Question 1

________ 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 2

ABC systems attempt to trace more costs as indirect costs.

Accepted Answer

A) True 
 B)False

Question 3

Managers should look for evidence of cause-and-effect when choosing a cost driver with the driver being the cause and the effect being the cost incurred.

Accepted Answer

A) True 
 B)False

Question 4

A well-designed,activity-based cost system helps managers make better decisions because information derived from an ABC analysis ________.

Accepted Answer

A) can be used to eliminate nonvalue-added activities 
B) is easy to analyze and interpret 
C) takes the choices and judgment challenges away from the managers 
D) emphasizes how managers can achieve higher sales 
A) can be used to eliminate nonvalue-added activities 
B) is easy to analyze and interpret 
C) takes the choices and judgment challenges away from the managers 
D) emphasizes how managers can achieve higher sales

Question 5

Extreme Manufacturing Company provides the following ABC costing information:
 
The above activities are used by Departments A and B as follows:
 
How much of the account inquiry cost will be assigned to Department A?

Accepted Answer

A) $54,000 
B) $320,000 
C) $160,000 
D) $84,000 
A) $54,000 
B) $320,000 
C) $160,000 
D) $84,000

Question 6

Rachel's Pet Supply Corporation manufactures two models of grooming stations,a standard and a deluxe model.The following activity and cost information has been compiled:

Assume a traditional costing system applies the $160,000 of overhead costs based on direct labor hours.
a.What is the total amount of overhead costs assigned to the standard model?
b.What is the total amount of overhead costs assigned to the deluxe model?
Assume an activity-based costing system is used and that the number of setups and the number of components are identified as the activity-cost drivers for overhead.
c.What is the total amount of overhead costs assigned to the standard model?
d.What is the total amount of overhead costs assigned to the deluxe model?
e.Explain the difference between the costs obtained from the traditional costing system and the ABC system.Which system provides a better estimate of costs? Why?

Accepted Answer

a.[$160,000 / (650 + 150)] × 650 = $130,

Question 7

Activity-based costing attempts to identify the most relevant cause-and-effect relationship for each activity pool without restricting the cost driver to only units of output or variables related to units of output.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

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

Question 9

Velshi Printers has contracts to complete weekly supplements required by forty-six customers.For the year 2018,manufacturing overhead cost estimates total $1,500,000 for an annual production capacity of 10 million pages.
For 2018 Velshi Printers has decided to evaluate the use of additional cost pools.After analyzing manufacturing overhead costs,it was determined that number of design changes,setups,and inspections are the primary manufacturing overhead cost drivers.The following information was gathered during the analysis:
 
During 2018,two customers,Money Managers and Hospital Systems,are expected to use the following printing services:
 
What is the cost driver rate if manufacturing overhead costs are considered one large cost pool and are assigned based on 10 million pages of production capacity?

Accepted Answer

A) $0.01 per page 
B) $0.15 per page 
C) $0.14 per page 
D) $0.13 per page 
A) $0.01 per page 
B) $0.15 per page 
C) $0.14 per page 
D) $0.13 per page

Question 10

The fundamental cost objects of ABC are ________.

Accepted Answer

A) activities 
B) cost drivers 
C) products 
D) services 
A) activities 
B) cost drivers 
C) products 
D) services

Question 11

Tiger Pride produces two product lines: T-shirts and Sweatshirts.Product profitability is analyzed as follows:
 
Tiger Pride's managers have decided to revise their current assignment of overhead costs to reflect the following ABC cost information:

Under the revised ABC system,total overhead costs allocated to Sweatshirts will be ________.

Accepted Answer

A) $47,460 
B) $68,460 
C) $201,480 
D) None of these answers are correct. 
A) $47,460 
B) $68,460 
C) $201,480 
D) None of these answers are correct.

Question 12

Recognizing ABC information is not always perfect because ________.

Accepted Answer

A) it mostly uses far too many indirect cost pools than what is actually required 
B) it balances the need for better information against the costs of creating a complex system 
C) it lacks the simplicity that traditional systems used to have to allocate overhead costs 
D) it never measures how the resources of an organization are used 
A) it mostly uses far too many indirect cost pools than what is actually required 
B) it balances the need for better information against the costs of creating a complex system 
C) it lacks the simplicity that traditional systems used to have to allocate overhead costs 
D) it never measures how the resources of an organization are used

Question 13

Extracts from cost information of Hebar Corp.:
 
Assuming that setup-hours is considered a more effective cost drive for allocating setup costs than direct labor-hours.Which of the following statements is true of Hebar's setup costs under traditional costing?

Accepted Answer

A) L3 pack is undercosted by $5,850 
B) L7 pack is undercosted by $5,750 
C) L3 pack is overcosted by $5,850 
D) L7 pack is overcosted by $5,850 
A) L3 pack is undercosted by $5,850 
B) L7 pack is undercosted by $5,750 
C) L3 pack is overcosted by $5,850 
D) L7 pack is overcosted by $5,850

Question 14

High Traffic Products Corporation has two departments,Small and Large.Central costs could be allocated to the two departments in various ways.
 
If total advertising expense of $629,300 is allocated on the basis of sales,the amount allocated to the Large Department would be ________.

Accepted Answer

A) $107,300 
B) $558,000 
C) $522,000 
D) $314,650 
A) $107,300 
B) $558,000 
C) $522,000 
D) $314,650

Question 15

Product-cost cross-subsidization is very common when costs are uniformly spread across various products.

Accepted Answer

A) True 
 B)False

Question 16

The Chapeau Company is noted for an exceptionally impressive line of one-size fits-all men's hats.Chapeau has established the following selling and distribution support activity-cost pools and their corresponding activity drivers for the year 2018:
   
Required:
a.Determine the activity-cost-driver rate for each of the four selling and distribution activities.
b.Under what circumstances is it appropriate to use each of the activity-cost drivers?
c.Describe at least one possible negative behavioral consequence for each of the four activity-cost drivers.

Accepted Answer

a.Activity-cost driver rate for Marketin

Question 17

Which of the following cost and cost allocation base have a strong cause and effect relationship?

Accepted Answer

A) administration costs and cubic feet 
B) setup costs and square feet 
C) quality control costs and the number of inspections 
D) machine maintenance and setup hours 
A) administration costs and cubic feet 
B) setup costs and square feet 
C) quality control costs and the number of inspections 
D) machine maintenance and setup hours

Question 18

Dartmouth Corporation manufactures two models of motorized go-carts,a standard and a deluxe model.The following activity and cost information has been compiled:

Assume a traditional costing system applies the $39,240 of overhead costs based on direct labor hours.What is the total amount of overhead cost assigned to the standard model? (Do not round interim calculations.Round the final answer to the nearest whole dollar. )

Accepted Answer

A) $13,190 
B) $26,050 
C) $25,343 
D) $13,898 
A) $13,190 
B) $26,050 
C) $25,343 
D) $13,898

Question 19

Stark Corporation has two departments,Car Rental and Truck Rental.Central costs may be allocated to the two departments in various ways.
 
If advertising expense of $140,000 is allocated on the basis of sales,the amount allocated to the Car Rental Department would be ________.(Do not round interim calculations.Round the final answer to the nearest whole dollar. )

Accepted Answer

A) $92,477.06 
B) $47,522.94 
C) $90,077.52 
D) $88,421.05 
A) $92,477.06 
B) $47,522.94 
C) $90,077.52 
D) $88,421.05

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

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

ABC systems attempt to trace more costs as indirect costs.

Managers should look for evidence of cause-and-effect when choosing a cost driver with the driver being the cause and the effect being the cost incurred.

A well-designed,activity-based cost system helps managers make better decisions because information derived from an ABC analysis ________.

Extreme Manufacturing Company provides the following ABC costing information: The above activities are used by Departments A and B as follows: How much of the account inquiry cost will be assigned to Department A?

Activity-based costing attempts to identify the most relevant cause-and-effect relationship for each activity pool without restricting the cost driver to only units of output or variables related to units of output.

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

The fundamental cost objects of ABC are ________.

Recognizing ABC information is not always perfect because ________.

Extracts from cost information of Hebar Corp.: Assuming that setup-hours is considered a more effective cost drive for allocating setup costs than direct labor-hours.Which of the following statements is true of Hebar's setup costs under traditional costing?

High Traffic Products Corporation has two departments,Small and Large.Central costs could be allocated to the two departments in various ways. If total advertising expense of $629,300 is allocated on the basis of sales,the amount allocated to the Large Department would be ________.

Product-cost cross-subsidization is very common when costs are uniformly spread across various products.

Which of the following cost and cost allocation base have a strong cause and effect relationship?

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

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

ABC systems attempt to trace more costs as indirect costs.

Managers should look for evidence of cause-and-effect when choosing a cost driver with the driver being the cause and the effect being the cost incurred.

A well-designed,activity-based cost system helps managers make better decisions because information derived from an ABC analysis ________.

Extreme Manufacturing Company provides the following ABC costing information: The above activities are used by Departments A and B as follows: How much of the account inquiry cost will be assigned to Department A?

Activity-based costing attempts to identify the most relevant cause-and-effect relationship for each activity pool without restricting the cost driver to only units of output or variables related to units of output.

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

The fundamental cost objects of ABC are ________.

Recognizing ABC information is not always perfect because ________.

Extracts from cost information of Hebar Corp.: Assuming that setup-hours is considered a more effective cost drive for allocating setup costs than direct labor-hours.Which of the following statements is true of Hebar's setup costs under traditional costing?

High Traffic Products Corporation has two departments,Small and Large.Central costs could be allocated to the two departments in various ways. If total advertising expense of $629,300 is allocated on the basis of sales,the amount allocated to the Large Department would be ________.

Product-cost cross-subsidization is very common when costs are uniformly spread across various products.

Which of the following cost and cost allocation base have a strong cause and effect relationship?

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