Question 1

The number of services provided by an accounting firm would be classified as an:

Accepted Answer

A)  volume-related activity. 
B)  batch-related activity. 
C)  product-related activity. 
D)  facility-related activity. 
A)  volume-related activity. 
B)  batch-related activity. 
C)  product-related activity. 
D)  facility-related activity.

Question 2

Data concerning three of Parkeman Corporation's activity cost pools appear below:
 
Required:
Compute the activity rates for each of the three cost pools.Show your work!

Accepted Answer

The answer of Data concerning three of Parkeman Corporation's activity...

Question 3

Why is a plantwide allocation often considered to be a single-stage allocation approach? Explain.

Accepted Answer

A plantwide allocation uses on

Question 4

Which of the following statements is true regarding activity based costing in administration?

Accepted Answer

A)  The principles of ABC are different when applied to administrative services. 
B)  ABC in administration involves five steps. 
C)  All cost drivers in an administrative system will be time related. 
D)  Activity-based costing for administrative services follows the same four-step procedure described for manufacturing. 
A)  The principles of ABC are different when applied to administrative services. 
B)  ABC in administration involves five steps. 
C)  All cost drivers in an administrative system will be time related. 
D)  Activity-based costing for administrative services follows the same four-step procedure described for manufacturing.

Question 5

Activity-based costing (ABC)is a two-stage cost allocation system that (1)allocates costs to activities and (2)then to products based on their use of the activities.

Accepted Answer

A) True 
 B)False

Question 6

The manager of the Personnel Department at King Enterprises has been reading about time-driven ABC and wants to apply it to her department.She has identified four basic activities where her employees spend the most time: Interviewing;Hiring,Assessment,and Separation Processing.The Department employs five staff who perform these activities.The manager provides the following estimates for the amount of time it takes to complete each of these activities:
• Interviewing: 40 minutes;
• Hiring: 60 minutes;
• Assessment: 85 minutes;
• Separation processing: 95 minutes.Employees in Personnel work 35 hour weeks with four weeks for vacation.Of the 35 hours,five are reserved for administrative tasks,training,and so on.The costs of the personnel department,including any allocated costs from other staff functions is $1,404,000.During the year,Personnel conducted 1,200 interviews,made 405 hires,made 2,850 assessments,and had 235 separations.Required:
a.What is the cost per minute for activities in Personnel?
b.What is the cost of interviewing and hiring one employee?
c.How many minutes of unused capacity did Personnel have for the year?
d.What was the cost of the unused capacity in Personnel?

Accepted Answer

The answer of The manager of the Personnel Department at...

Question 7

Activity-based costing is so beneficial because it provides more information about product costs but requires less recordkeeping.

Accepted Answer

A) True 
 B)False

Question 8

Merkel Industries has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,Large and Small,about which it has provided the following data:
 $$\begin{array} { | l | r | r | } 
\hline \text { Direct materials } & \text { Large } & \text { Small } \
\text { per unit }&\$17.80&\$55.40\
\hline\text { Direct labor per } & \$ 16.10 & \$ 65.20 \
\text { unit } & & \
\text { Direct labor-hours } & 0.70 & 2.40 \
\text { per unit } & & \
\hline \text { Annual production } & 30,000 & 15,000\
\hline
\end{array}$$

The company's estimated total manufacturing overhead for the year is $1,793,790 and the company's estimated total direct labor-hours for the year is 57,000.The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
 $$\begin{array} { | l | r | } 
\hline \text { Activities and Actirity } & \text { Estimated Overhead } \
\text { Measures } & \text { Cost } \
\text { Supporting direct labor (DLHs) } & \$ 285,000 \
\hline \text { Setting up machines (setups) } & 437,190 \
\hline \text { Parts administration (part } & 1,071,600 \
 \text { types) } & \
\hline \text { Total } &\underline{ \$ 1,793,790  }\
\hline
\end{array}$$ 
$$\begin{array} { | l | r | r | r | } 
\hline \text { Acturities } & \text { Large } & \text { Small } & \text { Total } \
\hline \text { Supporting direct labor } & 21,000 & 36,000 & 57,000 \
\hline \text { Setting up machines } & 798 & 2,565 & 3,363 \
\hline \text { Parts administration } & 1,539 & 1,140 & 2,679 \
\hline
\end{array}$$ 
Required:
a.Determine the unit product cost of each of the company's two products under the traditional costing system.b.Determine the unit product cost of each of the company's two products under activity-based costing system.

Accepted Answer

a.Traditional Unit Product Costs
Predete

Question 9

Which of the following would be least likely to be used as an allocation base in a company that applies a single plantwide rate?

Accepted Answer

A)  Machine hours. 
B)  Direct material costs. 
C)  Direct labor cost. 
D)  Direct labor hours. 
A)  Machine hours. 
B)  Direct material costs. 
C)  Direct labor cost. 
D)  Direct labor hours.

Question 10

Time equations can be used in extended time-driven activity based costing (TDABC)systems to allow managers to adjust the times for orders with different characteristics.

Accepted Answer

A) True 
 B)False

Question 11

The basic difference between a first-stage cost allocation and a second-stage cost allocation is that cost pools are not used in first-stage cost allocations.

Accepted Answer

A) True 
 B)False

Question 12

When product costs are used for decision-making,what assumption is most likely to distort the decisions?

Accepted Answer

A)  There is a proportionality of overhead costs and output,regardless of whether a product is dropped or not. 
B)  Some overhead estimates can decrease when a product is dropped. 
C)  Some overhead costs could be fixed when a product is dropped. 
D)  The cost accounting system treats all overhead as if it were variable with respect to the allocation base. 
A)  There is a proportionality of overhead costs and output,regardless of whether a product is dropped or not. 
B)  Some overhead estimates can decrease when a product is dropped. 
C)  Some overhead costs could be fixed when a product is dropped. 
D)  The cost accounting system treats all overhead as if it were variable with respect to the allocation base.

Question 13

Required:
For each of the following important costs in manufacturing companies,identify a cost driver and explain why it is appropriate.

Accepted Answer

(Student

Question 14

Activity-based costing (ABC)provides more detailed measures of costs than do plantwide or department allocation methods.

Accepted Answer

A) True 
 B)False

Question 15

Using the department allocation method,a company establishes a separate overhead allocation rate for each department.

Accepted Answer

A) True 
 B)False

Question 16

Pinnocle Corporation has provided the following data from its activity-based costing system: 
 
The company makes 430 units of product S78N a year,requiring a total of 1,120 machine-hours,40 orders,and 30 inspection-hours per year.The product's direct materials cost is $49.81 per unit and its direct labor cost is $12.34 per unit.The product sells for $129.90 per unit.According to the activity-based costing system,the product margin for product S78N is:

Accepted Answer

A)  $4,116.50. 
B)  $29,132.50. 
C)  $6,180.50. 
D)  $5,161.30. 
A)  $4,116.50. 
B)  $29,132.50. 
C)  $6,180.50. 
D)  $5,161.30.

Question 17

Which of the following would be the most appropriate activity and cost drivers pairing for a Purchasing Department?

Accepted Answer

A)  Activity: Placing orders - Possible Cost Driver: Number of orders 
B)  Activity: Placing orders - Possible Cost Driver: Number of new hires 
C)  Activity: Placing orders - Possible Cost Driver: Frequency of audits 
D)  Activity: Placing orders - Possible Cost Driver: Employee turnover rate 
A)  Activity: Placing orders - Possible Cost Driver: Number of orders 
B)  Activity: Placing orders - Possible Cost Driver: Number of new hires 
C)  Activity: Placing orders - Possible Cost Driver: Frequency of audits 
D)  Activity: Placing orders - Possible Cost Driver: Employee turnover rate

Question 18

In general,traditional product costing methods allocate less cost to low-volume products and more costs to high-volume products than activity-based costing (ABC).

Accepted Answer

A) True 
 B)False

Question 19

Upton Manufacturing Corporation has a traditional costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labor-hours (DLHs).The company has two products,Long and Short,about which it has provided the following data:
$$\begin{array} { | l | r | r | } 
\hline & \text { Long } & \text { Short } \
\hline \text { Direct materials per unit } & \$ 14.20 & \$ 48.30 \
\hline \text { Direct labor per unit } & \$ 16.80 & \$ 50.40 \
\hline \text { Direct labor-hours per unit } & 0.80 & 2.40 \
\hline \text { Annual production } & 45,000 & 10,000 \
\hline
\end{array}$$
 The company's estimated total manufacturing overhead for the year is $3,170,400 and the company's estimated total direct labor-hours for the year is 60,000.The company is considering using a variation of activity-based costing to determine its unit product costs for external reports.Data for this proposed activity-based costing system appear below:
 $\begin{array}{|l|r|}
\hline \begin{array}{l}
\text { Activities and Actirity } \
\text { Measures }
\end{array} & \text { Estimeted Overhead } \
& \text { cost}\
\text { Supporting direct labor (DLHs) } & \$ 1,740,000 \
\hline \text { Setting up machines (setups) } &422,400 \
\hline \text { Parts administration (part } & 1,008,000\
\text { ypes) } & \
\hline \text { Total } & \$3,170,400  \
\hline
\end{array}$
 
 The unit product cost of product Long under the company's traditional costing system is closest to:

Accepted Answer

A)  $54.20. 
B)  $73.27. 
C)  $64.25. 
D)  $31.00. 
A)  $54.20. 
B)  $73.27. 
C)  $64.25. 
D)  $31.00.

Question 20

Conway Mountain Analysis offers agriculture and environmental assays.Its Soil Division performs testing on soil (S)as well as examines for the presence of pesticide residue (PR).Aggregated operating costs for the division are $1,050,000 based on a single overhead pool at a rate of $70 per testing hour.S testing uses 5,000 hours and PR uses 10,000 hours.The company is trying to determine whether a better costing structure can be established.As such the controller identifies the following costs.(1)Salaries and wages of laboratory techs are $600,000 based on 45% to S testing and 55% to PR testing.(2)Equipment related overhead like depreciation,maintenance,utilities,and insurance amount to $150,000,with a cost driver of number of test hours.(3)Setup costs are $120,000 assigned on 10,000 total setup hours.S testing requires 4,200 of the setup hours and PR testing requires 5,800 of the setup hours.(4)Costs of test designs amount to $180,000,based on the time required to design the tests.S testing requires 3,250 hours and P testing requires 1,750 hours.Required:
Classify (1)through (4)above as output-,batch-,product-,or facility-level costs.

Accepted Answer

Output unit-level costs:
1.Salaries and

The number of services provided by an accounting firm would be classified as an:

Data concerning three of Parkeman Corporation's activity cost pools appear below: Required: Compute the activity rates for each of the three cost pools.Show your work!

Why is a plantwide allocation often considered to be a single-stage allocation approach? Explain.

Which of the following statements is true regarding activity based costing in administration?

Activity-based costing (ABC)is a two-stage cost allocation system that (1)allocates costs to activities and (2)then to products based on their use of the activities.

Activity-based costing is so beneficial because it provides more information about product costs but requires less recordkeeping.

Which of the following would be least likely to be used as an allocation base in a company that applies a single plantwide rate?

Time equations can be used in extended time-driven activity based costing (TDABC)systems to allow managers to adjust the times for orders with different characteristics.

The basic difference between a first-stage cost allocation and a second-stage cost allocation is that cost pools are not used in first-stage cost allocations.

When product costs are used for decision-making,what assumption is most likely to distort the decisions?

Required: For each of the following important costs in manufacturing companies,identify a cost driver and explain why it is appropriate.

Activity-based costing (ABC)provides more detailed measures of costs than do plantwide or department allocation methods.

Using the department allocation method,a company establishes a separate overhead allocation rate for each department.

Which of the following would be the most appropriate activity and cost drivers pairing for a Purchasing Department?

In general,traditional product costing methods allocate less cost to low-volume products and more costs to high-volume products than activity-based costing (ABC).

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

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Exam 9: Activity-Based Costing

The number of services provided by an accounting firm would be classified as an:

Data concerning three of Parkeman Corporation's activity cost pools appear below: Required: Compute the activity rates for each of the three cost pools.Show your work!

Why is a plantwide allocation often considered to be a single-stage allocation approach? Explain.

Which of the following statements is true regarding activity based costing in administration?

Activity-based costing (ABC)is a two-stage cost allocation system that (1)allocates costs to activities and (2)then to products based on their use of the activities.

Activity-based costing is so beneficial because it provides more information about product costs but requires less recordkeeping.

Which of the following would be least likely to be used as an allocation base in a company that applies a single plantwide rate?

Time equations can be used in extended time-driven activity based costing (TDABC)systems to allow managers to adjust the times for orders with different characteristics.

The basic difference between a first-stage cost allocation and a second-stage cost allocation is that cost pools are not used in first-stage cost allocations.

When product costs are used for decision-making,what assumption is most likely to distort the decisions?

Required: For each of the following important costs in manufacturing companies,identify a cost driver and explain why it is appropriate.

Activity-based costing (ABC)provides more detailed measures of costs than do plantwide or department allocation methods.

Using the department allocation method,a company establishes a separate overhead allocation rate for each department.

Which of the following would be the most appropriate activity and cost drivers pairing for a Purchasing Department?

In general,traditional product costing methods allocate less cost to low-volume products and more costs to high-volume products than activity-based costing (ABC).

Cost Accounting: Information for Decision Making

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Planning and Budgeting

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters