Question 1

Batch-level costs are resources sacrificed on activities undertaken to support specific products or services.

Accepted Answer

A) True 
 B)False

Question 2

Use the information below to answer the following question(s).Bill Cobb Corporation had the following activities, pooled costs, and physical flow of driver units.The company uses activity-based costing.  The above activities are used by departments X and Y as follows:
 
-How much of the account verification cost will be assigned to Department Y?

Accepted Answer

A) $15,000 
B) $7,500 
C) $100,000 
D) $10,000 
E) $50,000

Question 3

Use the information below to answer the following question(s).A transportation company provides bussing, limo and taxi service.The company charges: $350 per day for bussing service; $2.00 per kilometre for taxi service; and, $3.50 per kilometre for limo service.Two individual clients, the school board and the city government offices use the majority of the limo service on a contract agreement.Bussing services are used exclusively by the school board, and the taxi service is used almost exclusively by the general public, although the school board uses the taxi services when individual students have to be transported on occasion.Indirect costs are accumulated on internal records at $1.50 per kilometre for limo use and $1.00 per kilometre for taxi use, and $195 per day for each of the twenty buses.The company's costing system has tracked the following activities for the month:
 
-Compute the billing to each major client for the month.

Accepted Answer

A) School Board, $134,440.00; City Gov't, $7,050.50 
B) School Board, $8,090.00; City Gov't, $134,440.00 
C) School Board, $134,440.00; City Gov't, $4,323.50 
D) School Board, $7,050.50; City Gov't, $7,685.00 
E) School Board, $8,090.00; City Gov't, $7,050.50

Question 4

Engineering costs incurred to change product designs are which of the following?

Accepted Answer

A) market-sustaining costs 
B) output unit-level costs 
C) batch-level costs 
D) product-sustaining (service-sustaining)costs 
E) facility-sustaining costs

Question 5

In a cost system that doe not consider the cost hierarchy unit-level measures can distort product costing because the demand for overhead resources may be driven by batch-level or product-sustaining activities.

Accepted Answer

A) True 
 B)False

Question 6

Answer the following question(s)using the information below.Wallace Printing has contracts to complete weekly supplements required by forty-six customers.For the year 2019, manufacturing overhead cost estimates total $420,000 for an annual production capacity of 10 million pages.For 2019 Wallace Printing decided to evaluate the use of additional cost pools.After analyzing manufacturing overhead costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead cost drivers.The following information was gathered during the analysis:
  During 2019, two customers, Wayward Insurance and Hapless Systems, are expected to use the following printing services:
 
-Assuming activity-cost pools are used, what are the activity-cost driver rates for design changes, setups, and inspections cost pools?

Accepted Answer

A) $300 per change, $80 per setup, $2.50 per inspection 
B) $250 per change, $80 per setup, $3.75 per inspection 
C) $210 per change, $2.50 per setup, $26.25 per inspection 
D) $300 per change, $125 per setup, $4.00 per inspection 
E) $300 per change, $2.50 per setup, $80 per inspection

Question 7

If the cost of an activity increases with each hour of machine time, it is which of the following?

Accepted Answer

A) market-sustaining cost 
B) output unit-level cost 
C) batch-level cost 
D) product-sustaining (service-sustaining)costs 
E) facility-sustaining cost

Question 8

For each of the following activities identify an appropriate activity-cost driver.a.machine maintenance
b.machine setup
c.quality control
d.material ordering
e.production scheduling
f.warehouse expense
g.engineering design

Accepted Answer

The answer of For each of the following activities identify...

Question 9

How does direct cost tracing improve cost accuracy?

Accepted Answer

A) It identifies the cause-and-effect relationship between direct costs and indirect costs. 
B) It identifies the cause-and-effect relationship between activities and non-activities. 
C) It reclassifies costs or costs pools that vary with the quantity of a single activity cost driver as direct. 
D) It makes no assumptions about the cause-and-effect relationship between direct costs and activities. 
E) Because with a greater number of cost pools, it does not have to be concerned with the overhead costs used by different products.

Question 10

If a company undercosts one of its products from indirect cost smoothing, then it will overcost at least one of its other products.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is NOT a characterization of activity-based costing?

Accepted Answer

A) identification of only variable costs 
B) a focus on both operating and strategic decisions 
C) identifying all resources used by activities regardless of how individual costs behave in the short run 
D) using the cost hierarchy to allocate costs to products 
E) identification of all costs used by activities

Question 12

A critical distinction in activity-based costing is the difference between an activity and an event.

Accepted Answer

A) True 
 B)False

Question 13

Explain how activity-based costing systems can provide more accurate product costs than traditional (simple)cost systems.

Accepted Answer

The answer of Explain how activity-based costing systems can provide...

Question 14

Match the cost driver in the right column below to the appropriate function in the left column.
A)Number of shipments
B)Number of purchase orders
C)Number of employees
D)Number of customers
E)Number of desktop computers
F)Number of invoices
-Billing

Accepted Answer

The answer of Match the cost driver in the right...

Question 15

The Marionettes Company is noted for an exceptionally impressive line of Mardi Gras masks.Marionettes has established the following selling and distribution support activity-cost pools and their corresponding activity drivers for the year 2012:
  Required:
a.Determine the activity cost driver rate for each of the four selling and distribution activities.
b.Under what circumstances is it appropriate to use each of the activity cost drivers?
c.Describe at least one possible negative behavioral consequence for each of the four activity cost drivers.

Accepted Answer

The answer of The Marionettes Company is noted for an...

Question 16

Describe each of the four cost hierarchies used to define levels for activities in activity-based costing.

Accepted Answer

The answer of Describe each of the four cost hierarchies...

Question 17

Aunt Ethel's Fancy Cookie Company manufactures and sells three flavors of cookies: Macaroon, Sugar, and Buttercream.The batch size for the cookies is limited to 1,000 cookies based on the size of the ovens and cookie molds owned by the company.Based on budgetary projections, the information listed below is available:
  Per Unit data:
   Overhead cost based on direct labour
  Hours per 1,000-unit batch:
  Total overhead costs and activity levels for the year are estimated as follows:
  Required:
a.Using the traditional (simple)costing system, determine the operating profit per unit for the sugar cookie.
b.Determine the activity cost driver rate for oven costs and packaging costs.
c.Using the ABC system, for the sugar cookie:
  d.Explain the difference between the profits obtained from the traditional system and the ABC system.Which system provides a better estimate of profitability? Why?

Accepted Answer

The answer of Aunt Ethel's Fancy Cookie Company manufactures and...

Question 18

Using a broad average to allocate costs to products is called

Accepted Answer

A) activity-based costing. 
B) refined costing. 
C) peanut butter costing. 
D) product undercoating. 
E) job costing.

Question 19

Match the cost driver in the right column below to the appropriate function in the left column.
A)Number of shipments
B)Number of purchase orders
C)Number of employees
D)Number of customers
E)Number of desktop computers
F)Number of invoices
-Customer Service

Accepted Answer

The answer of Match the cost driver in the right...

Question 20

Peanut butter costing involves assigning costs in a non uniform manner to reflect the different utilization of resources by different products or services.

Accepted Answer

A) True 
 B)False

Exam 5: Activity-Based Costing and Management

Batch-level costs are resources sacrificed on activities undertaken to support specific products or services.

Engineering costs incurred to change product designs are which of the following?

In a cost system that doe not consider the cost hierarchy unit-level measures can distort product costing because the demand for overhead resources may be driven by batch-level or product-sustaining activities.

If the cost of an activity increases with each hour of machine time, it is which of the following?

For each of the following activities identify an appropriate activity-cost driver.a.machine maintenance b.machine setup c.quality control d.material ordering e.production scheduling f.warehouse expense g.engineering design

How does direct cost tracing improve cost accuracy?

If a company undercosts one of its products from indirect cost smoothing, then it will overcost at least one of its other products.

Which of the following is NOT a characterization of activity-based costing?

A critical distinction in activity-based costing is the difference between an activity and an event.

Explain how activity-based costing systems can provide more accurate product costs than traditional (simple)cost systems.

Match the cost driver in the right column below to the appropriate function in the left column. A)Number of shipments B)Number of purchase orders C)Number of employees D)Number of customers E)Number of desktop computers F)Number of invoices -Billing

Describe each of the four cost hierarchies used to define levels for activities in activity-based costing.

Using a broad average to allocate costs to products is called

Match the cost driver in the right column below to the appropriate function in the left column. A)Number of shipments B)Number of purchase orders C)Number of employees D)Number of customers E)Number of desktop computers F)Number of invoices -Customer Service

Peanut butter costing involves assigning costs in a non uniform manner to reflect the different utilization of resources by different products or services.