Question 1

An example of a cost which would not be assigned to an overhead cost pool is

Accepted Answer

A) indirect salaries. 
B) freight-out. 
C) depreciation. 
D) supplies. 
A) indirect salaries. 
B) freight-out. 
C) depreciation. 
D) supplies.

Question 2

Engineering design is a value-added activity.

Accepted Answer

A) True 
 B)False

Question 3

Each of the following is a limitation of activity-based costing except that

Accepted Answer

A) it can be expensive to use. 
B) it decreases control over overhead costs 
C) it is complex and can be difficult to understand 
D) some arbitrary allocations continue. 
A) it can be expensive to use. 
B) it decreases control over overhead costs 
C) it is complex and can be difficult to understand 
D) some arbitrary allocations continue.

Question 4

A value-added activity in a service enterprise is

Accepted Answer

A) performing landscaping services. 
B) reception. 
C) billing. 
D) ordering supplies. 
A) performing landscaping services. 
B) reception. 
C) billing. 
D) ordering supplies.

Question 5

An example of an activity cost pool is

Accepted Answer

A) machine hours. 
B) setting up machines. 
C) number of setups. 
D) number of inspections. 
A) machine hours. 
B) setting up machines. 
C) number of setups. 
D) number of inspections.

Question 6

A company incurs $4,050,000 of overhead each year in three departments: Ordering and Receiving, Mixing, and Testing. The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs 1,500 tests per year in producing 200,000 drums of Goo and 600,000 drums of Slime. The following data are available: $\begin{array}{crr}\text { Department}&\text {Expected use of Driver  }&\text {Cost }\
\text { Ordering and Receiving } & 2,000 & \$ 1,200,000 \
\text { Mixing } & 50,000 & 1,500,000 \
\text { Testing } & 1,500 & 1,350,000
\end{array}$

$\text { Production information for Goo is as follows: }$
$\begin{array}{cr}\text { Department }&\text { Expected use of Driver }\
\text { Ordering and Receiving } & 400 \
\text { Mixing } & 20,000 \
\text { Testing } & 500
\end{array}$ Compute the amount of overhead assigned to Goo.

Accepted Answer

A) $1,012,500 
B) $1,290,000 
C) $1,582,146 
D) $2,025,000 
A) $1,012,500 
B) $1,290,000 
C) $1,582,146 
D) $2,025,000

Question 7

Noland Company manufactures two models of its banjo, the Basic and the Luxury. The Basic model requires 10,000 direct labor hours and the Luxury requires 30,000 direct labor hours. The company produces 3,400 units of the Basic model and 600 units of the Luxury model each year. The company inspects one Basic for every 100 produced, and inspects one Luxury for every 10 produced. The company expects to incur $112,800 of total inspecting costs this year. How much of the inspecting costs should be allocated to the Basic model using ABC costing?

Accepted Answer

A) $28,200 
B) $40,800 
C) $56,400 
D) $95,880 
A) $28,200 
B) $40,800 
C) $56,400 
D) $95,880

Question 8

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

Accepted Answer

A) Purchase ordering 
B) Equipment setups 
C) Inspection 
D) Assembling 
A) Purchase ordering 
B) Equipment setups 
C) Inspection 
D) Assembling

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 B1 each year?

Accepted Answer

A) $240,000 
B) $192,000 
C) $363,000 
D) $384,000 
A) $240,000 
B) $192,000 
C) $363,000 
D) $384,000

Question 10

ABC is generally more costly to implement than traditional costing.

Accepted Answer

A) True 
 B)False

Question 11

Ben Gordon, Inc. manufactures 2 products, wheels and seats. The company has estimated its overhead in the assembling department to be $660,000. The company produces 300,000 wheels and 600,000 seats each year. Each wheel uses 2 parts, and each seat uses 3 parts. How much of the assembly overhead should be allocated to wheels?

Accepted Answer

A) $165,000. 
B) $220,000. 
C) $264,000 
D) $282,856. 
A) $165,000. 
B) $220,000. 
C) $264,000 
D) $282,856.

Question 12

Windsor Co. incurs $1,050,000 of overhead costs each year in its three main departments, machining ($600,000), inspections ($300,000) and packing ($150,000). The machining department works 4,000 hours per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year. Information about Windsor's two products is as follows: $$\begin{array} { l c c } 
& \text { Product X } & \text { Product Y } \
\text { Machining hours } & 1,000 & 3,000 \
\text { Inspections } & 100 & 500 \
\text { Orders packed } & 350 & 650 \
\text { Direct labor hours } & 1,700 & 1,800
\end{array}$$ If traditional costing based on direct labor hours is used, how much overhead is assigned to Product X this year?

Accepted Answer

A) $252,501 
B) $363,462 
C) $510,000 
D) $525,000 
A) $252,501 
B) $363,462 
C) $510,000 
D) $525,000

Question 13

Nott Company manufactures two products, pillows and comforters. The company has estimated its overhead in the order-processing department to be $600,000. The company produces 50,000 pillows and 80,000 comforters each year. Pillow production requires 25,000 machine hours, comforter production requires 50,000 machine hours. The company places raw materials orders 10 times per month, 2 times for raw materials for pillows and the remainder for raw materials for comforters. How much of the order processing overhead should be allocated to comforters?

Accepted Answer

A) $300,000 
B) $400,000 
C) $369,232 
D) $480,000 
A) $300,000 
B) $400,000 
C) $369,232 
D) $480,000

Question 14

The last step in activity-based costing is to

Accepted Answer

A) assign overhead costs to products, using overhead rates determined for each cost pool. 
B) compute the activity-based overhead rate per cost driver. 
C) identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools. 
D) identify the cost driver that has a strong correlation to the activity cost pool. 
A) assign overhead costs to products, using overhead rates determined for each cost pool. 
B) compute the activity-based overhead rate per cost driver. 
C) identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools. 
D) identify the cost driver that has a strong correlation to the activity cost pool.

Question 15

Traditionally, overhead is allocated based on direct labor cost or direct labor hours.

Accepted Answer

A) True 
 B)False

Question 16

Ordering materials, setting up machines, assembling products, and inspecting products are examples of

Accepted Answer

A) cost drivers. 
B) overhead cost pools. 
C) direct labor costs. 
D) nonmanufacturing activities. 
A) cost drivers. 
B) overhead cost pools. 
C) direct labor costs. 
D) nonmanufacturing activities.

Question 17

Activity-based costing

Accepted Answer

A) allocates overhead to activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers. 
B) accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver. 
C) assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools. 
D) allocates overhead directly to products and services based on activity levels. 
A) allocates overhead to activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers. 
B) accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver. 
C) assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools. 
D) allocates overhead directly to products and services based on activity levels.

Question 18

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

Accepted Answer

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

Question 19

Younger, Inc. manufactures recliners for the hotel industry. It has two products, the Heater and the Massager, and total overhead is $3,160,000. The company plans to manufacture 400 Heaters and 100 Massagers this year. In manufacturing the recliners, the company must perform 600 material moves for the Heater and 400 for the Massager; it processes 900 purchase orders for the Heater and 700 for the Massager; and the company's employees work 1,400 direct labor hours on the Heater product and 3,400 on the Massager. Younger's total material handling costs are $2,000,000 and its total processing costs are $1,160,000. Using ABC, how much overhead would be assigned to the Heater product?

Accepted Answer

A) $1,580,000 
B) $1,852,500 
C) $1,307,500 
D) $2,238,332 
A) $1,580,000 
B) $1,852,500 
C) $1,307,500 
D) $2,238,332

Question 20

Advances in computerized systems, technological innovation, global competition, and automation have changed the manufacturing environment drastically by

Accepted Answer

A) increasing direct labor costs and increasing overhead costs. 
B) increasing direct labor costs and decreasing overhead costs. 
C) decreasing direct labor costs and decreasing overhead costs. 
D) decreasing direct labor costs and increasing overhead costs. 
A) increasing direct labor costs and increasing overhead costs. 
B) increasing direct labor costs and decreasing overhead costs. 
C) decreasing direct labor costs and decreasing overhead costs. 
D) decreasing direct labor costs and increasing overhead costs.

An example of a cost which would not be assigned to an overhead cost pool is

Engineering design is a value-added activity.

Each of the following is a limitation of activity-based costing except that

A value-added activity in a service enterprise is

An example of an activity cost pool is

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

ABC is generally more costly to implement than traditional costing.

The last step in activity-based costing is to

Traditionally, overhead is allocated based on direct labor cost or direct labor hours.

Ordering materials, setting up machines, assembling products, and inspecting products are examples of

Activity-based costing

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

Advances in computerized systems, technological innovation, global competition, and automation have changed the manufacturing environment drastically by

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

An example of a cost which would not be assigned to an overhead cost pool is

Engineering design is a value-added activity.

Each of the following is a limitation of activity-based costing except that

A value-added activity in a service enterprise is

An example of an activity cost pool is

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

ABC is generally more costly to implement than traditional costing.

The last step in activity-based costing is to

Traditionally, overhead is allocated based on direct labor cost or direct labor hours.

Ordering materials, setting up machines, assembling products, and inspecting products are examples of

Activity-based costing

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

Advances in computerized systems, technological innovation, global competition, and automation have changed the manufacturing environment drastically by

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