Question 1

Which of the following statements best completes this sentence: 'Activity-based costing …'

Accepted Answer

A)  asserts that cost behaviour can best be determined if the split between fixed and variable cost is ignored 
B)  has replaced standard costing as the preferred method of allocating costs to products 
C)  is based on allocating fixed overheads based on the elements that drive them 
D)  emphasises the need to obtain a better understanding of the behaviour of overhead costs 
A)  asserts that cost behaviour can best be determined if the split between fixed and variable cost is ignored 
B)  has replaced standard costing as the preferred method of allocating costs to products 
C)  is based on allocating fixed overheads based on the elements that drive them 
D)  emphasises the need to obtain a better understanding of the behaviour of overhead costs

Question 2

Summer Ice Pty Ltd is a manufacturer of a range of ice cream products.The following is a list of activities,costs and quantities of activity drivers for a number of activities that occur in the factory.Under an activity-based system,what is the activity cost per unit of activity division for packing into containers?

Accepted Answer

A)  $0.06 
B)  $0.05 
C)  $0.02 
D)  $0.04 
A)  $0.06 
B)  $0.05 
C)  $0.02 
D)  $0.04

Question 3

ABC is a methodology that can be as simple or as complex as the organisation wants it to be.

Accepted Answer

A) True 
 B)False

Question 4

The Pinewood Furniture Company Pty Ltd plans to manufacture two lines of chairs in the coming year-lounge and patio.The company is considering introducing an activity-based costing system.Given below are each activity,its cost and its related activity driver.The level of activity for the year is:
Under an activity-based costing system,what is the activity cost per unit of activity driver for machine setups?

Accepted Answer

A)  $5000 per setup 
B)  $2500 per setup 
C)  $1200 per setup 
D)  $1667 per setup 
A)  $5000 per setup 
B)  $2500 per setup 
C)  $1200 per setup 
D)  $1667 per setup

Question 5

While ABC can be used with service industries,it can be difficult to implement because service industries do not always have repetitive individual activities.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following are usually included in conventional cost systems?
i.Direct material is traced to products
ii.Non-manufacturing costs are assigned to products.
iii.Manufacturing overhead is allocated using a production-volume-based cost driver.

Accepted Answer

A)  i 
B)  ii 
C)  iii 
D)  i and iii 
A)  i 
B)  ii 
C)  iii 
D)  i and iii

Question 7

Conventional product costing does not generally include non-manufacturing costs despite the fact that these costs are now a significant proportion of most organisations' total costs.

Accepted Answer

A) True 
 B)False

Question 8

In a simple activity-based product costing system:

Accepted Answer

A)  direct material,direct labour,manufacturing overhead and non-manufacturing overhead are assigned to products on an activity basis 
B)  direct material is traced using a conventional approach,while direct labour,manufacturing overhead and non-manufacturing overhead are assigned to products on an activity basis 
C)  direct material and direct labour are traced using a conventional approach,manufacturing overhead is assigned on an activity basis and non-manufacturing overhead is expensed as it is incurred 
D)  direct material,direct labour and manufacturing overhead are traced using a conventional approach,and non-manufacturing overhead is assigned on an activity basis 
A)  direct material,direct labour,manufacturing overhead and non-manufacturing overhead are assigned to products on an activity basis 
B)  direct material is traced using a conventional approach,while direct labour,manufacturing overhead and non-manufacturing overhead are assigned to products on an activity basis 
C)  direct material and direct labour are traced using a conventional approach,manufacturing overhead is assigned on an activity basis and non-manufacturing overhead is expensed as it is incurred 
D)  direct material,direct labour and manufacturing overhead are traced using a conventional approach,and non-manufacturing overhead is assigned on an activity basis

Question 9

Twista Manufacturing has the following activities and activity costs per year: Machining ($20 000);Forklifting ($10 000);machine setup ($32 000)and quality inspection ($40 000).The operation starts with setting up the machines;each batch of products requires a different setup.This is followed by machining,where the cost of machining varies directly with the number of machine hours.Forklifts are used to move the work in progress around.Because quality is important,an inspection is carried out for each batch of products.The following information is also available:
Number of machine hours per year: 20 000 machine hours
Number of forklift moves per year: 500 moves
Number of batches per year: 4000 batches
Each year,Twista Manufacturing produces 5000 units of Product X.These units of Product X require 5000 machine hours,120 moves and 500 batches to produce.The direct materials and direct labour together cost $15 per unit of Product X.Which of the following activities should be grouped together in the same activity cost pool?

Accepted Answer

A)  Machining and machine set up 
B)  Machine set up and quality inspection 
C)  Forklifting and quality inspection 
D)  Machining and forklifting 
A)  Machining and machine set up 
B)  Machine set up and quality inspection 
C)  Forklifting and quality inspection 
D)  Machining and forklifting

Question 10

The Pinewood Furniture Company Pty Ltd plans to manufacture two lines of chairs in the coming year-lounge and patio.The company is considering introducing an activity-based costing system.Given below are each activity,its cost and its related activity driver.The level of activity for the year is:
Under an activity-based costing system,what is the activity cost per unit of activity driver for material handling?

Accepted Answer

A)  $2.00 per part 
B)  $16.67 per part 
C)  $2.50 per part 
D)  $5.00 per part 
A)  $2.00 per part 
B)  $16.67 per part 
C)  $2.50 per part 
D)  $5.00 per part

Question 11

Twista Manufacturing has the following activities and activity costs per year: Machining ($20 000);Forklifting ($10 000);machine setup ($32 000),and quality inspection ($40 000).The operation starts with setting up the machines;each batch of products requires a different setup.This is followed by machining,where the cost of machining varies directly with the number of machine hours.Forklifts are used to move the work in progress around.Because quality is important,an inspection is carried out for each batch of products.The following information is also available:
Number of machine hours per year: 20 000 machine hours
Number of forklift moves per year: 500 moves
Number of batches per year: 4000 batches
Each year,Twista Manufacturing produces 5000 units of Product X.These units of Product X require 5000 machine hours,120 moves and 500 batches to produce.The direct materials and direct labour together cost $15 per unit of Product X.The forklifting costs and machine set up costs allocated to Product X are:

Accepted Answer

A)  $2400 and $4000 
B)  $5000 and $9000 
C)  $2400 and $5000 
D)  $5000 and $4000 
A)  $2400 and $4000 
B)  $5000 and $9000 
C)  $2400 and $5000 
D)  $5000 and $4000

Question 12

Calculate the cost per unit for setup for one run of 10 000 units if setup labour is $20 per hour and 10 hours are required to set up.

Accepted Answer

A)  $0.04 per unit 
B)  $0.06 per unit 
C)  $2.00 per unit 
D)  $0.02 per unit 
A)  $0.04 per unit 
B)  $0.06 per unit 
C)  $2.00 per unit 
D)  $0.02 per unit

Question 13

Consider the following statements.Activity-based costing is more difficult in a service business because:
i.service businesses have a low proportion of overhead in their total costs
ii.service businesses tend to have a higher level of facility costs than most manufacturers
iii.it is often difficult to identify service activities because they are non-repetitive
Which of the above statements is true?

Accepted Answer

A)  i 
B)  ii 
C)  ii and iii 
D)  i,ii and iii 
A)  i 
B)  ii 
C)  ii and iii 
D)  i,ii and iii

Question 14

Characteristics of activity-based costing include:

Accepted Answer

A)  a greater number of overhead cost application bases compared to conventional costing systems 
B)  the overhead cost application bases are likely to be more accurate cost drivers than would be the case in conventional costing systems 
C)  the simplicity of the system makes it easy to implement 
D)  a greater number of overhead cost application bases compared to conventional costing systems AND the overhead cost application bases are likely to be more accurate cost drivers than would be the case in conventional costing systems 
A)  a greater number of overhead cost application bases compared to conventional costing systems 
B)  the overhead cost application bases are likely to be more accurate cost drivers than would be the case in conventional costing systems 
C)  the simplicity of the system makes it easy to implement 
D)  a greater number of overhead cost application bases compared to conventional costing systems AND the overhead cost application bases are likely to be more accurate cost drivers than would be the case in conventional costing systems

Question 15

Behavioural issues may be important in implementing an ABC system.Which of the following are some of the methods employed to minimise adverse outcomes?
i.Use a top down approach
ii.Use a bottom up approach.
iii.Ensure all employees have a sense of ownership in the system.

Accepted Answer

A)  i and ii 
B)  ii and iii 
C)  iii 
D)  i and iii 
A)  i and ii 
B)  ii and iii 
C)  iii 
D)  i and iii

Question 16

The Pinewood Furniture Company Pty Ltd plans to manufacture two lines of chairs in the coming year-lounge and patio.The company is considering introducing an activity-based costing system.Given below are each activity,its cost and its related activity driver.The level of activity for the year is:
Under an activity-based costing system,what is the activity cost per unit of activity driver for finishing?

Accepted Answer

A)  $7.50 per direct labour hour 
B)  $30.00 per direct labour hour 
C)  $25.00 per unit 
D)  $30.00 per unit 
A)  $7.50 per direct labour hour 
B)  $30.00 per direct labour hour 
C)  $25.00 per unit 
D)  $30.00 per unit

Question 17

Consider the following statements regarding conventional costing systems.i.All overhead costs are assumed to be driven by volume of production
Ii)All product costs are direct costs.
Iii)Conventional costing systems tend to distort product costs when numerous products are made that vary in their production requirements.Which statement/s is/are true?

Accepted Answer

A)  i 
B)  ii and iii 
C)  i and iii 
D)  ii 
A)  i 
B)  ii and iii 
C)  i and iii 
D)  ii

Question 18

Which of the following statements is true? Indicators of problems with product cost systems are:
i.non-manufacturing costs that are product related become insignificant
ii.the proportion of manufacturing overhead not driven by production volume increases
iii.there is an increase in product diversity

Accepted Answer

A)  i 
B)  ii 
C)  iii 
D)  ii and iii 
A)  i 
B)  ii 
C)  iii 
D)  ii and iii

Question 19

Which of the following are examples of batch level activities?

Accepted Answer

A)  Machine setup 
B)  Materials handling 
C)  Machining 
D)  Machine setup AND materials handling 
A)  Machine setup 
B)  Materials handling 
C)  Machining 
D)  Machine setup AND materials handling

Question 20

Activity-based costing has most to offer where:

Accepted Answer

A)  overhead is high and volume driven 
B)  overhead is high and non-volume driven 
C)  overhead is low and non-volume driven 
D)  direct labour is a major proportion of total costs 
A)  overhead is high and volume driven 
B)  overhead is high and non-volume driven 
C)  overhead is low and non-volume driven 
D)  direct labour is a major proportion of total costs

Which of the following statements best completes this sentence: 'Activity-based costing …'

ABC is a methodology that can be as simple or as complex as the organisation wants it to be.

While ABC can be used with service industries,it can be difficult to implement because service industries do not always have repetitive individual activities.

Which of the following are usually included in conventional cost systems? i.Direct material is traced to products ii.Non-manufacturing costs are assigned to products. iii.Manufacturing overhead is allocated using a production-volume-based cost driver.

Conventional product costing does not generally include non-manufacturing costs despite the fact that these costs are now a significant proportion of most organisations' total costs.

In a simple activity-based product costing system:

Calculate the cost per unit for setup for one run of 10 000 units if setup labour is $20 per hour and 10 hours are required to set up.

Characteristics of activity-based costing include:

Behavioural issues may be important in implementing an ABC system.Which of the following are some of the methods employed to minimise adverse outcomes? i.Use a top down approach ii.Use a bottom up approach. iii.Ensure all employees have a sense of ownership in the system.

Which of the following statements is true? Indicators of problems with product cost systems are: i.non-manufacturing costs that are product related become insignificant ii.the proportion of manufacturing overhead not driven by production volume increases iii.there is an increase in product diversity

Which of the following are examples of batch level activities?

Activity-based costing has most to offer where:

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

Filters

Exam 8: Activity-Based Costing

Which of the following statements best completes this sentence: 'Activity-based costing …'

ABC is a methodology that can be as simple or as complex as the organisation wants it to be.

While ABC can be used with service industries,it can be difficult to implement because service industries do not always have repetitive individual activities.

Which of the following are usually included in conventional cost systems? i.Direct material is traced to products ii.Non-manufacturing costs are assigned to products. iii.Manufacturing overhead is allocated using a production-volume-based cost driver.

Conventional product costing does not generally include non-manufacturing costs despite the fact that these costs are now a significant proportion of most organisations' total costs.

In a simple activity-based product costing system:

Calculate the cost per unit for setup for one run of 10 000 units if setup labour is $20 per hour and 10 hours are required to set up.

Characteristics of activity-based costing include:

Behavioural issues may be important in implementing an ABC system.Which of the following are some of the methods employed to minimise adverse outcomes? i.Use a top down approach ii.Use a bottom up approach. iii.Ensure all employees have a sense of ownership in the system.

Which of the following are examples of batch level activities?

Activity-based costing has most to offer where:

Management Accounting: Information for Creating Value and Managing Resources

Management Accounting: Cost Terms and Concepts

Cost Behaviour, Cost Drivers and Cost Estimation

Product Costing Systems

Process Costing and Operation Costing

Service Costing

A Closer Look at Overhead Costs

Budgeting Systems

Standard Costs for Control: Direct Material and Direct Labour

Standard Costs for Control: Flexible Budgets and Manufacturing Overhead

Managing and Reporting Performance

Financial Performance Measures and Incentive Schemes

Strategic Performance Measurement Systems

Managing Suppliers and Customers

Managing Costs and Quality

Sustainability and Management Accounting

Cost Volume Profit Analysis

Information for Decisions: Relevant Costs and Benefits

Pricing and Product Mix Decisions

Information for Capital Expenditure Decisions

Filters