Question 1

Successful adoptions of activity-based costing typically occur when companies rely heavily on:

Accepted Answer

A)  finance personnel. 
B)  accounting personnel. 
C)  manufacturing personnel. 
D)  office personnel. 
E)  multidisciplinary project teams. 
A)  finance personnel. 
B)  accounting personnel. 
C)  manufacturing personnel. 
D)  office personnel. 
E)  multidisciplinary project teams.

Question 2

Which of the following is the proper sequence of events in an activity-based costing system?

Accepted Answer

A)  Identification of cost drivers, identification of cost pools, calculation of pool rates, assignment of cost to products. 
B)  Identification of cost pools, identification of cost drivers, calculation of pool rates, assignment of cost to products. 
C)  Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation of pool rates. 
D)  Calculation of pool rates, identification of cost drivers, identification of cost pools, assignment of cost to products. 
E)  None of the answers is correct. 
A)  Identification of cost drivers, identification of cost pools, calculation of pool rates, assignment of cost to products. 
B)  Identification of cost pools, identification of cost drivers, calculation of pool rates, assignment of cost to products. 
C)  Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation of pool rates. 
D)  Calculation of pool rates, identification of cost drivers, identification of cost pools, assignment of cost to products. 
E)  None of the answers is correct.

Question 3

Use the following information to answer the following Questions
Skyline Florists uses an activity-based costing system to compute the cost of making floral bouquets and delivering the bouquets to its commercial customers. Company personnel who earn $180,000 typically perform both tasks; other firm-wide overhead is expected to total $70,000. These costs are allocated as follows:
 
Skyline anticipates making 20,000 bouquets and 4,000 deliveries in the upcoming year.
-The cost of wages and salaries and other overhead that would be charged to each bouquet made is:

Accepted Answer

A)  $7.15. 
B)  $8.75. 
C)  $12.50. 
D)  $13.75. 
E)  None of the answers is correct. 
A)  $7.15. 
B)  $8.75. 
C)  $12.50. 
D)  $13.75. 
E)  None of the answers is correct.

Question 4

Activity-based costing systems:

Accepted Answer

A)  use a single, volume-based cost driver. 
B)  assign overhead to products based on the products' relative usage of direct labor. 
C)  often reveal products that were under- or over-costed by traditional costing systems. 
D)  typically use fewer cost drivers than more traditional costing systems. 
E)  have a tendency to distort product costs. 
A)  use a single, volume-based cost driver. 
B)  assign overhead to products based on the products' relative usage of direct labor. 
C)  often reveal products that were under- or over-costed by traditional costing systems. 
D)  typically use fewer cost drivers than more traditional costing systems. 
E)  have a tendency to distort product costs.

Question 5

In comparison with a system that uses a single, volume-based cost driver, an activity-based costing system is preferred when a company has:

Accepted Answer

A)  a large proportion of non-unit-level activities. 
B)  product-line diversity. 
C)  minimal product-line diversity and a small proportion of non-unit-level activities. 
D)  existing variances from budgeted amounts. 
E)  product-line diversity and a large proportion of non-unit-level activities. 
A)  a large proportion of non-unit-level activities. 
B)  product-line diversity. 
C)  minimal product-line diversity and a small proportion of non-unit-level activities. 
D)  existing variances from budgeted amounts. 
E)  product-line diversity and a large proportion of non-unit-level activities.

Question 6

There are six important factors when selecting appropriate cost drivers.

Accepted Answer

A) True 
 B)False

Question 7

A hospital administrator is in the process of implementing an activity-based-costing system. Which of the following tasks would not be part of this process?

Accepted Answer

A)  Identification of cost pools. 
B)  Calculation of pool rates. 
C)  Assignment of cost to services provided. 
D)  Identification of cost drivers. 
E)  None of the answers is correct. 
A)  Identification of cost pools. 
B)  Calculation of pool rates. 
C)  Assignment of cost to services provided. 
D)  Identification of cost drivers. 
E)  None of the answers is correct.

Question 8

Use the following information to answer the following Questions
Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe. The company, which uses activity-based costing, has identified five activities (and related cost drivers). Each activity, its budgeted cost, and related cost driver is identified below.

-What is Barnett's pool rate for the finishing activity?

Accepted Answer

A)  $5.00 per labor hour. 
B)  $5.00 per machine hour. 
C)  $5.00 per unit. 
D)  $7.50 per unit. 
E)  None of the answers is correct. 
A)  $5.00 per labor hour. 
B)  $5.00 per machine hour. 
C)  $5.00 per unit. 
D)  $7.50 per unit. 
E)  None of the answers is correct.

Question 9

Kettle Company produces two products (F56 and F57), applying manufacturing overhead on the basis of direct labor hours. Anticipated unit production costs (material, labor, and overhead) and manufacturing volumes are:
F56: 2,000 units, $234
F57: 3,500 units, $271
Kettle's overhead arises because of various activities, one of which is purchase-order processing. Budgeted cost for this activity is expected to be $70,000. The firm believes that the number of purchase orders processed is a key cost driver and expects the following activity for its products: F56, 10 purchase orders; F57, 40 purchase orders. Kettle's selling prices are based heavily on cost.
Required: 
A. Activity-based costing (ABC) is said to result in improved costing accuracy when compared with traditional costing procedures. Briefly explain how this improved accuracy is attained.
B. Compute:
1. the pool rate for purchase-order processing.
2. the purchase-order processing cost to be charged to one unit of F56.
C. Assume that Kenyon switched to activity-based costing and calculated total unit production costs as follows: F56, $285; F57, $220.
1. Which of the two products, F56 or F57, was overcosted prior to the change to ABC? No explanation is necessary.
2. Which of the two products, F56 or F57, may have been less competitive in the marketplace prior to the change to ABC? Briefly explain.

Accepted Answer

A. Activity-based costing (ABC) uses mul

Question 10

In an activity-based costing system, materials receiving would typically be classified as a:

Accepted Answer

A)  unit-level activity. 
B)  batch-level activity. 
C)  product-sustaining activity. 
D)  facility-level activity. 
E)  period-level activity. 
A)  unit-level activity. 
B)  batch-level activity. 
C)  product-sustaining activity. 
D)  facility-level activity. 
E)  period-level activity.

Question 11

In the first stage of ABC, a cost driver is selected for each activity cost pool.

Accepted Answer

A) True 
 B)False

Question 12

Of the following organizations, activity-based costing (ABC) cannot be used by:

Accepted Answer

A)  manufacturers. 
B)  financial-services firms. 
C)  book publishers. 
D)  hotels. 
E)  None of these are correct, as all these organizations can use ABC. 
A)  manufacturers. 
B)  financial-services firms. 
C)  book publishers. 
D)  hotels. 
E)  None of these are correct, as all these organizations can use ABC.

Question 13

Pound Industries' customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 7,000 calls and incurred costs of $203,000. If 2,940 of these calls were for the company's wholesale operation (the remainder were for the retail division), costs allocated to the wholesale operation should amount to:

Accepted Answer

A)  $0. 
B)  $29. 
C)  $85,260. 
D)  $117,740. 
E)  $203,000. 
A)  $0. 
B)  $29. 
C)  $85,260. 
D)  $117,740. 
E)  $203,000.

Question 14

Which of the following can have a negative impact on a particular sale's profitability?

Accepted Answer

A)  Number of required sales contacts (phone calls, visits, etc.). 
B)  Special shipping instructions. 
C)  Accounts receivable collection time. 
D)  Purchase-order changes. 
E)  All of the answers are correct. 
A)  Number of required sales contacts (phone calls, visits, etc.). 
B)  Special shipping instructions. 
C)  Accounts receivable collection time. 
D)  Purchase-order changes. 
E)  All of the answers are correct.

Question 15

Use the following information to answer the following Questions
Barnett Products manufactures three types of remote-control devices: Economy, Standard, and Deluxe. The company, which uses activity-based costing, has identified five activities (and related cost drivers). Each activity, its budgeted cost, and related cost driver is identified below.

-Under Barnett's activity-based costing system, what is the per-unit overhead cost of Deluxe?

Accepted Answer

A)  $272. 
B)  $282. 
C)  $320. 
D)  $440. 
E)  None of the answers is correct. 
A)  $272. 
B)  $282. 
C)  $320. 
D)  $440. 
E)  None of the answers is correct.

Question 16

Which of the following statements is (are) true about non-value-added activities?
I. Non-value-added activities are often unnecessary and dispensable.
II. Non-value-added activities may be necessary but are being performed in an inefficient and improvable manner.
III. Non-value-added activities can be eliminated without deterioration of product quality, performance, or perceived value.

Accepted Answer

A)  I only 
B)  II only. 
C)  III only. 
D)  I and II. 
E)  I, II, and III. 
A)  I only 
B)  II only. 
C)  III only. 
D)  I and II. 
E)  I, II, and III.

Question 17

Which of the following tasks is not normally associated with an activity-based costing system?

Accepted Answer

A)  Calculation of pool rates. 
B)  Identification of cost pools. 
C)  Preparation of allocation matrices. 
D)  Identification of cost drivers. 
E)  Assignment of cost to products. 
A)  Calculation of pool rates. 
B)  Identification of cost pools. 
C)  Preparation of allocation matrices. 
D)  Identification of cost drivers. 
E)  Assignment of cost to products.

Question 18

Because labor hours are related closely to the volume of activity in the factory, these traditional product-costing systems often are said to be volume-based costing systems.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is least likely to be classified as a batch-level activity in an activity-based costing system?

Accepted Answer

A)  Shipping. 
B)  Receiving and inspection. 
C)  Production setup. 
D)  Property taxes. 
E)  Quality assurance. 
A)  Shipping. 
B)  Receiving and inspection. 
C)  Production setup. 
D)  Property taxes. 
E)  Quality assurance.

Question 20

Use the following information to answer the following Questions
Bridges and Lloyd, an accounting firm, provides consulting and tax planning services. For many years, the firm's total administrative cost (currently $250,000) has been allocated to services on the basis of billable hours to clients. A recent analysis found that 65% of the firm's billable hours to clients resulted from tax planning services, while 35% resulted from consulting services.
The firm, contemplating a change to activity-based costing, has identified three components of administrative cost, as follows:
 
A recent analysis of staff support found a strong correlation between the number of staff personnel and the number of clients served (consulting, 20; tax planning, 60). In contrast, in-house computing and miscellaneous office cost varied directly with the number of computer hours logged and number of client transactions, respectively. Consulting consumed 30% of the firm's computer hours and had 20% of the total client transactions.
-Assuming the use of activity-based costing, the proper percentage to use in allocating staff support costs to tax planning services is:

Accepted Answer

A)  20%. 
B)  60%. 
C)  65%. 
D)  75%. 
E)  80%. 
A)  20%. 
B)  60%. 
C)  65%. 
D)  75%. 
E)  80%.

Successful adoptions of activity-based costing typically occur when companies rely heavily on:

Which of the following is the proper sequence of events in an activity-based costing system?

Activity-based costing systems:

In comparison with a system that uses a single, volume-based cost driver, an activity-based costing system is preferred when a company has:

There are six important factors when selecting appropriate cost drivers.

A hospital administrator is in the process of implementing an activity-based-costing system. Which of the following tasks would not be part of this process?

In an activity-based costing system, materials receiving would typically be classified as a:

In the first stage of ABC, a cost driver is selected for each activity cost pool.

Of the following organizations, activity-based costing (ABC) cannot be used by:

Which of the following can have a negative impact on a particular sale's profitability?

Which of the following tasks is not normally associated with an activity-based costing system?

Because labor hours are related closely to the volume of activity in the factory, these traditional product-costing systems often are said to be volume-based costing systems.

Which of the following is least likely to be classified as a batch-level activity in an activity-based costing system?

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

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Exam 5: Activity-Based Costing and Management

Successful adoptions of activity-based costing typically occur when companies rely heavily on:

Which of the following is the proper sequence of events in an activity-based costing system?

Activity-based costing systems:

In comparison with a system that uses a single, volume-based cost driver, an activity-based costing system is preferred when a company has:

There are six important factors when selecting appropriate cost drivers.

A hospital administrator is in the process of implementing an activity-based-costing system. Which of the following tasks would not be part of this process?

In an activity-based costing system, materials receiving would typically be classified as a:

In the first stage of ABC, a cost driver is selected for each activity cost pool.

Of the following organizations, activity-based costing (ABC) cannot be used by:

Which of the following can have a negative impact on a particular sale's profitability?

Which of the following tasks is not normally associated with an activity-based costing system?

Because labor hours are related closely to the volume of activity in the factory, these traditional product-costing systems often are said to be volume-based costing systems.

Which of the following is least likely to be classified as a batch-level activity in an activity-based costing system?

The Changing Role of Managerial Accounting in a Dynamic Business Environment

Basic Cost Management Concepts

Product Costing and Cost Accumulation in a Batch Production Environment

Process Costing and Hybrid Product-Costing Systems

Activity Analysis, Cost Behavior, and Cost Estimation

Cost-Volume-Profit Analysis

Variable Costing and the Costs of Quality and Sustainability

Financial Planning and Analysis: the Master Budget

Standard Costing and Analysis of Direct Costs

Flexible Budgeting and Analysis of Overhead Costs

Responsibility Accounting, Operational Performance Measures, and the Balanced Scorecard

Investment Centers and Transfer Pricing

Decision Making: Relevant Costs and Benefits

Target Costing and Cost Analysis for Pricing Decisions

Capital Expenditure Decisions

Allocation of Support Activity Costs and Joint Costs

The Sarbanes-Oxley Act, Internal Controls, and Management Accounting

Compound Interest and the Concept of Present Value

Inventory Management

Filters