Question 1

Activities that support specific products or product lines are known as:

Accepted Answer

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

Question 2

Perez Company manufactures two products. Making Product A requires 6,000 hours of labor and Product B requires 4,000 hours of labor. Perez undertakes an automation program that reduces the consumption of labor required by Product A to only 3,000 hours of labor. Product B is not affected by the automation process. Overhead cost prior to the automation totaled $30,000. After automation, overhead cost amounted to $56,000. Perez uses direct labor hours as a company-wide allocation base before and after the automation.Required:
1) Compute the amount of overhead costs allocated to both products before automation.2) Compute the amount of overhead costs allocated to both products after automation.3) Is direct labors hours a good choice for allocation after the automation? Why or why not?

Accepted Answer

1) Overhead cost allocation before autom

Question 3

Anderson Company produces a variety of products, some in labor-intensive departments and some in heavily automated departments. Using a company-wide overhead allocation rate based on direct labor will result in overcosting some products and undercosting others.

Accepted Answer

A) True 
 B)False

Question 4

All of the following are external failure costs except:

Accepted Answer

A) warranty repairs and replacement. 
B) reliability testing 
C) customer relations. 
D) restocking and packaging. 
A) warranty repairs and replacement. 
B) reliability testing 
C) customer relations. 
D) restocking and packaging.

Question 5

Which of the following is an upstream cost?

Accepted Answer

A) Research and development costs 
B) Shipping costs to ship completed goods 
C) Sales commissions 
D) Sales promotion and advertising costs 
A) Research and development costs 
B) Shipping costs to ship completed goods 
C) Sales commissions 
D) Sales promotion and advertising costs

Question 6

Explain how the use of direct labor hours as a cost driver can distort costs of products in a highly automated manufacturing environment.

Accepted Answer

Answers will vary
In a highly automated

Question 7

Costs incurred to avoid nonconforming products are:

Accepted Answer

A) prevention costs. 
B) appraisal costs. 
C) failure costs. 
D) voluntary costs. 
A) prevention costs. 
B) appraisal costs. 
C) failure costs. 
D) voluntary costs.

Question 8

When making a long-term cost plus pricing decision, a company should consider:

Accepted Answer

A) the upstream research and development cost. 
B) the allocated portion of facility-level cost. 
C) the direct manufacturing cost. 
D) All of these answers are correct. 
A) the upstream research and development cost. 
B) the allocated portion of facility-level cost. 
C) the direct manufacturing cost. 
D) All of these answers are correct.

Question 9

Chastain Company recently implemented an activity-based-costing system. As a result of the ABC allocations, the cost of one of the company's products was determined to be above its current selling price. Due to competition, the company is unable to raise the price of this product. Which of the following options is most reasonable, assuming Chastain employs a target pricing strategy?

Accepted Answer

A) Use less expensive materials to make the product. 
B) Raise prices under the assumption that the company's competitors will follow suit. 
C) Target advertising to high income customers. 
D) Return to the old allocation method which produces a lower amount of estimated cost. 
A) Use less expensive materials to make the product. 
B) Raise prices under the assumption that the company's competitors will follow suit. 
C) Target advertising to high income customers. 
D) Return to the old allocation method which produces a lower amount of estimated cost.

Question 10

All of the following are hierarchical categories in which a firm's overhead support costs can be classified except:

Accepted Answer

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

Question 11

Depreciation on a manufacturing facility is an example of a(n):

Accepted Answer

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

Question 12

The objective of using the following graph is to:

Accepted Answer

A) minimize quality. 
B) maximize profit. 
C) minimize total quality costs. 
D) maximize total quality costs. 
A) minimize quality. 
B) maximize profit. 
C) minimize total quality costs. 
D) maximize total quality costs.

Question 13

Keene Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $8,000 to two different jobs as follows: Job 1: (10 hours) = $4,000; Job 2: (10 hours) = $4,000
The production process for Job 2 was then automated. Now Job 2 requires only two hours of direct labor but four hours of mechanical processing. As a result, total overhead increased to $12,000. How much overhead cost will be assigned to Job 1 after automation?

Accepted Answer

A) $10,000 
B) $6,000 
C) $4,000 
D) $2,000 
A) $10,000 
B) $6,000 
C) $4,000 
D) $2,000

Question 14

The concept of cost of quality is not applicable in service-type businesses such as accounting firms.

Accepted Answer

A) True 
 B)False

Question 15

The minimum amount of total quality costs is achieved when the:

Accepted Answer

A) marginal voluntary expenditures exceed marginal failure costs. 
B) marginal voluntary expenditures equal the marginal savings on failure costs. 
C) marginal voluntary expenditures are less than the marginal savings on failure costs. 
D) none of the other answers are correct. 
A) marginal voluntary expenditures exceed marginal failure costs. 
B) marginal voluntary expenditures equal the marginal savings on failure costs. 
C) marginal voluntary expenditures are less than the marginal savings on failure costs. 
D) none of the other answers are correct.

Question 16

Farber Company produces its product in three departments, Prepping, Machining, and Finishing. A customer recently returned a defective product that had not been machined properly. The company's accountant would classify the repair cost as an internal failure cost.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following statements is incorrect?

Accepted Answer

A) An activity-based costing system uses more cause-and-effect relationships in tracing costs than does a traditional cost allocation system. 
B) An activity-based costing system first assigns or traces costs to the departments in which products are made. 
C) The hierarchical categories into which activities are grouped are unit-level, batch-level, product-level and facility-level activities. 
D) The total amount of unit-level costs changes in proportion to the number of units of product made. 
A) An activity-based costing system uses more cause-and-effect relationships in tracing costs than does a traditional cost allocation system. 
B) An activity-based costing system first assigns or traces costs to the departments in which products are made. 
C) The hierarchical categories into which activities are grouped are unit-level, batch-level, product-level and facility-level activities. 
D) The total amount of unit-level costs changes in proportion to the number of units of product made.

Question 18

Which of the following costs is likely to be driven by machine usage?

Accepted Answer

A) Factory insurance 
B) Depreciation on factory building 
C) Factory utilities 
D) Factory rent 
A) Factory insurance 
B) Depreciation on factory building 
C) Factory utilities 
D) Factory rent

Question 19

Select the incorrect statement regarding the use of cost drivers in activity-based costing systems.

Accepted Answer

A) ABC uses volume-based and activity-based cost drivers. 
B) Volume-based drivers are most appropriate for costs that are affected by the number of units produced. 
C) ABC's use of multiple cost drivers will produce less accurate unit costs when a company produces many different products that require different types and levels of overhead costs. 
D) An arbitrary cost driver must be selected when allocating facility-level activity costs. 
A) ABC uses volume-based and activity-based cost drivers. 
B) Volume-based drivers are most appropriate for costs that are affected by the number of units produced. 
C) ABC's use of multiple cost drivers will produce less accurate unit costs when a company produces many different products that require different types and levels of overhead costs. 
D) An arbitrary cost driver must be selected when allocating facility-level activity costs.

Question 20

Mason Company is planning to introduce an activity-based costing system. Which of the following actions by employees could lower the success of the new system?

Accepted Answer

A) Employees may purposely report on their time cards different amounts of time than they actually worked.Perhaps, amounts "of" time Agree. Changed. JMF 
B) Employees may decrease their productivity to demonstrate their dissatisfaction with the new system. 
C) Employees may resist having to maintain additional records (such as the number of setups). 
D) All of these answers are correct. Perhaps, amounts "of" time
Agree. Changed. JMF 
A) Employees may purposely report on their time cards different amounts of time than they actually worked.Perhaps, amounts "of" time Agree. Changed. JMF 
B) Employees may decrease their productivity to demonstrate their dissatisfaction with the new system. 
C) Employees may resist having to maintain additional records (such as the number of setups). 
D) All of these answers are correct. Perhaps, amounts "of" time
Agree. Changed. JMF

Activities that support specific products or product lines are known as:

Anderson Company produces a variety of products, some in labor-intensive departments and some in heavily automated departments. Using a company-wide overhead allocation rate based on direct labor will result in overcosting some products and undercosting others.

All of the following are external failure costs except:

Which of the following is an upstream cost?

Explain how the use of direct labor hours as a cost driver can distort costs of products in a highly automated manufacturing environment.

Costs incurred to avoid nonconforming products are:

When making a long-term cost plus pricing decision, a company should consider:

All of the following are hierarchical categories in which a firm's overhead support costs can be classified except:

Depreciation on a manufacturing facility is an example of a(n):

The objective of using the following graph is to:

The concept of cost of quality is not applicable in service-type businesses such as accounting firms.

The minimum amount of total quality costs is achieved when the:

Farber Company produces its product in three departments, Prepping, Machining, and Finishing. A customer recently returned a defective product that had not been machined properly. The company's accountant would classify the repair cost as an internal failure cost.

Which of the following statements is incorrect?

Which of the following costs is likely to be driven by machine usage?

Select the incorrect statement regarding the use of cost drivers in activity-based costing systems.

Mason Company is planning to introduce an activity-based costing system. Which of the following actions by employees could lower the success of the new system?

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

Activities that support specific products or product lines are known as:

Anderson Company produces a variety of products, some in labor-intensive departments and some in heavily automated departments. Using a company-wide overhead allocation rate based on direct labor will result in overcosting some products and undercosting others.

All of the following are external failure costs except:

Which of the following is an upstream cost?

Explain how the use of direct labor hours as a cost driver can distort costs of products in a highly automated manufacturing environment.

Costs incurred to avoid nonconforming products are:

When making a long-term cost plus pricing decision, a company should consider:

All of the following are hierarchical categories in which a firm's overhead support costs can be classified except:

Depreciation on a manufacturing facility is an example of a(n):

The objective of using the following graph is to:

The concept of cost of quality is not applicable in service-type businesses such as accounting firms.

The minimum amount of total quality costs is achieved when the:

Farber Company produces its product in three departments, Prepping, Machining, and Finishing. A customer recently returned a defective product that had not been machined properly. The company's accountant would classify the repair cost as an internal failure cost.

Which of the following statements is incorrect?

Which of the following costs is likely to be driven by machine usage?

Select the incorrect statement regarding the use of cost drivers in activity-based costing systems.

Mason Company is planning to introduce an activity-based costing system. Which of the following actions by employees could lower the success of the new system?

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