Question 1

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

Accepted Answer

A)  Depreciation on factory equipment 
B)  Depreciation on factory building 
C)  Depreciation of engineering equipment 
D)  Depreciation of setup equipment 
A)  Depreciation on factory equipment 
B)  Depreciation on factory building 
C)  Depreciation of engineering equipment 
D)  Depreciation of setup equipment

Question 2

____ are procedures or processes that cause work to be accomplished.

Accepted Answer

A)  Unit-level costs 
B)  Overhead costs 
C)  Activities 
D)  Batch-level costs 
A)  Unit-level costs 
B)  Overhead costs 
C)  Activities 
D)  Batch-level costs

Question 3

Which of the following statements is true regarding activities?

Accepted Answer

A)  An activity that drives overhead costs should only take place within the physical manufacturing facility. 
B)  Activities can be consumed by resources. 
C)  Overhead costs can be traced to more than one activity. 
D)  Activities seldom cause work to be accomplished. 
A)  An activity that drives overhead costs should only take place within the physical manufacturing facility. 
B)  Activities can be consumed by resources. 
C)  Overhead costs can be traced to more than one activity. 
D)  Activities seldom cause work to be accomplished.

Question 4

Activity-based costing (ABC):

Accepted Answer

A)  should not be applied to non-manufacturing activities. 
B)  should not be applied to service companies. 
C)  can be applied to administrative activities. 
D)  can only be used by manufacturing companies. 
A)  should not be applied to non-manufacturing activities. 
B)  should not be applied to service companies. 
C)  can be applied to administrative activities. 
D)  can only be used by manufacturing companies.

Question 5

Aunt Lucy's Candies Aunt Lucy's Candies sells standard and premium chocolate candies through its catalog business. Many of the candies are sold in bulk to other companies. Last year, the company incurred $400,000 in overhead costs. After implementing activity-based costing (ABC), the company's controller identified the following information:
  The number of activities for standard and premium candies is as follows:
  Refer to the Aunt Lucy's Candies information above. If a single sales order for premium candies requires 2 purchase orders for a total of 500 pieces (units), how much overhead should be assigned to that order?

Accepted Answer

A)  $201.08 
B)  $204.93 
C)  $262.56 
D)  $240.00 
A)  $201.08 
B)  $204.93 
C)  $262.56 
D)  $240.00

Question 6

Identify and define each of the four general types of cost classifications used with activity-based costing (ABC).

Accepted Answer

Unit-level costs are incurred each time

Question 7

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

Accepted Answer

A)  Service companies are not permitted to use ABC costing. 
B)  Service companies find it easier to use ABC costing than manufacturing companies. 
C)  Fewer repetitive activities make ABC costing more difficult to implement in service companies. 
D)  Service companies have proportionately less facility-level costs than manufacturing companies. 
A)  Service companies are not permitted to use ABC costing. 
B)  Service companies find it easier to use ABC costing than manufacturing companies. 
C)  Fewer repetitive activities make ABC costing more difficult to implement in service companies. 
D)  Service companies have proportionately less facility-level costs than manufacturing companies.

Question 8

Traditional overhead allocation methods as opposed to activity-based allocation methods work best when:

Accepted Answer

A)  there are many different volume-based cost drivers. 
B)  most costs are unit-level costs. 
C)  overhead can be estimated. 
D)  most costs are facility-level costs. 
A)  there are many different volume-based cost drivers. 
B)  most costs are unit-level costs. 
C)  overhead can be estimated. 
D)  most costs are facility-level costs.

Question 9

Compton Corporation The following overhead cost information is available for Compton Corporation for 2011:
  During the year, 5,000 purchase orders were issued; 20,000 shipments were received; 3,000 machine setups were performed; and 4,000 inspections were conducted.
Refer to the Compton Corporation information above. What is the overhead rate for the purchasing activity?

Accepted Answer

A)  $0.05 per purchase order 
B)  $20.00 per purchase order 
C)  $72.00 per purchase order 
D)  $3.13 per purchase order 
A)  $0.05 per purchase order 
B)  $20.00 per purchase order 
C)  $72.00 per purchase order 
D)  $3.13 per purchase order

Question 10

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs would most likely be a product-level cost?

Accepted Answer

A)  A package product design cost for a new product line 
B)  A machine setup cost 
C)  Depreciation on the factory building 
D)  Energy costs for factory machinery 
A)  A package product design cost for a new product line 
B)  A machine setup cost 
C)  Depreciation on the factory building 
D)  Energy costs for factory machinery

Question 11

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs would most likely be a unit-level cost?

Accepted Answer

A)  A package product design cost 
B)  A machine setup cost 
C)  Depreciation on the factory building 
D)  Energy costs for factory machinery 
A)  A package product design cost 
B)  A machine setup cost 
C)  Depreciation on the factory building 
D)  Energy costs for factory machinery

Question 12

For each of the following activities, identify one potential cost driver.

Accepted Answer

The answer of For each of the following activities, identify...

Question 13

Aunt Lucy's Candies Aunt Lucy's Candies sells standard and premium chocolate candies through its catalog business. Many of the candies are sold in bulk to other companies. Last year, the company incurred $400,000 in overhead costs. After implementing activity-based costing (ABC), the company's controller identified the following information:
  The number of activities for standard and premium candies is as follows:
  Refer to the Aunt Lucy's Candies information above. What is the overhead rate for the sales activity?

Accepted Answer

A)  $16.00 per sales order 
B)  $102.63 per sales order 
C)  $10.26 per sales order 
D)  $52.23 per sales order 
A)  $16.00 per sales order 
B)  $102.63 per sales order 
C)  $10.26 per sales order 
D)  $52.23 per sales order

Question 14

Compton Corporation The following overhead cost information is available for Compton Corporation for 2011:
  During the year, 5,000 purchase orders were issued; 20,000 shipments were received; 3,000 machine setups were performed; and 4,000 inspections were conducted.
Refer to the Compton Corporation information above. What is the overhead rate for the receiving activity?

Accepted Answer

A)  $1.88 per shipment received 
B)  $6.00 per shipment received 
C)  $3.00 per shipment received 
D)  $0.33 per shipment received 
A)  $1.88 per shipment received 
B)  $6.00 per shipment received 
C)  $3.00 per shipment received 
D)  $0.33 per shipment received

Question 15

Which of the following statements regarding cost drivers is false?

Accepted Answer

A)  Different businesses can have different sets of cost drivers. 
B)  Cost drivers should generally be chosen based on a cause-and-effect relationship between the driver and the specific cost being considered. 
C)  Cost drivers are groups of overhead costs that are similar. 
D)  An activity could have more than one potential cost driver. 
A)  Different businesses can have different sets of cost drivers. 
B)  Cost drivers should generally be chosen based on a cause-and-effect relationship between the driver and the specific cost being considered. 
C)  Cost drivers are groups of overhead costs that are similar. 
D)  An activity could have more than one potential cost driver.

Question 16

Aunt Lucy's Candies Aunt Lucy's Candies sells standard and premium chocolate candies through its catalog business. Many of the candies are sold in bulk to other companies. Last year, the company incurred $400,000 in overhead costs. After implementing activity-based costing (ABC), the company's controller identified the following information:
  The number of activities for standard and premium candies is as follows:
  Refer to the Aunt Lucy's Candies information above. What is the overhead rate for the processing activity?

Accepted Answer

A)  $0.92 per unit 
B)  $1.44 per unit 
C)  $0.40 per unit 
D)  $0.72 per unit 
A)  $0.92 per unit 
B)  $1.44 per unit 
C)  $0.40 per unit 
D)  $0.72 per unit

Question 17

The following overhead cost information is available for Millennium Inc. for 2011:
   During the year, 7,500 purchase orders were issued; 18,000 machine setups were performed; and 3,000 inspections were conducted.
Required:

Accepted Answer

The answer of The following overhead cost information is available...

Question 18

Which of the following statements is false regarding the identification of activities in activity-based costing (ABC)?

Accepted Answer

A)  The identification of activities that drive overhead costs is done before cost drivers are selected. 
B)  An activity can be thought of as a procedure or process that causes work to be accomplished. 
C)  Overhead costs should not be traced to more than one activity. 
D)  Because of different types of production processes and products, every business will have a different set of activities and cost drivers. 
A)  The identification of activities that drive overhead costs is done before cost drivers are selected. 
B)  An activity can be thought of as a procedure or process that causes work to be accomplished. 
C)  Overhead costs should not be traced to more than one activity. 
D)  Because of different types of production processes and products, every business will have a different set of activities and cost drivers.

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

____ are procedures or processes that cause work to be accomplished.

Which of the following statements is true regarding activities?

Activity-based costing (ABC):

Identify and define each of the four general types of cost classifications used with activity-based costing (ABC).

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

Traditional overhead allocation methods as opposed to activity-based allocation methods work best when:

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs would most likely be a product-level cost?

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs would most likely be a unit-level cost?

For each of the following activities, identify one potential cost driver.

Which of the following statements regarding cost drivers is false?

The following overhead cost information is available for Millennium Inc. for 2011: During the year, 7,500 purchase orders were issued; 18,000 machine setups were performed; and 3,000 inspections were conducted. Required:

Which of the following statements is false regarding the identification of activities in activity-based costing (ABC)?

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 would most likely be a facility-level cost?

____ are procedures or processes that cause work to be accomplished.

Which of the following statements is true regarding activities?

Activity-based costing (ABC):

Identify and define each of the four general types of cost classifications used with activity-based costing (ABC).

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

Traditional overhead allocation methods as opposed to activity-based allocation methods work best when:

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs would most likely be a product-level cost?

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs would most likely be a unit-level cost?

For each of the following activities, identify one potential cost driver.

Which of the following statements regarding cost drivers is false?

The following overhead cost information is available for Millennium Inc. for 2011: During the year, 7,500 purchase orders were issued; 18,000 machine setups were performed; and 3,000 inspections were conducted. Required:

Which of the following statements is false regarding the identification of activities in activity-based costing (ABC)?

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