Exam 8: Activity-Based Costing

Which of the following is not an indicator of a company whose costing system needs to be more accurate?

Which of the following are common production volume measures? i.Direct labour hours ii.Machine hours iii.Direct material cost

One of the results of the inaccuracies arising from traditional costing systems may be:

The ABC model links resources to activities via resource drivers and activities to cost objects via activity drivers.

Activity management:

Which of the following are indicators of an outdated costing system? i.Products that are difficult to make have high profit margins ii.Competitors prices appear unrealistically low. iii.Customers are not deterred by price increases.iv.A lot of time is spent on special product cost projects.

Which of the following statements is false?

Prime indicators of problems with a conventional costing system include company profits being eroded and production managers not being able to make sense of product costs.

In which of the following may a traditional costing system result in?

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 machining costs and quality inspection costs allocated to each unit of Product X are:

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 total cost for one unit of Product X is:

Consider the following statements.i.The optimal product costing system is the most accurate system ii.The optimal product costing system is the one that minimises the cost of poor decisions from inferior information. iii.The optimal product costing system is the most expensive one.Which of the statements is true?

Which of the following statements is/are true? i.Activity management requires analysis of overhead activities only ii.Activity management requires analysis of all activities. iii.Activity management requires identification of detailed activities,rather than broad activities.

Which of the following is not a useful broad category of cost classification in activity-based costing?

HiTech Products manufactures three types of CD players: Cheap,Econo and Deluxe.HiTech uses an activity-based product costing system.The company has identified five activities.Each activity,its cost and related activity driver are identified below: The following information pertains to each product line of CD players: Under an activity-based product costing system,what is the cost per unit of Econo (to the nearest dollar)?

Which of the following statements,as indicators of product cost systems,are out of date? i.Highly profitable products are difficult to make ii.Competitors' prices appear to be very low. iii.The market easily absorbs price increases.

Conventional product costing systems result in inaccurate product costs when:

Recent developments in manufacturing and marketing have resulted in significant changes to cost manufacturing structures.Which of the following statements is/are false? i.The proportion of direct labour increases ii.The proportion of manufacturing overhead increases iii.Product diversity decreases iv.The proportion of non-volume-related manufacturing overheads increases