Question 1

Activity-based costing assigns more costs to items produced in __________ than traditional methods do.

Accepted Answer

A) small runs 
B) medium runs 
C) large runs 
D) extra large runs 
A) small runs 
B) medium runs 
C) large runs 
D) extra large runs

Question 2

Activity-based costing.Carlton Fisher,the manager of Kingfish Charters,uses activity-based costing to compute the costs of his deep-sea fishing charters.Each chartered boat holds six paying customers and a guide.The company offers two types of charters to corporations planning events-half-day trips for beginners and full-day trips for more seasoned fishermen.The breakdown of the costs is as follows:
   
Required:
a.Compute the cost of a corporate event requiring four boats for half-day charters for 28-persons (including four guides).
b.Compute the cost of a corporate event requiring four boats for full-day charters for 28-persons (including four guides).
c.Recommend a minimum price per customer to the manager if he wants to cover his costs.
(Kingfish Charters;activity-based costing. )

Accepted Answer

a.and b.
 @#IMG-DLM&_TB2144_00 c.If the manager wa

Question 3

Chester Marx,the new Vice-President of Finance at Tempco,Inc. ,has just finished reviewing the company's financial statements.The company appears to be losing profits steadily.In fact,profits have dropped by 30 percent over the last two years.Upon further investigation,Marx learned that the decrease was attributable to the decline in sales resulting from higher prices than competitors.Since the company has recently changed its production method,Marx thinks the company should adopt a more relevant product costing system.The controller,Ted Vince,believes the higher sales price is necessary to cover costs.Vince,who has been controller for 20 years,feels that the company has come out of downturns before and will again.He is unaware of activity-based costing techniques and argues the current costing system has been serving the company well for a long time.What are the ethical considerations in this situation?

Accepted Answer

Management accountants have a responsibi

Question 4

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.What is the amount of machine handling cost allocated to Job 150?

Accepted Answer

A) $ 1,000 
B) $ 5,000 
C) $25,000 
D) None of the above 
A) $ 1,000 
B) $ 5,000 
C) $25,000 
D) None of the above

Question 5

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

Accepted Answer

A) ABC can distort product costs. 
B) ABC fails to recognize that the demand for overhead activities is driven by product-sustaining activities. 
C) ABC permits management to focus on the increased efficiencies and better resource utilization. 
D) ABC first assigns costs to products,then to cost pools. 
A) ABC can distort product costs. 
B) ABC fails to recognize that the demand for overhead activities is driven by product-sustaining activities. 
C) ABC permits management to focus on the increased efficiencies and better resource utilization. 
D) ABC first assigns costs to products,then to cost pools.

Question 6

Which of the following is the secondstep 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 cost driver unit. 
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 cost driver unit. 
D) Assign cost to products by multiplying the cost driver rate times the volume of cost driver consumed by the product.

Question 7

Which is not an example of a cost driver?

Accepted Answer

A) General and administrative expenses. 
B) Machine hours. 
C) Number of inspections. 
D) Number of different customers. 
A) General and administrative expenses. 
B) Machine hours. 
C) Number of inspections. 
D) Number of different customers.

Question 8

The use of activity-based costing and activity-based management have resulted in

Accepted Answer

A) less need to maintain good relationships with suppliers. 
B) overhead costs being reduced substantially. 
C) increased number of supervisory personnel being hired. 
D) All of the answers are correct. 
A) less need to maintain good relationships with suppliers. 
B) overhead costs being reduced substantially. 
C) increased number of supervisory personnel being hired. 
D) All of the answers are correct.

Question 9

Which of the following is a systematic way for organizations to identify and eliminate activities that add costs but not value to the product?

Accepted Answer

A) customer profitability analysis. 
B) activity analysis. 
C) systems analysis. 
D) cost-based analysis. 
A) customer profitability analysis. 
B) activity analysis. 
C) systems analysis. 
D) cost-based analysis.

Question 10

A major cause of difficulty in implementing activity-based costing is the failure to get buy-in of which of the following?

Accepted Answer

A) engineering people in the organization 
B) production people in the organization 
C) marketing people in the organization 
D) influential people in the organization 
A) engineering people in the organization 
B) production people in the organization 
C) marketing people in the organization 
D) influential people in the organization

Question 11

In comparison with firms that use traditional costing,which of the following statements is true for firms that adopt activity-based costing (ABC)?

Accepted Answer

A) Firms using ABC only experience better cost control. 
B) Firms using ABC only experience better asset utilization. 
C) Firms using ABC experience better cost control and asset utilization. 
D) There is no appreciable difference in cost control or asset utilization for firms using ABC. 
A) Firms using ABC only experience better cost control. 
B) Firms using ABC only experience better asset utilization. 
C) Firms using ABC experience better cost control and asset utilization. 
D) There is no appreciable difference in cost control or asset utilization for firms using ABC.

Question 12

Stan's Good Drugstore is an all-service drug store and fills prescriptions for nursing homes and individual customers.Stan's uses an activity-based costing system.Data concerning overhead costs and activity pools is as follows:
Activity Estimated Estimated
Cost Pool Wages "Other"
Prescriptions $48,000 $18,000
Deliveries $24,000 $10,000
Other $ 8,000 $12,000
Total $80,000 $40,000
During the month,Stan's fills 60,000 prescriptions and makes 5,000 deliveries.
Using activity-based costing what is the approximate cost per delivery?

Accepted Answer

A) $16.00 
B) $4.80 
C) $6.80 
D) $24.00 
A) $16.00 
B) $4.80 
C) $6.80 
D) $24.00

Question 13

Resources used versus resources supplied.Selected information about resources for Morton 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?
(Morton Industries;Resources used versus resources supplied. )

Accepted Answer

a.Morton Industries
Activity-Based Manag

Question 14

Resources used for an activity are measured by the

Accepted Answer

A) cost driver rate times the cost driver volume. 
B) resources supplied to an activity. 
C) expenditures for the activity. 
D) unused resource capacity. 
A) cost driver rate times the cost driver volume. 
B) resources supplied to an activity. 
C) expenditures for the activity. 
D) unused resource capacity.

Question 15

Which of the following is not a step accountants must follow in activity-based costing?

Accepted Answer

A) Identify the activities that consume resources and assign costs to them. 
B) Identify the cost drivers associated with each activity. 
C) Compute a cost rate per cost driver. 
D) Compute the variance between the estimated cost driver and the actual cost driver. 
A) Identify the activities that consume resources and assign costs to them. 
B) Identify the cost drivers associated with each activity. 
C) Compute a cost rate per cost driver. 
D) Compute the variance between the estimated cost driver and the actual cost driver.

Question 16

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

Accepted Answer

A) ABCM has two parts,the costing part known as activity-based costing and the management part known as activity-based management. 
B) ABCM rests on the premise that products require activities. 
C) ABCM rests on the premise that activities consume resources. 
D) All of the answers are correct. 
A) ABCM has two parts,the costing part known as activity-based costing and the management part known as activity-based management. 
B) ABCM rests on the premise that products require activities. 
C) ABCM rests on the premise that activities consume resources. 
D) All of the answers are correct.

Question 17

Managers usually decide which cost driver to use based upon which of the following factors?

Accepted Answer

A) Causal relation. 
B) Cost considerations. 
C) Generally accepted costing techniques. 
D) Uniform cost driver standards. 
A) Causal relation. 
B) Cost considerations. 
C) Generally accepted costing techniques. 
D) Uniform cost driver standards.

Question 18

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

Accepted Answer

A) Capacity-sustaining. 
B) Department-sustaining. 
C) Plant-sustaining. 
D) Employee-sustaining. 
A) Capacity-sustaining. 
B) Department-sustaining. 
C) Plant-sustaining. 
D) Employee-sustaining.

Question 19

In what way(s)do 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 activity-based costing as a special analysis,but not as an ongoing information system. 
D) All of the answers are correct. 
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 activity-based costing as a special analysis,but not as an ongoing information system. 
D) All of the answers are correct.

Activity-based costing assigns more costs to items produced in __________ than traditional methods do.

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

Which of the following is the secondstep in activity based costing?

Which is not an example of a cost driver?

The use of activity-based costing and activity-based management have resulted in

Which of the following is a systematic way for organizations to identify and eliminate activities that add costs but not value to the product?

A major cause of difficulty in implementing activity-based costing is the failure to get buy-in of which of the following?

In comparison with firms that use traditional costing,which of the following statements is true for firms that adopt activity-based costing (ABC)?

Resources used for an activity are measured by the

Which of the following is not a step accountants must follow in activity-based costing?

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

Managers usually decide which cost driver to use based upon which of the following factors?

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

In what way(s)do managers make cost-benefit decisions as to the use of activity analysis or traditional costing methods?

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

Activity-based costing assigns more costs to items produced in __________ than traditional methods do.

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

Which of the following is the secondstep in activity based costing?

Which is not an example of a cost driver?

The use of activity-based costing and activity-based management have resulted in

Which of the following is a systematic way for organizations to identify and eliminate activities that add costs but not value to the product?

A major cause of difficulty in implementing activity-based costing is the failure to get buy-in of which of the following?

In comparison with firms that use traditional costing,which of the following statements is true for firms that adopt activity-based costing (ABC)?

Resources used for an activity are measured by the

Which of the following is not a step accountants must follow in activity-based costing?

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

Managers usually decide which cost driver to use based upon which of the following factors?

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

In what way(s)do managers make cost-benefit decisions as to the use of activity analysis or traditional costing methods?

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