Question 1

The system that first traces costs to activities and then to products is called:

Accepted Answer

A)  direct costing 
B)  absorption costing 
C)  functional-based costing 
D)  activity-based costing 
A)  direct costing 
B)  absorption costing 
C)  functional-based costing 
D)  activity-based costing

Question 2

An __________costing database is the collected data sets that are organized and interrelated for use in a company's ABC information system.
or

Accepted Answer

activity-b

Question 3

Figure 4-19 Attraction Corporation produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. In addition, there is a sustaining process with two activities: providing utilities (plantwide) and providing space. Costs have been assigned to each activity using direct tracing and resource drivers:
  Activity drivers for each activity have been identified and their practical capacities listed:
  The costs of facility-level activities are assigned using machine hours.
Refer to Figure 4-19. What is (are) the unit-level activity(ies)?

Accepted Answer

A)  engineering 
B)  setups 
C)  providing space 
D)  machining 
A)  engineering 
B)  setups 
C)  providing space 
D)  machining

Question 4

Figure 4-6 The Fast & Furious Company produces two products: toy planes and toy race cars. They use departmental overhead rates for the two production departments: molding and finishing. Molding uses machine hours to assign overhead and Finishing uses direct labor hours. 50,000 planes and 250,000 race cars are produced. Please find the following data:
  Refer to Figure 4-6. What are the departmental overhead rates for the molding and finishing department respectively?

Accepted Answer

A)  $25; $2.50 
B)  $8.33; $2 
C)  $25; $10 
D)  $12.50; $2.50 
A)  $25; $2.50 
B)  $8.33; $2 
C)  $25; $10 
D)  $12.50; $2.50

Question 5

Figure 4-7 The Cherokee Company uses a predetermined overhead rate. The following accounts have these unadjusted balances:
  Refer to Figure 4-7. If Manufacturing overhead was $12,000 overapplied and considered material, what is the journal entry?

Accepted Answer

A)  Cost of Goods Sold $12,000 Manufacturing Overhead $12,000 
B)  Manufacturing Overhead $12,000 Cost of Goods Sold $12,000 
C)  Manufacturing Overhead $12,000 Raw Materials $2,000
Work in Process $4,000
Finished Goods $1,000
Cost of Goods Sold $5,000 
D)  Raw Materials $2,000 Work in process $4,000
Finished Goods $1,000
Cost of Goods Sold $5,000
Manufacturing Overhead $12,000 
E)  Manufacturing Overhead $12,000 Work in Process $4,800
Finished Goods $1,200
Cost of Goods Sold $6,000 
A)  Cost of Goods Sold $12,000 Manufacturing Overhead $12,000 
B)  Manufacturing Overhead $12,000 Cost of Goods Sold $12,000 
C)  Manufacturing Overhead $12,000 Raw Materials $2,000
Work in Process $4,000
Finished Goods $1,000
Cost of Goods Sold $5,000 
D)  Raw Materials $2,000 Work in process $4,000
Finished Goods $1,000
Cost of Goods Sold $5,000
Manufacturing Overhead $12,000 
E)  Manufacturing Overhead $12,000 Work in Process $4,800
Finished Goods $1,200
Cost of Goods Sold $6,000

Question 6

Classifying activities into four general categories facilitates product costing by associating the response to different types of activity drivers.

Accepted Answer

A) True 
 B)False

Question 7

Predetermined overhead rates are calculated at the end of each year using the formula: overhead rate = budgeted annual driver level/budgeted annual driver level.

Accepted Answer

A) True 
 B)False

Question 8

Figure 4-10 The Manoli Company has collected the following data for use in calculating product costs:
Activity Data: (expected and actual)
  Departmental Data: (expected and actual)
  Refer to Figure 4-10. What is the consumption ratio for the plantwide activity rate of direct labor hours?

Accepted Answer

A)  .25; .75 
B)  .71; .29 
C)  .2; .8 
D)  .8; .2 
A)  .25; .75 
B)  .71; .29 
C)  .2; .8 
D)  .8; .2

Question 9

Inventive Manufacturing Company has the following activities: creating bills of materials (BOM), studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tooling. The general ledger accounts reveal the following expenditures for manufacturing engineering:
   The equipment is used for two activities: improving processes and designing tooling. Forty percent of the equipment's time is used for improving processes and 60 percent is used for designing tools. The salaries are for five engineers, one who earns $160,000 and four who earn $85,000 each. The $160,000 engineer spends 30 percent of his time training employees in new processes and 70 percent of his time on improving processes. One engineer spends 100 percent of her time on designing tooling and another engineer spends 100 percent of his time on improving processes. The remaining two engineers spend equal time on all activities. Supplies are consumed in the following proportions:
   Required:
Using the resource drivers and direct tracing, calculate the cost of each manufacturing engineering activity. What are the resource drivers?

Accepted Answer

@#IMG-DLM& Resource drivers: P

Question 10

Figure 4-17 X-TREME Corporation has the following activities: creating bills of materials (BOM), studying manufacturing capabilities, improving manufacturing processes, training employees, and designing tooling. The general ledger accounts reveal the following expenditures for manufacturing engineering:
  The equipment is used for two activities: improving processes and designing tooling. Thirty-five percent of the equipment's time is used for improving processes and 65 percent is used for designing tools. The salaries are for two engineers. One is paid $50,000, while the other earns $25,000. The $50,000 engineer spends 40 percent of his time training employees in new processes and 60 percent of his time on improving processes. The remaining engineer spends equal time on all activities. Supplies are consumed in the following proportions:
  Refer to 4-17. What is the cost assigned to the training employees activity?

Accepted Answer

A)  $125,000 
B)  $81,250 
C)  $31,250 
D)  $27,500 
A)  $125,000 
B)  $81,250 
C)  $31,250 
D)  $27,500

Question 11

Figure 4-21 Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G. Information relating to the two products is as follows:   The following overhead costs are reported for the following activities of the production process:
  Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below:
  Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
Refer to Figure 4-21. Under this new approach, what cost would be assigned to the labor related cost pool?

Accepted Answer

A)  0 
B)  $120,000 
C)  $255,000 
D)  $315,000 
A)  0 
B)  $120,000 
C)  $255,000 
D)  $315,000

Question 12

Figure 4-21 Appleby Manufacturing uses an activity-based costing system. The company produces Model F and Model G. Information relating to the two products is as follows:   The following overhead costs are reported for the following activities of the production process:
  Jones manufacturing has used activity based costing to assign costs to Models F and G as given in the table below:
  Appleby Manufacturing wants to implement an approximately relevant ABC system by using the two most expensive activities for cost assignment.
Refer to Figure 4-21. Under the equally accurate reduced ABC system, what are the global consumption ratios for Model F and Model G respectively? (round to 2 decimal places)

Accepted Answer

A)  .41: .59 
B)  .44; .56 
C)  .40; .60 
D)  .50; .50 
A)  .41: .59 
B)  .44; .56 
C)  .40; .60 
D)  .50; .50

Question 13

The first step in designing an activity-based costing system is to identify activities.

Accepted Answer

A) True 
 B)False

Question 14

Figure 4-14 Lawson Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are as follows:
  Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labor hours. 20,000 direct labor hours are budgeted for next year.
The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 15 percent. Estimates for the proposed job are as follows:
  In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based activity driver, direct labor hours. The plant manager has heard of a new way of applying overhead that uses cost pools and activity drivers. Expected activity for the four activity drivers that would be used are:
  Refer to Figure 4-14. If material moves are used to assign material handling costs, the amount of material handling costs allocated to the proposed job would be

Accepted Answer

A)  $ 60. 
B)  $147. 
C)  $170. 
D)  $180. 
A)  $ 60. 
B)  $147. 
C)  $170. 
D)  $180.

Question 15

Maroone, Inc., has identified the following overhead costs and activity drivers for next year:
   The following are the two product models completed during the year:
   The company's normal activity is 20,000 direct labor hours.
Required:

Accepted Answer

The answer of Maroone, Inc., has identified the following overhead...

Question 16

For labor-intensive operations, the most appropriate activity driver would be the __________ hours.

Accepted Answer

The answer of For labor-intensive operations, the most appropriate activity...

Question 17

The grouping of logically related information is called:

Accepted Answer

A)  activity driver 
B)  data set 
C)  cost objective 
D)  both a and c 
A)  activity driver 
B)  data set 
C)  cost objective 
D)  both a and c

Question 18

Figure 4-16 Samson Company recently installed an activity-based relational database. Using the information contained in the activity relational table, the following pool rates were computed:
$400 per purchase order
$24 per machine hour, Process 1
$30 per machine hour, Process 2
$80 per engineering hour
Two products are produced by Special Products: L and M. The plant has two manufacturing processes, Process 1 and Process 2. Other processes include engineering, product handling, and procurement. Product L goes through Process 1 while Product M goes through Process 2. The product relational table for Special Products is as follows:
  Refer to Figure 4-16. How much purchasing overhead cost will be assigned to Product L using the number of purchase orders?

Accepted Answer

A)  $ 100,000 
B)  $ 50,000 
C)  $80,000,000 
D)  $ 133,500 
A)  $ 100,000 
B)  $ 50,000 
C)  $80,000,000 
D)  $ 133,500

Question 19

Figure 4-1 The Foremost Company predicted factory overhead for 2013 and 2014 would be $120,000 for each year. The predicted activity for 2013 and 2014 were 30,000 and 20,000 direct labor hours, respectively. Additional data are as follows:
  The company assumes that the long-run normal production level is 20,000 direct labor hours per year. The actual factory overhead cost for the end of 2013 and 2014 was $120,000. Assume that it takes one direct labor hour to make one finished unit.
Refer to Figure 4-1. When the normal factory overhead rate is used, the gross profits for 2013 and 2014, respectively, are

Accepted Answer

A)  $80,000 and $80,000. 
B)  $200,000 and $200,000. 
C)  $120,000 and $140,000. 
D)  $100,000 and $100,000. 
A)  $80,000 and $80,000. 
B)  $200,000 and $200,000. 
C)  $120,000 and $140,000. 
D)  $100,000 and $100,000.

Question 20

Figure 4-7 The Cherokee Company uses a predetermined overhead rate. The following accounts have these unadjusted balances:
  Refer to Figure 4-7. If overhead is underapplied by $12,000 and considered immaterial, the journal entry would be

Accepted Answer

A)  Cost of Goods Sold $12,000 Manufacturing overhead $12,000 
B)  Manufacturing Overhead $12,000 Cost of Goods Sold $12,000 
C)  Raw Materials $2,000 Work in Process $4,000
Finished goods $1,000
Cost of Goods Sold $5,000
Manufacturing Overhead $12,000 
D)  Manufacturing Overhead $12,000 Raw Materials $2,000
Work in Process $4,000
Finished goods $1,000
Cost of Goods Sold $5,000 
E)  Manufacturing Overhead $12,000 Work in Process $4,800
Finished goods $1,200
Cost of Goods Sold $6,000 
A)  Cost of Goods Sold $12,000 Manufacturing overhead $12,000 
B)  Manufacturing Overhead $12,000 Cost of Goods Sold $12,000 
C)  Raw Materials $2,000 Work in Process $4,000
Finished goods $1,000
Cost of Goods Sold $5,000
Manufacturing Overhead $12,000 
D)  Manufacturing Overhead $12,000 Raw Materials $2,000
Work in Process $4,000
Finished goods $1,000
Cost of Goods Sold $5,000 
E)  Manufacturing Overhead $12,000 Work in Process $4,800
Finished goods $1,200
Cost of Goods Sold $6,000

The system that first traces costs to activities and then to products is called:

An __________costing database is the collected data sets that are organized and interrelated for use in a company's ABC information system. or

Figure 4-7 The Cherokee Company uses a predetermined overhead rate. The following accounts have these unadjusted balances: Refer to Figure 4-7. If Manufacturing overhead was $12,000 overapplied and considered material, what is the journal entry?

Classifying activities into four general categories facilitates product costing by associating the response to different types of activity drivers.

Predetermined overhead rates are calculated at the end of each year using the formula: overhead rate = budgeted annual driver level/budgeted annual driver level.

Figure 4-10 The Manoli Company has collected the following data for use in calculating product costs: Activity Data: (expected and actual) Departmental Data: (expected and actual) Refer to Figure 4-10. What is the consumption ratio for the plantwide activity rate of direct labor hours?

The first step in designing an activity-based costing system is to identify activities.

Maroone, Inc., has identified the following overhead costs and activity drivers for next year: The following are the two product models completed during the year: The company's normal activity is 20,000 direct labor hours. Required:

For labor-intensive operations, the most appropriate activity driver would be the __________ hours.

The grouping of logically related information is called:

Figure 4-7 The Cherokee Company uses a predetermined overhead rate. The following accounts have these unadjusted balances: Refer to Figure 4-7. If overhead is underapplied by $12,000 and considered immaterial, the journal entry would be

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control Key

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility Accounting, Performance Evaluation, and Transfer Pricing

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Cost-Volume-Profit Analysis

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

Filters

Exam 4: Activity-Based Costing

The system that first traces costs to activities and then to products is called:

An __________costing database is the collected data sets that are organized and interrelated for use in a company's ABC information system. or

Figure 4-7 The Cherokee Company uses a predetermined overhead rate. The following accounts have these unadjusted balances: Refer to Figure 4-7. If Manufacturing overhead was $12,000 overapplied and considered material, what is the journal entry?

Classifying activities into four general categories facilitates product costing by associating the response to different types of activity drivers.

Predetermined overhead rates are calculated at the end of each year using the formula: overhead rate = budgeted annual driver level/budgeted annual driver level.

Figure 4-10 The Manoli Company has collected the following data for use in calculating product costs: Activity Data: (expected and actual) Departmental Data: (expected and actual) Refer to Figure 4-10. What is the consumption ratio for the plantwide activity rate of direct labor hours?

The first step in designing an activity-based costing system is to identify activities.

Maroone, Inc., has identified the following overhead costs and activity drivers for next year: The following are the two product models completed during the year: The company's normal activity is 20,000 direct labor hours. Required:

For labor-intensive operations, the most appropriate activity driver would be the __________ hours.

The grouping of logically related information is called:

Figure 4-7 The Cherokee Company uses a predetermined overhead rate. The following accounts have these unadjusted balances: Refer to Figure 4-7. If overhead is underapplied by $12,000 and considered immaterial, the journal entry would be

Introduction to Cost Management

Basic Cost Management Concepts

Cost Behavior

Product and Service Costing: Job-Order System

Process Costing

Allocating Costs of Support Departments and Joint Products

Budgeting for Planning and Control Key

Standard Costing: a Functional-Based Control Approach

Decentralization: Responsibility Accounting, Performance Evaluation, and Transfer Pricing

Strategic Cost Management

Activity-Based Management

The Balanced Scorecard: Strategic-Based Control

Quality and Environmental Cost Management

Lean Accounting and Productivity Measurement

Cost-Volume-Profit Analysis

Activity Resource Usage Model and Tactical Decision Making

Pricing and Profitability Analysis

Capital Investment

Inventory Management: Economic Order Quantity, Jit, and the Theory of Constraints

Filters