Question 1

What type of costs are incurred to avoid poor quality goods or services in the first place?

Accepted Answer

A)  Appraisal costs
B)  External costs
C)  Prevention costs
D)  Internal failure costs C

Question 2

Potter & Weasley Company had the following activities, estimated indirect activity costs, and allocation bases:  Potter & Weasley uses activity based costing.
The above activities are used by Departments P and Q as follows:
 What is the cost per driver unit for the account verification activity?

Accepted Answer

A)  $1.75
B)  $1.50
C)  $9.56
D)  $8.00 B

Question 3

With increased competition, managers need more accurate estimates of product costs in order to set prices and to identify the most profitable products.

Accepted Answer

A) True 
 B)False  True

Question 4

Beartowne Enterprises uses an activity-based costing system to assign costs in its auto-parts division.  The following units were produced in December with the following information:
 Total unit costs for Part 001 is closest to (round to two decimal points)

Accepted Answer

A)  $5.70.
B)  $14.84.
C)  $9.37.
D)  $5.36.

Question 5

The allocation base selected for each department should be the cost driver of the costs in the departmental overhead pool.

Accepted Answer

A) True 
 B)False

Question 6

Costs incurred in detecting poor quality goods or services are what type of costs?

Accepted Answer

A)  External failure costs
B)  Appraisal costs
C)  Internal failure costs
D)  Prevention costs

Question 7

The cost of training employees would be classified as a prevention cost.

Accepted Answer

A) True 
 B)False

Question 8

The cost allocation rate for each activity is equal to the total estimated activity cost pool divided by the total estimated activity allocation base.

Accepted Answer

A) True 
 B)False

Question 9

The costs of training production personnel on their job tasks is an example of which of the following types of costs?

Accepted Answer

A)  Internal failure costs
B)  External failure costs
C)  Appraisal costs
D)  Prevention costs

Question 10

Costs incurred to detect poor quality goods and services refer to

Accepted Answer

A)  activity-based costing.
B)  appraisal costs.
C)  value engineering.
D)  prevention costs.

Question 11

Inspection is considered a non-value-added activity.

Accepted Answer

A) True 
 B)False

Question 12

Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2,200 units, while 1,500 units of blenders are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Toasters require 1.25 direct labor hours per unit, while blenders require 1 direct labor hours per unit. The total estimated overhead for the period is $149,115. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:  The overhead cost per Blenders using the traditional costing system would be closest to

Accepted Answer

A)  $28.86.
B)  $38.48.
C)  $99.41.
D)  $21.55.

Question 13

Which term below best describes the quality cost category for "cost of testing toasters before sale"?

Accepted Answer

A)  Appraisal costs
B)  Prevention costs
C)  Internal failure costs
D)  External failure costs

Question 14

Paulo Company has reengineered its production process and should now review and potentially revise its activity-based costing system.

Accepted Answer

A) True 
 B)False

Question 15

One condition that favors using plantwide overhead rates, rather than departmental overhead rates, is that different jobs or products use the departments to a different extent.

Accepted Answer

A) True 
 B)False

Question 16

The storage of raw materials is considered a value-added activity.

Accepted Answer

A) True 
 B)False

Question 17

There will be little benefit to using an activity-based costing system when products are vastly different from each other and consume different amounts of resources.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following condition(s)favors using departmental overhead rates in place of a plantwide overhead rate?

Accepted Answer

A)  Different departments incur different amounts and types of manufacturing overhead.
B)  Different jobs or products use the departments to a different extent.
C)  Both of the above.
D)  Neither of the above.

Question 19

If a company were to increase its appraisal costs by inspecting more units as the units are are in production (during production), the company's external failure costs would most likely

Accepted Answer

A)  decrease.
B)  increase.
C)  not be affected.
D)  Unable to predict

Question 20

Kramer Company manufactures coffee tables and uses an activity-based costing system. Each coffee table consists of 20 separate parts totaling $240 in direct materials, and requires 5.0 hours of machine time to produce. Additional information follows:  What is the cost of materials handling per coffee table?

Accepted Answer

A)  $40.00
B)  $20.00
C)  $7.75
D)  $15.00

Exam 4: Activity-Based Costing, Lean Operations, and the Costs of Quality

What type of costs are incurred to avoid poor quality goods or services in the first place?

Potter & Weasley Company had the following activities, estimated indirect activity costs, and allocation bases: Potter & Weasley uses activity based costing. The above activities are used by Departments P and Q as follows: What is the cost per driver unit for the account verification activity?

With increased competition, managers need more accurate estimates of product costs in order to set prices and to identify the most profitable products.

Beartowne Enterprises uses an activity-based costing system to assign costs in its auto-parts division. The following units were produced in December with the following information: Total unit costs for Part 001 is closest to (round to two decimal points)

The allocation base selected for each department should be the cost driver of the costs in the departmental overhead pool.

Costs incurred in detecting poor quality goods or services are what type of costs?

The cost of training employees would be classified as a prevention cost.

The cost allocation rate for each activity is equal to the total estimated activity cost pool divided by the total estimated activity allocation base.

The costs of training production personnel on their job tasks is an example of which of the following types of costs?

Costs incurred to detect poor quality goods and services refer to

Inspection is considered a non-value-added activity.

Which term below best describes the quality cost category for "cost of testing toasters before sale"?

Paulo Company has reengineered its production process and should now review and potentially revise its activity-based costing system.

One condition that favors using plantwide overhead rates, rather than departmental overhead rates, is that different jobs or products use the departments to a different extent.

The storage of raw materials is considered a value-added activity.

There will be little benefit to using an activity-based costing system when products are vastly different from each other and consume different amounts of resources.

Which of the following condition(s) favors using departmental overhead rates in place of a plantwide overhead rate?

If a company were to increase its appraisal costs by inspecting more units as the units are are in production (during production) , the company's external failure costs would most likely