Question 1

Which of the following is an example of a cost item that should be classified as a prevention cost?

Accepted Answer

A) Maintenance of manufacturing machinery 
B) Quality control checks 
C) Rework costs 
D) Warranty costs

Question 2

One condition that favors using a departmental overhead rate, rather than plantwide overhead rates, is that different departments incur different amounts and types of manufacturing overhead.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an example of a cost item that should be classified as an internal failure cost?

Accepted Answer

A) Inspection costs 
B) Employee training costs 
C) Rework costs 
D) Product return costs

Question 4

Indications that a product cost system needs revision include

Accepted Answer

A) managers lose bids they expected to win and win bids they expected to lose. 
B) employees do not believe the cost numbers are accurate. 
C) the company uses a single-allocation-base system developed long ago. 
D) all of the above.

Question 5

Hummingbird Manufacturing manufactures small parts and uses an activity-based costing system.  The following parts were produced in October with the following information:
 Total unit costs for Part A is closest to (round to two decimal points)

Accepted Answer

A) $4.64. 
B) $12.14. 
C) $7.63. 
D) $4.71.

Question 6

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 assembly fees for Part 002 is

Accepted Answer

A) $1,000. 
B) $1,250. 
C) $1,500. 
D) $2,500.

Question 7

An example of a prevention cost is the cost of redesigning the product to reduce its complexity.

Accepted Answer

A) True 
 B)False

Question 8

ABC can be used in routine planning and control decisions as well as pricing, product mix and cost cutting decisions.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following pertains to a lean company?

Accepted Answer

A) An individual does fewer tasks than under a traditional production system. 
B) Product costs attached to units are tracked as units move through production. 
C) Rather than many individual journal entries, summary journal entries are made when units are completed. 
D) Units are produced in larger batches than under a traditional production system.

Question 10

The goal of value-engineering is to

Accepted Answer

A) improve value-added activities. 
B) eliminate or reduce non-value added activities. 
C) both A and B. 
D) none of the above.

Question 11

The goal of value-engineering is to eliminate all waste in the system by making the company's processes as effective and efficient as possible.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following can be used in conjunction with activity-based costing?

Accepted Answer

A) Job costing 
B) Process costing 
C) Both A and B 
D) Neither A nor B

Question 13

The cost of evaluating potential raw material suppliers is an example of what type of cost?

Accepted Answer

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

Question 14

Hummingbird Manufacturing manufactures small parts and uses an activity-based costing system.  The following parts were produced in October with the following information:
 Total packaging fees for all three parts is

Accepted Answer

A) $11,000. 
B) $33,000. 
C) $ 6,250. 
D) $ 5,100.

Question 15

Ryan Fabrication allocates manufacturing overhead to each job using departmental overhead rates. Ryan's operations are divided into a metal casting department and a metal finishing department. The casting department uses a departmental overhead rate of $52 per machine hour, while the finishing department uses a departmental overhead rate of $28 per direct labor hour. Job A216 used the following direct labor hours and machine hours in the two departments:  The cost for direct labor is $32 per direct labor hour and the cost of the direct materials used by Job A216 is $1,800.
How much manufacturing overhead would be allocated to Job A216 using the departmental overhead rates?

Accepted Answer

A) $544 
B) $596 
C) $1,360 
D) $454

Question 16

Hummingbird Manufacturing manufactures small parts and uses an activity-based costing system.  The following parts were produced in October with the following information:
 Total assembly fees for part B is

Accepted Answer

A) $ 2,500. 
B) $17,000. 
C) $ 3,250. 
D) $ 975.

Question 17

If a company uses departmental overhead allocation rates, then the amount of manufacturing overhead allocated to the job is equal to the plantwide overhead rate multiplied by the actual use of the cost allocation base.

Accepted Answer

A) True 
 B)False

Question 18

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:
 How much of the correspondence cost will be assigned to Department P?

Accepted Answer

A) $16,000 
B) $9,000 
C) $8,000 
D) $1,500

Question 19

Molding and sanding each unit of product would most likely be classified as a ________ cost.

Accepted Answer

A) unit-level 
B) batch-level 
C) product-level 
D) facility-level

Question 20

Inspection of incoming raw materials and production loss caused by downtime are examples of prevention costs.

Accepted Answer

A) True 
 B)False

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

Which of the following is an example of a cost item that should be classified as a prevention cost?

One condition that favors using a departmental overhead rate, rather than plantwide overhead rates, is that different departments incur different amounts and types of manufacturing overhead.

Which of the following is an example of a cost item that should be classified as an internal failure cost?

Indications that a product cost system needs revision include

Hummingbird Manufacturing manufactures small parts and uses an activity-based costing system. The following parts were produced in October with the following information: Total unit costs for Part A is closest to (round to two decimal points)

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 assembly fees for Part 002 is

An example of a prevention cost is the cost of redesigning the product to reduce its complexity.

ABC can be used in routine planning and control decisions as well as pricing, product mix and cost cutting decisions.

Which of the following pertains to a lean company?

The goal of value-engineering is to

The goal of value-engineering is to eliminate all waste in the system by making the company's processes as effective and efficient as possible.

Which of the following can be used in conjunction with activity-based costing?

The cost of evaluating potential raw material suppliers is an example of what type of cost?

Hummingbird Manufacturing manufactures small parts and uses an activity-based costing system. The following parts were produced in October with the following information: Total packaging fees for all three parts is

Hummingbird Manufacturing manufactures small parts and uses an activity-based costing system. The following parts were produced in October with the following information: Total assembly fees for part B is

If a company uses departmental overhead allocation rates, then the amount of manufacturing overhead allocated to the job is equal to the plantwide overhead rate multiplied by the actual use of the cost allocation base.

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: How much of the correspondence cost will be assigned to Department P?

Molding and sanding each unit of product would most likely be classified as a ________ cost.

Inspection of incoming raw materials and production loss caused by downtime are examples of prevention costs.