Question 1

Widely varying consumption ratios:

Accepted Answer

A) are reflective of product-line diversity. 
B) indicate an out-of-control production environment. 
C) dictate a need for traditional costing systems. 
D) work against the implementation of activity-based costing. 
E) create an unsolvable product-costing problem.

Question 2

Martin and Beasley,an accounting firm,provides consulting and tax planning services.For many years,the firm's total administrative cost (currently $270,000)has been allocated to services on this basis of billable hours to clients.A recent analysis found that 55% of the firm's billable hours to clients resulted from tax planning services,while 45% resulted from consulting services.
The firm,contemplating a change to activity-based costing,has identified three components of administrative cost,as follows: 
A recent analysis of staff support found a strong correlation with the number of clients served.In contrast,in-house computing and miscellaneous office cost varied directly with the number of computer hours logged and number of client transactions,respectively.Consulting clients served totaled 35% of the total client base,consumed 30% of the firm's computer hours,and accounted for 20% of the total client transactions.
If Martin and Beasley switched from its current accounting method to an activity-based costing system,the amount of administrative cost chargeable to consulting services would:

Accepted Answer

A) decrease by $32,500. 
B) increase by $32,500. 
C) decrease by $59,500. 
D) change by an amount other than those listed above. 
E) change,but the amount cannot be determined based on the information presented.

Question 3

Which of the following is least likely to be classified as a facility-level activity in an activity-based costing system?

Accepted Answer

A) Plant maintenance. 
B) Property taxes. 
C) Machine processing cost. 
D) Plant depreciation. 
E) Plant management salaries.

Question 4

In an activity-based costing system,materials receiving would typically be classified as a:

Accepted Answer

A) unit-level activity. 
B) batch-level activity. 
C) product-sustaining activity. 
D) facility-level activity. 
E) period-level activity.

Question 5

The adoption of a 24-7 employee hotline for workplace complaints is an example of a:

Accepted Answer

A) business-value-added activity. 
B) customer-value-added activity. 
C) nonvalue-added activity. 
D) batch-related activity. 
E) product-sustaining activity.

Question 6

Templeton Industries currently assigns overhead to products by using a predetermined rate based on direct labor hours.The company is considering the adoption of an activity-based costing (ABC)system,and management desires a brief overview of this system before it makes a final decision.
Compare ABC with the company's current system,focusing on the number of cost pools and cost drivers,costing accuracy,and cost distortion.

Accepted Answer

The answer of Templeton Industries currently assigns overhead to products...

Question 7

Which of the following can have a negative impact on a sale's profitability?

Accepted Answer

A) Number of required sales contacts (phone calls,visits,etc. ). 
B) Special shipping instructions. 
C) Accounts receivable collection time. 
D) Purchase-order changes. 
E) All of thesE.

Question 8

Vanguilder combines all manufacturing overhead into a single cost pool and allocates this overhead to products by using machine hours.Activity-based costing would likely show that with Vanguard's current procedures

Accepted Answer

A) all of the company's products are undercosted. 
B) the company's high-volume products are undercosted. 
C) all of the company's products are overcosted. 
D) the company's high-volume products are overcosteD. 
E) the company's low-volume products are overcosted.

Question 9

Consider the following statements regarding product-sustaining activities:
I.They must be performed for each batch of product that is made.
II.They must be performed for each unit of product that is made.
III.They are needed to support an entire product line.
Which of the above statements is (are)true?

Accepted Answer

A) I only. 
B) II only. 
C) III only. 
D) I and II. 
E) II and III.

Question 10

What is HiTech's pool rate for the material-handling activity?

Accepted Answer

A) $1.00 per part. 
B) $2.25 per part. 
C) $6.62 per labor hour. 
D) $13.23 per part. 
E) A rate other than those listed abovE.

Question 11

A just-in-time production system uses a "pull method" to coordinate steps in the manufacturing process.Explain what is meant by the term "pull method."

Accepted Answer

The answer of A just-in-time production system uses a "pull...

Question 12

Johnson manufactures products X and Y,applying overhead on the basis of labor hours.X is a high-volume product and relatively simplistic in nature.Y is both a low-volume product and requires a variety of complex manufacturing procedures.What would an activity-based costing system likely disclose about products X and Y as a result of Johnson's current accounting procedures?

Accepted Answer

A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E

Question 13

Astro's customer service department follows up on customer complaints by telephone inquiry.During a recent period,the department initiated 10,000 calls and incurred costs of $312,000.Of these calls,3,800 were for the company's wholesale operation;the remainder were for the retail division.Costs allocated to the retail division are:

Accepted Answer

A) $0. 
B) $31,200. 
C) $118,560. 
D) $193,440. 
E) $203,000.

Question 14

A Kanban:

Accepted Answer

A) is used in conjunction with activity-based costing. 
B) facilitates quick and inexpensive setups of machines. 
C) helps train workers to do a variety of assignments. 
D) initiates production in a particular work center. 
E) measures the correlation between a cost driver and a cost pool.

Question 15

Which of the following statements is (are)true about non-value-added activities?
I.Non-value-added activities are often unnecessary and dispensable.
II.Non-value-added activities may be necessary but are being performed in an inefficient and improvable manner.
III.Non-value-added activities can be eliminated without deterioration of product quality,performance,or perceived value.

Accepted Answer

A) I only 
B) II only. 
C) III only. 
D) I and II. 
E) I,II,and III.

Question 16

An example of a customer-value-added activity is final painting and polishing of the product.

Accepted Answer

A) True 
 B)False

Question 17

Hilton Corporation's customers differ greatly with respect to number of required sales contacts (e.g. ,phone calls and sales visits),account payment patterns,and design/engineering change orders.Which of the following choices likely denotes an ideal customer from Hilton's perspective?

Accepted Answer

A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E

Question 18

The overhead cost allocated to Zeta by using activity-based costing procedures would be:

Accepted Answer

A) $240,000. 
B) $356,000. 
C) $444,000. 
D) $560,000. 
E) some other amount.

Question 19

Define the term "cost driver" and discuss the factors that are important in the selection of appropriate cost drivers.

Accepted Answer

The answer of Define the term "cost driver" and discuss...

Question 20

If Kelly and Logan switched from its current accounting method to an activity-based costing system,the amount of administrative cost chargeable to consulting services would:

Accepted Answer

A) decrease by $23,500. 
B) increase by $23,500. 
C) decrease by $32,500. 
D) change by an amount other than those listed above. 
E) change,but the amount cannot be determined based on the information presented.

Exam 5: Activity-Based Costing and Management