Question 1

Two main benefits of ABC are: (1) more accurate product cost information, and (2) more detailed information on the costs of activities and the drivers of those costs.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following statements is TRUE regarding activity-based costing systems?

Accepted Answer

A)  ABC systems accumulate overhead costs by departments. 
B)  ABC costing systems are less complex and, therefore, less costly than traditional systems. 
C)  ABC costing systems can be used in manufacturing firms only. 
D)  ABC costing systems have separate indirect cost allocation rates for each activity. 
A)  ABC systems accumulate overhead costs by departments. 
B)  ABC costing systems are less complex and, therefore, less costly than traditional systems. 
C)  ABC costing systems can be used in manufacturing firms only. 
D)  ABC costing systems have separate indirect cost allocation rates for each activity.

Question 3

Which of the following condition(s) favours using departmental overhead rates in place of a plantwide overhead rate?

Accepted Answer

A)  Manufacturing overhead represents a small proportion of total cost. 
B)  Different jobs or products use the departments to a different extent. 
C)  Departments use a similar amount of indirect costs. 
D)  Products spend the same amount of time in each department. 
A)  Manufacturing overhead represents a small proportion of total cost. 
B)  Different jobs or products use the departments to a different extent. 
C)  Departments use a similar amount of indirect costs. 
D)  Products spend the same amount of time in each department.

Question 4

Machine set-up would most likely be classified as a

Accepted Answer

A)  unit-level activity. 
B)  batch-level activity. 
C)  product-level activity. 
D)  facility-level activity. 
A)  unit-level activity. 
B)  batch-level activity. 
C)  product-level activity. 
D)  facility-level activity.

Question 5

Use the information below to answer the following question(s):
Electronics Unlimited uses activity-based costing to allocate all manufacturing conversion costs. Electronics Unlimited produces computer keyboards; each computer keyboard has $8.00 of direct materials, includes 12 parts and requires 1/2 hour of machine time. Additional information follows:
  
-What is the cost of materials handling per computer keyboard?

Accepted Answer

A)  $0.88 
B)  $3.00 
C)  $6.00 
D)  $12.00 
A)  $0.88 
B)  $3.00 
C)  $6.00 
D)  $12.00

Question 6

Using activity-based costing to allocate overhead costs, what is the total manufacturing overhead cost estimate for Hapless Systems during 2016?

Accepted Answer

A)  $3,113.75 
B)  $1,495.00 
C)  $2,068.00 
D)  $3,412.50 
A)  $3,113.75 
B)  $1,495.00 
C)  $2,068.00 
D)  $3,412.50

Question 7

The movement of parts is considered a value-added activity.

Accepted Answer

A) True 
 B)False

Question 8

Use the information below to answer the following question(s):
Vittoria Corporation manufactures two products-Carts and Wheelbarrows. The annual production and sales of Carts is 2,000 units, while 1,800 units of Wheelbarrows are produced and sold. The company has traditionally used direct labour hours to allocate its overhead to products. Carts require 1.0 direct labour hours per unit, while Wheelbarrows require 0.5 direct labour hours per unit. The total estimated overhead for the period is $117,500. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:
Expected Activity
  
-The cost pool activity rate for engineering costs would be closest to

Accepted Answer

A)  $10.00 per engineering hour. 
B)  $15.00 per engineering hour. 
C)  $40.00 per engineering hour. 
D)  $75.56 per engineering hour. 
A)  $10.00 per engineering hour. 
B)  $15.00 per engineering hour. 
C)  $40.00 per engineering hour. 
D)  $75.56 per engineering hour.

Question 9

Managers often reap benefits by using ABC data in ABM to pinpoint opportunities to cut costs.

Accepted Answer

A) True 
 B)False

Question 10

Use the information below to answer the following question(s):
Sparrow Manufacturing manufactures small parts and uses an activity-based costing system.
   
The following parts were produced in October with the following information:
  
-Total manufacturing costs for part A is

Accepted Answer

A)  $7,700. 
B)  $3,200. 
C)  $5,200. 
D)  $5,700. 
A)  $7,700. 
B)  $3,200. 
C)  $5,200. 
D)  $5,700.

Question 11

In ABC it is assumed that it is activities that drive costs, rather than cost objects such as inventory.

Accepted Answer

A) True 
 B)False

Question 12

The Braveheart Corporation uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: cutting and painting. The Cutting Department uses a departmental overhead rate of $12 per machine hour, while the Painting Department uses a departmental overhead rate of $17 per direct labour hour. Job 422 used the following direct labour hours and machine hours in the two departments:
   
The cost for direct labour is $20 per direct labour hour and the cost of the direct materials used by Job 422 is $800.
Required: What was the total cost of Job 422 if the Braveheart Corporation used the departmental overhead rates to allocate manufacturing overhead?

Accepted Answer

The answer of The Braveheart Corporation uses departmental overhead rates...

Question 13

If a company uses departmental overhead allocation rates, then the amount of manufacturing overhead allocated to the job is equal to the plantwide overhead rate multiplied by the actual use of the cost allocation base.

Accepted Answer

A) True 
 B)False

Question 14

Use the information below to answer the following question(s):
Kepple Manufacturing currently uses a traditional costing system. The company allocates overhead to its two products, Zips and Dees, using a predetermined manufacturing overhead rate based on direct labour hours. Here is data related to the company's two products:
   Information about the company's estimated manufacturing overhead for the year follows:
   Additional information about production needed for the activity-based costing system follows:
Expected Activity
  
-The amount of manufacturing overhead that would be allocated to one unit of Zips using an activity-based costing system would be closest to

Accepted Answer

A)  $32.86. 
B)  $51.12. 
C)  $64.81. 
D)  $11.95. 
A)  $32.86. 
B)  $51.12. 
C)  $64.81. 
D)  $11.95.

Question 15

Clucker Chicken produces several styles of precooked and package chicken wings (drums,
tips, buffalo and coated with a variety of spices and sauces). Each style of wing requires different
preparation time, different cooking and draining times and different packaging. Therefore
the company management has decided to try ABC costing to better capture the manufacturing
overhead costs incurred by each style of wing. The following activities related to yearly
manufacturing overhead costs and cost drivers have been identified:
   
Compute the activity cost allocation rates for each activity assuming the following total estimated activity for the year: 45,000 hours preparation time, 45,000 cooking and draining hours, and 9,000,000 packages.

Accepted Answer

Allocation bases:
Preparation = $900,000

Question 16

Why are the benefits of adopting ABC/ABM higher for companies in competitive markets?

Accepted Answer

A)  Because ABM can pinpoint opportunities for cost savings 
B)  Because accounting /information system expertise is inexpensive to develop 
C)  Because accurate product cost information is not as relevant for price setting 
D)  Because companies in competitive markets have low indirect costs 
A)  Because ABM can pinpoint opportunities for cost savings 
B)  Because accounting /information system expertise is inexpensive to develop 
C)  Because accurate product cost information is not as relevant for price setting 
D)  Because companies in competitive markets have low indirect costs

Question 17

If a company's plantwide overhead rate is allocated based on direct labour hours, then each job will be allocated manufacturing overhead based on the total direct labour hours incurred on the job, regardless of the manufacturing department in which those hours were incurred.

Accepted Answer

A) True 
 B)False

Question 18

All of the following are activities in an activity-based costing system that determine the cost of a manufactured product except for

Accepted Answer

A)  accounting. 
B)  inspecting. 
C)  machining. 
D)  materials handling. 
A)  accounting. 
B)  inspecting. 
C)  machining. 
D)  materials handling.

Question 19

The benefits of using the ABC costing system are higher if the company

Accepted Answer

A)  has high indirect costs. 
B)  produces many different products that use differing amounts of resources. 
C)  produces only one product. 
D)  has high indirect costs and produces many different products that use differing amounts of resources. 
A)  has high indirect costs. 
B)  produces many different products that use differing amounts of resources. 
C)  produces only one product. 
D)  has high indirect costs and produces many different products that use differing amounts of resources.

Question 20

Which of the following statements does NOT describe an ABC system?

Accepted Answer

A)  ABC systems can create more accurate product costs. 
B)  ABC systems may only be used by service companies. 
C)  ABC systems are more complex and costly than traditional costing systems. 
D)  ABC systems are used in both manufacturing and non manufacturing companies. 
A)  ABC systems can create more accurate product costs. 
B)  ABC systems may only be used by service companies. 
C)  ABC systems are more complex and costly than traditional costing systems. 
D)  ABC systems are used in both manufacturing and non manufacturing companies.

Two main benefits of ABC are: (1) more accurate product cost information, and (2) more detailed information on the costs of activities and the drivers of those costs.

Which of the following statements is TRUE regarding activity-based costing systems?

Which of the following condition(s) favours using departmental overhead rates in place of a plantwide overhead rate?

Machine set-up would most likely be classified as a

Using activity-based costing to allocate overhead costs, what is the total manufacturing overhead cost estimate for Hapless Systems during 2016?

The movement of parts is considered a value-added activity.

Managers often reap benefits by using ABC data in ABM to pinpoint opportunities to cut costs.

Use the information below to answer the following question(s): Sparrow Manufacturing manufactures small parts and uses an activity-based costing system. The following parts were produced in October with the following information: -Total manufacturing costs for part A is

In ABC it is assumed that it is activities that drive costs, rather than cost objects such as inventory.

If a company uses departmental overhead allocation rates, then the amount of manufacturing overhead allocated to the job is equal to the plantwide overhead rate multiplied by the actual use of the cost allocation base.

Why are the benefits of adopting ABC/ABM higher for companies in competitive markets?

If a company's plantwide overhead rate is allocated based on direct labour hours, then each job will be allocated manufacturing overhead based on the total direct labour hours incurred on the job, regardless of the manufacturing department in which those hours were incurred.

All of the following are activities in an activity-based costing system that determine the cost of a manufactured product except for

The benefits of using the ABC costing system are higher if the company

Which of the following statements does NOT describe an ABC system?

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Cost Behaviour

Cost-Volume-Profit Analysis

Job Costing

Process Costing

Short-Term Business Decisions

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Capital Investment Decisions and the Time Value of Money

Filters

Exam 7: Activity Based Costing

Two main benefits of ABC are: (1) more accurate product cost information, and (2) more detailed information on the costs of activities and the drivers of those costs.

Which of the following statements is TRUE regarding activity-based costing systems?

Which of the following condition(s) favours using departmental overhead rates in place of a plantwide overhead rate?

Machine set-up would most likely be classified as a

Using activity-based costing to allocate overhead costs, what is the total manufacturing overhead cost estimate for Hapless Systems during 2016?

The movement of parts is considered a value-added activity.

Managers often reap benefits by using ABC data in ABM to pinpoint opportunities to cut costs.

Use the information below to answer the following question(s): Sparrow Manufacturing manufactures small parts and uses an activity-based costing system. The following parts were produced in October with the following information: -Total manufacturing costs for part A is

In ABC it is assumed that it is activities that drive costs, rather than cost objects such as inventory.

If a company uses departmental overhead allocation rates, then the amount of manufacturing overhead allocated to the job is equal to the plantwide overhead rate multiplied by the actual use of the cost allocation base.

Why are the benefits of adopting ABC/ABM higher for companies in competitive markets?

If a company's plantwide overhead rate is allocated based on direct labour hours, then each job will be allocated manufacturing overhead based on the total direct labour hours incurred on the job, regardless of the manufacturing department in which those hours were incurred.

All of the following are activities in an activity-based costing system that determine the cost of a manufactured product except for

The benefits of using the ABC costing system are higher if the company

Which of the following statements does NOT describe an ABC system?

Introduction to Managerial Accounting

Building Blocks of Managerial Accounting

Cost Behaviour

Cost-Volume-Profit Analysis

Job Costing

Process Costing

Short-Term Business Decisions

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Capital Investment Decisions and the Time Value of Money

Filters