Question 1

Activity-based costing is most likely to yield benefits for companies ________.

Accepted Answer

A)  with complex product design processes 
B)  with operations that remain fairly consistent 
C)  in a monopolistic market 
D)  having nominal percentage of indirect costs 
A)  with complex product design processes 
B)  with operations that remain fairly consistent 
C)  in a monopolistic market 
D)  having nominal percentage of indirect costs

Question 2

Explain how activity-based costing systems can provide more accurate product costs than traditional cost systems.

Accepted Answer

A key reason for assigning indirect cost

Question 3

Answer the following questions using the information below:
Zitriks Corp. manufactures two sizes of ceramic paperweights, regular and jumbo. The following information applies to their expectations for the planning period:
 $\begin{array}{lll}
\text { Cost Pool }&\text { Overhead Costs }&\text { Activity-cost driver }\
\text { Materials handling } & \$ 45,000 & 90,000 \text { orders } \
\text { Machine maintenance } & \$ 300,000 & 15,000 \text { maintenance hours } \
\text { Setups } & \$ 270,000 & 45,500 \text { æetups } \
\text { Inspections } & \$ 139,750 & 21,500 \text { inspections } \
\text { Total support costs } &\$ 754,750 &
\end{array}$

$\text { Production Estimates }$
$\begin{array}{l}
\text { Production units: }\
\text { Regular } & =8,000,000 \text { units } \
\text { Jumbo } & =16,000,000 \text { units } \
\text { Machine-hours } & =200,000 \mathrm{mh} \
\text { Labor-hours } & =400,000 \mathrm{dlh}
\end{array}$ Expected direct costs amounts to $960,000 for the period. Support cost requirements of both products are substantially different from one another. Zitriks uses an ABC costing system.
-The setups activity-cost driver rate is ________.

Accepted Answer

A)  $6.50 per setup 
B)  $5.93 per setup 
C)  $5.75 per setup 
D)  $5.24 per setup 
A)  $6.50 per setup 
B)  $5.93 per setup 
C)  $5.75 per setup 
D)  $5.24 per setup

Question 4

How does ABC costing system help service companies?

Accepted Answer

The widespread use of ABC systems in ser

Question 5

Department costing systems always properly recognize how resources are used by products as they require the creation of multiple indirect cost pools.

Accepted Answer

A) True 
 B)False

Question 6

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 7

Activity based costing system differs from traditional costing systems in the treatment of ________.

Accepted Answer

A)  direct labor costs 
B)  direct material costs 
C)  prime costs 
D)  indirect costs 
A)  direct labor costs 
B)  direct material costs 
C)  prime costs 
D)  indirect costs

Question 8

Answer the following questions using the information below:
Luzent Corporation has two departments, Small and Large. Central costs could be allocated to the two departments in various ways.
 $\begin{array}{lrr}& \text { Small Department}& \text {  Large Department}\
\text { Square footage } & 6,750 & 17,250 \
\text { Number of employees } & 1,120 & 480 \
\text { Sales } & \$ 350,000 & \$ 1,750,000
\end{array}$
-If advertising expense of $483,000 is allocated on the basis of sales,the cost per cost driver rate would be ________.

Accepted Answer

A)  $0.22 per dollar of sales 
B)  $0.23 per dollar of sales 
C)  $0.25 per dollar of sales 
D)  $0.24 per dollar of sales 
A)  $0.22 per dollar of sales 
B)  $0.23 per dollar of sales 
C)  $0.25 per dollar of sales 
D)  $0.24 per dollar of sales

Question 9

Trintal Corporation manufactures two models of motorized go-carts, a standard and a deluxe model. The following activity and cost information has been compiled:
 $\begin{array}{lrrr}
&\text { Number of }&\text { Number of }&\text { Number of } \
\text { Product }&\text { Setups }&\text { Components }&\text { Direct Labor Hours }\
\text { Standard } & 15 & 10 & 750 \
\text { Del uxe } & 35 & 15 & 500 \
\text { Overhead costs } & \$ 16,500 & \$ 23,500 
\end{array}$
-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 cost assigned to the deluxe model?

Accepted Answer

A)  $25,650 
B)  $24,350 
C)  $26,550 
D)  $25,350 
A)  $25,650 
B)  $24,350 
C)  $26,550 
D)  $25,350

Question 10

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 the facility lease expense of $384,000 is allocated on the basis of vehicles in the fleet,the amount allocated to the Truck Rental Department would be ________.

Accepted Answer

A)  $125,000 
B)  $127,000 
C)  $129,000 
D)  $123,000 
A)  $125,000 
B)  $127,000 
C)  $129,000 
D)  $123,000

Question 11

Direct tracing of costs reduces the amount of costs classified as indirect costs.

Accepted Answer

A) True 
 B)False

Question 12

Activity-based management refers to the use of information derived from ABC analysis to analyze and improve operations.

Accepted Answer

A) True 
 B)False

Question 13

Answer the following questions using the information below:
Luzent Corporation has two departments, Small and Large. Central costs could be allocated to the two departments in various ways.
 $\begin{array}{lrr}& \text { Small Department}& \text {  Large Department}\
\text { Square footage } & 6,750 & 17,250 \
\text { Number of employees } & 1,120 & 480 \
\text { Sales } & \$ 350,000 & \$ 1,750,000
\end{array}$
-If total rent expense of $180,000 is allocated on the basis of square footage,the amount allocated to the Small Department would be ________.

Accepted Answer

A)  $50,525 
B)  $50,625 
C)  $50,725 
D)  $50,825 
A)  $50,525 
B)  $50,625 
C)  $50,725 
D)  $50,825

Question 14

The unique feature of an ABC system is the emphasis on ________.

Accepted Answer

A)  costing individual jobs 
B)  department indirect-cost rates 
C)  multiple-cost pools 
D)  individual activities 
A)  costing individual jobs 
B)  department indirect-cost rates 
C)  multiple-cost pools 
D)  individual activities

Question 15

Which of the following is a sign that an ABC system may be useful for an organization?

Accepted Answer

A)  Significant amounts of indirect costs are allocated using multiple cost pools. 
B)  Products make similar demands on resources because of similarities in volume, process steps, batch size, or complexity. 
C)  Many indirect costs are described as batch-level costs, product-sustaining costs, or facility-sustaining costs. 
D)  Operations staff disagrees with accountants about the costs of manufacturing and marketing products and services. 
A)  Significant amounts of indirect costs are allocated using multiple cost pools. 
B)  Products make similar demands on resources because of similarities in volume, process steps, batch size, or complexity. 
C)  Many indirect costs are described as batch-level costs, product-sustaining costs, or facility-sustaining costs. 
D)  Operations staff disagrees with accountants about the costs of manufacturing and marketing products and services.

Question 16

Companies often use costing systems that have features of ABC systems but that do not emphasize individual activities.

Accepted Answer

A) True 
 B)False

Activity-based costing is most likely to yield benefits for companies ________.

Explain how activity-based costing systems can provide more accurate product costs than traditional cost systems.

How does ABC costing system help service companies?

Department costing systems always properly recognize how resources are used by products as they require the creation of multiple indirect cost pools.

An accelerated need for refined cost systems is due to ________.

Activity based costing system differs from traditional costing systems in the treatment of ________.

Direct tracing of costs reduces the amount of costs classified as indirect costs.

Activity-based management refers to the use of information derived from ABC analysis to analyze and improve operations.

The unique feature of an ABC system is the emphasis on ________.

Which of the following is a sign that an ABC system may be useful for an organization?

Companies often use costing systems that have features of ABC systems but that do not emphasize individual activities.

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

Activity-based costing is most likely to yield benefits for companies ________.

Explain how activity-based costing systems can provide more accurate product costs than traditional cost systems.

How does ABC costing system help service companies?

Department costing systems always properly recognize how resources are used by products as they require the creation of multiple indirect cost pools.

An accelerated need for refined cost systems is due to ________.

Activity based costing system differs from traditional costing systems in the treatment of ________.

Direct tracing of costs reduces the amount of costs classified as indirect costs.

Activity-based management refers to the use of information derived from ABC analysis to analyze and improve operations.

The unique feature of an ABC system is the emphasis on ________.

Which of the following is a sign that an ABC system may be useful for an organization?

Companies often use costing systems that have features of ABC systems but that do not emphasize individual activities.

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