Question 1

Activity-based management focuses on reducing costs and improving processes.

Accepted Answer

A) True 
 B)False

Question 2

Direct labor is sometimes the appropriate basis for assigning overhead cost to products. It is appropriate to use direct labor when which of the following is true?
(1) Direct labor constitutes a significant part of total product cost.
(2) A high correlation exists between direct labor and changes in the amount of overhead costs.

Accepted Answer

A) (1) only 
B) (2) only 
C) Either (1) or (2) 
D) Both (1) and (2) 
A) (1) only 
B) (2) only 
C) Either (1) or (2) 
D) Both (1) and (2)

Question 3

The overall objective of installing ABC in service firms is no different than it is in a manufacturing company.

Accepted Answer

A) True 
 B)False

Question 4

One of Matheny Company's activity cost pools is inspecting, with estimated overhead of $200,000. Matheny produces throw rugs (700 inspections) and area rugs (1,300 inspections). How much of the inspecting cost pool should be assigned to throw rugs?

Accepted Answer

A) $70,000. 
B) $100,000. 
C) $107,692. 
D) $200,000. 
A) $70,000. 
B) $100,000. 
C) $107,692. 
D) $200,000.

Question 5

Which of the following is not a facility-level activity?

Accepted Answer

A) Plant depreciation 
B) Property taxes 
C) Engineering changes 
D) Utilities 
A) Plant depreciation 
B) Property taxes 
C) Engineering changes 
D) Utilities

Question 6

Thomsen Computer Company produces three products: Earth, Wind, and Fire. Earth requires 80 machine setups, Wind requires 60 setups, and Fire requires 180 setups. Thomsen has identified an activity cost pool with allocated overhead of $960,000 for which the cost driver is machine setups. How much overhead is assigned to each product? $\begin{array}{llll}&\text { Earth}&\text { Wind}&\text { Fire }\
\text { a. } & \$ 320,000 & \$ 320,000 & \$ 320,000 \
\text { b. } & \$ 200,000 & \$ 150,000 & \$ 450,000 \
\text { c. } & \$ 240,000 & \$ 180,000 & \$ 540,000 \
\text { d. } & \$ 180,000 & \$ 320,000 & \$ 460,000
\end{array}$

Accepted Answer

The answer of Thomsen Computer Company produces three products: Earth,...

Question 7

Machining is a non-value-added activity.

Accepted Answer

A) True 
 B)False

Question 8

All of the following statements are correct except that

Accepted Answer

A) activity-based costing has been widely adopted in service industries. 
B) the objective of installing ABC in service firms is different than it is in a manufacturing firm. 
C) a larger proportion of overhead costs are company-wide costs in service industries. 
D) the general approach to identifying activities and activity cost pools is the same in a service company as in a manufacturing company. 
A) activity-based costing has been widely adopted in service industries. 
B) the objective of installing ABC in service firms is different than it is in a manufacturing firm. 
C) a larger proportion of overhead costs are company-wide costs in service industries. 
D) the general approach to identifying activities and activity cost pools is the same in a service company as in a manufacturing company.

Question 9

Activity-based costing is used by

Accepted Answer

A) accounting firms. 
B) law firms. 
C) consulting firms. 
D) all of the above. 
A) accounting firms. 
B) law firms. 
C) consulting firms. 
D) all of the above.

Question 10

Boswell Company manufactures two products, Regular and Supreme. Boswell's overhead costs consist of machining, $3,000,000; and assembling, $1,500,000. Information on the two products is: $\begin{array}{lrr}&\text { Regular}&\text { Supreme }
\text { Direct labor hours } & 10,000 & 15,000 \
\text { Machine hours } & 10,000 & 30,000 \
\text { Number of parts } & 90,000 & 160,000
\end{array}$ Overhead applied to Regular using activity-based costing is

Accepted Answer

A) $1,290,000. 
B) $1,800,000. 
C) $2,700,000. 
D) $3,210,000. 
A) $1,290,000. 
B) $1,800,000. 
C) $2,700,000. 
D) $3,210,000.

Question 11

ABC is particularly useful when overhead costs are an insignificant portion of total costs.

Accepted Answer

A) True 
 B)False

Question 12

Which would be an appropriate cost driver for the ordering and receiving activity cost pool?

Accepted Answer

A) Machine setups 
B) Purchase orders 
C) Machine hours 
D) Inspections 
A) Machine setups 
B) Purchase orders 
C) Machine hours 
D) Inspections

Question 13

Peters, Inc. produces 3 products: P1, Q2, and R3. P1 requires 400 purchase orders, Q2 requires 600 purchase orders, and R3 requires 1,000 purchase orders. Peters has identified an ordering and receiving activity cost pool with allocated overhead of $240,000 for which the cost driver is purchase orders. Direct labor hours used on each product are 50,000 for P1, 40,000 for Q2, and 110,000 for R3. How much ordering and receiving overhead is assigned to each product? $\begin{array}{llll}&P1&Q2&R3\
\text { a. } & \$ 80,000 & \$ 80,000 & \$ 80,000 \
\text { b. } & \$ 60,000 & \$ 48,000 & \$ 132,000 \
\text { c. }& \$ 48,000 & \$ 72,000 & \$ 120,000 \
\text { d. } & \$ 54,000 & \$ 60,000 & \$ 126,000
\end{array}$

Accepted Answer

The answer of Peters, Inc. produces 3 products: P1, Q2,...

Question 14

Which of the following is not typical of traditional costing systems?

Accepted Answer

A) Use of a single predetermined overhead rate. 
B) Use of direct labor hours or direct labor cost to assign overhead. 
C) Assumption of correlation between direct labor and incurrence of overhead cost. 
D) Use of multiple cost drivers to allocate overhead. 
A) Use of a single predetermined overhead rate. 
B) Use of direct labor hours or direct labor cost to assign overhead. 
C) Assumption of correlation between direct labor and incurrence of overhead cost. 
D) Use of multiple cost drivers to allocate overhead.

Question 15

To use activity-based costing, it is necessary to know the

Accepted Answer

A) cost driver for each activity cost pool. 
B) expected use of cost drivers per activity. 
C) expected use of cost drivers per product. 
D) all of the above. 
A) cost driver for each activity cost pool. 
B) expected use of cost drivers per activity. 
C) expected use of cost drivers per product. 
D) all of the above.

Question 16

Gant Accounting performs two types of services, Audit and Tax. Gant's overhead costs consist of computer support, $300,000; and legal support, $150,000. Information on the two services is:
Overhead applied to audit services using activity-based costing is

Accepted Answer

A) $150,000. 
B) $180,000. 
C) $270,000. 
D) $300,000. 
A) $150,000. 
B) $180,000. 
C) $270,000. 
D) $300,000.

Question 17

Low-volume products often require more special handling than high-volume products.

Accepted Answer

A) True 
 B)False

Question 18

One of Stine Company's activity cost pools is machine setups, with estimated overhead of $360,000. Stine produces sparklers (400 setups) and lighters (600 setups). How much of the machine setup cost pool should be assigned to sparklers?

Accepted Answer

A) $360,000 
B) $144,000 
C) $180,000 
D) $216,000 
A) $360,000 
B) $144,000 
C) $180,000 
D) $216,000

Question 19

Which of the following factors would suggest a switch to activity-based costing?

Accepted Answer

A) Product lines similar in volume and manufacturing complexity. 
B) Overhead costs constitute a significant portion of total costs. 
C) The manufacturing process has been stable. 
D) Production managers use data provided by the existing system. 
A) Product lines similar in volume and manufacturing complexity. 
B) Overhead costs constitute a significant portion of total costs. 
C) The manufacturing process has been stable. 
D) Production managers use data provided by the existing system.

Question 20

Zimmerman Company manufactures two products, Board 12 and Case 165. Zimmerman's overhead costs consist of setting up machines, $2,400,000; machining, $5,400,000; and inspecting, $1,800,000. Information on the two products is: $\begin{array}{lrr}&\text { Board } 12& \text { Case } 165\
\text { Direct labor hours } & 15,000 & 25,000 \
\text { Machine setups } & 600 & 400 \
\text { Machine hours } & 24,000 & 26,000 \
\text { Inspections } & 800 & 700
\end{array}$ Overhead applied to Case 165 using traditional costing using direct labor hours is

Accepted Answer

A) $3,840,000. 
B) $4,608,000. 
C) $5,010,000. 
D) $6,000,000. 
A) $3,840,000. 
B) $4,608,000. 
C) $5,010,000. 
D) $6,000,000.

Activity-based management focuses on reducing costs and improving processes.

The overall objective of installing ABC in service firms is no different than it is in a manufacturing company.

One of Matheny Company's activity cost pools is inspecting, with estimated overhead of $200,000. Matheny produces throw rugs (700 inspections) and area rugs (1,300 inspections). How much of the inspecting cost pool should be assigned to throw rugs?

Which of the following is not a facility-level activity?

Machining is a non-value-added activity.

All of the following statements are correct except that

Activity-based costing is used by

ABC is particularly useful when overhead costs are an insignificant portion of total costs.

Which would be an appropriate cost driver for the ordering and receiving activity cost pool?

Which of the following is not typical of traditional costing systems?

To use activity-based costing, it is necessary to know the

Gant Accounting performs two types of services, Audit and Tax. Gant's overhead costs consist of computer support, $300,000; and legal support, $150,000. Information on the two services is: Overhead applied to audit services using activity-based costing is

Low-volume products often require more special handling than high-volume products.

One of Stine Company's activity cost pools is machine setups, with estimated overhead of $360,000. Stine produces sparklers (400 setups) and lighters (600 setups). How much of the machine setup cost pool should be assigned to sparklers?

Which of the following factors would suggest a switch to activity-based costing?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters

Exam 16: Activity-Based Costing

Activity-based management focuses on reducing costs and improving processes.

The overall objective of installing ABC in service firms is no different than it is in a manufacturing company.

One of Matheny Company's activity cost pools is inspecting, with estimated overhead of $200,000. Matheny produces throw rugs (700 inspections) and area rugs (1,300 inspections). How much of the inspecting cost pool should be assigned to throw rugs?

Which of the following is not a facility-level activity?

Machining is a non-value-added activity.

All of the following statements are correct except that

Activity-based costing is used by

ABC is particularly useful when overhead costs are an insignificant portion of total costs.

Which would be an appropriate cost driver for the ordering and receiving activity cost pool?

Which of the following is not typical of traditional costing systems?

To use activity-based costing, it is necessary to know the

Gant Accounting performs two types of services, Audit and Tax. Gant's overhead costs consist of computer support, $300,000; and legal support, $150,000. Information on the two services is: Overhead applied to audit services using activity-based costing is

Low-volume products often require more special handling than high-volume products.

One of Stine Company's activity cost pools is machine setups, with estimated overhead of $360,000. Stine produces sparklers (400 setups) and lighters (600 setups). How much of the machine setup cost pool should be assigned to sparklers?

Which of the following factors would suggest a switch to activity-based costing?

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters