Question 1

An example of a customer-value-added activity is:

Accepted Answer

A)  final painting and polishing of the product. 
B)  installation of a computerized human resource management module. 
C)  shortening the customers' billing cycle. 
D)  addition of an employee hotline for workplace complaints. 
E)  maintenance of an adequate safety stock. 
A)  final painting and polishing of the product. 
B)  installation of a computerized human resource management module. 
C)  shortening the customers' billing cycle. 
D)  addition of an employee hotline for workplace complaints. 
E)  maintenance of an adequate safety stock.

Question 2

Use the following information to answer the following Questions
St. Vincent’s, Inc., currently uses traditional costing procedures, applying $800,000 of overhead to products Beta and Zeta on the basis of direct labor hours. The company is considering a shift to activity-based costing and the creation of individual cost pools that will use direct labor hours (DLH), production setups (SU), and number of parts components (PC) as cost drivers. Data on the cost pools and respective driver volumes follow.

-The overhead cost allocated to Beta by using activity-based costing procedures would be:

Accepted Answer

A)  $240,000. 
B)  $356,000. 
C)  $444,000. 
D)  $560,000. 
E)  None of the answers is correct. 
A)  $240,000. 
B)  $356,000. 
C)  $444,000. 
D)  $560,000. 
E)  None of the answers is correct.

Question 3

Private Corporation manufactures two types of transponders-no. 156 and no. 157-and applies manufacturing overhead to all units at the rate of $76.50 per machine hour. Production information follows.
   
The controller, who is studying the use of activity-based costing, has determined that the firm's overhead can be identified with three activities: manufacturing setups, machine processing, and product shipping. Data on the number of setups, machine hours worked, and outgoing shipments, the activities' three respective cost drivers, follow.
   
The firm's total overhead of $3,060,000 is subdivided as follows: manufacturing setups, $260,000; machine processing, $2,400,000; and product shipping, $400,000. 
Required: 
A. Compute the pool rates that would be used for manufacturing setups, machine processing, and product shipping in an activity-based costing system.
B. Assuming use of activity-based costing, compute the unit overhead costs of product nos. 156 and 157 if the expected manufacturing volume is attained.
C. Assuming use of activity-based costing, compute the total cost per unit of product no. 156.
D. If the company's selling price is based heavily on cost, would a switch to activity-based costing from the current traditional system result in a price increase or decrease for product no. 156? Show computations.

Accepted Answer

A. Manufacturing setups: $260,000 / 100

Question 4

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 material-handling activity?

Accepted Answer

A)  $1.00 per part. 
B)  $2.25 per part. 
C)  $6.62 per labor hour. 
D)  $13.23 per part. 
E)  None of the answers is correct. 
A)  $1.00 per part. 
B)  $2.25 per part. 
C)  $6.62 per labor hour. 
D)  $13.23 per part. 
E)  None of the answers is correct.

Question 5

An example of a customer-value-added activity is final painting and polishing of the product.

Accepted Answer

A) True 
 B)False

Question 6

A product's cost is the sum of its direct-material cost, its direct-labor cost, and its overhead cost, which is the accumulation of all the resource costs driven to the product by the various cost drivers selected for the ABC system.

Accepted Answer

A) True 
 B)False

Question 7

A bill of activities is a complete listing of the activities identified and used in the ABC analysis.

Accepted Answer

A) True 
 B)False

Question 8

Sampler, Inc., which sells books to college bookstores and individuals, uses activity-based costing and activity-based management. The following information is available for the company's three cost pools:
   
Bookstore sales totaled $8,400,000, and sales to individuals amounted to $2,400,000. Costs for the three activities were: Incoming receipts, $450,000; warehousing, $520,000; and outgoing shipments, $630,000. A review of the company's activities found various inefficiencies with respect to the warehousing of textbooks (acquired for eventual sale to bookstores) and outgoing shipments to individuals. These inefficiencies resulted in an extra 500 moves and 400 shipments, respectively. 
Required: 
A. What is a non-value-added activity?
B. How much did non-value-added activities cost Sampler this past year?
C. Which of the two markets-sales to bookstores or sales to individuals-resulted in lower overall costs for incoming receipts, warehousing, and outgoing shipments? Evaluate these costs in both absolute dollars and as a percentage of sales. In addition, present a possible explanation for your results. Note: Exclude costs that arose from inefficient operations.

Accepted Answer

A. Non-value-added activities can be def

Question 9

The division of activities into unit-level, batch-level, product-sustaining level, and facility-level categories is commonly known as a cost:

Accepted Answer

A)  object. 
B)  application method. 
C)  hierarchy. 
D)  estimation method. 
E)  classification scheme that is useful in traditional, volume-based systems. 
A)  object. 
B)  application method. 
C)  hierarchy. 
D)  estimation method. 
E)  classification scheme that is useful in traditional, volume-based systems.

Question 10

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 retail division 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 11

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 Economy?

Accepted Answer

A)  $141. 
B)  $164. 
C)  $225. 
D)  $228. 
E)  None of the answers is correct. 
A)  $141. 
B)  $164. 
C)  $225. 
D)  $228. 
E)  None of the answers is correct.

Question 12

Which of the following is not a broad, cost classification category typically used in activity-based costing?

Accepted Answer

A)  Unit-level. 
B)  Batch-level. 
C)  Product-sustaining level. 
D)  Facility-level. 
E)  Management-level. 
A)  Unit-level. 
B)  Batch-level. 
C)  Product-sustaining level. 
D)  Facility-level. 
E)  Management-level.

Question 13

Which of the following best explains the main advantages of time-driven-activity-based costing for services over the use of conventional ABC?

Accepted Answer

A)  The number of services can more easily be expanded than under conventional ABC, since costs are assigned to unused capacity. 
B)  Theoretical capacity, used in this type of costing, allows service companies a better method to assess quality control than does conventional ABC. 
C)  Time-based resource and activity data is easy to collect and practical capacity is used by time-driven-activity-based costing. 
D)  The number of line items on a service's bill is minimized and practical capacity is used by time-driven-activity-based costing. 
E)  This type of costing allows service companies better information since their objectives when using ABC are different than those of manufacturing firms. 
A)  The number of services can more easily be expanded than under conventional ABC, since costs are assigned to unused capacity. 
B)  Theoretical capacity, used in this type of costing, allows service companies a better method to assess quality control than does conventional ABC. 
C)  Time-based resource and activity data is easy to collect and practical capacity is used by time-driven-activity-based costing. 
D)  The number of line items on a service's bill is minimized and practical capacity is used by time-driven-activity-based costing. 
E)  This type of costing allows service companies better information since their objectives when using ABC are different than those of manufacturing firms.

Question 14

Generally speaking, companies prefer doing business with customers who:

Accepted Answer

A)  order small quantities rather than large quantities. 
B)  often change their orders. 
C)  require special packaging or handling. 
D)  request normal delivery times. 
E)  need specialized engineering design changes. 
A)  order small quantities rather than large quantities. 
B)  often change their orders. 
C)  require special packaging or handling. 
D)  request normal delivery times. 
E)  need specialized engineering design changes.

Question 15

Washburn Corporation produces flat-screen computer monitors. Consider the following selected costs that arose during the current year:
1. Direct materials used: $3,640,000
2. Plant rent, utilities, and taxes: $1,229,000
3. New technology design engineering: $2,040,000
4. Materials receiving: $318,000
5. Manufacturing-run/set-up charges: $115,000
6. Equipment depreciation: $92,000
7. General management salaries: $1,564,000
Required: 
A. Briefly distinguish between batch-level and facility-level activities.
B. Determine the cost of the firm's unit-level, batch-level, product-sustaining, and facility-level activities.

Accepted Answer

A. A batch-level activity is performed f

Question 16

Todd Manufacturing, contemplating the adoption of an activity-based costing system, has established three activity-cost pools: machine setup, quality assurance, and engineering. These cost pools, the appropriate cost driver, and the percentage of each cost driver consumed by the company's products (H15, H16, and H17) follow.

Accepted Answer

A. More
B. Machine setup: $400,000 * 30%

Question 17

Widely varying consumption ratios:

Accepted Answer

A)  are reflective of product-line diversity. 
B)  indicate an out-of-control production environment. 
C)  dictate a need for traditional costing systems. 
D)  work against the implementation of activity-based costing. 
E)  create an unsolvable product-costing problem. 
A)  are reflective of product-line diversity. 
B)  indicate an out-of-control production environment. 
C)  dictate a need for traditional costing systems. 
D)  work against the implementation of activity-based costing. 
E)  create an unsolvable product-costing problem.

Question 18

Non-value-added activities are the events that trigger activities and linkages among activities.

Accepted Answer

A) True 
 B)False

Question 19

Generally speaking, companies prefer doing business with customers who order small quantities rather than large quantities.

Accepted Answer

A) True 
 B)False

Question 20

Magnolia Industries combines all manufacturing overhead into a single cost pool and allocates this overhead to products by using machine hours. Activity-based costing would likely show that with Magnolia's current procedures that:

Accepted Answer

A)  all of the company's products are undercosted. 
B)  the company's high-volume products are undercosted. 
C)  all of the company's products are overcosted. 
D)  the company's high-volume products are overcosted. 
E)  the company's low-volume products are overcosted. 
A)  all of the company's products are undercosted. 
B)  the company's high-volume products are undercosted. 
C)  all of the company's products are overcosted. 
D)  the company's high-volume products are overcosted. 
E)  the company's low-volume products are overcosted.

An example of a customer-value-added activity is:

An example of a customer-value-added activity is final painting and polishing of the product.

A product's cost is the sum of its direct-material cost, its direct-labor cost, and its overhead cost, which is the accumulation of all the resource costs driven to the product by the various cost drivers selected for the ABC system.

A bill of activities is a complete listing of the activities identified and used in the ABC analysis.

The division of activities into unit-level, batch-level, product-sustaining level, and facility-level categories is commonly known as a cost:

Which of the following is not a broad, cost classification category typically used in activity-based costing?

Which of the following best explains the main advantages of time-driven-activity-based costing for services over the use of conventional ABC?

Generally speaking, companies prefer doing business with customers who:

Widely varying consumption ratios:

Non-value-added activities are the events that trigger activities and linkages among activities.

Generally speaking, companies prefer doing business with customers who order small quantities rather than large quantities.

Magnolia Industries combines all manufacturing overhead into a single cost pool and allocates this overhead to products by using machine hours. Activity-based costing would likely show that with Magnolia's current procedures that:

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

An example of a customer-value-added activity is:

An example of a customer-value-added activity is final painting and polishing of the product.

A product's cost is the sum of its direct-material cost, its direct-labor cost, and its overhead cost, which is the accumulation of all the resource costs driven to the product by the various cost drivers selected for the ABC system.

A bill of activities is a complete listing of the activities identified and used in the ABC analysis.

The division of activities into unit-level, batch-level, product-sustaining level, and facility-level categories is commonly known as a cost:

Which of the following is not a broad, cost classification category typically used in activity-based costing?

Which of the following best explains the main advantages of time-driven-activity-based costing for services over the use of conventional ABC?

Generally speaking, companies prefer doing business with customers who:

Widely varying consumption ratios:

Non-value-added activities are the events that trigger activities and linkages among activities.

Generally speaking, companies prefer doing business with customers who order small quantities rather than large quantities.

Magnolia Industries combines all manufacturing overhead into a single cost pool and allocates this overhead to products by using machine hours. Activity-based costing would likely show that with Magnolia's current procedures that:

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