Question 1

Use of activity-based costing will result in the development of

Accepted Answer

A) one overhead rate based on direct labor hours. 
B) one plantwide activity-based overhead rate. 
C) multiple activity-based overhead rates. 
D) no overhead rates; overhead rates are not used in activity-based costing. 
A) one overhead rate based on direct labor hours. 
B) one plantwide activity-based overhead rate. 
C) multiple activity-based overhead rates. 
D) no overhead rates; overhead rates are not used in activity-based costing.

Question 2

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 Board 12 using activity-based costing is

Accepted Answer

A) $3,600,000. 
B) $4,608,000. 
C) $4,992,000. 
D) $5,760,000. 
A) $3,600,000. 
B) $4,608,000. 
C) $4,992,000. 
D) $5,760,000.

Question 3

Which of the following is true about activity-based costing?

Accepted Answer

A) Less cost pools 
B) Same base as traditional costing 
C) More costly to use 
D) Eliminates arbitrary allocations 
A) Less cost pools 
B) Same base as traditional costing 
C) More costly to use 
D) Eliminates arbitrary allocations

Question 4

Reynoso Corporation manufactures titanium and aluminum tennis racquets. Reynoso's total overhead costs consist of assembly costs and inspection costs. The following information is available: $\begin{array}{cccc}\text { Cost }& \text {Titanium }& \text {Aluminum }& \text { total Cost }\
\hline \text { Assembly } & 500 \text { mach. hours } & 500 \text { mach. hours } & \$ 60,000 \
\text { Inspections } & 350 & 150 & \$ 100,000 \
& 2,100 \text { labor hours } & 1,900 \text { labor hours } &
\end{array}$ Reynoso is considering switching from one overhead rate based on labor hours to activity-based costing. Using activity-based costing, how much inspections cost is assigned to titanium racquets?

Accepted Answer

A) $30,000. 
B) $47,500. 
C) $50,000. 
D) $52,500. 
A) $30,000. 
B) $47,500. 
C) $50,000. 
D) $52,500.

Question 5

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. $\begin{array}{llrl}\text { Activity Cost Pool }&\text { Cost Driver }&\text { Est Overhead }&\text { Cost Driver Activity }\\hline
\text { Ordering and Receiving } & \text { Orders } & \$ 120,000 & 500 \text { orders } \
\text { Machine Setup } & \text { Setups } & 297,000 & 450 \text { setups } \
\text { Machining } & \text { Machine hours } & 1,500,000 & 125,000 \mathrm{MH} \
\text { Assembly } & \text { Parts } & 1,200,000 & 1,000,000 \text { parts } \
\text { Inspection } & \text { Inspections } & 300,000 & 500 \text { inspections }
\end{array}$ If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is

Accepted Answer

A) $1.20 per direct labor hour. 
B) $240 per order. 
C) $0.12 per part. 
D) $6,834 per order. 
A) $1.20 per direct labor hour. 
B) $240 per order. 
C) $0.12 per part. 
D) $6,834 per order.

Question 6

Activity-based costing is used in $\begin{array}{lll}&\text { Service industries }&\text { Manufacturing industries }\
\text { a. } & \text { Yes } & \text { No } \
\text { b. } & \text { Yes } & \text { Yes } \
\text { c. } & \text { No } & \text { Yes } \
\text { d. } & \text { No } & \text { No }
\end{array}$

Accepted Answer

The answer of Activity-based costing is used in \(\begin{array}{lll}&\text {...

Question 7

Tidwell Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year. $\begin{array}{llrl}\text { Activity Cost Pool }&\text {Cost Driver }&\text {Est. Overhead }&\text {Cost Driver Activity }\\hline
\text { Ordering and Receiving } & \text { Orders } & \$ 120,000 & 500 \text { orders } \
\text { Machine Setup } & \text { Setups } & 297,000 & 450 \text { setups } \
\text { Machining } & \text { Machine hours } & 1,500,000 & 125,000 \mathrm{MH} \
\text { Assembly } & \text { Parts } & 1,200,000 & 1,000,000 \text { parts } \
\text { Inspection } & \text { Inspections } & 300,000 & 500 \text { inspections }
\end{array}$ If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is

Accepted Answer

A) $9.60. 
B) $12.00. 
C) $15.00. 
D) $34.17. 
A) $9.60. 
B) $12.00. 
C) $15.00. 
D) $34.17.

Question 8

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 Board 12 using traditional costing using direct labor hours is

Accepted Answer

A) $3,600,000. 
B) $4,608,000. 
C) $5,010,000. 
D) $5,760,000. 
A) $3,600,000. 
B) $4,608,000. 
C) $5,010,000. 
D) $5,760,000.

Question 9

Foxx Company incurs $480,000 overhead costs each year in its three main departments, setup ($30,000), machining ($330,000), and packing ($120,000). The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year. Information about Foxx's two products is as follows: $$\begin{array} { l c c } 
& \text { Product A1 } & \text { Product B1 } \
\text { Number of setups } & 20 & 20 \
\text { Machining hours } & 1,000 & 4,000 \
\text { Orders packed } & 150 & 350 \
\text { Number of products manufactured } & 600 & 400
\end{array}$$ Using ABC, how much overhead is assigned to Product A1 each year?

Accepted Answer

A) $240,000 
B) $363,000 
C) $ 96,000 
D) $117,000 
A) $240,000 
B) $363,000 
C) $ 96,000 
D) $117,000

Question 10

Which of the following is not a benefit of activity-based costing?

Accepted Answer

A) More accurate product costing 
B) Enhanced control over overhead costs 
C) Better management decisions 
D) Less costly to use 
A) More accurate product costing 
B) Enhanced control over overhead costs 
C) Better management decisions 
D) Less costly to use

Question 11

The presence of any of the following factors would suggest a switch to ABC except when

Accepted Answer

A) product lines differ greatly in volume. 
B) overhead costs constitute a minor portion of total costs. 
C) the manufacturing process has changed significantly. 
D) production managers are ignoring data provided by the existing system. 
A) product lines differ greatly in volume. 
B) overhead costs constitute a minor portion of total costs. 
C) the manufacturing process has changed significantly. 
D) production managers are ignoring data provided by the existing system.

Question 12

Which would be an appropriate cost driver for the machining 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

An activity-based overhead rate is computed as follows:

Accepted Answer

A) actual overhead divided by actual use of cost drivers. 
B) estimated overhead divided by actual use of cost drivers. 
C) actual overhead divided by estimated use of cost drivers. 
D) estimated overhead divided by estimated use of cost drivers. 
A) actual overhead divided by actual use of cost drivers. 
B) estimated overhead divided by actual use of cost drivers. 
C) actual overhead divided by estimated use of cost drivers. 
D) estimated overhead divided by estimated use of cost drivers.

Question 14

Traditional costing systems use multiple predetermined overhead rates.

Accepted Answer

A) True 
 B)False

Question 15

A non-value-added activity in a service enterprise is

Accepted Answer

A) taking appointments. 
B) traveling. 
C) advertising. 
D) all of these. 
A) taking appointments. 
B) traveling. 
C) advertising. 
D) all of these.

Question 16

Value-added activities

Accepted Answer

A) should be minimized or eliminated. 
B) involve those activities that are essential to a company's operations. 
C) add cost to a product without affecting selling price. 
D) cannot be differentiated from non-value-added activities. 
A) should be minimized or eliminated. 
B) involve those activities that are essential to a company's operations. 
C) add cost to a product without affecting selling price. 
D) cannot be differentiated from non-value-added activities.

Question 17

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: $\begin{array}{lrr}&\text { Audit }& \text { Tax }\
\text { Direct labor cost } & \$ 50,000 & \$ 100,000 \
\text { CPU minutes } & 40,000 & 10,000 \
\text { Leqal hours used } & 200 & 800
\end{array}$ Overhead applied to tax services using traditional 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 18

Kiner Co. computed an overhead rate for machining costs ($500,000) of $5 per machine hour. Machining costs are driven by machine hours. If computed based on direct labor hours, the overhead rate for machining costs would be $10 per direct labor hour. The company produces two products, Cape and Chap. Cape requires 60,000 machine hours and 20,000 direct labor hours, while Chap requires 40,000 machine hours and 30,000 direct labor hours. Using activity-based costing, machining costs assigned to each product is $\begin{array}{lll}&\text { Cape }&\text { Chap }\
\text { a. } & \$ 200,000 & \$ 300,000 \
\text { b. } & \$ 750,000 & \$ 250,000 \
\text { c. } & \$ 266,667 & \$ 233,333 \
\text { d. } & \$ 300,000 & \$ 200,000
\end{array}$

Accepted Answer

The answer of Kiner Co. computed an overhead rate for...

Question 19

Which best describes the flow of overhead costs in an activity-based costing system?

Accepted Answer

A) Overhead costs $\rightarrow$ direct labor cost or hours $\rightarrow$ products 
B) Overhead costs $\rightarrow$ products 
C) Overhead costs $\rightarrow$ activity cost pools $\rightarrow$ cost drivers $\rightarrow$ products 
D) Overhead costs $\rightarrow$ machine hours $\rightarrow$ products 
A) Overhead costs $\rightarrow$ direct labor cost or hours $\rightarrow$ products 
B) Overhead costs $\rightarrow$ products 
C) Overhead costs $\rightarrow$ activity cost pools $\rightarrow$ cost drivers $\rightarrow$ products 
D) Overhead costs $\rightarrow$ machine hours $\rightarrow$ products

Question 20

An activity that has a direct cause-effect relationship with the resources consumed is a(n)

Accepted Answer

A) cost driver. 
B) overhead rate. 
C) cost pool. 
D) product activity. 
A) cost driver. 
B) overhead rate. 
C) cost pool. 
D) product activity.

Use of activity-based costing will result in the development of

Which of the following is true about activity-based costing?

Activity-based costing is used in Service industries Manufacturing industries a. Yes No b. Yes Yes c. No Yes d. No No

Which of the following is not a benefit of activity-based costing?

The presence of any of the following factors would suggest a switch to ABC except when

Which would be an appropriate cost driver for the machining activity cost pool?

An activity-based overhead rate is computed as follows:

Traditional costing systems use multiple predetermined overhead rates.

A non-value-added activity in a service enterprise is

Value-added activities

Which best describes the flow of overhead costs in an activity-based costing system?

An activity that has a direct cause-effect relationship with the resources consumed is a(n)

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

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Exam 16: Activity-Based Costing

Use of activity-based costing will result in the development of

Which of the following is true about activity-based costing?

Activity-based costing is used in Service industries Manufacturing industries a. Yes No b. Yes Yes c. No Yes d. No No

Which of the following is not a benefit of activity-based costing?

The presence of any of the following factors would suggest a switch to ABC except when

Which would be an appropriate cost driver for the machining activity cost pool?

An activity-based overhead rate is computed as follows:

Traditional costing systems use multiple predetermined overhead rates.

A non-value-added activity in a service enterprise is

Value-added activities

Which best describes the flow of overhead costs in an activity-based costing system?

An activity that has a direct cause-effect relationship with the resources consumed is a(n)

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