Deck 8: Activity-Based Costing

Question 1

A resource driver is:

A) a factor that causes a cost
B) a unit of work performed within the organisation
C) used to estimate the cost of resources consumed by an activity
D) a factor that causes a cost AND is used to estimate the cost of resources consumed by an activity

Answer 1

D

Question 2

Characteristics of activity-based costing include:

A) a greater number of overhead cost application bases compared to conventional costing systems
B) the overhead cost application bases are likely to be more accurate cost drivers than would be the case in conventional costing systems
C) the simplicity of the system makes it easy to implement
D) a greater number of overhead cost application bases compared to conventional costing systems AND the overhead cost application bases are likely to be more accurate cost drivers than would be the case in conventional costing systems

Answer 2

D

Question 3

Calculate the activity cost per unit of activity driver if the activity cost is $3500,the activity driver is the number of batches and the total quantity of the activity driver is 1750 batches.

A) $3.00 per batch
B) $1.50 per batch
C) $2.00 per batch
D) $2.50 per batch

Answer 3

C

Question 4

Activity management:

A) is another name for activity-based costing
B) is the same as the comprehensive activity-based product costing system
C) uses activity information to monitor and control what is happening in a business
D) None of the given answers

Question 5

Consider the following statements.Which of the statements is true?

A) As the activity-based system accuracy increases,the cost of inferior decisions based on distorted product costs decreases.
B) As the activity-based system accuracy increases,the costs of implementing and operating the system increase.
C) As the activity-based system accuracy increases,the total cost from inferior decisions and the cost to implement and operate the system decrease.
D) As the activity-based system accuracy increases,the cost of inferior decisions based on distorted product costs decreases AND as the activity-based system accuracy increases,the costs of implementing and operating the system increase.

Question 6

Activity-based costing has most to offer where:

A) overhead is high and volume driven
B) overhead is high and non-volume driven
C) overhead is low and non-volume driven
D) direct labour is a major proportion of total costs

Question 7

Consider the following statements.Conventional costing systems can produce distorted product costs if:
I)overheads are driven by non-volume factors
Ii)overheads are a minor part of the product cost
Iii)it fails to recognise non-manufacturing costs as product costs
Which of the statements is true?

A) i
B) ii
C) iii
D) i and iii

Question 8

Which of the following can signal the need for a new product costing system?

A) Bids won and lost are difficult to explain.
B) Competitors' high-volume products are priced unreasonably low.
C) Our low-volume products are priced low compared to competitors.
D) All of the given answers

Question 9

Which of the following statements is false?

A) Under conventional costing,product cost distortions will be relatively insignificant if overhead costs are a small proportion of product cost.
B) Activity-based costing will significantly improve the product cost accuracy where overhead costs are a small proportion of total costs.
C) Activity-based costing will significantly improve product cost accuracy where there is significant product diversity.
D) Upstream and downstream costs are often a significant part of a product's costs.

Question 10

Calculate the cost of processing one sales order if the total activity cost is $1 720 000 p.a. ,the activity driver is the number of orders received and the annual quantity of the activity driver is 43 000 orders.

A) $20 per order
B) $25 per order
C) $40 per order
D) $50 per order

Question 11

Which of the following statements regarding activity-based costing (ABC)is false?

A) ABC can be used to measure the cost of cost objects.
B) ABC can be used to analyse the profitability of customers.
C) ABC is not an appropriate tool for analysing non-manufacturing costs.
D) ABC evolved as a response to problems with conventional costing systems.

Question 12

Consider the following statements.Activity-based costing is more difficult in a service business because:
I)service businesses have a low proportion of overhead in their total costs
Ii)service businesses tend to have a higher level of facility costs than most manufacturers
Iii)it is often difficult to identify service activities because they are non-repetitive
Which of the above statements is true?

A) i
B) ii
C) ii and iii
D) i,ii and iii

Question 13

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?

A) i
B) ii
C) iii
D) None of the given answers

Question 14

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.

A) iii
B) ii
C) i and iii
D) ii and iii

Question 15

Which of the following can signal the need for a new product costing system?

A) Line managers do not believe reported product costs.
B) Complex products have high reported profitability while more basic high-volume products show small margins or even losses.
C) Overhead rates are high and increasing.
D) All of the given answers

Question 16

Which of the following statements is false?

A) Conventional costing systems tend to over cost high-volume product lines.
B) Conventional costing systems tend to create a product cost distortion problem.
C) In conventional costing,the high-volume products are often subsidising the low-volume products.
D) Conventional product costing systems recognise a range of non-volume-based cost drivers.

Question 17

Companies are likely to benefit from activity-based costing systems if:

A) they have wide variations in the volume of individual production runs and setups are costly
B) they have a narrow range of products with similar volumes and setups are costly
C) they have a narrow range of products and setups are not costly
D) None of the given answers

Question 18

In a simple activity-based product costing system:

A) direct material,direct labour,manufacturing overhead and non-manufacturing overhead are assigned to products on an activity basis
B) direct material is traced using a conventional approach,while direct labour,manufacturing overhead and non-manufacturing overhead are assigned to products on an activity basis
C) direct material and direct labour are traced using a conventional approach,manufacturing overhead is assigned on an activity basis and non-manufacturing overhead is expensed as it is incurred
D) direct material,direct labour and manufacturing overhead are traced using a conventional approach,and non-manufacturing overhead is assigned on an activity basis

Question 19

Calculate the cost per unit for setup for one run of 10 000 units if setup labour is $20 per hour and 10 hours are required to set up.

A) $0.04 per unit
B) $0.06 per unit
C) $2.00 per unit
D) $0.02 per unit

Question 20

A cost driver:

A) is a factor that causes a cost
B) may also be a resource driver
C) is a unit of work performed within the organisation
D) is a factor that causes a cost AND may also be a resource driver

Question 21

Quality Carvings manufactures furniture.They have decided to develop an activity-based costing system.Shown below is each activity,its cost and the activity driver used to assign these costs to products.Under an activity-based costing system,what is the activity cost per unit of activity driver for processing orders?

A) $93.33
B) $25.20
C) $25.40
D) $62.00

Question 22

Consider the following statements regarding conventional costing systems.i.All overhead costs are assumed to be driven by volume of production
Ii)All product costs are direct costs.
Iii)Conventional costing systems tend to distort product costs when numerous products are made that vary in their production requirements.Which statement/s is/are true?

A) i
B) ii and iii
C) i and iii
D) ii

Question 23

The Pinewood Furniture Company Pty Ltd plans to manufacture two lines of chairs in the coming year-lounge and patio.The company is considering introducing an activity-based costing system.Given below are each activity,its cost and its related activity driver.The level of activity for the year is:
Under an activity-based costing system,what is the activity cost per unit of activity driver for machine setups?

A) $5000 per setup
B) $2500 per setup
C) $1200 per setup
D) $1667 per setup

Question 24

Summer Ice Pty Ltd is a manufacturer of a range of ice cream products.The following is a list of activities,costs and quantities of activity drivers for a number of activities that occur in the factory.Under an activity-based system,what is the activity cost per unit of activity division for packing into containers?

A) $0.06
B) $0.05
C) $0.02
D) $0.04

Question 25

The Pinewood Furniture Company Pty Ltd plans to manufacture two lines of chairs in the coming year-lounge and patio.The company is considering introducing an activity-based costing system.Given below are each activity,its cost and its related activity driver.The level of activity for the year is:
Under an activity-based costing system,what is the activity cost per unit of activity driver for assembly?

A) $4.80 per part
B) $24 per direct labour hour
C) $10 per part
D) $10 per direct labour hour

Question 26

Which of the following are examples of batch level activities?

A) Machine setup
B) Materials handling
C) Machining
D) Machine setup AND materials handling

Question 27

An activity cost pool:

A) is a combination of a number of activities
B) must be made up of activities at the same level
C) can only be used at the product level
D) is a combination of a number of activities AND must be made up of activities at the same level

Question 28

The Pinewood Furniture Company Pty Ltd plans to manufacture two lines of chairs in the coming year-lounge and patio.The company is considering introducing an activity-based costing system.Given below are each activity,its cost and its related activity driver.The level of activity for the year is:
Under an activity-based costing system,what is the total cost of lounge chairs for the year?

A) $1 710 000
B) $1 410 000
C) $890 000
D) $1 150 000

Question 29

Conventional product costing systems result in inaccurate product costs when:

A) direct labour increases
B) the proportion of direct labour and raw material increases
C) product diversity increases
D) the proportion of direct labour and raw material increases AND product diversity increases

Question 30

Quality Carvings manufactures furniture.They have decided to develop an activity-based costing system.Shown below is each activity,its cost and the activity driver used to assign these costs to products.Under an activity-based costing system,what is the activity cost per unit of activity driver for making patterns?

A) $4.73
B) $10.00
C) $17.50
D) $21.50

Question 31

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 Cheap?

A) $141.00
B) $272.00
C) $164.00
D) $228.24

Question 32

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

A) The unit level activity
B) The batch level activity
C) The facility level activity
D) The differential level activity

Question 33

Consider the following statements.i.Product diversity creates problems in product costing because diverse products tend to utilise productive activities in very different ways
Ii)Overhead costs that are not incurred at the unit level create product-costing problems because they do not vary with measures such as direct labour hours or machine hours.
Iii)Product diversity exists when a single product,such as pens,are made in different colours.Which of the above statement/s is/are true?

A) i
B) ii
C) i and ii
D) i and iii

Question 34

The Pinewood Furniture Company Pty Ltd plans to manufacture two lines of chairs in the coming year-lounge and patio.The company is considering introducing an activity-based costing system.Given below are each activity,its cost and its related activity driver.The level of activity for the year is:
Under an activity-based costing system,what is the activity cost per unit of activity driver for material handling?

A) $2.00 per part
B) $16.67 per part
C) $2.50 per part
D) $5.00 per part

Question 35

The Pinewood Furniture Company Pty Ltd plans to manufacture two lines of chairs in the coming year-lounge and patio.The company is considering introducing an activity-based costing system.Given below are each activity,its cost and its related activity driver.The level of activity for the year is:
Under an activity-based costing system,what is the total cost of patio chairs for the year?

A) $1 150 000
B) $890 600
C) $1 710 000
D) $590 000

Question 36

Summer Ice Pty Ltd is a manufacturer of a range of ice cream products.The following is a list of activities,costs and quantities of activity drivers for a number of activities that occur in the factory.Under an activity-based costing system,what is the activity cost per unit of activity driver for measuring ingredients?

A) $12.90
B) $15.00
C) $13.80
D) $14.00

Question 37

Which of the following statements is true? Indicators of problems with product cost systems are:
I)non-manufacturing costs that are product related become insignificant
Ii)the proportion of manufacturing overhead not driven by production volume increases
Iii)there is an increase in product diversity

A) i
B) ii
C) iii
D) ii and iii

Question 38

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)?

A) $272
B) $282
C) $228
D) $320

Question 39

The Pinewood Furniture Company Pty Ltd plans to manufacture two lines of chairs in the coming year-lounge and patio.The company is considering introducing an activity-based costing system.Given below are each activity,its cost and its related activity driver.The level of activity for the year is:
Under an activity-based costing system,what is the activity cost per unit of activity driver for finishing?

A) $7.50 per direct labour hour
B) $30.00 per direct labour hour
C) $25.00 per unit
D) $30.00 per unit

Question 40

In an activity-based costing system,a bill of activities will include:

A) a charge for allocated overhead
B) the activity cost per unit of activity driver
C) the quantity of activity consumed
D) the activity cost per unit of activity driver AND the quantity of activity consumed

Question 41

Despite the obvious advantages of ABC,many firms are still reluctant to implement it.What are the reasons for this reluctance?
I)Uncertainty about the benefits of ABC
Ii)The opinion that the current system serves all the firm's needs
Iii)Lack of resources to implement ABC

A) i and ii
B) ii and iii
C) i and iii
D) i,ii and iii

Question 42

A cost driver is:

A) a collection of cost pools
B) a cost-allocation base chosen arbitrarily
C) any factor which caused costs to be incurred
D) costs that behave in a similar manner

Question 43

Behavioural issues may be important in implementing an ABC system.Which of the following are some of the methods employed to minimise adverse outcomes?
I)Use a top down approach
Ii)Use a bottom up approach.
Iii)Ensure all employees have a sense of ownership in the system.

A) i and ii
B) ii and iii
C) iii
D) i and iii

Question 44

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

A) overhead costs are overapplied
B) overhead costs are underapplied
C) actual overheads exceed overhead applied
D) overhead costs are underapplied AND actual overheads exceed overhead applied

Question 45

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.

A) i,ii and iii
B) ii,iii and iv
C) i,iii and iv
D) i,ii,iii and iv

Question 46

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

A) i and ii
B) i and iii
C) ii and iii
D) iii and iv

Question 47

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

A) Competitors' prices seem unrealistically low.
B) Products that are difficult to make have low profit margin.
C) At the end of the year,there is a significant amount of overapplied overhead.
D) Customers are not deterred by a significant increase in prices.

Question 48

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

A) The product costs are distorted
B) Complex products are under costed
C) Simple products are over costed
D) All the given answers

Question 49

Which of the following statements best completes this sentence: 'Activity-based costing …'

A) asserts that cost behaviour can best be determined if the split between fixed and variable cost is ignored
B) has replaced standard costing as the preferred method of allocating costs to products
C) is based on allocating fixed overheads based on the elements that drive them
D) emphasises the need to obtain a better understanding of the behaviour of overhead costs

Question 50

Which of the following are limitations of ABC?
I)The system requires significantly more data
Ii)The system requires extensive updating if the product range changes.
Iii)The inclusion of facility level costs greatly increases the accuracy of cost per unit.

A) i and ii
B) i and iii
C) i,ii and iii
D) None of the given answers

Question 51

Which of the following statements is/are true?
I)Both conventional cost systems and ABC focus on resources supplied
Ii)Plant and equipment is an example of a committed resource under an ABC system.
Iii)Committed resources always equal resources used.

A) i
B) ii
C) iii
D) ii and iii

Question 52

Appropriate cost-driver identification depends on:

A) a cause-and-effect relationship existing between the cost driver and costs of the activity
B) the number of cost pools used
C) homogeneity of cost pools
D) the number of products produced or services provided

Question 53

Which of the following are common production volume measures?
I)Direct labour hours
Ii)Machine hours
Iii)Direct material cost

A) i and ii
B) ii and iii
C) i and iii
D) iii only

Question 54

Volume-based measures may be used to apply overhead when:

A) production runs are of various sizes and overhead costs are directly proportional to the size of the run
B) production runs are of various sizes but each run has a constant setup time
C) purchasing costs are related to the number of purchase orders not the number of items bought
D) material handling costs are driven by the number of materials issued to production,and components are used differentially by different products

Question 55

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.Which of the following activities should be grouped together in the same activity cost pool?

A) Machining and machine set up
B) Machine set up and quality inspection
C) Forklifting and quality inspection
D) Machining and forklifting

Question 56

The benefits arising from the introduction of activity-based costing are likely to be greater where:
I)overhead is a large proportion of total cost
Ii)implementation costs are not high due to the support of advanced IT systems
Iii)batches are of a similar size

A) i and ii
B) i and iii
C) ii and iii
D) None of the given answers

Question 57

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.

A) i
B) i and iii
C) ii and iii
D) i,ii and iii

Question 58

Direct labour hours or direct labour dollars are suitable overhead allocation bases when:

A) overhead costs are insignificant
B) direct labour details are readily available
C) direct material costs are highly correlated with direct labour hours
D) they have been used satisfactorily in the past

Question 59

Which of the following are usually included in conventional cost systems?
I)Direct material is traced to products
Ii)Non-manufacturing costs are assigned to products.
Iii)Manufacturing overhead is allocated using a production-volume-based cost driver.

A) i
B) ii
C) iii
D) i and iii

Question 60

Recent increases in downstream costs have occurred because of:
I)increased advertising and product promotion
Ii)increased customer servicing
Iii)increased competition
Iv)increases in product design

A) i and ii
B) ii and iii
C) iii and iv
D) i,ii and iii

Question 61

At a recent professional meeting,two accountants discussed product-costing problems in their respective companies.Both accountants are familiar with ABC systems but neither of their firms utilise this method.Accountant A reported that part of the problem in product costing in his firm is that there are major differences between product lines as to volume of units,utilisation of various activities,quality assurance requirements established by customers and size of the products.Accountant B noted that in her firm,which produces consumer products,all products undergo the same basic production processes and in the same sequence,but in an increasing variety of colours and packaging modes.Both accountants are worried about the potential distortion of product costs under their conventional product costing systems.Which accountant should be more concerned about the potential distortion? Explain.

Question 62

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 forklifting costs and machine set up costs allocated to Product X are:

A) $2400 and $4000
B) $5000 and $9000
C) $2400 and $5000
D) $5000 and $4000

Question 63

While ABC can be used with service industries,it can be difficult to implement because service industries do not always have repetitive individual activities.

Question 64

Puff Animal Hospital looks after the health of household pets such as dogs,cats,birds and rabbits.The hospital wants to use an activity based costing system to allocate costs to each animal case it handles.These cases tend to vary in their complexity: some pets are here for a regular check ups and immunisation;other pets have emergencies which require surgery.Some pets are very exotic and require the attention of the supervisor vet;others are common animals with common problems such that only the junior vets are needed.Puff Animal Hospital is quite large;on average there are five vets,a general assistant,and two receptionists on duty at one time.Which of the following is NOT a reason that supports the use of activity-based costing at Puff Animal Hospital?

A) There are a variety of different activities involved for cases that vary in complexity
B) It is easy to trace the time each vet spent on different animals
C) The hospital is large and therefore likely to have a lot of indirect costs
D) Some cases require surgery which means using surgery facilities;other cases do not.

Question 65

ABC is a methodology that can be as simple or as complex as the organisation wants it to be.

Question 66

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:

A) $0.16 and $0.32
B) $1 and $2
C) $0.5 and $1
D) $1 and $1

Question 67

Conventional product costing does not generally include non-manufacturing costs despite the fact that these costs are now a significant proportion of most organisations' total costs.

Question 68

There does not need to be a strong correlation between overhead costs and the cost driver to ensure accurate product costs.

Question 69

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.Which of the following are the correct activity rates for machining and quality inspection?

A) $1 per machine hour and $2 per machine hour
B) $5 per batch and $10 per batch
C) $2400 and $5000
D) $1 per machine hour,and $10 per batch

Question 70

Cofission Electronics make small electronic parts.The management accountant at Cofission,Jasmine Vake,decides to implement an activity-based costing (ABC)system.She lists the following points to support her decision:
I)The recent cost report shows that the ratio of prime costs to manufacturing overhead cost is approximately 1:3
Ii)Cofission is a small company.
Iii)Cofission has three product lines: basic parts (parts that are common to many products and many suppliers),customized parts (electronic parts that are highly customized to very specialized electric motors),prototypes (where Cofission Electronics need to design as well as manufacture these specialized electronic parts).iv.Cofission Electronics has recently implemented a flexible manufacturing system;this practically eliminates any setup costs;with this system,product customization takes very little additional time.You are not convinced that all of these points support Jasmine's decision.Which of the above points contradict Jasmine's decision?

A) i and ii
B) ii
C) i.ii and iv
D) ii and iv

Question 71

One of the major benefits of ABC is that there are virtually no behavioural implications of introducing such a costing system,as there is no real change in the way data are collected and analysed.

Question 72

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

Question 73

Puff Animal Hospital looks after the health of household pets such as dogs,cats,birds and rabbits.The hospital wants to use an activity based costing system to allocate costs to each animal case it handles.These cases tend to vary in their complexity: some pets are here for a regular check ups and immunization;other pets have emergencies which require surgery.Some pets are very exotic and require the attention of the supervisor vet,others are common animals with common problems such that only the junior vets are needed.Puff Animal Hospital is quite large;on average there are five vets,a general assistant,and two receptionists on duty at one time.Which of the following is an example of a facility sustaining activity for Puff Animal Hospital?

A) The supervisor vet supervises junior vets in some of the more complex cases
B) Processing invoices
C) The general vet gives health check ups for small dogs
D) The general assistant cleans the hospital

Question 74

The activity drivers used with ABC can include labour hours,machine parts,numbers of setups and kilograms of materials.

Question 75

Cofission Electronics make small electronic parts.The management accountant at Cofission,Jasmine Vake,decides to implement an activity-based costing (ABC)system.She lists the following points to support her decision:
I)The recent cost report shows that the ratio of prime costs to manufacturing overhead cost is approximately 1:3
Ii)Cofission is a small company.
Iii)Cofission has three product lines: basic parts (parts that are common to many products and many suppliers),customised parts (electronic parts that are highly customised to very specialised electric motors),prototypes (where Cofission Electronics need to design as well as manufacture these specialized electronic parts).iv.Cofission Electronics has recently implemented a flexible manufacturing system;this practically eliminates any setup costs;with this system,product customization takes very little additional time.You are not convinced that all of these points support Jasmine's decision.Which of the above points support the use of ABC in Cofission?

A) i,ii and iii
B) ii,iii and iv
C) i and iii
D) iii and iv

Question 76

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.

Question 77

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:

A) $20.10
B) $18.28
C) $5.10
D) $3.28

Question 78

Activities in ABC can be classified as batch level activities,product-sustaining activities,facility-sustaining activities and departmental activities.