Question 1

Machine set-up would be considered a batch-level cost.

Accepted Answer

A) True 
 B)False

Question 2

Which term listed below describes a system where companies purchase raw materials when needed in production and complete finished goods when needed by customers?

Accepted Answer

A) Internal failure costs 
B) Backflush costing 
C) Just-in-time 
D) External failure costs

Question 3

Which of the following cost of quality categories represent the cost incurred to rework a product after the company detects a poor-quality product before the company delivers the product to a consumer?

Accepted Answer

A) Lean production 
B) Value added activity 
C) Internal failure costs 
D) External failure costs

Question 4

Which of the following does ABC take into account?

Accepted Answer

A) The types of manufacturing activities used by the product 
B) The extent to which the manufacturing activities are used by the product 
C) Both A and B 
D) Neither A nor B

Question 5

Lean companies typically cross-train employees to perform more than one task.

Accepted Answer

A) True 
 B)False

Question 6

The benefits of using the ABC costing system are higher if the company

Accepted Answer

A) has high indirect costs. 
B) produces many different products that use differing amounts of resources. 
C) has high indirect costs and produces many different products that use differing amounts of resources. 
D) produces only one product.

Question 7

The new manager at Sailboat Manufacturing oversees the manufacturing operations to ensure the effective manufacturing process of sails to accommodate the special-orders of sails they receive for sailboats. The manager compiled a report that contained the following data:
  Compute the activity cost allocation rate for each of Sailboat Manufacturing's production activities listed in the report. What should the new manager understand about the cost allocation rates at Sailboat Manufacturing? How will the new manager use the activity cost allocation rates during the coming year at Sailboat Manufacturing?

Accepted Answer

The answer of The new manager at Sailboat Manufacturing oversees...

Question 8

Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2100 units, while 1500 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 .75 direct labor hours per unit. The total estimated overhead for the period is $149,015. 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 predetermined overhead allocation rate using the traditional costing system would be closest to
(Round all answers to two decimal places.)

Accepted Answer

A) $39.68 per direct labor hour. 
B) $124.70 per direct labor hour. 
C) $54.78 per direct labor hour. 
D) $38.06 per direct labor hour.

Question 9

Which of the following cost of quality categories represent the cost incurred to "re-inspect a reworked blender?"

Accepted Answer

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

Question 10

Telecom uses activity-based costing to allocate all manufacturing conversion costs. Telecom produces cellular telephones; each phone has $40.00 of direct materials, includes 10 parts and requires 6 hours of machine time. Additional information follows:  What is the cost of assembling per phone?

Accepted Answer

A) $24 
B) $18 
C) $5 
D) $20

Question 11

All of the following statements regarding total quality management are true except

Accepted Answer

A) TQM emphasizes educating, training, and cross training employees to increase and broaden their skills. 
B) TQM is a formal effort to improve quality throughout an organization's value chain. 
C) TQM extends horizontally across business functions in the value chain. 
D) TQM increases time spent on rework and warranty work.

Question 12

Which of the following cost of quality categories represent the cost incurred to "rework a defective product" before the product is shipped to a consumer?

Accepted Answer

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

Question 13

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 14

In developing an ABC system, what is the last step?

Accepted Answer

A) Identify the primary activities and estimate a total cost pool for each. 
B) Select an allocation base for each activity. 
C) Allocate the costs to the cost object using the activity cost allocation rates. 
D) Calculate an activity cost allocation rate for each activity.

Question 15

The cost of downtime caused by quality problems with the raw materials would be classified as what type of cost?

Accepted Answer

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

Question 16

Gwynnie Pie Company makes dessert pies for national fast food chains. Gwynnie Pie Company is considering using ABC costing and has the following activity cost pools and information available:  Gwynnie Pie Company currently uses a plantwide overhead rate based on total estimated machine hours of 100,000 hours.
Based on the above information, what would the activity cost allocation rate be for mixing?

Accepted Answer

A) $4.52 per machine hour 
B) $100 per batch 
C) $0.03 per unit 
D) $44.80 per batch

Question 17

Kepple Manufacturing currently uses a traditional costing system. The company allocates overhead to its two products, Zips and Dees, using a predetermined manufacturing overhead rate based on direct labor hours. Here is data related to the company's two products:  Information about the company's estimated manufacturing overhead for the year follows:
 Total estimated direct labor hours for the company for the year are 102,500 hours.
The company is evaluating whether it should use an activity-based costing system in place of its traditional costing system. Additional information about production needed for the activity-based costing system follows:
 The amount of manufacturing overhead that would be allocated to one unit of Zips using the traditional costing system would be closest to (Round all answers to two decimal places.)

Accepted Answer

A) $11.76 
B) $23.52 
C) $70.56 
D) $10.81

Question 18

Lean companies typically emphasize quality.

Accepted Answer

A) True 
 B)False

Question 19

Crane Fabrication allocates manufacturing overhead to each job using departmental overhead rates. Crane's operations are divided into a metal casting department and a metal finishing department. The casting department uses a departmental overhead rate of $51 per machine hour, while the finishing department uses a departmental overhead rate of $26 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 $34 per direct labor hour and the cost of the direct matrials used by Job A216 is $1700.
How much manufacturing overhead would be allocated to Job A216 using the departmental overhead rates?

Accepted Answer

A) $362 
B) $425 
C) $1072 
D) $283

Question 20

A plantwide overhead rate is calculated by multiplying the estimated total manufacturing overhead costs for the year by estimated total amount of the allocation base for the year.

Accepted Answer

A) True 
 B)False

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

Machine set-up would be considered a batch-level cost.

Which term listed below describes a system where companies purchase raw materials when needed in production and complete finished goods when needed by customers?

Which of the following cost of quality categories represent the cost incurred to rework a product after the company detects a poor-quality product before the company delivers the product to a consumer?

Which of the following does ABC take into account?

Lean companies typically cross-train employees to perform more than one task.

The benefits of using the ABC costing system are higher if the company

Which of the following cost of quality categories represent the cost incurred to "re-inspect a reworked blender?"

Telecom uses activity-based costing to allocate all manufacturing conversion costs. Telecom produces cellular telephones; each phone has $40.00 of direct materials, includes 10 parts and requires 6 hours of machine time. Additional information follows: What is the cost of assembling per phone?

All of the following statements regarding total quality management are true except

Which of the following cost of quality categories represent the cost incurred to "rework a defective product" before the product is shipped to a consumer?

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.

In developing an ABC system, what is the last step?

The cost of downtime caused by quality problems with the raw materials would be classified as what type of cost?

Lean companies typically emphasize quality.

A plantwide overhead rate is calculated by multiplying the estimated total manufacturing overhead costs for the year by estimated total amount of the allocation base for the year.