Question 1

Which of the following is false regarding activity-based costing (ABC)?

Accepted Answer

A)  Companies that have a high potential for cost distortions are more likely to benefit with ABC. 
B)  Opportunities for continuous improvement are rarely revealed by using ABC. 
C)  The cost of implementing ABC may outweigh the benefits. 
D)  Increased accuracy with budgeting resources is often realized. 
A)  Companies that have a high potential for cost distortions are more likely to benefit with ABC. 
B)  Opportunities for continuous improvement are rarely revealed by using ABC. 
C)  The cost of implementing ABC may outweigh the benefits. 
D)  Increased accuracy with budgeting resources is often realized.

Question 2

Troxler Inc. produces various types of floor rugs with many different designs. They typically produce at least 200 rugs with a single machine setup. A cost incurred every time an individual rug is produced is called a(n):

Accepted Answer

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

Question 3

In activity-based costing (ABC), wages paid to an assembly-line worker would most likely be classified as:

Accepted Answer

A)  overhead. 
B)  a product-level cost. 
C)  direct labor. 
D)  a facility-level cost. 
A)  overhead. 
B)  a product-level cost. 
C)  direct labor. 
D)  a facility-level cost.

Question 4

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

Accepted Answer

A)  The benefits of using ABC always outweigh its limitations. 
B)  The lower the proportion of overhead costs as compared to direct materials and direct labor costs, the more likely a company will benefit by using ABC. 
C)  Companies with a high-proportion of non-unit-level costs should rarely use ABC. 
D)  High measurement costs associated with ABC may deter some companies from its use. 
A)  The benefits of using ABC always outweigh its limitations. 
B)  The lower the proportion of overhead costs as compared to direct materials and direct labor costs, the more likely a company will benefit by using ABC. 
C)  Companies with a high-proportion of non-unit-level costs should rarely use ABC. 
D)  High measurement costs associated with ABC may deter some companies from its use.

Question 5

What would one expect to occur when cross subsidies are eliminated with the use of activity-based costing (ABC)?

Accepted Answer

A)  That lower-volume products pick up more of their fair share of overhead costs. 
B)  That higher-volume products pick up more of their fair share of overhead costs. 
C)  That lower-volume products will be determined as being unprofitable. 
D)  That higher-volume products will be determined as being unprofitable. 
A)  That lower-volume products pick up more of their fair share of overhead costs. 
B)  That higher-volume products pick up more of their fair share of overhead costs. 
C)  That lower-volume products will be determined as being unprofitable. 
D)  That higher-volume products will be determined as being unprofitable.

Question 6

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

Accepted Answer

A)  It is based on the concept that a single cost driver can drive all overhead costs. 
B)  It is based on the concept that activities drive overhead costs. 
C)  It is based on the concept that unit-level costs drive all overhead costs. 
D)  It is based on the concept that either the number of direct labor or machine hours incurred drives all overhead costs. 
A)  It is based on the concept that a single cost driver can drive all overhead costs. 
B)  It is based on the concept that activities drive overhead costs. 
C)  It is based on the concept that unit-level costs drive all overhead costs. 
D)  It is based on the concept that either the number of direct labor or machine hours incurred drives all overhead costs.

Question 7

Which of the following is a likely advantage in activity-based costing (ABC)?

Accepted Answer

A)  A decrease in the need to maintain accurate cost driver information. 
B)  A decrease in the need to maintain accurate overhead cost information. 
C)  An increase in the ability to trace indirect costs to specific activities. 
D)  As increase in the cost of accumulating, tracking, and assigning costs to products and services. 
A)  A decrease in the need to maintain accurate cost driver information. 
B)  A decrease in the need to maintain accurate overhead cost information. 
C)  An increase in the ability to trace indirect costs to specific activities. 
D)  As increase in the cost of accumulating, tracking, and assigning costs to products and services.

Question 8

Which of the following statements is false regarding activities in an ABC system?

Accepted Answer

A)  As a business becomes more complex, more activities will probably need to be identified. 
B)  Two different manufacturing companies that make the same products may come up with different sets of activities and cost drivers. 
C)  The maximum number of activities that should be identified as batch-level is two. 
D)  Overhead costs may be allocated to more than one activity. 
A)  As a business becomes more complex, more activities will probably need to be identified. 
B)  Two different manufacturing companies that make the same products may come up with different sets of activities and cost drivers. 
C)  The maximum number of activities that should be identified as batch-level is two. 
D)  Overhead costs may be allocated to more than one activity.

Question 9

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

Accepted Answer

A)  Resources consume activities and products consume costs. 
B)  Activities consume resources and products consume activities. 
C)  Costs consume activities and products cause costs. 
D)  Resources consume activities and activities cause costs. 
A)  Resources consume activities and products consume costs. 
B)  Activities consume resources and products consume activities. 
C)  Costs consume activities and products cause costs. 
D)  Resources consume activities and activities cause costs.

Question 10

Which of the following would most likely be a unit-level cost?

Accepted Answer

A)  Factory insurance 
B)  Quality control 
C)  Lubricants used on factory machinery 
D)  Research and development costs for a new product line 
A)  Factory insurance 
B)  Quality control 
C)  Lubricants used on factory machinery 
D)  Research and development costs for a new product line

Question 11

In Stage 2 of ABC allocation:

Accepted Answer

A)  cost drivers are determined and costs are traced to each activity. 
B)  activities are identified. 
C)  predetermined overhead rates are calculated. 
D)  equivalent units are computed. 
A)  cost drivers are determined and costs are traced to each activity. 
B)  activities are identified. 
C)  predetermined overhead rates are calculated. 
D)  equivalent units are computed.

Question 12

Which of the following items might cause activity-based costing (ABC) to be more difficult to implement in a service company than in a manufacturing company?

Accepted Answer

A)  The lack of direct labor. 
B)  The lack of facility-level costs. 
C)  The lack of repetitive activities. 
D)  The lack of overhead costs. 
A)  The lack of direct labor. 
B)  The lack of facility-level costs. 
C)  The lack of repetitive activities. 
D)  The lack of overhead costs.

Question 13

Ken's Carpets sells carpet for both residential and business use. To better estimate costs, the company recently adopted an activity-based costing system. Last year, the company incurred $300,000 in overhead costs. Based on an intense study of their company, the following activities, allocation bases, and percentages of overhead costs were determined:
   The number of activities for residential and business is as follows:
   Required:

Accepted Answer

The answer of Ken's Carpets sells carpet for both residential...

Question 14

What should be done in Stage 1 in an activity-based costing (ABC) system?

Accepted Answer

A)  Total manufacturing costs are calculated. 
B)  Raw materials are purchased. 
C)  Cost drivers for activities are chosen. 
D)  Activities are identified. 
A)  Total manufacturing costs are calculated. 
B)  Raw materials are purchased. 
C)  Cost drivers for activities are chosen. 
D)  Activities are identified.

Question 15

When comparing traditional product costing and activity-based costing (ABC) methods, which kind(s) of costs are allocated to products in a similar manner and which kind(s) are allocated to products in a different manner? Explain your answers.

Accepted Answer

Both traditional and ABC costing methods

Question 16

Which of the following statements associated with traditional overhead allocation is true?

Accepted Answer

A)  A traditional overhead allocation method is the most accurate in automated environments with diverse products. 
B)  A traditional overhead allocation method can also be referred to as activity-based costing. 
C)  A traditional overhead allocation method provides the most accurate product cost information. 
D)  A traditional overhead allocation method usually uses one or two volume-based cost drivers. 
A)  A traditional overhead allocation method is the most accurate in automated environments with diverse products. 
B)  A traditional overhead allocation method can also be referred to as activity-based costing. 
C)  A traditional overhead allocation method provides the most accurate product cost information. 
D)  A traditional overhead allocation method usually uses one or two volume-based cost drivers.

Question 17

Which of the following types of costs would service-oriented companies be more likely to have proportionately more of than manufacturing companies?

Accepted Answer

A)  Facility-level costs 
B)  Product-level costs 
C)  Batch-level costs 
D)  Unit-level costs 
A)  Facility-level costs 
B)  Product-level costs 
C)  Batch-level costs 
D)  Unit-level costs

Question 18

Classify each of the following costs as unit-level (U), batch-level (B), product-level (P), or facility-level (F).

Accepted Answer

The answer of Classify each of the following costs as...

Question 19

Activity-based costing is a method of cost allocation that is useful for assigning ____ costs to products or services.

Accepted Answer

A)  direct materials 
B)  direct labor 
C)  overhead 
D)  direct materials and direct labor 
A)  direct materials 
B)  direct labor 
C)  overhead 
D)  direct materials and direct labor

Question 20

As companies experience a shift from labor-intensive operations to automated operations, which of the following costs becomes more difficult to trace to products?

Accepted Answer

A)  Administrative costs 
B)  Direct labor costs 
C)  Direct material costs 
D)  Overhead costs 
A)  Administrative costs 
B)  Direct labor costs 
C)  Direct material costs 
D)  Overhead costs

Which of the following is false regarding activity-based costing (ABC)?

Troxler Inc. produces various types of floor rugs with many different designs. They typically produce at least 200 rugs with a single machine setup. A cost incurred every time an individual rug is produced is called a(n):

In activity-based costing (ABC), wages paid to an assembly-line worker would most likely be classified as:

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

What would one expect to occur when cross subsidies are eliminated with the use of activity-based costing (ABC)?

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

Which of the following is a likely advantage in activity-based costing (ABC)?

Which of the following statements is false regarding activities in an ABC system?

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

Which of the following would most likely be a unit-level cost?

In Stage 2 of ABC allocation:

Which of the following items might cause activity-based costing (ABC) to be more difficult to implement in a service company than in a manufacturing company?

What should be done in Stage 1 in an activity-based costing (ABC) system?

When comparing traditional product costing and activity-based costing (ABC) methods, which kind(s) of costs are allocated to products in a similar manner and which kind(s) are allocated to products in a different manner? Explain your answers.

Which of the following statements associated with traditional overhead allocation is true?

Which of the following types of costs would service-oriented companies be more likely to have proportionately more of than manufacturing companies?

Classify each of the following costs as unit-level (U), batch-level (B), product-level (P), or facility-level (F).

Activity-based costing is a method of cost allocation that is useful for assigning ____ costs to products or services.

As companies experience a shift from labor-intensive operations to automated operations, which of the following costs becomes more difficult to trace to products?

Introduction to Managerial Accounting

Product Costing: Manufacturing Processes, Cost Terminology, and Cost Flows

Job Costing, Process Costing, and Operations Costing

Cost Behavior

Cost-Volume-Profit Analysis

Relevant Costs and Product Planning Decisions

Long-Term Capital Investment Decisions

The Use of Budgets in Planning and Decision Making

Variance Analysis A Tool for Cost Control and Performance Evaluation

Decentralization, Performance Evaluation, and the Balanced Scorecard

Financial Statement Analysis

The Statement of Cash Flows

Filters

Exam 4: Activity-Based Costing

Which of the following is false regarding activity-based costing (ABC)?

Troxler Inc. produces various types of floor rugs with many different designs. They typically produce at least 200 rugs with a single machine setup. A cost incurred every time an individual rug is produced is called a(n):

In activity-based costing (ABC), wages paid to an assembly-line worker would most likely be classified as:

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

What would one expect to occur when cross subsidies are eliminated with the use of activity-based costing (ABC)?

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

Which of the following is a likely advantage in activity-based costing (ABC)?

Which of the following statements is false regarding activities in an ABC system?

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

Which of the following would most likely be a unit-level cost?

In Stage 2 of ABC allocation:

Which of the following items might cause activity-based costing (ABC) to be more difficult to implement in a service company than in a manufacturing company?

What should be done in Stage 1 in an activity-based costing (ABC) system?

When comparing traditional product costing and activity-based costing (ABC) methods, which kind(s) of costs are allocated to products in a similar manner and which kind(s) are allocated to products in a different manner? Explain your answers.

Which of the following statements associated with traditional overhead allocation is true?

Which of the following types of costs would service-oriented companies be more likely to have proportionately more of than manufacturing companies?

Classify each of the following costs as unit-level (U), batch-level (B), product-level (P), or facility-level (F).

Activity-based costing is a method of cost allocation that is useful for assigning ____ costs to products or services.

As companies experience a shift from labor-intensive operations to automated operations, which of the following costs becomes more difficult to trace to products?

Introduction to Managerial Accounting

Product Costing: Manufacturing Processes, Cost Terminology, and Cost Flows

Job Costing, Process Costing, and Operations Costing

Cost Behavior

Cost-Volume-Profit Analysis

Relevant Costs and Product Planning Decisions

Long-Term Capital Investment Decisions

The Use of Budgets in Planning and Decision Making

Variance Analysis A Tool for Cost Control and Performance Evaluation

Decentralization, Performance Evaluation, and the Balanced Scorecard

Financial Statement Analysis

The Statement of Cash Flows

Filters