Deck 5: Activity-Based Costing and Management

Question 1

Simplified forms of ABC use time-driven elements for service companies that are well aligned with the resources deployed in terms of units of time of labor.

Answer 1

True

Question 2

A bill of activities is a complete listing of the activities identified and used in the ABC analysis.

Answer 2

False

Question 3

Storyboarding may be used to develop a detailed process flowchart.

Answer 3

True

Question 4

In the first stage of ABC, a cost driver is selected for each activity cost pool.

Question 5

An example of a customer-value-added activity is final painting and polishing of the product.

Question 6

Because labor hours are related closely to the volume of activity in the factory, these traditional product-costing systems often are said to be volume-based costing systems.

Question 7

The pool rate is defined as the cost per unit of the cost driver for a particular activity cost pool.

Question 8

Generally speaking, companies prefer doing business with customers who order small quantities rather than large quantities.

Question 9

Engineering design costs are typically known as batch-level activities.

Question 10

A version of ABC that has found wide acceptance in service-industry settings is called volume-based activity-costing.

Question 11

When using ABC, overhead costs assigned to each activity comprise an activity cost pool.

Question 12

There are six important factors when selecting appropriate cost drivers.

Question 13

Consumption ratios are useful in determining the existence of product-line diversity.

Question 14

Non-value-added activities are the events that trigger activities and linkages among activities.

Question 15

Traditional product-costing systems are structured on multiple, volume-based cost drivers.

Question 16

In an activity-based costing system, direct materials used would typically be classified as a unit-level cost.

Question 17

One of the important factors when selecting appropriate cost drivers is the ability to overcost related services.

Question 18

A product's cost is the sum of its direct-material cost, its direct-labor cost, and its overhead cost, which is the accumulation of all the resource costs driven to the product by the various cost drivers selected for the ABC system.

Question 19

Activity-based costing systems have a tendency to distort product costs.

Question 20

Customer-profitability analysis uses activity-based costing to determine the activities, costs, and profit associated with serving particular customers.

Question 21

International Gems sells fine jewelry and has implemented activity-based costing.Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping.International has determined that the number of boxes shipped is an appropriate cost driver for these costs.The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected.The final cost pool is used for general operations of the department and the cost driver is the number of orders.Information about the activities is summarized below: An order is shipped to a retail customer who has ordered 6 individual items.This order will be shipped in 3 separate boxes.What is the packing and shipping cost that will be allocated to the order?

A)$4.03
B)$4.20
C)$12.60
D)$25.20
E)None of the answer choices is correct.

Question 22

Rocket Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe.The company, which uses activity-based costing, has identified five activities (and related cost drivers).Each activity, its budgeted cost, and related cost driver is identified below. Assume that Rocket is using a volume-based costing system, and the preceding overhead costs are applied to all products on the basis of direct labor hours. The overhead cost that would be assigned to the Deluxe product line is closest to:

A)$456,471.
B)$646,471.
C)$961,176.
D)$1,141,176.
E)None of the answers is correct.

Question 23

In an activity-based costing system, direct materials used would typically be classified as a:

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

Question 24

Consider the following statements regarding traditional costing systems: I.Overhead costs are applied to products on the basis of volume-related measures. II.All manufacturing costs are easily traceable to the goods produced. III.Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements. Which of the above statements is (are) true?

A)I only.
B)II only.
C)III only.
D)I and III.
E)II and III.

Question 25

Which of the following is the proper sequence of events in an activity-based costing system?

A)Identification of cost drivers, identification of cost pools, calculation of pool rates, assignment of cost to products.
B)Identification of cost pools, identification of cost drivers, calculation of pool rates, assignment of cost to products.
C)Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation of pool rates.
D)Calculation of pool rates, identification of cost drivers, identification of cost pools, assignment of cost to products.
E)None of the answers is correct.

Question 26

Which of the following is least likely to be classified as a batch-level activity in an activity-based costing system?

A)Shipping.
B)Receiving and inspection.
C)Production setup.
D)Property taxes.
E)Quality assurance.

Question 27

St.Vincent's, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers.Data on the cost pools and respective driver volumes follow. The overhead cost allocated to Zeta by using traditional costing procedures would be:

A)$240,000.
B)$356,000.
C)$444,000.
D)$560,000.
E)None of the answers is correct.

Question 28

St.Vincent's, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers.Data on the cost pools and respective driver volumes follow. The overhead cost allocated to Beta by using activity-based costing procedures would be:

A)$240,000.
B)$356,000.
C)$444,000.
D)$560,000.
E)None of the answers is correct.

Question 29

Carlin and Marley, an accounting firm, provides consulting and tax planning services.For many years, the firm's total administrative cost (currently $270,000) has been allocated to services on this basis of billable hours to clients.A recent analysis found that 55% of the firm's billable hours to clients resulted from tax planning services, while 45% resulted from consulting services. The firm, contemplating a change to activity-based costing, has identified three components of administrative cost, as follows: A recent analysis of staff support found a strong correlation with the number of clients served.In contrast, in-house computing and miscellaneous office cost varied directly with the number of computer hours logged and number of client transactions, respectively.Consulting clients served totaled 35% of the total client base, consumed 30% of the firm's computer hours, and accounted for 20% of the total client transactions. If Carlin and Marley switched from its current accounting method to an activity-based costing system, the amount of administrative cost chargeable to consulting services would:

A)decrease by $32,500.
B)increase by $32,500.
C)decrease by $59,500.
D)change by an amount other than those listed.
E)change, but the amount cannot be determined based on the information presented.

Question 30

International Gems sells fine jewelry and has implemented activity-based costing.Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping.International has determined that the number of boxes shipped is an appropriate cost driver for these costs.The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected.The final cost pool is used for general operations of the department and the cost driver is the number of orders.Information about the activities is summarized below: During the period, the Southern sales office generated 240 orders for a total of 3,560 items, which were shipped in 1,200 boxes.What amount of shipping department costs should be allocated to these sales?

A)$9,480
B)$5,040
C)$14,200
D)$18,328
E)None of the answer choices is correct.

Question 31

St.Vincent's, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers.Data on the cost pools and respective driver volumes follow. The overhead cost allocated to Beta by using traditional costing procedures would be:

A)$240,000.
B)$356,000.
C)$444,000.
D)$560,000.
E)None of the answers is correct.

Question 32

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

A)Unit-level.
B)Batch-level.
C)Product-sustaining level.
D)Facility-level.
E)Management-level.

Question 33

International Gems sells fine jewelry and has implemented activity-based costing.Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping.International has determined that the number of boxes shipped is an appropriate cost driver for these costs.The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected.The final cost pool is used for general operations of the department and the cost driver is the number of orders.Information about the activities is summarized below: During December, 4,000 items were sold, reflecting 800 orders that were packed and shipped in 2,100 boxes.What amount is allocated to each order for general operations of the department?

A)$4.20
B)$8.50
C)$10.00
D)$29.53
E)None of the answer choices is correct.

Question 34

Cost allocation is the process of assigning indirect costs to a cost object.The indirect costs are grouped in cost pools and then allocated by a common allocation base to the cost object.The base that is employed to allocate a homogeneous cost pool should:

A)Assign the costs in the pool uniformly to cost objects even if the cost objects use resources in a nonuniform way.
B)Be a nonfinancial measure (e.g., number of setups) because a nonfinancial measure is more objective.
C)Have a cause-and-effect relationship with the cost items in the cost pool.
D)Have a high correlation with the cost items in the cost pool as the sole criterion for selection.
E)None of these answer choices is correct.

Question 35

The following tasks are associated with an activity-based costing system: 1- Assignment of cost to products 2- Calculation of pool rates 3- Identification of cost drivers 4- Identification of cost pools Which of the following choices correctly expresses the proper order of the preceding tasks?

A)1, 2, 3, 4.
B)2, 4, 1, 3.
C)3, 4, 2, 1.
D)4, 2, 1, 3.
E)4, 3, 2, 1.

Question 36

International Gems sells fine jewelry and has implemented activity-based costing.Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping.International has determined that the number of boxes shipped is an appropriate cost driver for these costs.The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected.The final cost pool is used for general operations of the department and the cost driver is the number of orders.Information about the activities is summarized below: A new customer orders two items that can be shipped in a single box.What is the total shipping department cost that will be allocated to this order?

A)$8.20
B)$14.70
C)$16.70
D)$25.20
E)None of the answer choices is correct.

Question 37

St.Vincent's, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers.Data on the cost pools and respective driver volumes follow. The overhead cost allocated to Zeta by using activity-based costing procedures would be:

A)$240,000.
B)$356,000.
C)$444,000.
D)$560,000.
E)None of the answers is correct.

Question 38

Many traditional costing systems:

A)trace manufacturing overhead to individual activities and require the development of numerous activity-costing rates.
B)write off manufacturing overhead as an expense of the current period.
C)combine widely varying elements of overhead into a single cost pool.
D)use a host of different cost drivers (e.g., number of production setups, inspection hours, orders processed) to improve the accuracy of product
E)produce results far superior to those achieved with activity-based costing.

Question 39

International Gems sells fine jewelry and has implemented activity-based costing.Costs in the shipping department have been divided into three cost pools. The first cost pool contains costs that are related to packaging and shipping.International has determined that the number of boxes shipped is an appropriate cost driver for these costs.The second cost pool is made up of costs related to the final inspection of each item before it is shipped and the cost driver for this pool is the number of individual items that are inspected.The final cost pool is used for general operations of the department and the cost driver is the number of orders.Information about the activities is summarized below: During December, 2,100 boxes were packed and shipped.How much is the packaging and shipping cost for each box shipped?

A)$0.24
B)$4.20
C)$7.62
D)$32.00
E)None of the answer choices is correct.

Question 40

Rocket Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe.The company, which uses activity-based costing, has identified five activities (and related cost drivers).Each activity, its budgeted cost, and related cost driver is identified below. Assume that Rocket is using a volume-based costing system, and the preceding overhead costs are applied to all products on the basis of direct labor hours. The overhead cost that would be assigned to the Standard product line is closest to:

A)$456,471.
B)$646,471.
C)$961,176.
D)$1,141,176.
E)None of the answers is correct.

Question 41

Baxter customer service department follows up on customer complaints by telephone inquiry.During a recent period, the department initiated 10,000 calls and incurred costs of $312,000.Of these calls, 3,800 were for the company's wholesale operation; the remainder was for the retail division.Costs allocated to the retail division are:

A)$0.
B)$31,200.
C)$118,560.
D)$193,440.
E)$203,000.

Question 42

Ice Land offers 2 types of skating lessons for children-advanced and hockey skating lessons.The company has two different activities-skating instruction and maintenance-that provide input into its cost objectives.Data on estimated overhead for the year follows: The company provides 2,400 hockey skating lessons and 1,200 advanced skating lessons each year.How much overhead will be assigned to each hockey skating lesson?

A)$42.20
B)$73.24
C)$22.56
D)$33.84
E)None of the answer choices is correct.

Question 43

Which of the following choices correctly depicts the proper classification of direct materials used and management salaries?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 44

Consider the following statements regarding product-sustaining activities: I.They must be performed for each batch of product that is made. II.They must be performed for each unit of product that is made. III.They are needed to support an entire product line. Which of the above statements is (are) true?

A)I only.
B)II only.
C)III only.
D)I and II.
E)II and III.

Question 45

Pound Industries' customer service department follows up on customer complaints by telephone inquiry.During a recent period, the department initiated 7,000 calls and incurred costs of $203,000.If 2,940 of these calls were for the company's wholesale operation (the remainder were for the retail division), costs allocated to the wholesale operation should amount to:

A)$0.
B)$29.
C)$85,260.
D)$117,740.
E)$203,000.

Question 46

Which of the following is most likely to be a cost driver for a packaging and shipping activity?

A)Number of setups.
B)Number of components.
C)Hours of testing.
D)Number of orders.
E)Estimated product costs.

Question 47

In an activity-based costing system, materials receiving would typically be classified as a:

A)unit-level activity.
B)batch-level activity.
C)product-sustaining activity.
D)facility-level activity.
E)period-level activity.

Question 48

Pound Industries' customer service department follows up on customer complaints by telephone inquiry.During a recent period, the department initiated 10,000 calls and incurred costs of $312,000.Of these calls, 3,800 were for the company's wholesale operation; the remainder was for the retail division.Costs allocated to the wholesale operation are:

A)$0.
B)$31,200.
C)$118,560.
D)$193,440.
E)$203,000.

Question 49

Skyline Florists uses an activity-based costing system to compute the cost of making floral bouquets and delivering the bouquets to its commercial customers. Company personnel who earn $180,000 typically perform both tasks; other firm-wide overhead is expected to total $70,000.These costs are allocated as follows: Skyline anticipates making 20,000 bouquets and 4,000 deliveries in the upcoming year. The cost of wages and salaries and other overhead that would be charged to each delivery is closest to:

A)$19.63.
B)$20.31.
C)$26.75.
D)$40.63.
E)None of the answers is correct.

Question 50

Pound Industries' customer service department follows up on customer complaints by telephone inquiry.During a recent period, the department initiated 7,000 calls and incurred costs of $203,000.If 2,940 of these calls were for the company's wholesale operation (the remainder were for the retail division), costs allocated to the retail division should amount to:

A)$0.
B)$29.
C)$85,260.
D)$117,740.
E)$203,000.

Question 51

Which of the following is least likely to be classified as a facility-level activity in an activity-based costing system?

A)Plant maintenance.
B)Property taxes.
C)Machine processing cost.
D)Plant depreciation.
E)Plant management salaries.

Question 52

The division of activities into unit-level, batch-level, product-sustaining level, and facility-level categories is commonly known as a cost:

A)object.
B)application method.
C)hierarchy.
D)estimation method.
E)classification scheme that is useful in traditional, volume-based systems.

Question 53

Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe.The company, which uses activity-based costing, has identified five activities (and related cost drivers).Each activity, its budgeted cost, and related cost driver is identified below. What is Barnett's pool rate for the material-insertion activity?

A)$11.00 per part.
B)$49.50 per part.
C)$16.18 per labor hour.
D)$1.00 per part.
E)None of the answers is correct.

Question 54

Rosen, Inc., an appliance manufacturer, is developing a new line of ovens that uses controlled-laser technology.The research and testing costs associated with the new ovens is said to arise from a:

A)unit-level activity.
B)batch-level activity.
C)product-sustaining activity.
D)facility-level activity.
E)competitive-level activity.

Question 55

Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe.The company, which uses activity-based costing, has identified five activities (and related cost drivers).Each activity, its budgeted cost, and related cost driver is identified below. What is Barnett's pool rate for the material-handling activity?

A)$1.00 per part.
B)$2.25 per part.
C)$6.62 per labor hour.
D)$13.23 per part.
E)None of the answers is correct.

Question 56

Which of the following choices correctly depicts a cost that arises from a batch-level activity and one that arises from a facility-level activity?

A)Choice A
B)Choice B
C)Choice C
D)Choice D
E)Choice E

Question 57

Dawg Town produces dog tags and bowls with the name of your dog permanently etched into a stainless steel label.Indirect etching costs are allocated to tags and bowls based on the amount of time spent on the laser etching machine.The company has budgeted etching costs of $4,224 per month and expects to spend 4,800 hours on the etching labels each month.Each dog tag uses 24 minutes and each bowl uses 6 minutes of laser etching time.How much of the etching costs will be allocated to each dog tag?

A)$0.88
B)$0.35
C)$8.12
D)$21.12
E)None of the answer choices is correct.

Question 58

The salaries of a manufacturing plant's management are said to arise from:

A)unit-level activities.
B)batch-level activities.
C)product-sustaining activities.
D)facility-level activities.
E)direct-cost activities.

Question 59

Due to changes that are occurring in the basic operations of many firms, all of the following represent trends in the way indirect costs are allocated except:

A)Using several machine cost pools to measure product costs on the basis of time in a machine center.
B)Preferring facility-wide application rates that are applied to machine hours rather than incurring the cost of detailed allocations.
C)Using throughput time as an application base to increase awareness of the costs associated with lengthened throughput time.
D)Treating direct labor as an indirect manufacturing cost in an automated factory.
E)Incorporate a value chain analysis as a continuous process of gathering, evaluating, and communicating information for business decision making.

Question 60

Skyline Florists uses an activity-based costing system to compute the cost of making floral bouquets and delivering the bouquets to its commercial customers. Company personnel who earn $180,000 typically perform both tasks; other firm-wide overhead is expected to total $70,000.These costs are allocated as follows: Skyline anticipates making 20,000 bouquets and 4,000 deliveries in the upcoming year. The cost of wages and salaries and other overhead that would be charged to each bouquet made is:

A)$7.15.
B)$8.75.
C)$12.50.
D)$13.75.
E)None of the answers is correct.

Question 61

Flavorful Manufacturing sells a number of goods whose selling price is heavily influenced by cost.A recent study of product no.519 revealed a traditionally- derived total cost of $1,019, a selling price of $1,850 based on that figure, and a newly computed activity-based total cost of $1,215.Which of the following statements is true?

A)All other things being equal, the company should consider a drop in its sales price.
B)The company may have been extremely competitive in the marketplace from a price perspective.
C)Product no.519 could be labeled as being overcosted by the firm's traditional costing procedures.
D)If product no.519 is undercosted by traditional accounting procedures, then all of the company's other products must be undercosted as well.
E)Generally speaking, the activity-based cost figure is "less accurate" than the traditionally-derived cost figure.

Question 62

Which of the following would likely not be a cost driver?

A)Product orders
B)Product inspections
C)Cost accountant's labor hours
D)Material requisitions
E)Machine setups

Question 63

Colonial Company manufactures decorative wall clocks and uses activity-based costing.Each clock consists of 20 separate parts totaling $95 in direct materials, and requires 2.5 hours of machine time to produce.Additional information is as follows: What is the cost of machining per clock?

A)$7.20.
B)$18.00.
C)$180.00.
D)$30.00.
E)$144.00.

Question 64

Colonial Company manufactures decorative wall clocks and uses activity-based costing.Each clock consists of 20 separate parts totaling $95 in direct materials, and requires 2.5 hours of machine time to produce.Additional information is as follows: What is the total manufacturing cost per clock?

A)$115.32.
B)$121.13.
C)$124.30.
D)$125.75.
E)$206.60.

Question 65

Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe.The company, which uses activity-based costing, has identified five activities (and related cost drivers).Each activity, its budgeted cost, and related cost driver is identified below. The following information pertains to the three product lines for next year: What is Barnett's pool rate for the packaging activity?

A)$4.86 per machine hour.
B)$5.00 per labor hour.
C)$10.00 per part.
D)$100.00 per order shipped.
E)None of the answers is correct.

Question 66

Bridges and Lloyd, an accounting firm, provides consulting and tax planning services.For many years, the firm's total administrative cost (currently $250,000) has been allocated to services on the basis of billable hours to clients.A recent analysis found that 65% of the firm's billable hours to clients resulted from tax planning services, while 35% resulted from consulting services. The firm, contemplating a change to activity-based costing, has identified three components of administrative cost, as follows: A recent analysis of staff support found a strong correlation between the number of staff personnel and the number of clients served (consulting, 20; tax planning, 60).In contrast, in-house computing and miscellaneous office cost varied directly with the number of computer hours logged and number of client transactions, respectively.Consulting consumed 30% of the firm's computer hours and had 20% of the total client transactions. If Bridges and Lloyd switched from its current accounting method to an activity-based costing system, the amount of administrative cost chargeable to consulting services would:

A)decrease by $23,500.
B)increase by $23,500.
C)decrease by $32,500.
D)change by an amount other than those listed.
E)change, but the amount cannot be determined based on the information presented.

Question 67

Bridges and Lloyd, an accounting firm, provides consulting and tax planning services.For many years, the firm's total administrative cost (currently $250,000) has been allocated to services on the basis of billable hours to clients.A recent analysis found that 65% of the firm's billable hours to clients resulted from tax planning services, while 35% resulted from consulting services. The firm, contemplating a change to activity-based costing, has identified three components of administrative cost, as follows: A recent analysis of staff support found a strong correlation between the number of staff personnel and the number of clients served (consulting, 20; tax planning, 60).In contrast, in-house computing and miscellaneous office cost varied directly with the number of computer hours logged and number of client transactions, respectively.Consulting consumed 30% of the firm's computer hours and had 20% of the total client transactions. Assuming the use of activity-based costing, the proper percentage to use in allocating staff support costs to tax planning services is:

A)20%.
B)60%.
C)65%.
D)75%.
E)80%.

Question 68

Colonial Company manufactures decorative wall clocks and uses activity-based costing.Each clock consists of 20 separate parts totaling $95 in direct materials, and requires 2.5 hours of machine time to produce.Additional information is as follows: What is the number of finished clocks?

A)20.
B)100.
C)200.
D)250.
E)Cannot be determined from the information given.

Question 69

Magnolia Industries combines all manufacturing overhead into a single cost pool and allocates this overhead to products by using machine hours.Activity- based costing would likely show that with Magnolia's current procedures that:

A)all of the company's products are undercosted.
B)the company's high-volume products are undercosted.
C)all of the company's products are overcosted.
D)the company's high-volume products are overcosted.
E)the company's low-volume products are overcosted.

Question 70

Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe.The company, which uses activity-based costing, has identified five activities (and related cost drivers).Each activity, its budgeted cost, and related cost driver is identified below. The following information pertains to the three product lines for next year: What is Barnett's pool rate for the finishing activity?

A)$5.00 per labor hour.
B)$5.00 per machine hour.
C)$5.00 per unit.
D)$7.50 per unit.
E)None of the answers is correct.

Question 71

Which of the following would activity-based costing most likely lead to?

A)Cutting back on high-volume products that appear to be unprofitable.
B)Raising the sale price of low-volume products.
C)Raising the sale price of high-volume products.
D)Expanding low-volume products that appear to be profitable.
E)Distorting product costs.

Question 72

Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe.The company, which uses activity-based costing, has identified five activities (and related cost drivers).Each activity, its budgeted cost, and related cost driver is identified below. The following information pertains to the three product lines for next year: Under Barnett's activity-based costing system, what is the per-unit overhead cost of Economy?

A)$141.
B)$164.
C)$225.
D)$228.
E)None of the answers is correct.

Question 73

If Fowler Corporation changes to activity-based costing (ABC), this method normally results in:

A)Equalizing setup costs for all product lines.
B)Substantially lower unit costs for low-volume products than is reported by traditional product costing.
C)Decreased setup costs being charged to low-volume products.
D)Substantially greater unit costs for low-volume products than are reported by traditional product costing.
E)None of the answer choices is correct.

Question 74

Starwatch Manufacturing sells a number of goods whose selling price is heavily influenced by cost.A recent study of product no.520 revealed a traditionally- derived total cost of $1,623 and a selling price of $1,850 based on that figure.A newly computed activity-based total cost is $1,215.Which of the following statements is true?

A)All other things being equal, Starwatch should consider increasing its sales price.
B)Starwatch should increase the product's selling price to maintain the same markup percentage.
C)Product no.520 could be labeled as being overcosted by Starwatch's traditional costing procedures.
D)If product no.520 is undercosted by traditional accounting procedures, then all of Starwatch's other products must be undercosted as well.
E)Generally speaking, the activity-based cost figure is "less accurate" than the traditionally-derived cost figure.

Question 75

Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe.The company, which uses activity-based costing, has identified five activities (and related cost drivers).Each activity, its budgeted cost, and related cost driver is identified below. Under Barnett's activity-based costing system, what is the per-unit overhead cost of Standard?

A)$164.
B)$228.
C)$272.
D)$282.
E)None of the answers is correct.

Question 76

Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe.The company, which uses activity-based costing, has identified five activities (and related cost drivers).Each activity, its budgeted cost, and related cost driver is identified below. Under Barnett's activity-based costing system, what is the per-unit overhead cost of Deluxe?

A)$272.
B)$282.
C)$320.
D)$440.
E)None of the answers is correct.

Question 77

Colonial Company manufactures decorative wall clocks and uses activity-based costing.Each clock consists of 20 separate parts totaling $95 in direct materials, and requires 2.5 hours of machine time to produce.Additional information is as follows: What is the cost of assembling per clock?

A)$7.00.
B)$7.50.
C)$35.00.
D)$70.00.
E)$87.50.

Question 78

Activity-based costing systems:

A)use a single, volume-based cost driver.
B)assign overhead to products based on the products' relative usage of direct labor.
C)often reveal products that were under- or over-costed by traditional costing systems.
D)typically use fewer cost drivers than more traditional costing systems.
E)have a tendency to distort product costs.

Question 79

Colonial Company manufactures decorative wall clocks and uses activity-based costing.Each clock consists of 20 separate parts totaling $95 in direct materials, and requires 2.5 hours of machine time to produce.Additional information is as follows: What is the cost of materials handling per clock?

A)$0.08.
B)$1.60.
C)$6.00.
D)$5.00.
E)$7.20.

Question 80

Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe.The company, which uses activity-based costing, has identified five activities (and related cost drivers).Each activity, its budgeted cost, and related cost driver is identified below. The following information pertains to the three product lines for next year: What is Barnett's pool rate for the automated machinery activity?

A)$24.00 per machine hour.
B)$24.50 per labor hour.
C)$49.42 per unit.
D)$50.00 per machine hour.
E)None of the answers is correct.