Question 1

Often the most interesting and challenging step(s)of activity-based costing (ABC)which also require(s)the manager to know the product is to

Accepted Answer

A) identify the activities that consume resources,and assign costs to those activities. 
B) identify the cost driver(s)associated with each activity. 
C) compute a cost rate per cost driver unit. 
D) assign costs to products by multiplying the cost driver rate by the volume of cost drivers consumed by the product. 
A) identify the activities that consume resources,and assign costs to those activities. 
B) identify the cost driver(s)associated with each activity. 
C) compute a cost rate per cost driver unit. 
D) assign costs to products by multiplying the cost driver rate by the volume of cost drivers consumed by the product.

Question 2

Which of the following are examples of unit activities in the product cost hierarchy?

Accepted Answer

A) Product specifications and product testing. 
B) Market research,customer records,and promotion. 
C) Machine setups and quality inspections. 
D) Energy to run machines and direct materials. 
A) Product specifications and product testing. 
B) Market research,customer records,and promotion. 
C) Machine setups and quality inspections. 
D) Energy to run machines and direct materials.

Question 3

Explain the differences between resources used and the resources supplied,and measure unused resource capacity.

Accepted Answer

Resources used for an activity are measu

Question 4

Which of the following is not a step in activity based costing?

Accepted Answer

A) Identify the activities that consume resources and assign costs to those activities. 
B) Identify the cost drivers associated with each activity. 
C) Compute a cost rate per department or plant. 
D) Assign cost to products by multiplying the cost driver rate times the volume of cost driver consumed by the product. 
A) Identify the activities that consume resources and assign costs to those activities. 
B) Identify the cost drivers associated with each activity. 
C) Compute a cost rate per department or plant. 
D) Assign cost to products by multiplying the cost driver rate times the volume of cost driver consumed by the product.

Question 5

The second step in Activity-based costing (ABC)is to identify the cost driver(s)associated with each activity.Cost drivers usually relate to

Accepted Answer

A) volume of production. 
B) hours used in production. 
C) marketing process. 
D) All of the answers are correct. 
A) volume of production. 
B) hours used in production. 
C) marketing process. 
D) All of the answers are correct.

Question 6

Use the following information to answer the following questions.Magnolia Company makes products B546 and C245.Information for overhead costs and for the two products appears below.The company makes 100,000 units of product B546 each year and 20,000 units of product C245.
 
Use the information from the Magnolia Company and assume that Activity Based Costing is used,with each activity in its own cost pool.What is the rate per inspection that should be used to assign inspection cost to the two products?

Accepted Answer

A) $8 per inspection 
B) $40 per inspection 
C) $36 per inspection 
D) $400,000 per inspection 
A) $8 per inspection 
B) $40 per inspection 
C) $36 per inspection 
D) $400,000 per inspection

Question 7

Which of the following does not represent how managers make cost-benefit decisions as to the use of activity analysis or traditional costing methods?

Accepted Answer

A) They reject activity analysis and stay with the simpler traditional method. 
B) They use activity-based costing because they want information that will help them be competitive. 
C) They use traditional costing as a special analysis,but not as an ongoing information system. 
D) They use activity-based costing as a special analysis,but not as an ongoing information system. 
A) They reject activity analysis and stay with the simpler traditional method. 
B) They use activity-based costing because they want information that will help them be competitive. 
C) They use traditional costing as a special analysis,but not as an ongoing information system. 
D) They use activity-based costing as a special analysis,but not as an ongoing information system.

Question 8

Moss Point Manufacturing has just completed a major change in its quality control (QC)process.Previously,products had been reviewed by QC inspectors at the end of each major process,and the company's ten QC inspectors were charged as direct labor to the operation or job.In an effort to improve efficiency and quality,a computer video QC system was purchased for $250,000.The system consists of a minicomputer,15 video cameras,other peripheral hardware,and software.
The new system uses cameras stationed by QC engineers at key points in the production process.Each time an operation changes or there is a new operation,the cameras are moved,and a new master picture is loaded into the computer by a QC engineer.The camera takes pictures of the unit in process,and the computer compares them to the picture of a "good" unit.Any differences are sent to a QC engineer who removes the bad units and discusses the flaws with the production supervisors.The new system has replaced the 10 QC inspectors with two QC engineers.
The operating costs of the new QC system,including the salaries of the QC engineers,have been included as factory overhead in calculating the company's plant-wide factory overhead rate,which is based on direct labor dollars.
The company's president is confused.His vice president of production has told him how efficient the new system is,yet there is a large increase in the factory overhead rate.The computation of the rate before and after is shown below.
   
"Three hundred percent," lamented the president."How can we compete with such a high factory overhead rate?"
REQUIRED:

Accepted Answer

The answer of Moss Point Manufacturing has just completed a...

Question 9

Which of the following costs are not customer activities in the product cost hierarchy?

Accepted Answer

A) Plant management. 
B) Promotion. 
C) Customer records. 
D) Market research. 
A) Plant management. 
B) Promotion. 
C) Customer records. 
D) Market research.

Question 10

Which of the following statements is true concerning activity-based costing (ABC)?

Accepted Answer

A) ABC can only be used in manufacturing. 
B) ABC can be used for manufacturing,marketing,or administrative activities. 
C) ABC should only be used for service companies. 
D) ABC can be used for manufacturing and administrative activities,but not for marketing activities. 
A) ABC can only be used in manufacturing. 
B) ABC can be used for manufacturing,marketing,or administrative activities. 
C) ABC should only be used for service companies. 
D) ABC can be used for manufacturing and administrative activities,but not for marketing activities.

Question 11

Patricia Woodward and Ronald Smith are marketing managers for different products within one company.Ms.Woodward argues that as a result of changes in technology,the use of the current plantwide overhead allocation base unfairly burdens her product costs.Ronald Smith recognizes the problem,but expects that a change to departmental overhead allocations will result in higher costs for his products.What guidance does the Institute of Management Accountant's Standards of Ethical Conduct for Management Accountants give the controller of the company in this situation?

Accepted Answer

The IMA's code of ethical conduct requir

Question 12

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 amount of machine setup cost allocated to Item No.824?

Accepted Answer

A) $40,000 
B) $ 8,000 
C) $ 2,500 
D) $ 2,000 
A) $40,000 
B) $ 8,000 
C) $ 2,500 
D) $ 2,000

Question 13

Resources used versus resources supplied.Selected information about resources for Farris Industries,which produces various products,is as follows:
   
Required:
a.Prepare an activity-based management income statement .
b.Write a short report stating why managers should know the difference between resources used and resources supplied.Give examples of how managers could use the information about resources used and resources supplied.
c.Management wants to keep the cost of unused capacity to less than 20 percent of total costs.How well is the company doing?
(Farris Industries;Resources used versus resources supplied. )

Accepted Answer

a.Farris Industries
Activity-Based Manag

Question 14

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 machine setup activity at Marshall Manufacturing Co.?

Accepted Answer

A) $ 4.00 
B) $80.00 
C) $ 2.00 
D) $20.00 
A) $ 4.00 
B) $80.00 
C) $ 2.00 
D) $20.00

Question 15

Gem Systems
Gem Systems 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 Job 150.
 
Refer to Gem Systems.Calculate the product cost of one unit of Job 150.

Accepted Answer

A) $11.74 
B) $13.00 
C) $ 8.74 
D) $16.74 
A) $11.74 
B) $13.00 
C) $ 8.74 
D) $16.74

Question 16

Which of the following would be considered a capacity-sustaining activityin the product cost hierarchy?

Accepted Answer

A) Plant management,building depreciation,rent,heating and lighting,market research,and customer records. 
B) Market research,customer records,and promotion. 
C) Machine setups and quality inspections. 
D) Energy to run machines and direct materials. 
A) Plant management,building depreciation,rent,heating and lighting,market research,and customer records. 
B) Market research,customer records,and promotion. 
C) Machine setups and quality inspections. 
D) Energy to run machines and direct materials.

Question 17

How can activity-based management and costing be applied to marketing?

Accepted Answer

Activity-based costing identifies the ma

Question 18

Activity-based costing (ABC)assigns costs first to

Accepted Answer

A) activities,then to the products based on each product's use of activities. 
B) products,then to the activities based on each activity's use of products. 
C) services,then to the activities based on each service's use of activities. 
D) None of the above answers is correct. 
A) activities,then to the products based on each product's use of activities. 
B) products,then to the activities based on each activity's use of products. 
C) services,then to the activities based on each service's use of activities. 
D) None of the above answers is correct.

Question 19

Which of the following costs are not unit activities in the product cost hierarchy?

Accepted Answer

A) Energy to run machines. 
B) Direct materials. 
C) Machine setups. 
D) Piecework labor costs. 
A) Energy to run machines. 
B) Direct materials. 
C) Machine setups. 
D) Piecework labor costs.

Question 20

Traditional cost allocation methods include which of the following?

Accepted Answer

A) plantwide allocation,only. 
B) department allocation,only. 
C) activity-based costing. 
D) plantwide and department allocation. 
A) plantwide allocation,only. 
B) department allocation,only. 
C) activity-based costing. 
D) plantwide and department allocation.

Often the most interesting and challenging step(s)of activity-based costing (ABC)which also require(s)the manager to know the product is to

Which of the following are examples of unit activities in the product cost hierarchy?

Explain the differences between resources used and the resources supplied,and measure unused resource capacity.

Which of the following is not a step in activity based costing?

The second step in Activity-based costing (ABC)is to identify the cost driver(s)associated with each activity.Cost drivers usually relate to

Which of the following does not represent how managers make cost-benefit decisions as to the use of activity analysis or traditional costing methods?

Which of the following costs are not customer activities in the product cost hierarchy?

Which of the following statements is true concerning activity-based costing (ABC)?

Gem Systems Gem Systems 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 Job 150. Refer to Gem Systems.Calculate the product cost of one unit of Job 150.

Which of the following would be considered a capacity-sustaining activityin the product cost hierarchy?

How can activity-based management and costing be applied to marketing?

Activity-based costing (ABC)assigns costs first to

Which of the following costs are not unit activities in the product cost hierarchy?

Traditional cost allocation methods include which of the following?

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

Often the most interesting and challenging step(s)of activity-based costing (ABC)which also require(s)the manager to know the product is to

Which of the following are examples of unit activities in the product cost hierarchy?

Explain the differences between resources used and the resources supplied,and measure unused resource capacity.

Which of the following is not a step in activity based costing?

The second step in Activity-based costing (ABC)is to identify the cost driver(s)associated with each activity.Cost drivers usually relate to

Which of the following does not represent how managers make cost-benefit decisions as to the use of activity analysis or traditional costing methods?

Which of the following costs are not customer activities in the product cost hierarchy?

Which of the following statements is true concerning activity-based costing (ABC)?

Gem Systems Gem Systems 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 Job 150. Refer to Gem Systems.Calculate the product cost of one unit of Job 150.

Which of the following would be considered a capacity-sustaining activityin the product cost hierarchy?

How can activity-based management and costing be applied to marketing?

Activity-based costing (ABC)assigns costs first to

Which of the following costs are not unit activities in the product cost hierarchy?

Traditional cost allocation methods include which of the following?

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