Question 1

Using department indirect-cost rates to allocate costs will result in results similar to ABC if:

Accepted Answer

A) a single activity accounts for a sizable portion of the costs of the department 
B) several activities cause a sizable portion of the costs of the department 
C) a single activity accounts for a small portion of the costs of the department 
D) several activities cause a small portion of the costs of the department 
A) a single activity accounts for a sizable portion of the costs of the department 
B) several activities cause a sizable portion of the costs of the department 
C) a single activity accounts for a small portion of the costs of the department 
D) several activities cause a small portion of the costs of the department

Question 2

ABC and traditional systems are quite similar in ________.

Accepted Answer

A) the treatment of direct costs 
B) the allocation of overheads 
C) evaluating performance 
D) the identification of cost pools 
A) the treatment of direct costs 
B) the allocation of overheads 
C) evaluating performance 
D) the identification of cost pools

Question 3

Brilliant Accents Company manufactures and sells three styles of kitchen faucets: Brass,Chrome,and White.Production takes 25,25,and 10 machine hours to manufacture 1,000-unit batches of brass,chrome,and white faucets,respectively.The following additional data apply:
   
PER UNIT data:

Overhead cost based on direct labor hours
   
Hours per 1000-unit batch:
   
Total overhead costs and activity levels for the year are estimated as follows:
   
Required:
a.Using the traditional system,determine the operating profit per unit for the brass style of faucet.
b.Determine the activity-cost-driver rate for setup costs and inspection costs.
c.Using the ABC system,for the brass style of faucet:
   
d.Explain the difference between the profits obtained from the traditional system and the ABC system.Which system provides a better estimate of profitability? Why?

Accepted Answer

a.Traditional system:
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Question 4

When allocating the total indirect cost pool to cost pools such as setup costs including depreciation and maintenance costs of setup equipment,wages of setup employees,and allocation of supervisors is called a second-stage allocation.

Accepted Answer

A) True 
 B)False

Question 5

________ are the costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced.

Accepted Answer

A) Unit-level costs 
B) Batch-level costs 
C) Product-sustaining costs 
D) Facility-sustaining costs 
A) Unit-level costs 
B) Batch-level costs 
C) Product-sustaining costs 
D) Facility-sustaining costs

Question 6

Milan Company has identified three cost pools to allocate overhead costs.The following estimates are provided for the coming year:
 
The accounting records show the Mossman Job consumed the following resources:
 
Under activity-based costing,what is the amount of machine maintenance costs allocated to the Mossman Job? (Do not round any intermediary calculations. )

Accepted Answer

A) $1,881.88 
B) $200.20 
C) $1,681.68 
D) $210.45 
A) $1,881.88 
B) $200.20 
C) $1,681.68 
D) $210.45

Question 7

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

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) $21,960 
B) $17,025 
C) $16,840 
D) $17,210 
A) $21,960 
B) $17,025 
C) $16,840 
D) $17,210

Question 8

Johnson Superior Products Inc.produces hospital equipment and the setup requirements vary from product to product.Johnson produces its products based on customer orders and uses ABC costing.In one of its indirect cost pools,setup costs and distribution costs are pooled together.Costs in this pool are allocated using number of customer orders for the easiness of costing operations.Based on the information provided,which of the following arguments is valid?

Accepted Answer

A) Johnson has clearly failed to identify as many direct costs as is economically feasible. 
B) All costs in a homogeneous cost pool have the same or a similar cause-and-effect relationship with the single cost driver that is used as the cost-allocation base for Johnson. 
C) Johnson has unnecessarily wasted resources by classifying setup and distribution costs as they could have been considered as direct costs. 
D) Johnson has failed to use the correct cost driver as the cost-allocation base for setup costs. 
A) Johnson has clearly failed to identify as many direct costs as is economically feasible. 
B) All costs in a homogeneous cost pool have the same or a similar cause-and-effect relationship with the single cost driver that is used as the cost-allocation base for Johnson. 
C) Johnson has unnecessarily wasted resources by classifying setup and distribution costs as they could have been considered as direct costs. 
D) Johnson has failed to use the correct cost driver as the cost-allocation base for setup costs.

Question 9

High Traffic Products Corporation has two departments,Small and Large.Central costs could be allocated to the two departments in various ways.
 
If total payroll processing costs of $34,560 are allocated on the basis of number of employees,the amount allocated to the Small Department would be ________.(Do not round interim calculations.Round the final answer to the nearest whole dollar. )

Accepted Answer

A) $24,960 
B) $28,560 
C) $17,280 
D) $9,600 
A) $24,960 
B) $28,560 
C) $17,280 
D) $9,600

Question 10

Xylon Corp.has contracts to complete weekly supplements required by forty-six customers.For the year 2018,manufacturing overhead cost estimates total $900,000 for an annual production capacity of 10 million pages.
For 2018,Xylon 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:
 
If manufacturing overhead costs are considered one large cost pool and are assigned based on 10 million pages of production capacity,what is the cost driver rate? (Round the final answer to three decimal places. )

Accepted Answer

A) $0.078 per page 
B) $0.035 per page 
C) $0.055 per page 
D) $0.09 per page 
A) $0.078 per page 
B) $0.035 per page 
C) $0.055 per page 
D) $0.09 per page

Question 11

Dartmouth Corporation manufactures two models of office chairs,a standard and a deluxe model.The following activity and cost information has been compiled:

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 costs assigned to the deluxe model?

Accepted Answer

A) $59,450 
B) $83,800 
C) $56,800 
D) $62,100 
A) $59,450 
B) $83,800 
C) $56,800 
D) $62,100

Question 12

Put the following ABC implementation steps in order ________.

Accepted Answer

A) DACB 
B) DBCA 
C) BADC 
D) CDAB 
A) DACB 
B) DBCA 
C) BADC 
D) CDAB

Question 13

The following conditions with departmental indirect-cost rates will result in allocation of costs similar to ABC costing except:

Accepted Answer

A) a single activity accounts for a sizable portion of the costs of the department 
B) Significant costs are incurred on different activities within a department 
C) several activities cause a sizable portion of the costs of the department 
D) significant costs are incurred for different activities with different cost -allocation bases within a department 
A) a single activity accounts for a sizable portion of the costs of the department 
B) Significant costs are incurred on different activities within a department 
C) several activities cause a sizable portion of the costs of the department 
D) significant costs are incurred for different activities with different cost -allocation bases within a department

Question 14

ABC systems and department costing systems use totally different approaches towards indirect cost allocation and can never be used together.

Accepted Answer

A) True 
 B)False

Question 15

Columbus Company provides the following ABC costing information:
 
The above activities used by their three departments are:
 
How much of the total costs will be assigned to the Lawn Department?

Accepted Answer

A) $192,000 
B) $464,000 
C) $174,800 
D) $154,667 
A) $192,000 
B) $464,000 
C) $174,800 
D) $154,667

Question 16

Columbus Company provides the following ABC costing information:
 
The above activities used by their three departments are:
 
How much of the labor cost will be assigned to the Bush Department?

Accepted Answer

A) $127,400 
B) $63,700 
C) $200,900 
D) $97,825 
A) $127,400 
B) $63,700 
C) $200,900 
D) $97,825

Question 17

Canton's Corp.manufactures two sizes of ceramic paperweights,regular and jumbo.The following information applies to their expectations for the planning period:

Expected direct costs amounts to $9,130,000 for the period.Support cost requirements of both products are substantially different from one another.Canton uses an ABC costing system.
Which of the following statements is true of implementing an ABC system?

Accepted Answer

A) Managers should never compromise on the cause-and-effect relationship of cost drivers and costs. 
B) The three guidelines for refining costing systems should be ignored while implementing an ABC costing system. 
C) The heterogeneous cost pools give managers greater confidence in the activity and product cost numbers from the ABC system. 
D) Identifying the cost-allocation bases defines the number of activity pools into which costs must be grouped in an ABC system. 
A) Managers should never compromise on the cause-and-effect relationship of cost drivers and costs. 
B) The three guidelines for refining costing systems should be ignored while implementing an ABC costing system. 
C) The heterogeneous cost pools give managers greater confidence in the activity and product cost numbers from the ABC system. 
D) Identifying the cost-allocation bases defines the number of activity pools into which costs must be grouped in an ABC system.

Question 18

The total amount of indirect costs assigned to product SR6 using the traditional method is ________ the total amount assigned using ABC.

Accepted Answer

A) more than 
B) less than 
C) equal to 
D) more accurate than 
A) more than 
B) less than 
C) equal to 
D) more accurate than

Question 19

Explain how a top-selling product may actually result in losses for the company.

Accepted Answer

If indirect costs are not properly alloc

Question 20

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,overhead costs per unit for the Sweatshirts will be ________.(Do not round interim calculations.Round the final answer to the nearest cent)

Accepted Answer

A) $1.19 per unit 
B) $1.20 per unit 
C) $1.90 per unit 
D) $1.58 per unit 
A) $1.19 per unit 
B) $1.20 per unit 
C) $1.90 per unit 
D) $1.58 per unit

Using department indirect-cost rates to allocate costs will result in results similar to ABC if:

ABC and traditional systems are quite similar in ________.

When allocating the total indirect cost pool to cost pools such as setup costs including depreciation and maintenance costs of setup equipment,wages of setup employees,and allocation of supervisors is called a second-stage allocation.

________ are the costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced.

Put the following ABC implementation steps in order ________.

The following conditions with departmental indirect-cost rates will result in allocation of costs similar to ABC costing except:

ABC systems and department costing systems use totally different approaches towards indirect cost allocation and can never be used together.

Columbus Company provides the following ABC costing information: The above activities used by their three departments are: How much of the total costs will be assigned to the Lawn Department?

Columbus Company provides the following ABC costing information: The above activities used by their three departments are: How much of the labor cost will be assigned to the Bush Department?

The total amount of indirect costs assigned to product SR6 using the traditional method is ________ the total amount assigned using ABC.

Explain how a top-selling product may actually result in losses for the company.

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

Using department indirect-cost rates to allocate costs will result in results similar to ABC if:

ABC and traditional systems are quite similar in ________.

When allocating the total indirect cost pool to cost pools such as setup costs including depreciation and maintenance costs of setup equipment,wages of setup employees,and allocation of supervisors is called a second-stage allocation.

________ are the costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced.

Put the following ABC implementation steps in order ________.

The following conditions with departmental indirect-cost rates will result in allocation of costs similar to ABC costing except:

ABC systems and department costing systems use totally different approaches towards indirect cost allocation and can never be used together.

Columbus Company provides the following ABC costing information: The above activities used by their three departments are: How much of the total costs will be assigned to the Lawn Department?

Columbus Company provides the following ABC costing information: The above activities used by their three departments are: How much of the labor cost will be assigned to the Bush Department?

The total amount of indirect costs assigned to product SR6 using the traditional method is ________ the total amount assigned using ABC.

Explain how a top-selling product may actually result in losses for the company.

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