Deck 7: Activity-Based Costing and Management

Question 1

Factors that measure the consumption of activities by products and other cost objects are value-added costs.

Answer 1

False

Question 2

One of the three major dimensions of measuring activity performance is quality.

Answer 2

True

Question 3

To calculate an activity rate,the practical capacity of each activity must be determined.

Answer 3

True

Question 4

Activity attributes are financial and nonfinancial information items that describe individual activities.

Question 5

Product diversity means that products consume overhead activities in systematically different proportions.

Question 6

Discretionary activities are necessary to comply with legal mandates.

Question 7

The consumption ratio is the amount of each activity consumed by a product.

Question 8

Unit-level activities are performed each time a unit is produced.

Question 9

Resource drivers are factors that measure the consumption of resources by product.

Question 10

An activity dictionary lists the activities in an organization along with some critical activity attributes.

Question 11

Activity inputs are the resources consumed by the activity in producing its output.

Question 12

Activity analysis is the effort expended to identify those factors that are the root causes of activity costs.

Question 13

A volume-based costing system emphasizes direct tracing and driver tracing.

Question 14

The value-added standard is the waste-free component of the value-added activity.

Question 15

A work distribution matrix is derived from an interview or a written survey.

Question 16

An activity-based costing system first assigns costs to activities and then to cost objects.

Question 17

Activity drivers should be classified as either unit-level or nonunit-level.

Question 18

Costs that are caused by the inefficient performance of value-added activities are value added costs.

Question 19

One of the questions answered by activity analysis should be "What activities are done?"

Question 20

Activities necessary to remain in business are called valuable activities.

Question 21

One way to improve efficiency is to produce higher activity output with higher cost.

Question 22

Control activities are performed by an organization or its customers in response to poor quality.

Question 23

Environmental costs are costs that are incurred because poor environmental quality may or does exists.

Question 24

Velocity is the length of time that it takes to produce a unit o output from the time raw materials are received until the good is delivered.

Question 25

____________________ are financial and nonfinancial information items that describe individual activities.

Question 26

Environmental internal failure costs are the costs of activities performed after discharging contaminants and waste into the environment.

Question 27

_____________________ are factors that measure the consumption of activities by products and other cost objects and can be classified as either unit-level or nonunit-level.

Question 28

A defective product is one that does conform to specifications.

Question 29

___________________ are performed each time a unit is produced.

Question 30

Control activities are performed by an organization to prevent or detect poor quality.

Question 31

Zero defects means that most products conform to specifications.

Question 32

Environmental costs are associated with the creation,detection,remediation,and prevention of environmental degradation.

Question 33

_________________________ assigns costs to activities and then costs to cost objects.

Question 34

Activity elimination focuses on nonvalue-added activities.

Question 35

A company will sometimes use a ____________________ which identifies the amount of labor consumed by each activity.

Question 36

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Question 37

When products consume overhead activities in systematically different proportion due to such things as product size,product complexity,setup time and size of batches this is known as _________________.

Question 38

Appraisal costs are incurred to determine whether products and services are conforming to their requirements or customer needs.

Question 39

Quality improvement can increase profitability by decreasing costs.

Question 40

The ___________________ is calculated by taking the amount of the activity driver per product and dividing it by total driver quantity.

Question 41

The activity driver for the shipping activity is the number of orders shipped.Product A uses 20 orders and Product B uses 60 orders.Calculate the consumption ratios for each product.

A)0.3; 0.7
B)0.625; 0.375
C)0.25; 0.75
D)0.215; 0.785

Question 42

____ costs in many firms represent a much higher percentage of product costs than direct labor.

A)Nonvalue-added
B)Failure
C)Overhead
D)Appraisal
E)Control

Question 43

Activity drivers can be classified as either ____ or ____.

A)unit-level; nonunit-level
B)exact; inexact
C)inputs; outputs
D)right; wrong

Question 44

______________ is concerned with doing the activity right the first time it is performed.

Question 45

The cost of recalls would be an example of a(n)____________________.

Question 46

Using only unit-based activity drivers to assign nonunit-related overhead costs can cause

A)product diversity.
B)distorted product costs.
C)efficiency.
D)activity sharing.
E)none of these

Question 47

A(n)____ ratio measures the proportion of an activity consumed by a product.

A)Production
B)Consumption
C)Efficiency
D)Quality
E)Usage

Question 48

Reinspection and design changes are examples of _____________________ costs.

Question 49

Tracing ________________ costs to suppliers can enable managers to choose the true low-cost supplier.

Question 50

Setups,material handling,and inspection are all possible examples of

A)product diversity.
B)unit level overhead activities.
C)nonunit-level overhead activities.
D)sustainable development.
E)none of these

Question 51

A focus on cost reduction instead of cost assignment and emphasizing the maximization of systemwide performance is known as _______________________.

Question 52

Cleaning up a polluted lake or an oil spill are examples of __________________ costs.

Question 53

Companies will incur costs to perform such tasks as recycling products,controlling pollution,reducing contaminates.All of these tasks are examples of _____________________ costs.

Question 54

A ____________________ is classified as value-added provided it simultaneously meets three conditions.

Question 55

Activities necessary to remain in business are known as _____________________.

Question 56

_________________________ is a system-wide,integrated approach that focuses management's attention on activities with the objective of improving customer value and profit achieved by providing this value.

Question 57

___________________ are incurred to prevent poor quality in the products and services being produced.

Question 58

When a new product can be designed to use components already being used by other products this is known as ________________.

Question 59

Accurate ___________________ allow managers to make better pricing decisions,customer-mix decisions,and other customer-related decisions that improve profitability.

Question 60

____ is present whenever products have different consumption ratios for different overhead activities.

A)Environmental costs
B)Activity sharing
C)Product diversity
D)Activity inputs
E)Control costs

Question 61

In an activity dictionary,types of resources consumed is an example of a(n)

A)activity sharing.
B)quality.
C)activity attribute.
D)allocation.

Question 62

Figure 7-5. Rizzo Manufacturing produces two types of cameras: 35mm and digital.The cameras are produced using one continuous process.Four activities have been identified: machining,setups,receiving,and packing.Resource drivers have been used to assign costs to each activity.The overhead activities,their costs,and the other related data are as follows:
Refer to Figure 7-5.Using an activity rate for receiving based on receiving orders,assign receiving costs to the 35mm camera.

A)$1,800
B)$2,000
C)$1,600
D)$1,200
E)$4,000

Question 63

Figure 7-5. Rizzo Manufacturing produces two types of cameras: 35mm and digital.The cameras are produced using one continuous process.Four activities have been identified: machining,setups,receiving,and packing.Resource drivers have been used to assign costs to each activity.The overhead activities,their costs,and the other related data are as follows:
Refer to Figure 7-5.Calculate a consumption ratio for setups on the digital cameras.

A)0.688
B)0.730
C)0.700
D)0.714
E)0.500

Question 64

To calculate an activity rate,the ____ of each activity must be determined.

A)practical capacity
B)expenditure level
C)processing ratio
D)Value

Question 65

Figure 7-4. Honeydew Company produces two products,a high end laptop computer under the label Bunsen Laptops,and an inexpensive desktop computer under the label Beaker Computers.The two products use two overhead activities,with the following costs:
The controller has collected the expected annual prime costs for each product,the machine hours,the setup hours,and the expected production.
Refer to Figure 7-4.Calculate the overhead cost per unit for each Beaker Computer,using overhead rates based on machine hours and setup hours.

A)$6.10 per unit
B)$4.50 per unit
C)$5.75 per unit
D)$3.88 per unit

Question 66

A list of activities accompanied by information that describes each activity is an activity ____.

A)manifesto
B)diary
C)journal
D)dictionary
E)note

Question 67

____ can help a company become more competitive by providing more accurate cost data.

A)Unit-based costing
B)Volume-based costing
C)Kaizen costing
D)Production costing
E)Activity-based costing

Question 68

Producing 10,000 units of a cell phone requires $300,000 of prime costs,uses 2,000 machine hours,and takes 1,200 setup hours.The activity rates are $40 per machine hour and $100 per setup hour.What is the unit cost of a cell phone?

A)$60
B)$40
C)$50
D)$100
E)$30

Question 69

A(n)____ is derived from the interview process (or written survey).

A)work distribution matrix
B)activity explanation matrix
C)driver consumption matrix
D)value analysis matrix
E)tracing matrix

Question 70

Figure 7-5. Rizzo Manufacturing produces two types of cameras: 35mm and digital.The cameras are produced using one continuous process.Four activities have been identified: machining,setups,receiving,and packing.Resource drivers have been used to assign costs to each activity.The overhead activities,their costs,and the other related data are as follows:
Refer to Figure 7-5.Calculate the total overhead assigned to the 35mm cameras using only machine hours to calculate a plantwide rate.

A)$132,000
B)$72,000
C)$60,000
D)$75,000
E)$66,000

Question 71

A company has two inspectors,each earning a salary of $75,000.One inspector works exclusively on inspecting parts received from outside suppliers,while the other spends 30 percent of her time inspecting parts and 70 percent of her time inspecting final products.How much labor cost should be assigned to the activity,inspecting parts?

A)$100,000
B)$95,000
C)$75,000
D)$96,275
E)$97,500

Question 72

____ are assigned using direct tracing and resource drivers.

A)Resources
B)Costs
C)Profits
D)Materials
E)Products

Question 73

Figure 7-4. Honeydew Company produces two products,a high end laptop computer under the label Bunsen Laptops,and an inexpensive desktop computer under the label Beaker Computers.The two products use two overhead activities,with the following costs:
The controller has collected the expected annual prime costs for each product,the machine hours,the setup hours,and the expected production.
Refer to Figure 7-4.Calculate Beaker's consumption ratio for setup hours.

A)0.50
B)0.45
C)0.90
D)0.25
E)0.75

Question 74

Receiving provides 12,000 receiving hours and costs $60,000 per year.What is the activity rate for receiving?

A)$14 per receiving hour
B)$5 per receiving hour
C)$4 per receiving hour
D)$4.50 per receiving hour
E)cannot be determined from this information

Question 75

The moving activity has an expected cost of $160,000.Expected direct labor hours are 40,000,and the expected number of moves is 80,000.The best activity rate for moving is

A)$4 per move.
B)$1.33 per hour-move.
C)$4 per hour.
D)$2 per move.

Question 76

Last year,Stevita Inc.shipped 3,000,000 kilograms of goods to customers at a cost of $2,400,000.If an individual customer orders 20,000 kilograms and produces $400,000 of revenue (total revenue is $40 million),the amount of shipping cost assigned to the customer using activity-based costing would be:

A)$16,000
B)$8,000
C)$24,000
D)$4,000
E)$60,000

Question 77

Figure 7-5. Rizzo Manufacturing produces two types of cameras: 35mm and digital.The cameras are produced using one continuous process.Four activities have been identified: machining,setups,receiving,and packing.Resource drivers have been used to assign costs to each activity.The overhead activities,their costs,and the other related data are as follows:
Refer to Figure 7-5.Calculate an activity rate for packing based on packing orders.

A)$9.00 per packing order
B)$10.00 per packing order
C)$8.00 per packing order
D)$60.00 per packing order
E)$1.20 per packing order

Question 78

Figure 7-4. Honeydew Company produces two products,a high end laptop computer under the label Bunsen Laptops,and an inexpensive desktop computer under the label Beaker Computers.The two products use two overhead activities,with the following costs:
The controller has collected the expected annual prime costs for each product,the machine hours,the setup hours,and the expected production.
Refer to Figure 7-4.Calculate the overhead cost per unit for Bunsen Laptops,using a plantwide rate based on direct labor costs.

A)$9.63 per laptop
B)$22.45 per laptop
C)$5.60 per laptop
D)$7.22 per laptop
E)$7.50 per laptop

Question 79

A costing system that first assigns costs to activities and then to products is

A)activity-based costing.
B)job-order costing.
C)activity-based management.
D)volume based costing.
E)nonunit-level costing.

Question 80

Interviews and surveys are used to identify

A)cycle time.
B)velocity.
C)control costs.
D)costs.
E)activities.