Question 1

Traditional costing that uses a plantwide overhead allocation rate is considered to be most accurate when each product uses specific resources.

Accepted Answer

A) True 
 B)False

Question 2

Outsourcing the accounting function is an example of what facet of activity-based management?

Accepted Answer

A)  reduce costs of non-value-added activities 
B)  improve selection of process activities to enhance profit 
C)  match the company's use of resources to customer demand 
D)  achieve planned growth 
A)  reduce costs of non-value-added activities 
B)  improve selection of process activities to enhance profit 
C)  match the company's use of resources to customer demand 
D)  achieve planned growth

Question 3

Value-added activities are

Accepted Answer

A)  also called waste activities. 
B)  activities that neither enhance the customer's image of the product or service nor provide a competitive advantage. 
C)  activities that could be reduced or removed from the process with no ill effect on the end product or service. 
D)  activities for which the customer is willing to pay. 
A)  also called waste activities. 
B)  activities that neither enhance the customer's image of the product or service nor provide a competitive advantage. 
C)  activities that could be reduced or removed from the process with no ill effect on the end product or service. 
D)  activities for which the customer is willing to pay.

Question 4

Use the information below to answer the following question(s):
Traditions Home Accessories Company manufactures pillows using an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of June:
  
 Each pillow consists of 3 parts; the total direct materials cost per pillow is $8.00.
-What is the total cost of packaging per pillow?

Accepted Answer

A)  $2.00 
B)  $10.00 
C)  $1.50 
D)  $3.60 
A)  $2.00 
B)  $10.00 
C)  $1.50 
D)  $3.60

Question 5

Value-added activities can be described as activities for which the customer is willing to pay.

Accepted Answer

A) True 
 B)False

Question 6

Dudley & Spahr, Attorneys at Law, provide a variety of legal services. The law firm uses an activity-based costing system and has developed the following activity pool cost rates:   
Cost and activity data related to two clients is as follows:   How much overhead cost would be allocated to Client 103 using the activity-based costing system?

Accepted Answer

A)  $565 
B)  $3,113 
C)  $8,743 
D)  $32,205 
A)  $565 
B)  $3,113 
C)  $8,743 
D)  $32,205

Question 7

The plantwide overhead cost allocation rate is computed by dividing the estimated total manufacturing overhead costs by the estimated total quantity of the cost allocation base.

Accepted Answer

A) True 
 B)False

Question 8

The storage of raw materials is considered a non-value-added activity.

Accepted Answer

A) True 
 B)False

Question 9

Use the information below to answer the following question(s):
Martin Corporation manufactures two products-Plows and Harrows. The annual production and sales of Plows is 1,000 units, while 2,000 units of Harrows are produced and sold. The company has traditionally used direct labour hours to allocate its overhead to products. Plows require 5.0 direct labour hours per unit, while Harrows require 2.0 direct labour hours per unit. The total estimated overhead for the period is $603,500. 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 Machining Costs would be closest to

Accepted Answer

A)  $223.52 per Machine hour. 
B)  $198.53 per Machine hour. 
C)  $125.00 per Machine hour. 
D)  $37.50 per Machine hour. 
A)  $223.52 per Machine hour. 
B)  $198.53 per Machine hour. 
C)  $125.00 per Machine hour. 
D)  $37.50 per Machine hour.

Question 10

Which of the following describes how, in ABC, the activity allocation rate is computed?

Accepted Answer

A)  The total estimated activity cost pool is divided by the total estimated activity allocation base. 
B)  The total estimated activity allocation base is divided by the total estimated activity cost pool. 
C)  The total estimated activity allocation base is multiplied by the total estimated activity cost pool. 
D)  You take the total estimated activity allocation base and subtract the total estimated total activity cost pool. 
A)  The total estimated activity cost pool is divided by the total estimated activity allocation base. 
B)  The total estimated activity allocation base is divided by the total estimated activity cost pool. 
C)  The total estimated activity allocation base is multiplied by the total estimated activity cost pool. 
D)  You take the total estimated activity allocation base and subtract the total estimated total activity cost pool.

Question 11

Silver Company manufactures several different products and uses an activity-based costing system. Information from its system for the year for all products follows:  
 The annual production and sales of one of its products, the Zinger, are 1,000 units. The following data relate to the production and sales of Zingers in the most recent year:   What is the average cost of one Zinger?

Accepted Answer

A)  $19.96 
B)  $195.16 
C)  $226.30 
D)  $155.24 
A)  $19.96 
B)  $195.16 
C)  $226.30 
D)  $155.24

Question 12

Use the information below to answer the following question(s):
General Products Company manufactures toaster ovens and uses an activity-based costing system. The following information is provided for the month of May:
   
Each toaster oven consists of 3 parts. The direct materials cost per toaster oven is $25.00.
-What is the cost of materials handling and assembling per toaster oven?

Accepted Answer

A)  $9.60 
B)  $5.40 
C)  $17.50 
D)  $15.00 
A)  $9.60 
B)  $5.40 
C)  $17.50 
D)  $15.00

Question 13

Use the information below to answer the following question(s):
Traditions Home Accessories Company manufactures pillows using an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of June:
  
 Each pillow consists of 3 parts; the total direct materials cost per pillow is $8.00.
-What is the total manufacturing cost per pillow?

Accepted Answer

A)  $13.10 
B)  $5.10 
C)  $15.10 
D)  $7.10 
A)  $13.10 
B)  $5.10 
C)  $15.10 
D)  $7.10

Question 14

What is activity-based management and how can it be used to improve the profitability of a company?

Accepted Answer

Activity-based management is a method of

Question 15

Machine set-up would be considered a batch-level cost.

Accepted Answer

A) True 
 B)False

Question 16

Use the information below to answer the following question(s):
Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1,000 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plantwide overhead rate to allocate its $8,088,000 of annual manufacturing overhead. Of this amount, $2,210,000 is associated with the Large Bag line, $3,418,800 is associated with the Medium Bag line, and $2,459,200 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 40,000 machine hours; 13,000 in the Large Bag line, 15,400 in the Medium Bag line, and 11,600 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs.
-At Cooper's Bags the plantwide manufacturing overhead rate would be closest to

Accepted Answer

A)  $55.25 per machine hour. 
B)  $170.00 per machine hour. 
C)  $222.00 per machine hour. 
D)  $202.20 per machine hour. 
A)  $55.25 per machine hour. 
B)  $170.00 per machine hour. 
C)  $222.00 per machine hour. 
D)  $202.20 per machine hour.

Question 17

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 units costs for all parts is

Accepted Answer

A)  $4.34. 
B)  $6.06. 
C)  $7.98. 
D)  $13.48. 
A)  $4.34. 
B)  $6.06. 
C)  $7.98. 
D)  $13.48.

Question 18

Use the information below to answer the following question(s):
Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1,000 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plantwide overhead rate to allocate its $8,088,000 of annual manufacturing overhead. Of this amount, $2,210,000 is associated with the Large Bag line, $3,418,800 is associated with the Medium Bag line, and $2,459,200 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 40,000 machine hours; 13,000 in the Large Bag line, 15,400 in the Medium Bag line, and 11,600 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs.
-Which product line(s) have been overcosted or undercosted by using the plantwide manufacturing overhead rate?

Accepted Answer

A)  Large Bags has been undercosted; Medium and Small have been overcosted. 
B)  Large, Medium, and Small Bags have all been overcosted. 
C)  Large, Medium, and Small Bags have all been undercosted. 
D)  Large Bags has been overcosted; Medium and Small have been undercosted. 
A)  Large Bags has been undercosted; Medium and Small have been overcosted. 
B)  Large, Medium, and Small Bags have all been overcosted. 
C)  Large, Medium, and Small Bags have all been undercosted. 
D)  Large Bags has been overcosted; Medium and Small have been undercosted.

Question 19

The cost to research and develop, design and market new models would be considered a unit-level cost.

Accepted Answer

A) True 
 B)False

Question 20

Use the information below to answer the following question(s):
Durable Engines Company uses ABC to account for it manufacturing process.
  
 Durable Engines Company expects to produce 2,000 engines. Durable Engines Company also expects to use 12,000 parts and have 16 setups.
-The allocation rate for machine setups is

Accepted Answer

A)  $1,200. 
B)  $800. 
C)  $375. 
D)  $5.28. 
A)  $1,200. 
B)  $800. 
C)  $375. 
D)  $5.28.

Traditional costing that uses a plantwide overhead allocation rate is considered to be most accurate when each product uses specific resources.

Outsourcing the accounting function is an example of what facet of activity-based management?

Value-added activities are

Value-added activities can be described as activities for which the customer is willing to pay.

The plantwide overhead cost allocation rate is computed by dividing the estimated total manufacturing overhead costs by the estimated total quantity of the cost allocation base.

The storage of raw materials is considered a non-value-added activity.

Which of the following describes how, in ABC, the activity allocation rate is computed?

What is activity-based management and how can it be used to improve the profitability of a company?

Machine set-up would be considered a batch-level cost.

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 units costs for all parts is

The cost to research and develop, design and market new models would be considered a unit-level cost.

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

Traditional costing that uses a plantwide overhead allocation rate is considered to be most accurate when each product uses specific resources.

Outsourcing the accounting function is an example of what facet of activity-based management?

Value-added activities are

Value-added activities can be described as activities for which the customer is willing to pay.

The plantwide overhead cost allocation rate is computed by dividing the estimated total manufacturing overhead costs by the estimated total quantity of the cost allocation base.

The storage of raw materials is considered a non-value-added activity.

Which of the following describes how, in ABC, the activity allocation rate is computed?

What is activity-based management and how can it be used to improve the profitability of a company?

Machine set-up would be considered a batch-level cost.

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 units costs for all parts is

The cost to research and develop, design and market new models would be considered a unit-level cost.

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