Question 1

How do we assign indirect costs to cost objects?

Accepted Answer

A)  based on the proportion of indirect costs to total costs 
B)  based on the proportion of indirect costs to direct costs 
C)  in proportion to the cost object's use of a cost-allocation base 
D)  based on the amount of direct cost used by the cost object 
A)  based on the proportion of indirect costs to total costs 
B)  based on the proportion of indirect costs to direct costs 
C)  in proportion to the cost object's use of a cost-allocation base 
D)  based on the amount of direct cost used by the cost object

Question 2

When allocating indirect production costs to cost objects,most cost-allocation bases are ________.

Accepted Answer

A)  assigned to a cost object 
B)  accumulated for a cost object 
C)  traced to the cost object 
D)  cost drivers 
A)  assigned to a cost object 
B)  accumulated for a cost object 
C)  traced to the cost object 
D)  cost drivers

Question 3

Merchandising and manufacturing companies account for ________ in the same way.

Accepted Answer

A)  design expenses 
B)  customer service expenses 
C)  selling expenses 
D)  all of the above 
A)  design expenses 
B)  customer service expenses 
C)  selling expenses 
D)  all of the above

Question 4

Activity-based costing systems should be adopted when ________.

Accepted Answer

A)  indirect costs represent a small proportion of a product's total costs 
B)  indirect costs represent a large proportion of a product's total costs 
C)  a company makes one simple product 
D)  a company has a simple manufacturing process 
A)  indirect costs represent a small proportion of a product's total costs 
B)  indirect costs represent a large proportion of a product's total costs 
C)  a company makes one simple product 
D)  a company has a simple manufacturing process

Question 5

The manufacturing division of an electronics company uses activity-based costing.The company has identified three activities and the related cost drivers for indirect production costs.
 $\begin{array}{ll}\text { Activity }&\text { Cost Driver }\
\text { Activity 1 } & \text { Direct materials cost } \
\text { Activity 2 } & \text { Direct labor cost } \
\text { Activity 3 } & \text { Kilowatt hours }
\end{array}$ 
Three types of products are produced.Direct costs and cost-driver activity for each product for a month are as follows:
 $\begin{array}{llll}&\text { Product A }&\text { Product B }&\text { Product C }\
\text { Direct materials cost } & \$ 75,000 & \$ 50,000 & \$ 125,000 \
\text { Direct labor cost } & \$ 6,000 & \$ 1,000 & \$ 3,000 \
\text { Direct labor hours } & 2,000 & 1,000 & 2,000 \
\text { Kilowatt hours } & 150,000 & 200,000 & 150,000
\end{array}$ 
Indirect production costs for the month are as follows:
 $\begin{array}{ll}
\text { Activity 1 } & \$ 30,000 \
\text { Activity } 2 & 20,000 \
\text { Activity 3 } & {16,000} \
\text { Total } &{\$ 66,000}
\end{array}$ 
Required: 
A) Compute the indirect production costs allocated to each product using the ABC system.
B) Compute the indirect production costs allocated to each product using a traditional costing system. Assume indirect production costs are allocated to each product using the cost driver: direct labor hours.

Accepted Answer

A)
Product A:
 @#IMG-DLM& Product B:
 @#IMG-DLM& P

Question 6

External users of financial reports need ________ measures of inventory and cost of goods sold.Internal users of financial reports need ________ cost information about products.

Accepted Answer

A)  strategic; operational 
B)  operational; strategic 
C)  aggregate; detailed 
D)  detailed; aggregate 
A)  strategic; operational 
B)  operational; strategic 
C)  aggregate; detailed 
D)  detailed; aggregate

Question 7

Which of the following is an example of a value-added cost to a manufactured product?

Accepted Answer

A)  the cost of handling inventory 
B)  the cost of storing inventory 
C)  changing the setup of production-line operations 
D)  the depreciation expense of robots that assemble the product 
A)  the cost of handling inventory 
B)  the cost of storing inventory 
C)  changing the setup of production-line operations 
D)  the depreciation expense of robots that assemble the product

Question 8

In a manufacturing firm,the computation of Cost of Goods Manufactured does NOT use ________.

Accepted Answer

A)  Finished Goods Inventory, ending balance 
B)  indirect production costs 
C)  direct labor costs 
D)  direct materials used 
A)  Finished Goods Inventory, ending balance 
B)  indirect production costs 
C)  direct labor costs 
D)  direct materials used

Question 9

Factory overhead does NOT include ________.

Accepted Answer

A)  electricity bill in factory 
B)  insurance Expense on factory building 
C)  supplies used in factory 
D)  wages of janitors in corporate headquarters 
A)  electricity bill in factory 
B)  insurance Expense on factory building 
C)  supplies used in factory 
D)  wages of janitors in corporate headquarters

Question 10

Depreciation Expense on the Heating and Air Conditioning Equipment for the factory of $50,000 is allocated to five departments.The cost-allocation base for this expense is the number of cubic feet,which equals 100,000 cubic feet.Information for five departments is below:
$\begin{array}{lll}
 \text {Department }& \text { Square Feet}& \text { Cubic Feet}\
\text { Department A } & 15,000 & 15,000 \
\text { Department B } & 5,000 & 5,000 \
\text { Department C } & 30,000 & 20,000 \
\text { Department D } & 20,000 & 35,000 \
\text { Department E } & 10,000 & 25,000
\end{array}$
How much Depreciation Expense is allocated to Department A?

Accepted Answer

A)  $2,500 
B)  $7,500 
C)  $15,000 
D)  $18,750 
A)  $2,500 
B)  $7,500 
C)  $15,000 
D)  $18,750

Question 11

The monthly indirect production cost is Depreciation Expense on Assembly Equipment of $100,000.The cost allocation base is number of machine hours.The expected level of production in a month is 10,000 machine hours.What is the amount of indirect production cost per unit assigned to Product 1 and Product 2.Product 1 requires 10 machine hours per unit.Product 2 requires 20 machine hours per unit.
$\begin{array}{ll}&\text { Product } 1&\text { Product } 2\
A)&\$ 1 & \$ 2 \
B)&\$ 10 & \$ 20 \
C)&\$ 100 & \$ 200
\end{array}$
D) none of the above

Accepted Answer

The answer of The monthly indirect production cost is Depreciation...

Question 12

Which of the following statements is FALSE?

Accepted Answer

A)  A cost may be defined as a sacrifice or giving up of resources for a particular purpose. 
B)  Costs are frequently measured by the monetary units that must be paid for goods and services. 
C)  Only manufacturing firms need some form of cost accounting. 
D)  A cost accounting system typically has two processes that include cost accumulation and cost assignment. 
A)  A cost may be defined as a sacrifice or giving up of resources for a particular purpose. 
B)  Costs are frequently measured by the monetary units that must be paid for goods and services. 
C)  Only manufacturing firms need some form of cost accounting. 
D)  A cost accounting system typically has two processes that include cost accumulation and cost assignment.

Question 13

Period costs become expenses during a future period.

Accepted Answer

A) True 
 B)False

Question 14

Indirect production costs do NOT include ________.

Accepted Answer

A)  property taxes on factory building 
B)  rent expense on factory building 
C)  wages of security guards at corporate headquarters 
D)  wages of forklift truck operators in assembly area 
A)  property taxes on factory building 
B)  rent expense on factory building 
C)  wages of security guards at corporate headquarters 
D)  wages of forklift truck operators in assembly area

Question 15

Why are more organizations adopting activity-based costing systems?

Accepted Answer

A)  Computer technology has increased the costs of developing and operating ABC systems. 
B)  Indirect costs are more important in automated manufacturing environments. 
C)  Less competition. 
D)  Less diversity in product mix offered to customers. 
A)  Computer technology has increased the costs of developing and operating ABC systems. 
B)  Indirect costs are more important in automated manufacturing environments. 
C)  Less competition. 
D)  Less diversity in product mix offered to customers.

Question 16

The number of cubic feet is a logical cost driver for allocating depreciation expense of heating equipment to cost objects.

Accepted Answer

A) True 
 B)False

Question 17

Pilot Bank uses activity-based costing.Pilot Bank has the following activities,traceable costs,and cost drivers:
 $\begin{array}{lll}\text { Activities }&\text { Traceable Costs }&\text { Cost Drivers }\\hline
\text { Open new accounts } & \$ 40,000 & 1,000 \text { accounts } \
\text { Process deposits } & \$ 72,000 & 360,000 \text { deposits } \
\text { Process withdrawals } & \$ 100,000 & 200,000 \text { withdrawals }
\end{array}$ 
The above activities are used by Downtown branch and North branch as follows:
 $\begin{array}{lll}\text { Activities }&\text { Downtown}&\text { North }\
\hline\text { Open new accounts } & 200 & 400 \
\text { Process deposits } & 40,000 & 20,000 \
\text { Process withdrawals } & 15,000 & 18,000 \

\end{array}$ 
Required: 
A) Compute the new account cost assigned to the North branch.
B) Compute the deposit processing cost assigned to the Downtown branch.
C) Compute the withdrawal processing cost assigned to the Downtown branch.

Accepted Answer

A)$16,000 = ($40,000/1,000)× 4

Question 18

In activity-based costing systems,the system first accumulates indirect costs for ________,and then assigns these costs to ________.

Accepted Answer

A)  products; departments 
B)  products; territories 
C)  cost objects; types of customers 
D)  activities; cost objects 
A)  products; departments 
B)  products; territories 
C)  cost objects; types of customers 
D)  activities; cost objects

Question 19

In a merchandising company,________.

Accepted Answer

A)  selling and administrative costs are period costs 
B)  insurance expense on the corporate building is a product cost 
C)  Work-In-Process Inventory may be present 
D)  Finished Goods Inventory may be present 
A)  selling and administrative costs are period costs 
B)  insurance expense on the corporate building is a product cost 
C)  Work-In-Process Inventory may be present 
D)  Finished Goods Inventory may be present

Question 20

Which of the following is an example of a strategic management decision that uses cost information?

Accepted Answer

A)  determination of Cost of Goods Sold for the income statement 
B)  identification of value-chain function to outsource 
C)  evaluation of operational cost control program 
D)  assessment of process improvement efforts in quality control 
A)  determination of Cost of Goods Sold for the income statement 
B)  identification of value-chain function to outsource 
C)  evaluation of operational cost control program 
D)  assessment of process improvement efforts in quality control

How do we assign indirect costs to cost objects?

When allocating indirect production costs to cost objects,most cost-allocation bases are ________.

Merchandising and manufacturing companies account for ________ in the same way.

Activity-based costing systems should be adopted when ________.

External users of financial reports need measures of inventory and cost of goods sold.Internal users of financial reports need cost information about products.

Which of the following is an example of a value-added cost to a manufactured product?

In a manufacturing firm,the computation of Cost of Goods Manufactured does NOT use ________.

Factory overhead does NOT include ________.

Which of the following statements is FALSE?

Period costs become expenses during a future period.

Indirect production costs do NOT include ________.

Why are more organizations adopting activity-based costing systems?

The number of cubic feet is a logical cost driver for allocating depreciation expense of heating equipment to cost objects.

In activity-based costing systems,the system first accumulates indirect costs for ,and then assigns these costs to .

In a merchandising company,________.

Which of the following is an example of a strategic management decision that uses cost information?

Managerial Accounting,the Business Organization,and Professional Ethics

Introduction to Cost Behavior and Cost Volume Profit Relationships

Measurement of Cost Behavior

Relevant Information for Decision Making With a Focus on Pricing Decisions

Relevant Information for Decision Making With a Focus on Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

Exam 4: Cost Management Systems and Activity-Based Costing

How do we assign indirect costs to cost objects?

When allocating indirect production costs to cost objects,most cost-allocation bases are ________.

Merchandising and manufacturing companies account for ________ in the same way.

Activity-based costing systems should be adopted when ________.

External users of financial reports need ________ measures of inventory and cost of goods sold.Internal users of financial reports need ________ cost information about products.

Which of the following is an example of a value-added cost to a manufactured product?

In a manufacturing firm,the computation of Cost of Goods Manufactured does NOT use ________.

Factory overhead does NOT include ________.

Which of the following statements is FALSE?

Period costs become expenses during a future period.

Indirect production costs do NOT include ________.

Why are more organizations adopting activity-based costing systems?

The number of cubic feet is a logical cost driver for allocating depreciation expense of heating equipment to cost objects.

In activity-based costing systems,the system first accumulates indirect costs for ________,and then assigns these costs to ________.

In a merchandising company,________.

Which of the following is an example of a strategic management decision that uses cost information?

Managerial Accounting,the Business Organization,and Professional Ethics

Introduction to Cost Behavior and Cost Volume Profit Relationships

Measurement of Cost Behavior

Relevant Information for Decision Making With a Focus on Pricing Decisions

Relevant Information for Decision Making With a Focus on Operational Decisions

Introduction to Budgets and Preparing the Master Budget

Flexible Budgets and Variance Analysis

Management Control Systems and Responsibility Accounting

Management Control in Decentralized Organizations

Capital Budgeting

Cost Allocation

Accounting for Overhead Costs

Job-Order Costing and Process-Costing Systems

Basic Accounting: Concepts, techniques, and Conventions

Understanding Corporate Annual Reports: Basic Financial Statements

Understanding and Analyzing Consolidated Financial Statements

Filters

External users of financial reports need measures of inventory and cost of goods sold.Internal users of financial reports need cost information about products.

In activity-based costing systems,the system first accumulates indirect costs for ,and then assigns these costs to .