Question 1

Which of the following costs are not capacity-sustaining activities in the product cost hierarchy?

Accepted Answer

A) Plant management. 
B) Building depreciation and rent. 
C) Heat and lighting. 
D) Market research. 
A) Plant management. 
B) Building depreciation and rent. 
C) Heat and lighting. 
D) Market research. D

Question 2

The major cost pool(s)for activity-based costing is/are

Accepted Answer

A) the "plant." 
B) the department. 
C) the activity center. 
D) the "plant" and the department. 
A) the "plant." 
B) the department. 
C) the activity center. 
D) the "plant" and the department. C

Question 3

Relate activity-based management to the value chain.

Accepted Answer

Activity analysis is a fundamental aspect of activity-based management.A value chain is a linked set of value-creating activities leading from raw material sources to the ultimate end use of the goods or services provided.Activity analysis is a systematic way for organizations to evaluate the processes that they may use to produce products for their customers and can identify and eliminate activities that add costs but not value to the product.

Question 4

The cost hierarchy can be used to organize cost information for decision-making.Which cost isnot part of the product cost hierarchy of expenses?

Accepted Answer

A) Capacity-sustaining. 
B) Product-sustaining. 
C) Customer-sustaining. 
D) Vendor-sustaining. 
A) Capacity-sustaining. 
B) Product-sustaining. 
C) Customer-sustaining. 
D) Vendor-sustaining.

Question 5

Activity-based management starts with activity analysis.The four steps in activity analysis are:
 
The value-added activities identified in Step 2 make up the

Accepted Answer

A) low cost solution. 
B) critical path. 
C) value chain. 
D) optimal solution. 
A) low cost solution. 
B) critical path. 
C) value chain. 
D) optimal solution.

Question 6

In comparison to an activity-based costing system,traditional allocation systems would most likely distort which of the following costs?

Accepted Answer

A) product costs. 
B) activity costs. 
C) department costs. 
D) plant costs. 
A) product costs. 
B) activity costs. 
C) department costs. 
D) plant costs.

Question 7

Which of the following might explain why unused resource capacity occurs?

Accepted Answer

A) Managers have committed to use a certain level of resources before supplying them. 
B) Managers have committed to supply a certain level of resources before using them. 
C) Managers have committed to supply a certain level of resources before supplying them. 
D) Managers have committed to use a certain level of resources before using them. 
A) Managers have committed to use a certain level of resources before supplying them. 
B) Managers have committed to supply a certain level of resources before using them. 
C) Managers have committed to supply a certain level of resources before supplying them. 
D) Managers have committed to use a certain level of resources before using them.

Question 8

What is the final step in the activity analysis process used to implement Activity Based Management?

Accepted Answer

A) Chart,from start to finish,the activities used to complete the product or service. 
B) Classify activities as value-added or non-value-added. 
C) Eliminate non-value-added activities. 
D) Continuously improve and reevaluate the efficiency of value-added activities or replace them with more efficient activities. 
A) Chart,from start to finish,the activities used to complete the product or service. 
B) Classify activities as value-added or non-value-added. 
C) Eliminate non-value-added activities. 
D) Continuously improve and reevaluate the efficiency of value-added activities or replace them with more efficient activities.

Question 9

Bush Enterprises adopts Strategic activity-based costing and management techniques which would most likely shift the mix of activities and products away from

Accepted Answer

A) less profitable to more profitable applications. 
B) less complex to more complex applications. 
C) high volume to low volume applications. 
D) less prestigious to more prestigious applications. 
A) less profitable to more profitable applications. 
B) less complex to more complex applications. 
C) high volume to low volume applications. 
D) less prestigious to more prestigious applications.

Question 10

Marshall Manufacturing Co.
Marshall Manufacturing Co.uses an activity-based costing system.The company has gathered the following information concerning various cost pools and activity drivers;
 
The following data was collected and is specific to Item No.824.
 
Refer to Marshall Manufacturing Co.What would be the unit cost for the inspection activity on Item No.824?

Accepted Answer

A) $ 4.00 
B) $80.00 
C) $ 5.00 
D) $ 1.00 
A) $ 4.00 
B) $80.00 
C) $ 5.00 
D) $ 1.00

Question 11

Which of the following is an example of non-value added activities?

Accepted Answer

A) Storage. 
B) Moving items. 
C) Waiting for work. 
D) All of the answers are correct. 
A) Storage. 
B) Moving items. 
C) Waiting for work. 
D) All of the answers are correct.

Question 12

Which statement is true in an activity-based costing environment?

Accepted Answer

A) Managers do not need to know product costs. 
B) Companies use departmental overhead rates. 
C) Companies compute the rate for each cost driver in each activity center. 
D) Companies compute the rate for up to three cost drivers in each activity center. 
A) Managers do not need to know product costs. 
B) Companies use departmental overhead rates. 
C) Companies compute the rate for each cost driver in each activity center. 
D) Companies compute the rate for up to three cost drivers in each activity center.

Question 13

Explain the concept of activity-based costing.

Accepted Answer

Activity-based costing first assigns cos

Question 14

Which term describes the costs of activities that the company can eliminate without reducing product quality,performance,or value?

Accepted Answer

A) non-value-performance-quality-added costs. 
B) non-value-added costs. 
C) non-performance-added costs. 
D) non-quality-added costs. 
A) non-value-performance-quality-added costs. 
B) non-value-added costs. 
C) non-performance-added costs. 
D) non-quality-added costs.

Question 15

Which of the following are true regarding activity-based management (ABM)?

Accepted Answer

A) ABM deals with how management uses the cost information generated from activity-based costing. 
B) ABM rests on the premise that products require activities. 
C) ABM rests on the premise that activities consume resources. 
D) All of the answers are correct. 
A) ABM deals with how management uses the cost information generated from activity-based costing. 
B) ABM rests on the premise that products require activities. 
C) ABM rests on the premise that activities consume resources. 
D) All of the answers are correct.

Question 16

The value chain is a linked set of value-creating activities leading from

Accepted Answer

A) supplier to marketing. 
B) research and development to distribution. 
C) design to customer service. 
D) raw material sources to the ultimate end use of the goods or services produced. 
A) supplier to marketing. 
B) research and development to distribution. 
C) design to customer service. 
D) raw material sources to the ultimate end use of the goods or services produced.

Question 17

Activity-based costing in a nonmanufacturing environment.Crystal Clear,Inc. ,is a pool service.The company originally specialized in serving residential clients but has recently started contracting for work with larger commercial clients,like hotels.Dudley Waters,the owner,is considering reducing residential services and increasing commercial pool service.Five field employees worked a total of 15,000 hours last year-10,000 on residential jobs and 5,000 on commercial jobs.Wages were $8 per hour for all work done.Direct materials used were minimal and are included in overhead.All overhead is allocated on the basis of labor hours worked,which is also the basis for customer charges.Because of greater competition for commercial accounts,Mr.Waters can charge $20 per hour for residential work,but only $17 per hour for commercial work.
Required:
a.If overhead for the year was $75,000,what were the profits of commercial and residential service using labor hours as the allocation base?
b.Overhead consists of office supplies,garden supplies,and depreciation and maintenance on equipment.These costs can be traced to the following activities:
   
Recalculate profits for commercial and residential services based on these activity bases.
c.What recommendations do you have for management?

Accepted Answer

a.Using Labor Hours
 @#IMG-DLM&_TB2144_00 a$85,000

Question 18

Which of the following is the primary criterion for selecting a cost driver?

Accepted Answer

A) Causal relation. 
B) Benefits received. 
C) Reasonableness. 
D) Fairness. 
A) Causal relation. 
B) Benefits received. 
C) Reasonableness. 
D) Fairness.

Question 19

How does activity-based management treats fixed costs?

Accepted Answer

A) As costs which vary directly with volume. 
B) As costs which cannot be controlled over the long-run. 
C) As costs which may vary for reasons other than volume. 
D) As sunk costs which have no future economic benefit. 
A) As costs which vary directly with volume. 
B) As costs which cannot be controlled over the long-run. 
C) As costs which may vary for reasons other than volume. 
D) As sunk costs which have no future economic benefit.

Question 20

The Chinese Teapot Company manufactures plastic and ceramic teapots.The company's western plant has changed from a labor-intensive operation to a robotics environment.As a result,management is considering changing from a direct-labor based overhead rate to an activity-based cost method.The controller has chosen the following activity cost pools and cost drivers for the factory overhead:
   
REQUIRED:

Accepted Answer

@#IMG-DLM&_TB2144_00

Which of the following costs are not capacity-sustaining activities in the product cost hierarchy?

The major cost pool(s)for activity-based costing is/are

Relate activity-based management to the value chain.

The cost hierarchy can be used to organize cost information for decision-making.Which cost isnot part of the product cost hierarchy of expenses?

Activity-based management starts with activity analysis.The four steps in activity analysis are: The value-added activities identified in Step 2 make up the

In comparison to an activity-based costing system,traditional allocation systems would most likely distort which of the following costs?

Which of the following might explain why unused resource capacity occurs?

What is the final step in the activity analysis process used to implement Activity Based Management?

Bush Enterprises adopts Strategic activity-based costing and management techniques which would most likely shift the mix of activities and products away from

Which of the following is an example of non-value added activities?

Which statement is true in an activity-based costing environment?

Explain the concept of activity-based costing.

Which term describes the costs of activities that the company can eliminate without reducing product quality,performance,or value?

Which of the following are true regarding activity-based management (ABM)?

The value chain is a linked set of value-creating activities leading from

Which of the following is the primary criterion for selecting a cost driver?

How does activity-based management treats fixed costs?

Fundamental Concepts

Measuring Product Costs

Strategic Management of Costs,quality,and Time

Cost Drivers and Cost Behavior

Financial Modeling for Short-Term Decision Making

Differential Cost Analysis for Operating Decisions

Capital Expenditure Decisions

Profit Planning and Budgeting

Profit and Cost Center Performance Evaluation

Investment Center Performance Evaluation

Incentive Issues

Allocating Costs to Responsibility Centers

Filters

Exam 3: Activity-Based Management

Which of the following costs are not capacity-sustaining activities in the product cost hierarchy?

The major cost pool(s)for activity-based costing is/are

Relate activity-based management to the value chain.

The cost hierarchy can be used to organize cost information for decision-making.Which cost isnot part of the product cost hierarchy of expenses?

Activity-based management starts with activity analysis.The four steps in activity analysis are: The value-added activities identified in Step 2 make up the

In comparison to an activity-based costing system,traditional allocation systems would most likely distort which of the following costs?

Which of the following might explain why unused resource capacity occurs?

What is the final step in the activity analysis process used to implement Activity Based Management?

Bush Enterprises adopts Strategic activity-based costing and management techniques which would most likely shift the mix of activities and products away from

Which of the following is an example of non-value added activities?

Which statement is true in an activity-based costing environment?

Explain the concept of activity-based costing.

Which term describes the costs of activities that the company can eliminate without reducing product quality,performance,or value?

Which of the following are true regarding activity-based management (ABM)?

The value chain is a linked set of value-creating activities leading from

Which of the following is the primary criterion for selecting a cost driver?

How does activity-based management treats fixed costs?

Fundamental Concepts

Measuring Product Costs

Strategic Management of Costs,quality,and Time

Cost Drivers and Cost Behavior

Financial Modeling for Short-Term Decision Making

Differential Cost Analysis for Operating Decisions

Capital Expenditure Decisions

Profit Planning and Budgeting

Profit and Cost Center Performance Evaluation

Investment Center Performance Evaluation

Incentive Issues

Allocating Costs to Responsibility Centers

Filters