Question 1

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 2

To achieve accurate costing, a high degree of correlation must exist between the cost driver and the actual consumption of the activity cost pool.

Accepted Answer

A) True 
 B)False

Question 3

Hartley Company produces two products, Flower and Planter.Flower is a high-volume item totaling 20,000 units annually.Planter is a low-volume item totaling only 6,000 units per year.Flower requires one hour of direct labor for completion, while each unit of Planter requires 2 hours.Therefore, total annual direct labor hours are 32,000 (20,000 + 12,000).Expected annual manufacturing overhead costs are $960,000.Hartley uses a traditional costing system and assigns overhead based on direct labor hours.Each unit of Planter would be assigned overhead of

Accepted Answer

A) $30.00. 
B) $36.91. 
C) $60.00. 
D) need more information to compute. 
A) $30.00. 
B) $36.91. 
C) $60.00. 
D) need more information to compute.

Question 4

Which would be a cost driver for a facility-level activity?

Accepted Answer

A) Number of setups 
B) Number of product designs 
C) Square footage 
D) Number of purchase orders 
A) Number of setups 
B) Number of product designs 
C) Square footage 
D) Number of purchase orders

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

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 7

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 8

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 9

In service industries

Accepted Answer

A) activities cannot be labeled as value-added or non-value-added. 
B) the overall objective of ABC is different than in manufacturing industries. 
C) a larger proportion of overhead costs are company-wide costs. 
D) activity cost pools cannot be identified. 
A) activities cannot be labeled as value-added or non-value-added. 
B) the overall objective of ABC is different than in manufacturing industries. 
C) a larger proportion of overhead costs are company-wide costs. 
D) activity cost pools cannot be identified.

Question 10

Activity-based costing has been found to be useful in each of the following service industries except

Accepted Answer

A) airlines. 
B) railroads. 
C) hotels. 
D) ABC has been useful in all of these industries. 
A) airlines. 
B) railroads. 
C) hotels. 
D) ABC has been useful in all of these industries.

Question 11

Which would be an appropriate cost driver for the purchasing 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 12

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 13

Tidwell Industries has the following overhead costs and cost drivers.Direct labor hours are estimated at 100,000 for the year. $\begin{array}{llrl}
\text { Activitu Cost Pool }&\text { Cost Driver }&\text { Est Overhead }&\text { Cost Driver Activity }\\hline
\text { Ordering and Receiving } & \text { Orders } & \$ 120,000 & 500 \text { orders } \
\text { Machine Setup } & \text { Setups } & 297,000 & 450 \text { setups } \
\text { Machining } & \text { Machine hours } & 1,500,000 & 125,000 \mathrm{MH} \
\text { Assembly } & \text { Parts } & 1,200,000 & 1,000,000 \text { parts } \
\text { Inspection } & \text { Inspections } & 300,000 & 500 \text { inspections }
\end{array}$ 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 14

What sometimes makes implementation of activity-based costing difficult in service industries is

Accepted Answer

A) the labeling of activities as value-added. 
B) identifying activities, activity cost plus, and cost drivers. 
C) that a larger proportion of overhead costs are company-wide costs. 
D) attempting to reduce or eliminate non-value-added activities. 
A) the labeling of activities as value-added. 
B) identifying activities, activity cost plus, and cost drivers. 
C) that a larger proportion of overhead costs are company-wide costs. 
D) attempting to reduce or eliminate non-value-added activities.

Question 15

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

Accepted Answer

A) it can be expensive to use. 
B) it is more complex than traditional costing. 
C) more cost pools are used. 
D) some arbitrary allocations continue. 
A) it can be expensive to use. 
B) it is more complex than traditional costing. 
C) more cost pools are used. 
D) some arbitrary allocations continue.

Question 16

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 17

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: $\begin{array}{lccc}\text { Cost }&\text { Titanium }&\text { Aluminum }&\text { Total Cost }\
\text { Assembly } & 500 \text { mach. hours } & 500 \text { mach. hours } & \$ 45,000 \
\text { Inspections } & 350 & 150 & \$ 75,000 \
& 2,100 \text { labor hours } & 1,900 \text { labor hours } &
\end{array}$ 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) $70,000. 
A) $30,000. 
B) $47,500. 
C) $50,000. 
D) $70,000.

Question 18

A company incurs $3,600,000 of overhead each year in three departments: Processing, Packaging, and Testing.The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of Oil and 600,000 drums of Sludge.The following data are available: $$\begin{array}{l}
\begin{array} { l c r } 
\text { Department } & \text { Expected Use of Driver } &  { \text { Cost } } \
\text { Processing } & 800 & \$ 1,500,000 \
\text { Packaging } & 200,000 & 1,500,000 \
\text { Testing } & 2,000 & 600,000
\end{array}\
\text { Production information for the two products is as follows: }\\
\begin{array}{ll}
&\text { Oil }&\text { Sludae }\\text { Department }&\text { Expected Use of Driver }&\text { Expected Use of Driver }\\hline \text { Processing } & 300 & 500 \
\text { Packaging } & 120,000 & 80,000 \
\text { Testing } & 1,600 & 400
\end{array}
\end{array}$$ The amount of overhead assigned to Sludge using ABC is

Accepted Answer

A) $1,800,000. 
B) $1,657,500. 
C) $1,942,500. 
D) $1,380,000. 
A) $1,800,000. 
B) $1,657,500. 
C) $1,942,500. 
D) $1,380,000.

Question 19

In the pull approach

Accepted Answer

A) subassembly parts are manufactured and stored just in case they are needed later in the manufacturing process. 
B) Finished goods are completed and stored just in case unexpected and rush customer orders are received. 
C) the manufacturing process begins with a customer placing an order. 
D) None of the above. 
A) subassembly parts are manufactured and stored just in case they are needed later in the manufacturing process. 
B) Finished goods are completed and stored just in case unexpected and rush customer orders are received. 
C) the manufacturing process begins with a customer placing an order. 
D) None of the above.

Question 20

Which of the following is a product-level activity?

Accepted Answer

A) Equipment setups 
B) Product design 
C) Property taxes 
D) Utilities 
A) Equipment setups 
B) Product design 
C) Property taxes 
D) Utilities

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

To achieve accurate costing, a high degree of correlation must exist between the cost driver and the actual consumption of the activity cost pool.

Which would be a cost driver for a facility-level activity?

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

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

In service industries

Activity-based costing has been found to be useful in each of the following service industries except

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

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

What sometimes makes implementation of activity-based costing difficult in service industries is

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

Activity-based costing is used by

In the pull approach

Which of the following is a product-level activity?

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

Time Value of Money

Filters

Exam 4: Accrual Accounting Concepts

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

To achieve accurate costing, a high degree of correlation must exist between the cost driver and the actual consumption of the activity cost pool.

Which would be a cost driver for a facility-level activity?

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

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

In service industries

Activity-based costing has been found to be useful in each of the following service industries except

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

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

What sometimes makes implementation of activity-based costing difficult in service industries is

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

Activity-based costing is used by

In the pull approach

Which of the following is a product-level activity?

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

Time Value of Money

Filters