Question 1

Invoice processing costs would be considered a:

Accepted Answer

A) unit-level cost. 
B) batch-level cost. 
C) product-level cost. 
D) facility-level cost. 
A) unit-level cost. 
B) batch-level cost. 
C) product-level cost. 
D) facility-level cost.

Question 2

Franklin Manufacturing manufactures two models of windows, bay windows and casement windows. Franklin uses an activity-based costing system. The following information about the activities used to produce the company's products has been provided.The amount of product-level cost that should be allocated to the casement windows equals: Produce
Agree. Change made. JMF
$\begin{array} { | l | c |r | c | c | } 
\hline { \text { Category } } & { \text { Estimated Cost } } & \text { Cost Driver } & \text { Bay Windows } & \text { Casement } \
\hline \text { Unit-level } & \$  125,000 & \text { Labor hours } & 750 & 500 \
\hline \text { Batch-level } & \$  75,000 & \text { Inspections } & 30 & 20 \
\hline \text { Product-level } & \$  35,000 & \text { Storage Space } & 3500 \text { sq feet } & 2100 \text { sq feet } \
\hline \text { Facility-level } & \$  165,000 & \text { Machine hours } & 9,000 & 6,000 \
\hline
\end{array}$

Accepted Answer

A) $13,125. 
B) $21,875. 
C) $30,000. 
D) $45,000. Produce
Agree. Change made. JMF 
A) $13,125. 
B) $21,875. 
C) $30,000. 
D) $45,000. Produce
Agree. Change made. JMF

Question 3

Most firms have found that it is cost-effective to achieve a "zero defects" condition among their products and services.

Accepted Answer

A) True 
 B)False

Question 4

Using a single plant-wide overhead rate is likely to cause some distortion in allocation of product-level costs.

Accepted Answer

A) True 
 B)False

Question 5

An increase in appraisal costs will probably lead to a decrease in internal failure costs and an increase in external failure costs.

Accepted Answer

A) True 
 B)False

Question 6

Voluntary costs refer to:

Accepted Answer

A) prevention and appraisal costs. 
B) prevention and internal failure costs. 
C) appraisal and external failure costs. 
D) internal failure costs and external failure costs. 
A) prevention and appraisal costs. 
B) prevention and internal failure costs. 
C) appraisal and external failure costs. 
D) internal failure costs and external failure costs.

Question 7

Indicate whether each of the following statements is true or false.The allocation of indirect costs using activity-based costing is a three-step process. ____
The first stage of activity-based costing is to calculate activity rates. ____
A typical business may engage in thousands of different activities. ____
Determining the number of activity centers to use in an activity-based costing system should be based on a cost/benefit analysis. ____
A traditional cost allocation system first assigns costs to activity centers and then uses a single volume-based cost driver to assign the costs to products. ____

Accepted Answer

The allocation of indirect costs using a

Question 8

ABX Company produces two types of computer speakers. The Prestige line is made to provide excellent sound for the most demanding applications. The Standard line is geared toward workplace use and delivers average performance. During its most recent accounting period, the company incurred $50,000 of inspection costs. Its production activities were classified into four cost centers, unit-level, batch-level, product-level, and facility-level. The following cost and cost driver information is provided for the unit-level and batch-level cost centers:
Required:
1) Allocate the inspection cost between the two products assuming the inspection cost is driven by a) only unit-level activities; b) only batch-level activities.2) How should managers of the company determine which allocation is more appropriate?
 $$\begin{array} { | l | r | r | } 
\hline \text { Cost-Center: } & \text { Unit-Level } & \text { Batch-Level } \
\hline & \
\hline \text { Cost Driver. } &  \text { Number of direct labor hours } & \text { Number of batches }  \
\hline \text { Prestige Product } &4,000  &15 \
\hline \text { Standard Product } &\underline { 6,000 } &\underline { 5} \
\hline { \text { Totals } } &\underline { 10,000 } &\underline { 20} \
\hline & &\
\hline
\end{array}$$

Accepted Answer

1) The two alternative allocations are s

Question 9

Direct labor hours is an appropriate cost driver when:

Accepted Answer

A) production is labor intensive. 
B) overhead costs increase. 
C) production is automated. 
D) all of these answers are correct. 
A) production is labor intensive. 
B) overhead costs increase. 
C) production is automated. 
D) all of these answers are correct.

Question 10

Select the incorrect statement from the following.

Accepted Answer

A) If overhead costs are allocated on the basis of activities, the amount of overhead allocated to a particular product can be reduced by increasing the number of activities required by the product, thereby spreading the overhead costs over more units. 
B) Activity costs are considered relevant for decision making because the cost of an activity will be avoided if the activity is eliminated. 
C) In highly automated environments where companies produce many different products with varying levels of production, activity-based cost drivers are superior to volume-based drivers. 
D) Activity-based cost drivers produce a better cost allocation than volume-based drivers because they distribute only relevant costs to the appropriate products. 
A) If overhead costs are allocated on the basis of activities, the amount of overhead allocated to a particular product can be reduced by increasing the number of activities required by the product, thereby spreading the overhead costs over more units. 
B) Activity costs are considered relevant for decision making because the cost of an activity will be avoided if the activity is eliminated. 
C) In highly automated environments where companies produce many different products with varying levels of production, activity-based cost drivers are superior to volume-based drivers. 
D) Activity-based cost drivers produce a better cost allocation than volume-based drivers because they distribute only relevant costs to the appropriate products.

Question 11

Which activity is likely to be involved in the acquisition of raw materials?

Accepted Answer

A) Identifying potential suppliers 
B) Getting price quotations 
C) Preparing purchase orders 
D) All of the other answers are correct. 
A) Identifying potential suppliers 
B) Getting price quotations 
C) Preparing purchase orders 
D) All of the other answers are correct.

Question 12

As companies have become more highly automated, overhead costs have become a larger part of total manufacturing cost.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following activity costs would likely be included in a batch-level activity cost pool?

Accepted Answer

A) Per unit inspection costs 
B) Machine set-up costs 
C) Quality control costs 
D) All of these answers are correct. 
A) Per unit inspection costs 
B) Machine set-up costs 
C) Quality control costs 
D) All of these answers are correct.

Question 14

Which of the following is a volume-based cost driver?

Accepted Answer

A) Machine hours 
B) Material cost 
C) Direct labor hours 
D) All of these answers are correct. 
A) Machine hours 
B) Material cost 
C) Direct labor hours 
D) All of these answers are correct.

Question 15

Sales commissions are an example of:

Accepted Answer

A) unit-level activities. 
B) batch-level activities. 
C) facility-level activities. 
D) product-level activities. 
A) unit-level activities. 
B) batch-level activities. 
C) facility-level activities. 
D) product-level activities.

Question 16

Traditional cost systems usually allocate overhead to products on the basis of direct labor.

Accepted Answer

A) True 
 B)False

Question 17

Playtime Electronics produces two kinds of electronic toys, Wizards and Gizmos. During the current period, 8,000 Wizards and 16,000 Gizmos were produced and sold, generating revenues of $500,000 and $2,000,000, respectively. Unit production costs for the two toys are $50 for Wizards and $70 for Gizmos. In calculating the cost of goods sold, Playtime uses activity-based costing to allocate its overhead costs. However, upstream costs of $240,000 are allocated equally to the two products.Required:
1) Compute the total net profit for each product and for the firm as a whole.2) Would you advise eliminating either toy? Why or why not?

Accepted Answer

1) Net profit
2) Wizards are showing a l

Question 18

All of the following are downstream costs except:

Accepted Answer

A) advertising costs. 
B) distribution costs. 
C) patent filing legal costs. 
D) warehousing costs. 
A) advertising costs. 
B) distribution costs. 
C) patent filing legal costs. 
D) warehousing costs.

Question 19

A modern cost allocation process that employs multiple cost drivers is:

Accepted Answer

A) activity-based costing. 
B) contribution costing. 
C) process costing. 
D) job order costing. 
A) activity-based costing. 
B) contribution costing. 
C) process costing. 
D) job order costing.

Question 20

Upstream costs are relevant for deciding whether to discontinue a product line.

Accepted Answer

A) True 
 B)False

Invoice processing costs would be considered a:

Most firms have found that it is cost-effective to achieve a "zero defects" condition among their products and services.

Using a single plant-wide overhead rate is likely to cause some distortion in allocation of product-level costs.

An increase in appraisal costs will probably lead to a decrease in internal failure costs and an increase in external failure costs.

Voluntary costs refer to:

Direct labor hours is an appropriate cost driver when:

Select the incorrect statement from the following.

Which activity is likely to be involved in the acquisition of raw materials?

As companies have become more highly automated, overhead costs have become a larger part of total manufacturing cost.

Which of the following activity costs would likely be included in a batch-level activity cost pool?

Which of the following is a volume-based cost driver?

Sales commissions are an example of:

Traditional cost systems usually allocate overhead to products on the basis of direct labor.

All of the following are downstream costs except:

A modern cost allocation process that employs multiple cost drivers is:

Upstream costs are relevant for deciding whether to discontinue a product line.

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost, Volume, and Pricing to Increase Profitability

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 5: Cost Management in an Automated Business Environment: Abc, Abm, and Tqm

Invoice processing costs would be considered a:

Most firms have found that it is cost-effective to achieve a "zero defects" condition among their products and services.

Using a single plant-wide overhead rate is likely to cause some distortion in allocation of product-level costs.

An increase in appraisal costs will probably lead to a decrease in internal failure costs and an increase in external failure costs.

Voluntary costs refer to:

Direct labor hours is an appropriate cost driver when:

Select the incorrect statement from the following.

Which activity is likely to be involved in the acquisition of raw materials?

As companies have become more highly automated, overhead costs have become a larger part of total manufacturing cost.

Which of the following activity costs would likely be included in a batch-level activity cost pool?

Which of the following is a volume-based cost driver?

Sales commissions are an example of:

Traditional cost systems usually allocate overhead to products on the basis of direct labor.

All of the following are downstream costs except:

A modern cost allocation process that employs multiple cost drivers is:

Upstream costs are relevant for deciding whether to discontinue a product line.

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost, Volume, and Pricing to Increase Profitability

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters