Deck 5: Activity-Based Costing: A Tool to Aid Decision Making

Question 1

Setting up equipment is an example of an activity at which of the following levels?

A) Unit-level activity.
B) Batch-level activity.
C) Product-level activity.
D) Organization-sustaining activity.

Answer 1

B

Question 2

Arranging for a shipment of a number of different products to a customer is an example of an activity at which of the following levels?

A) Unit-level activity.
B) Batch-level activity.
C) Customer-level activity.
D) Organization-sustaining activity.

Answer 2

B

Question 3

Testing a prototype of a new product is an example of an activity at which of the following levels?

A) Unit-level activity.
B) Batch-level activity.
C) Product-level activity.
D) Organization-sustaining activity.

Answer 3

C

Question 4

(Appendix 5B)Why would an activity-based costing system that is designed for internal decision making NOT conform to generally accepted accounting principles?

A) Some manufacturing costs (i.e.,the costs of idle capacity and organization-sustaining costs)will not be assigned to products.
B) Some non-manufacturing costs are assigned to products.
C) First-stage allocations may be based on subjective interview data.
D) All of the above.

Question 5

What is a duration driver?

A) A simple count of the number of times an activity occurs.
B) An activity measure that is used for the life of the company.
C) A measure of the amount of time required to perform an activity.
D) An activity measure that is used for the life of an activity-based costing system.

Question 6

Worker recreational facilities are examples of costs that would ordinarily be considered to be incurred at which of the following activity levels?

A) Unit-level activity.
B) Batch-level activity.
C) Product-level activity.
D) Organization-sustaining activity.

Question 7

(Appendix 5A)Which of the following best describes a cost object,such as a product or customer,that has a positive red margin?

A) Its green margin will be positive.
B) Its green margin may be positive,negative,or zero.
C) Its green margin will be negative.
D) Its green margin will be zero.

Question 8

Which of the following is NOT a limitation of activity-based costing?

A) Maintaining an activity-based costing system is more costly than maintaining a traditional direct labour-based costing system.
B) Changing from a traditional direct labour-based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers.Such changes are often resisted by managers.
C) In practice,most managers insist on fully allocating all costs to products,customers,and other costing objects in an activity-based costing system.This results in overstated costs.
D) More accurate product costs may result in increasing the selling prices of some products.

Question 9

Which of the following activity levels is an example of the clerical activity associated with processing purchase orders to produce an order for a standard product?

A) Unit-level activity.
B) Batch-level activity.
C) Product-level activity.
D) Organization-sustaining activity.

Question 10

What is a transaction driver?

A) An event that causes a transaction to begin.
B) A measure of the amount of time required to perform an activity.
C) An event that causes a transaction to end.
D) A simple count of the number of times an activity occurs.

Question 11

Why may departmental overhead rates NOT correctly assign overhead costs?

A) Because of the use of direct labour hours in allocating overhead costs to products rather than machine time or quantity of materials.
B) Because of the high correlation between direct labour hours and the incurrence of overhead costs.
C) Because of the over-reliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced,lot size,or complexity of production.
D) Because of the difficulties associated with identifying cost pools for the first stage of the allocation process.

Question 12

Which of the following would be classified as a product-level activity?

A) Machine setup for a batch of a standard product.
B) Cafeteria facilities available to and used by all employees.
C) Human resource management.
D) Advertising a product.

Question 13

How much cost,in total,would be allocated in the first-stage allocation to the Order Size activity cost pool?

A) $150,000.
B) $234,000.
C) $255,000.
D) $360,000.

Question 14

Human resource management is an example of an activity at which of the following levels?

A) Unit-level activity.
B) Product-level activity.
C) Batch-level activity.
D) Organization-sustaining activity.

Question 15

Costs incurred at which of the following activity levels should NOT be allocated to products for decision-making purposes?

A) Unit-level activities.
B) Batch-level activities.
C) Product-level activities.
D) Organization-sustaining activities.

Question 16

(Appendix 5A)Which of the following best describes a cost object,such as a product or customer,that has a negative green margin?

A) Its yellow margin will be positive.
B) Its yellow margin may be either positive or negative.
C) Its yellow margin will be negative.
D) Its yellow margin will be zero.

Question 17

(Appendix 5A)Which of the following statements concerning ease of adjustment codes is NOT correct?

A) "Green" costs adjust automatically to changes in activity.
B) "Yellow" costs could be adjusted to changes in activity,but such adjustments require management action; the adjustment is not automatic.
C) "Red" costs cannot be adjusted to changes in activity.
D) The costs of idle capacity and organization-sustaining costs are not assigned codes.

Question 18

(Appendix 5A)Which of the following best describes a cost object,such as a product or customer,that has a positive green margin?

A) Its yellow margin will be positive.
B) Its yellow margin may be either positive,negative,or zero.
C) Its yellow margin will be negative.
D) Its yellow margin will be zero.

Question 19

Which of the following statements about overhead allocation based on volume alone is correct?

A) It is a key aspect of the activity-based costing model.
B) It will systematically overcost high-volume products and undercost low-volume products.
C) It will systematically overcost low-volume products and undercost high-volume products.
D) It must be used for external financial reporting.

Question 20

(Appendix 5A)Which of the following best describes a cost object,such as a product or customer,that has a negative red margin?

A) Its yellow margin will be positive.
B) Its yellow margin may be positive,negative,or zero.
C) Its yellow margin will be negative.
D) Its yellow margin will be zero.

Question 21

How much cost,in total,would be allocated in the first-stage allocation to the Order Size activity cost pool?

A) $210,000.
B) $240,000.
C) $255,000.
D) $300,000.

Question 22

How much cost,in total,should not be allocated to orders and products in the second stage of the allocation process if the activity-based costing system is used for internal decision making?

A) $0.
B) $58,000.
C) $68,000.
D) $116,000.

Question 23

What would be the total overhead cost per order according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Filling Orders activity cost pool?

A) $18.50.
B) $23.50.
C) $27.75.
D) $37.00.

Question 24

What would be the total overhead cost per customer according to the activity-based costing system,rounded to the nearest whole dollar? In other words,what would be the overall activity rate for the Customer Support activity cost pool?

A) $10,800.
B) $12,600.
C) $13,650.
D) $14,400.

Question 25

How much cost,in total should not be allocated to orders and products in the second stage of the allocation process if the activity-based costing system is used for internal decision making?

A) $0.
B) $60,000.
C) $80,000.
D) $120,000.

Question 26

How much cost,in total,would be allocated in the first-stage allocation to the Customer Support activity cost pool?

A) $116,000.
B) $304,500.
C) $428,000.
D) $493,000.

Question 27

To the nearest whole dollar,how much wages and salaries cost would be allocated to a customer who placed eight orders in a year?

A) $7,392.
B) $9,548.
C) $11,704.
D) $14,784.

Question 28

To the nearest whole dollar,how much wages and salaries cost would be allocated to a customer who placed eight orders in a year?

A) $7,474.
B) $9,191.
C) $10,908.
D) $14,948.

Question 29

How much cost,in total,would be allocated in the first-stage allocation to the Order Size activity cost pool?

A) $123,000.
B) $222,000.
C) $307,500.
D) $492,000.

Question 30

What would be the total overhead cost per customer according to the activity-based costing system,rounded to the nearest whole dollar? In other words,what would be the overall activity rate for the Customer Support activity cost pool?

A) $11,100.
B) $12,950.
C) $13,800.
D) $14,800.

Question 31

To the nearest whole dollar,how much wages and salaries cost would be allocated to a customer who placed four orders in a year?

A) $7,124.
B) $8,859.
C) $10,595.
D) $14,248.

Question 32

How much cost,in total,would be allocated in the first-stage allocation to the Customer Support activity cost pool?

A) $120,000.
B) $255,000.
C) $282,000.
D) $390,000.

Question 33

What would be the total overhead cost per customer according to the activity-based costing system,rounded to the nearest whole dollar? In other words,what would be the overall activity rate for the Customer Support activity cost pool?

A) $11,700.
B) $12,350.
C) $12,667.
D) $13,000.

Question 34

How much cost,in total,would be allocated in the first-stage allocation to the Customer Support activity cost pool?

A) $180,000.
B) $255,000.
C) $280,000.
D) $330,000.

Question 35

How much cost,in total,should not be allocated to orders and products in the second stage of the allocation process if the activity-based costing system is used for internal decision making?

A) $0.
B) $82,000.
C) $104,000.
D) $164,000.

Question 36

What would be the total overhead cost per order according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Filling Orders activity cost pool?

A) $48.00.
B) $49.67.
C) $52.00.
D) $56.00.

Question 37

How much cost,in total,would be allocated in the first-stage allocation to the Customer Support activity cost pool?

A) $164,000.
B) $389,500.
C) $494,000.
D) $615,000.

Question 38

How much cost,in total,would be allocated in the first-stage allocation to the Order Size activity cost pool?

A) $29,000.
B) $84,000.
C) $188,000.
D) $348,000.

Question 39

What would be the total overhead cost per order according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Filling Orders activity cost pool?

A) $273.00.
B) $292.50.
C) $302.00.
D) $312.00

Question 40

How much cost,in total,should NOT be allocated to orders and products in the second stage of the allocation process if the activity-based costing system is used for internal decision making?

A) $0.
B) $60,000.
C) $84,000.
D) $120,000.

Question 41

What would be the total overhead cost per delivery according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Deliveries activity cost pool?

A) $6.00
B) $6.60
C) $6.80
D) $7.20

Question 42

The cost per unit of Product S under activity-based costing is closest to which of the following?

A) $1.83.
B) $1.98.
C) $5.00.
D) $10.00.

Question 43

The cost per unit of Product P under activity-based costing is closest to which of the following?

A) $4.00.
B) $6.88.
C) $10.00.
D) $30.16.

Question 44

The predetermined overhead rate (i.e.,activity rate)for Activity 2 under the activity-based costing system is closest to which of the following?

A) $10.25.
B) $16.77.
C) $24.91.
D) $26.36.

Question 45

What would be the total overhead cost per bouquet according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Making Bouquets activity cost pool?

A) $0.90.
B) $1.05.
C) $1.10.
D) $1.20.

Question 46

The cost per unit of Product B is closest to which of the following?

A) $17.69.
B) $41.58.
C) $74.73.
D) $81.53.

Question 47

The activity rate under the activity-based costing system for Activity 3 is closest to which of the following?

A) $29.32.
B) $30.00.
C) $33.33.
D) $41.53.

Question 48

(Appendix 5B)The overhead cost per unit of Product B under the activity-based costing system is closest to which of the following?

A) $26.09.
B) $35.28.
C) $38.16.
D) $50.66.

Question 49

(Appendix 5B)The predetermined overhead rate (i.e.,activity rate)for Activity 2 under the activity-based costing system is closest to which of the following?

A) $9.15.
B) $10.23.
C) $51.99.
D) $86.93.

Question 50

(Appendix 5B)The predetermined overhead rate under the traditional costing system is closest to which of the following?

A) $9.15.
B) $19.08.
C) $43.48.
D) $84.43.

Question 51

The predetermined overhead rate (i.e.,activity rate)for Activity 1 under the activity-based costing system is closest to which of the following?

A) $13.17.
B) $24.15.
C) $28.97.
D) $83.66.

Question 52

What would be the total overhead cost per delivery according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Deliveries activity cost pool?

A) $24.00.
B) $26.50.
C) $27.00.
D) $30.00.

Question 53

(Appendix 5B)The overhead cost per unit of Product B under the traditional costing system is closest to which of the following?

A) $5.49.
B) $11.45.
C) $26.09.
D) $50.66.

Question 54

The cost per unit of Product A is closest to which of the following?

A) $22.70.
B) $47.89.
C) $57.20.
D) $59.23.

Question 55

The predetermined overhead rate under the traditional costing system is closest to which of the following?

A) $13.17.
B) $21.60.
C) $37.46.
D) $270.66.

Question 56

The overhead cost per unit of Product B under the traditional costing system is closest to which of the following?

A) $2.63.
B) $4.32.
C) $7.49.
D) $54.13.

Question 57

The overhead cost per unit of Product A under the activity-based costing system is closest to which of the following?

A) $11.24.
B) $70.79.
C) $81.20.
D) $86.97.

Question 58

The activity rate for Activity 3 is closest to which of the following?

A) $26.67.
B) $56.74.
C) $116.18.
D) $119.72.

Question 59

The activity rate under the activity-based costing system for Activity 2 is closest to which of the following?

A) $16.00.
B) $21.97.
C) $26.67.
D) $89.33.

Question 60

What would be the total overhead cost per bouquet according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Making Bouquets activity cost pool?

A) $1.35.
B) $1.73.
C) $1.79.
D) $2.10.

Question 61

(Appendix 5A)In an action analysis report prepared for the function mentioned above,what would be the "yellow margin" in the report,rounded to the nearest whole dollar?

A) $123.
B) $198.
C) $248.
D) $303.

Question 62

(Appendix 5A)In an action analysis report prepared for the function mentioned above,what would be the "red margin" in the report,rounded to the nearest whole dollar?

A) ($165).
B) ($115).
C) ($15).
D) $135.

Question 63

Which of the following types of costs present the greatest difficulty in efforts to trace them to products and services?

A) Unit-level costs
B) Batch-level costs
C) Product/service-level costs
D) Organization-sustaining costs

Question 64

(Appendix 5B)The overhead cost per unit of Product B under the activity-based costing system is closest to:

A) $73.74
B) $56.62
C) $22.38
D) $47.52

Question 65

According to the activity-based costing system,what was the total cost (including the costs of raw ingredients)of the function mentioned above,rounded to the nearest whole dollar?

A) $1,370.
B) $1,520.
C) $2,020.
D) $2,220.

Question 66

(Appendix 5A)In an action analysis report prepared for the function mentioned above,what would be the "red margin" in the report,rounded to the nearest whole dollar?

A) ($70).
B) ($20).
C) $80.
D) $230.

Question 67

Which of the following is the fundamental and primary driver of costs in the ABC model?

A) Cost objects.
B) Activities.
C) Consumption of resources.
D) Process improvements.

Question 68

Which of the following is a distinctive feature of an ABC system in comparison to a departmental overhead application system?

A) It is a two-stage allocation system.
B) It uses transactional drivers.
C) It must include at least one non unit-level driver.
D) It uses duration drivers.

Question 69

What would be the total overhead cost per delivery according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Deliveries activity cost pool?

A) $3.93.
B) $4.71.
C) $4.93.
D) $5.50.

Question 70

Which of the following is NOT a technique directly or indirectly useful in process improvements?

A) The lean thinking model.
B) Process costing.
C) Activity-based costing.
D) Activity-based management.

Question 71

According to the activity-based costing system,what was the total cost (including the costs of raw ingredients)of the function mentioned above,rounded to the nearest whole dollar?

A) $910.
B) $1,060.
C) $1,560.
D) $1,760.

Question 72

(Appendix 5A)In an action analysis report prepared for the function mentioned above,what would be the "yellow margin" in the report,rounded to the nearest whole dollar?

A) $240.
B) $315.
C) $365.
D) $420.

Question 73

What would be the total overhead cost per bouquet according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Making Bouquets activity cost pool?

A) $2.48.
B) $2.75.
C) $2.83.
D) $3.03.

Question 74

According to the activity-based costing system,what was the total cost (including the costs of raw ingredients)of the function mentioned above,rounded to the nearest whole dollar?

A) $505.
B) $655.
C) $1,155.
D) $1,355.

Question 75

(Appendix 5B)The total cost of a unit of product P85G under the company's traditional costing system is closest to:

A) $146.97
B) $102.58
C) $101.69
D) $80.50

Question 76

(Appendix 5B)The predetermined overhead rate under the traditional costing system is closest to:

A) $25.34
B) $22.60
C) $37.30
D) $122.91

Question 77

(Appendix 5B)The overhead cost per unit of Product B under the traditional costing system is closest to:

A) $22.38
B) $13.56
C) $73.74
D) $15.20

Question 78

(Appendix 5A)In an action analysis report prepared for the function mentioned above,what would be the "yellow margin" in the report,rounded to the nearest whole dollar?

A) $635.
B) $710.
C) $760.
D) $815.

Question 79

(Appendix 5A)In an action analysis report prepared for the function mentioned above,what would be the "red margin" in the report,rounded to the nearest whole dollar?

A) $390.
B) $440.
C) $540.
D) $690.

Question 80

(Appendix 5B)The predetermined overhead rate (i.e.,activity rate)for Activity 2 under the activity-based costing system is closest to:

A) $22.60
B) $54.84
C) $58.76
D) $36.73