-based costing system?

For service organizations,activity-based cost systems may be used to clarify appropriate cost assignments.

An effective activity-based cost system always ignores facility-sustaining cost drivers.

ABC systems and department costing systems use totally different approaches towards indirect cost allocation and can never be used together.

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

An activity-based costing system with many activities can become overly detailed and unwieldy to operate.

Activity-based costing information can be used for ________.

Quality-inspection costs is an example of batch-level costs.

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

________ is an example of an output unit-level cost in the cost hierarchy.

One reason for assigning selling and distribution costs to products for analytical purposes is ________.

Which of the following statements is true of ABC systems?

As product diversity and indirect costs increase,it is usually best to switch away from a broad averaging system to an activity-based cost system.

Managers implementing ABC systems for the first time always start by analyzing budgeted costs to identify activity-cost pools.

The Manager and Management Accounting

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

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

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 and Time

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

Misleading cost numbers are larger when only unit-level cost drivers are used for allocating overheads of multiple complex products.

It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that ________.

Which of the following is a disadvantage of an activity-based costing system?

For service organizations,activity-based cost systems may be used to clarify appropriate cost assignments.

An effective activity-based cost system always ignores facility-sustaining cost drivers.

ABC systems and department costing systems use totally different approaches towards indirect cost allocation and can never be used together.

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

An activity-based costing system with many activities can become overly detailed and unwieldy to operate.

Activity-based costing information can be used for ________.

Quality-inspection costs is an example of batch-level costs.

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

________ is an example of an output unit-level cost in the cost hierarchy.

One reason for assigning selling and distribution costs to products for analytical purposes is ________.

Which of the following statements is true of ABC systems?

As product diversity and indirect costs increase,it is usually best to switch away from a broad averaging system to an activity-based cost system.

Managers implementing ABC systems for the first time always start by analyzing budgeted costs to identify activity-cost pools.

The Manager and Management Accounting

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

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

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 and Time

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