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

Question 1

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

A)Setting up equipment.
B)Designing a new product.
C)Training employees.
D)Milling a part required for the final product.

Answer 1

A

Question 2

Managing and sustaining product diversity requires many more overhead resources such as production schedulers and product design engineers than managing and sustaining a single product. The costs of these resources can be accurately allocated to products on the basis of direct labor-hours.

Answer 2

False

Question 3

Customer-level activities relate to specific customers and are not tied to any specific products.

Answer 3

True

Question 4

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 labor-based costing system.
B)Changing from a traditional direct labor-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 5

Activity-based costing is a costing method that is designed to provide managers with product cost information for external financial reports.

Question 6

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

Question 7

Personnel administration is an example of a:

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

Question 8

Costs classified as batch-level costs should depend on the number of batches processed rather than on the number of units produced, the number of units sold, or other measures of volume.

Question 9

In activity-based costing, some manufacturing costs may be excluded from product costs.

Question 10

The practice of assigning the costs of idle capacity to products can result in unstable unit product costs.

Question 11

Even departmental overhead rates will not correctly assign overhead costs in situations where a company has a range of products that differ in volume, lot size, or complexity of production.

Question 12

Would the following activities at a manufacturer of canned soup be best classified as unit-level, batch-level, product-level, or organization-sustaining activities?

A)Option A
B)Option B
C)Option C
D)Option D

Question 13

A transaction driver is:

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 14

In general, duration drivers are more accurate measures of the consumption of resources than transaction drivers.

Question 15

The costs of a particular department should not be split up among activity cost pools in an activity-based costing system.

Question 16

An activity-based costing system should include all of the activities carried out in an organization because any simplification will inevitably result in inaccuracy.

Question 17

In activity-based costing, there are a number of activity cost pools, each of which is allocated to products and other costing objects using its own unique measure of activity.

Question 18

A duration driver is:

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 19

Organization-sustaining activities are activities of the general organization that support specific products.

Question 20

Transaction drivers usually take more effort to record than duration drivers.

Question 21

Petitte Corporation has provided the following data from its activity-based costing system: Data concerning the company's product K54A appear below: According to the activity-based costing system, the average cost of product K54A is closest to:

A)$112.64 per unit
B)$114.99 per unit
C)$116.98 per unit
D)$76.91 per unit

Question 22

Property taxes are an example of a cost that would be considered to be:

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

Question 23

Zee Corporation has provided the following data concerning its overhead costs for the coming year: The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year: The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs. The distribution of resource consumption across activity cost pools is given below: The activity rate for the Assembly activity cost pool is closest to:

A)$2.70 per labor-hour
B)$4.25 per labor-hour
C)$4.05 per labor-hour
D)$8.10 per labor-hour

Question 24

Data concerning three of the activity cost pools of Burlingame LLC, a legal firm, have been provided below: The activity rate for the "meeting with clients" activity cost pool is closest to:

A)$1,102,050 per meeting hour
B)$63 per meeting hour
C)$116 per meeting hour
D)$158 per meeting hour

Question 25

Youd Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system: How much cost, in total, would be allocated in the first-stage allocation to the Other activity cost pool?

A)$264,000
B)$208,000
C)$242,000
D)$165,000

Question 26

Designing a new product is an example of a:

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

Question 27

Mccaskey Corporation uses an activity-based costing system with the following three activity cost pools: The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs: The distribution of resource consumption across activity cost pools is given below: The activity rate for the Fabrication activity cost pool is closest to:

A)$1.65 per machine-hour
B)$4.00 per machine-hour
C)$0.80 per machine-hour
D)$2.40 per machine-hour

Question 28

Bossie Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system: How much cost, in total, would be allocated in the first-stage allocation to the Assembly activity cost pool?

A)$196,333
B)$209,000
C)$310,000
D)$155,000

Question 29

Tadlock Corporation has provided the following data concerning its overhead costs for the coming year: The company has an activity-based costing system with the following three activity cost pools and estimated activity for the coming year: The Other activity cost pool does not have a measure of activity; it is used to accumulate costs of idle capacity and organization-sustaining costs. The distribution of resource consumption across activity cost pools is given below: The activity rate for the Order Processing activity cost pool is closest to:

A)$420 per order
B)$520 per order
C)$490 per order
D)$780 per order

Question 30

Reach Consulting Corporation has its headquarters in Chicago and operates from three branch offices in Portland, Dallas, and Miami. Two of the company's activity cost pools are General Service and Research Service. These costs are allocated to the three branch offices using an activity-based costing system. Information for next year follows: Estimated branch data for next year is as follows: How much of the headquarters cost allocation should Dallas expect to receive next year?

A)$280,000
B)$409,500
C)$472,500
D)$504,000

Question 31

Maccarone Corporation has provided the following data from its activity-based costing system: Data concerning one of the company's products, Product A43V, appear below: According to the activity-based costing system, the product margin for product A43V is:

A)$2,891.90
B)$5,931.30
C)$11,917.50
D)$2,236.90

Question 32

Spendlove Corporation has provided the following data from its activity-based costing system: The company makes 430 units of product S78N a year, requiring a total of 1,120 machine-hours, 40 orders, and 30 inspection-hours per year. The product's direct materials cost is $49.81 per unit and its direct labor cost is $12.34 per unit. The product sells for $129.90 per unit. According to the activity-based costing system, the product margin for product S78N is:

A)$4,116.50
B)$29,132.50
C)$6,180.50
D)$5,161.30

Question 33

Kach Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs: The distribution of resource consumption across the three activity cost pools is given below: How much cost, in total, would be allocated in the first-stage allocation to the Other activity cost pool?

A)$249,000
B)$185,000
C)$259,000
D)$231,000

Question 34

An activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles because:

A)some manufacturing costs (i.e., the costs of idle capacity and organization-sustaining costs) will not be assigned to products.
B)some nonmanufacturing costs are assigned to products.
C)first-stage allocations may be based on subjective interview data.
D)all of these are reasons why an activity-based costing system that is designed for internal decision-making will not conform to generally accepted accounting principles.

Question 35

Madson Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs: The distribution of resource consumption across the three activity cost pools is given below: How much cost, in total, would be allocated in the first-stage allocation to the Order Processing activity cost pool?

A)$418,000
B)$357,000
C)$304,000
D)$266,000

Question 36

Drewniak Corporation has provided the following data from its activity-based costing system: The company makes 430 units of product O37W a year, requiring a total of 690 machine-hours, 40 orders, and 10 inspection-hours per year. The product's direct materials cost is $35.72 per unit and its direct labor cost is $29.46 per unit. According to the activity-based costing system, the average cost of product O37W is closest to:

A)$94.11 per unit
B)$89.72 per unit
C)$65.18 per unit
D)$92.49 per unit

Question 37

Gaucher Corporation has provided the following data from its activity-based costing accounting system: The activity rate for the "designing products" activity cost pool is closest to:

A)$78 per product design hour
B)$582,016 per product design hour
C)$128 per product design hour
D)$89 per product design hour

Question 38

Higbie Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs: The distribution of resource consumption across the three activity cost pools is given below: How much cost, in total, would be allocated in the first-stage allocation to the Fabricating activity cost pool?

A)$76,000
B)$204,000
C)$152,000
D)$266,000

Question 39

Christiansen Corporation uses an activity-based costing system with the following three activity cost pools: The Other activity cost pool is used to accumulate costs of idle capacity and organization-sustaining costs. The company has provided the following data concerning its costs: The distribution of resource consumption across activity cost pools is given below: The activity rate for the Order Processing activity cost pool is closest to:

A)$676 per order
B)$780 per order
C)$560 per order
D)$312 per order

Question 40

Mckenrick Corporation uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity based costing system: How much cost, in total, would be allocated in the first-stage allocation to the Setting Up activity cost pool?

A)$229,000
B)$155,000
C)$310,000
D)$248,000

Question 41

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)$104,000
B)$0
C)$52,000
D)$74,000

Question 42

Activity rates from Quattrone Corporation's activity-based costing system are listed below. The company uses the activity rates to assign overhead costs to products: Last year, Product F76D involved 2 customer orders, 434 assembly hours, and 20 batches. How much overhead cost would be assigned to Product F76D using the activity-based costing system?

A)$1,041.80
B)$2,000.04
C)$66,908.88
D)$146.73

Question 43

If the materials handling cost is allocated on the basis of direct labor-hours, how much of the total materials handling cost would be allocated to the prefab barns? (Round off your answer to the nearest whole dollar.)

A)$43,416
B)$57,888
C)$81,569
D)$19,296

Question 44

How much supervisory wages and factory supplies cost would NOT be assigned to products using the activity-based costing system?

A)$320,000
B)$52,000
C)$100,000
D)$0

Question 45

Wecker Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Data concerning two products appear below: How much overhead cost would be assigned to Product V09X using the activity-based costing system?

A)$157.87
B)$91,722.47
C)$10,385.22
D)$5,485.50

Question 46

If the materials handling cost is allocated on the basis of material moves, how much of the total materials handling cost would be allocated to the modular homes? (Round off your answer to the nearest whole dollar.)

A)$57,888
B)$77,184
C)$34,207
D)$96,480

Question 47

How much factory supervision and indirect factory labor cost would be assigned to the Batch Set-Up activity cost pool?

A)$640,000
B)$320,000
C)$112,000
D)$102,000

Question 48

What would be the total overhead cost per delivery according to the activity based costing system? In other words, what would be the overall activity rate for the deliveries activity cost pool? (Round to the nearest whole cent.)

A)$4.71
B)$5.14
C)$3.43
D)$6.00

Question 49

How much factory supervision and indirect factory labor cost would NOT be assigned to products using the activity-based costing system?

A)$0
B)$280,000
C)$360,000
D)$92,000

Question 50

Ekmark Corporation uses the following activity rates from its activity-based costing to assign overhead costs to products: Data for one of the company's products follow: How much overhead cost would be assigned to Product P59G using the activity-based costing system?

A)$54,482.56
B)$5,301.76
C)$10,014.40
D)$154.78

Question 51

How much supervisory wages and factory supplies cost would be assigned to the Batch Processing activity cost pool?

A)$136,500
B)$210,000
C)$420,000
D)$186,000

Question 52

The cost per unit of Product B is closest to:

A)$32.71
B)$60.12
C)$22.95
D)$62.73

Question 53

How much indirect factory wages and factory equipment depreciation cost would be assigned to the Customer Orders activity cost pool?

A)$247,000
B)$390,000
C)$214,500
D)$780,000

Question 54

How much indirect factory wages and factory equipment depreciation cost would NOT be assigned to products using the activity-based costing system?

A)$260,000
B)$520,000
C)$0
D)$104,000

Question 55

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

A)$78,000
B)$93,000
C)$104,000
D)$91,000

Question 56

The activity rate for Activity 2 is closest to:

A)$22.04
B)$117.55
C)$37.97
D)$18.56

Question 57

If the materials handling cost is allocated on the basis of material moves, how much of the total materials handling cost would be allocated to the specialty windows? (Round off your answer to the nearest whole dollar.)

A)$3,266
B)$9,274
C)$8,243
D)$6,595

Question 58

If the materials handling cost is allocated on the basis of direct labor-hours, how much of the total materials handling cost would be allocated to the wall mirrors? (Round off your answer to the nearest whole dollar.)

A)$13,220
B)$15,053
C)$9,892
D)$8,243

Question 59

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

A)$353,000
B)$364,000
C)$338,000
D)$351,000

Question 60

What would be the total overhead cost per bouquet according to the activity based costing system? In other words, what would be the overall activity rate for the making bouquets activity cost pool? (Round to the nearest whole cent.)

A)$1.50
B)$1.58
C)$1.60
D)$1.65

Question 61

Assuming that all of the costs listed above are avoidable costs in the event that an order is turned down, what amount would the company have to charge for the Euertz wedding cake to just break even?

A)$297.27
B)$78.19
C)$245.68
D)$15.45

Question 62

The activity rate for the Processing activity cost pool under activity-based costing is closest to:

A)$5.33 per MH
B)$0.68 per MH
C)$0.52 per MH
D)$3.00 per MH

Question 63

The activity rate for the Processing activity cost pool under activity-based costing is closest to:

A)$3.08 per MH
B)$7.80 per MH
C)$3.10 per MH
D)$0.50 per MH

Question 64

What is the overhead cost assigned to Product C6 under activity-based costing?

A)$19,920
B)$5,100
C)$42,500
D)$25,020

Question 65

What is the product margin for Product P3 under activity-based costing?

A)-$15,600
B)$2,844
C)$14,400
D)$8,484

Question 66

Assuming that all of the costs listed above are avoidable costs in the event that an order is turned down, what amount would the company have to charge for the Winterhalter wedding cake to just break even?

A)$65.95
B)$328.73
C)$19.65
D)$271.68

Question 67

What is the product margin for Product C6 under activity-based costing?

A)$12,480
B)$30,700
C)$5,680
D)$41,700

Question 68

The total amount of overhead cost allocated to Product X would be closest to:

A)$272,600
B)$196,800
C)$234,000
D)$274,000

Question 69

What is the overhead cost assigned to Product P3 under activity-based costing?

A)$30,000
B)$5,916
C)$5,640
D)$11,556

Question 70

Assuming that the company charges $534.11 for the Sparacio wedding cake, what would be the overall margin on the order?

A)$441.41
B)$170.89
C)$164.56
D)$92.70

Question 71

The activity rate for the Supervising activity cost pool under activity-based costing is closest to:

A)$10.00 per batch
B)$5.00 per batch
C)$38.00 per batch
D)$14.70 per batch

Question 72

Assuming that the company charges $613.98 for the Manliguis wedding cake, what would be the overall margin on the order?

A)$106.56
B)$168.40
C)$172.51
D)$507.42

Question 73

How much overhead cost is allocated to the Processing activity cost pool under activity-based costing in the first stage of allocation?

A)$30,800
B)$38,900
C)$31,000
D)$200

Question 74

How much overhead cost is allocated to the Supervising activity cost pool under activity-based costing?

A)$15,400
B)$17,000
C)$34,800
D)$1,600

Question 75

Suppose that the company decides that the present activity-based costing system is too complex and that all costs (except for the costs of purchased decorations) should be allocated on the basis of the number of guests. In that event, what would you expect to happen to the costs of cakes?

A)The cost of cakes for receptions with fewer than the average number of guests would go down.
B)The cost of cakes for receptions with more than the average number of guests would go down.
C)The costs of all cakes would go up.
D)The costs of all cakes would go down.

Question 76

What is the overhead cost assigned to Product B4 under activity-based costing?

A)$1,620
B)$39,000
C)$3,720
D)$5,340

Question 77

How much overhead cost is allocated to the Processing activity cost pool under activity-based costing in the first stage of allocation?

A)$3,200
B)$13,600
C)$27,600
D)$10,400

Question 78

The activity rate for the Supervising activity cost pool under activity-based costing is closest to:

A)$8.00 per batch
B)$17.00 per batch
C)$26.67 per batch
D)$85.00 per batch

Question 79

How much overhead cost is allocated to the Supervising activity cost pool under activity-based costing?

A)$13,200
B)$14,700
C)$8,100
D)$1,500

Question 80

The activity rate for the batch setup activity cost pool is closest to:

A)$91.20
B)$68.40
C)$77.90
D)$39.10