Question 1

If a cost pool is heterogeneous, it contains only resources from which the pool directly benefits.

Accepted Answer

A) True 
 B)False

Question 2

Howe Paper, Inc., produces a number of products, including a replacement filter bag for a popular vacuum cleaner. The filter bags pass through a machine center where the paper pieces are joined with an adhesive. This machine center operates a single eight-hour daily shift totaling 2,000 hours in each 8,760-hour year. Cycle time for each bag is 10 seconds, and in the just-concluded year, 600,000 filter bags were produced. The total committed costs of running the machine center for the year were $70,080, and the total managed costs were $80,000. 
-What amount of total nonproductive cost (to the nearest whole dollar) did Howe suffer for the year?

Accepted Answer

A)  $16,000 
B)  $25,013 
C)  $324,480 
D)  $54,080 
A)  $16,000 
B)  $25,013 
C)  $324,480 
D)  $54,080

Question 3

Layton Manufacturing Company maintains its own electricity-generating facility to provide power to the firm's various divisions. Layton has no metering facility to precisely measure the amount of power consumed by the divisions of the firm, but feels there is a high degree of correlation between power consumption and machine hours consumed at the divisional level. Under these circumstances, the cost of power attached to divisions may best be described as:

Accepted Answer

A)  Traced to the divisions. 
B)  Assigned to the divisions. 
C)  Allocated to the divisions. 
D)  Disregarded at the divisional level. 
A)  Traced to the divisions. 
B)  Assigned to the divisions. 
C)  Allocated to the divisions. 
D)  Disregarded at the divisional level.

Question 4

The amount of time that elapses between completed units coming off the end of the production line or completing a process is referred to as:

Accepted Answer

A)  Idle time 
B)  Cycle time 
C)  Productive capacity 
D)  Nonproductive capacity 
A)  Idle time 
B)  Cycle time 
C)  Productive capacity 
D)  Nonproductive capacity

Question 5

The most common term to describe costs that are indirect to all of a company's cost pools is:

Accepted Answer

A)  Manageable 
B)  Committed 
C)  Overhead 
D)  Traceable 
A)  Manageable 
B)  Committed 
C)  Overhead 
D)  Traceable

Question 6

All managed capacity costs are avoidable.

Accepted Answer

A) True 
 B)False

Question 7

As the amount of work performed by a cost pool is reduced, resource costs classified as avoidable will continue unchanged.

Accepted Answer

A) True 
 B)False

Question 8

Activity based costing traces resources to cost pools based on a common type of work performed by those resources.

Accepted Answer

A) True 
 B)False

Question 9

The most important criterion in accurate cost allocations is:

Accepted Answer

A)  Using a simple allocation method. 
B)  Allocating fixed and variable costs by using the same allocation base. 
C)  Using homogeneous cost pools. 
D)  Using multiple drivers for each cost pool. 
A)  Using a simple allocation method. 
B)  Allocating fixed and variable costs by using the same allocation base. 
C)  Using homogeneous cost pools. 
D)  Using multiple drivers for each cost pool.

Question 10

A company is considering the implementation of an activity-based costing and management program. The company:

Accepted Answer

A)  Should focus on manufacturing activities and avoid implementation with service-type functions. 
B)  Would probably find a lack of software in the marketplace to assist with the related record keeping. 
C)  Would normally gain added insights into causes of cost. 
D)  Would likely use fewer cost pools than it did under more traditional accounting methods. 
A)  Should focus on manufacturing activities and avoid implementation with service-type functions. 
B)  Would probably find a lack of software in the marketplace to assist with the related record keeping. 
C)  Would normally gain added insights into causes of cost. 
D)  Would likely use fewer cost pools than it did under more traditional accounting methods.

Question 11

The presence of idle capacity in a machine center results in the loss of both managed and committed capacity costs.

Accepted Answer

A) True 
 B)False

Question 12

Management at Integrated Controls, Inc., has identified a reduction of competitive cost in a critical machine center as a key objective. Which of the following tactics would be successful in reducing competitive cost?

Accepted Answer

A)  A reduction in a significant manageable cost. 
B)  An increase in cycle time. 
C)  A reduction in idle time in the form of waste. 
D)  All of the above would reduce competitive cost. 
A)  A reduction in a significant manageable cost. 
B)  An increase in cycle time. 
C)  A reduction in idle time in the form of waste. 
D)  All of the above would reduce competitive cost.

Question 13

A profitable company with five departments uses plant-wide overhead rates for its highly diversified operation. The firm is studying a change to either allocating overhead by using departmental rates or using activity-based costing (ABC). Which one of these two methods will likely result in the use of a greater number of cost allocation bases and more accurate costing results?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 14

Fisher and Caplan Company has identified eight employees who are in some way involved with obtaining the raw materials used in the firm's products and has grouped these individuals into a cost pool. These employees' activities range from ordering materials, taking receipt of incoming shipments, and preparing materials for use on the factory floor. Of the following events, which would be a reasonable activity driver for the employees in this cost pool?

Accepted Answer

A)  Labor hours 
B)  Production runs 
C)  Machine setups 
D)  Receipts of raw material shipments 
A)  Labor hours 
B)  Production runs 
C)  Machine setups 
D)  Receipts of raw material shipments

Question 15

If a cost pool contains resources shared with other cost pools, use of the shared resources will have to be estimated and not traced.

Accepted Answer

A) True 
 B)False

Question 16

The 195 Factory produces replacement parts and assemblies for vintage Cessna aircraft. The company is considering replacing its current costing system with an activity-based approach. It has identified three activities: computer-aided design; fabrication; and assembly and finishing. Data regarding these activities has been collected in the table below.
  
-Two jobs are currently complete and ready for delivery to the customer. One is a wing assembly that required raw materials costing $5,000 and consumed 40 hours of direct labor time. The wing assembly is a standard product that required only one hour of CAD time and three hours of machine time. What amount of overhead would the proposed activity-based costing system assign to this job?

Accepted Answer

A)  $500 
B)  $3,400 
C)  $2,000 
D)  $900 
A)  $500 
B)  $3,400 
C)  $2,000 
D)  $900

Question 17

The 195 Factory produces replacement parts and assemblies for vintage Cessna aircraft. The company is considering replacing its current costing system with an activity-based approach. It has identified three activities: computer-aided design; fabrication; and assembly and finishing. Data regarding these activities has been collected in the table below.
 
- What is the activity cost rate for the computer-aided design activity?

Accepted Answer

A)  $500 per computer hour 
B)  $300 per machine hour 
C)  $250 per labor hour 
D)  $1,000 per computer hour 
A)  $500 per computer hour 
B)  $300 per machine hour 
C)  $250 per labor hour 
D)  $1,000 per computer hour

Question 18

Atmel, Inc., manufactures and sells two products. Data with regard to these products is given below.
  Total budgeted machine hours are 100,000. The budgeted overhead costs are shown below.
  Using activity-based costing, the per-unit overhead cost allocation of receiving costs for product A is:

Accepted Answer

A)  $3.75 
B)  $10.75 
C)  $19.50 
D)  $28.13 
A)  $3.75 
B)  $10.75 
C)  $19.50 
D)  $28.13

Question 19

Managed capacity costs differ from committed capacity costs in that:

Accepted Answer

A)  Managed costs are found only in homogeneous and never in heterogeneous cost pools. 
B)  Managed costs are always strictly variable while committed costs are strictly fixed. 
C)  Managed costs will be avoided when the cost pool performs no work while committed costs will continue. 
D)  Managed costs are always traceable while committed costs will have to be assigned via some method of estimation. 
A)  Managed costs are found only in homogeneous and never in heterogeneous cost pools. 
B)  Managed costs are always strictly variable while committed costs are strictly fixed. 
C)  Managed costs will be avoided when the cost pool performs no work while committed costs will continue. 
D)  Managed costs are always traceable while committed costs will have to be assigned via some method of estimation.

Question 20

Bye-Bye Varmint Company produces a liquid rodent repellant that is packaged and sold in one-liter spray bottles. A single machine that is operated for two, 8-hour daily shifts, five days per week for 50 weeks each year blends the ingredients in the repellant. The annual committed costs of running the machine are $2,628,000, and the managed costs are $1,600,000. 
-The company has determined that its competitive cost per one-liter spray bottle unit in this machine center is $1.94. What cycle time does this imply?

Accepted Answer

A)  17.46 seconds 
B)  23.28 seconds 
C)  10 seconds 
D)  5 seconds 
A)  17.46 seconds 
B)  23.28 seconds 
C)  10 seconds 
D)  5 seconds

If a cost pool is heterogeneous, it contains only resources from which the pool directly benefits.

The amount of time that elapses between completed units coming off the end of the production line or completing a process is referred to as:

The most common term to describe costs that are indirect to all of a company's cost pools is:

All managed capacity costs are avoidable.

As the amount of work performed by a cost pool is reduced, resource costs classified as avoidable will continue unchanged.

Activity based costing traces resources to cost pools based on a common type of work performed by those resources.

The most important criterion in accurate cost allocations is:

A company is considering the implementation of an activity-based costing and management program. The company:

The presence of idle capacity in a machine center results in the loss of both managed and committed capacity costs.

Management at Integrated Controls, Inc., has identified a reduction of competitive cost in a critical machine center as a key objective. Which of the following tactics would be successful in reducing competitive cost?

If a cost pool contains resources shared with other cost pools, use of the shared resources will have to be estimated and not traced.

Atmel, Inc., manufactures and sells two products. Data with regard to these products is given below. Total budgeted machine hours are 100,000. The budgeted overhead costs are shown below. Using activity-based costing, the per-unit overhead cost allocation of receiving costs for product A is:

Managed capacity costs differ from committed capacity costs in that:

Business Planning and Analysis: An Integrative Framework for Management Accounting

Measuring and Evaluating Performance

Defining and Using Cost Estimates

Understanding the Management Process

Planning in the Product Domain

Assessing and Improving Product Profitability

Setting Process Expectations

Evaluating and Improving Process Performance

Setting Performance Expectations at the Entity Level

Setting Performance Expectations in Large, Complex Organizations

Evaluating and Improving Entity Performance

Setting and Achieving Targets in the Customer Domain

Strategic Cost Management and the Value Chain Domain

Filters

Exam 4: Cost Pools, Capacity, and Activity- Based Costing

If a cost pool is heterogeneous, it contains only resources from which the pool directly benefits.

The amount of time that elapses between completed units coming off the end of the production line or completing a process is referred to as:

The most common term to describe costs that are indirect to all of a company's cost pools is:

All managed capacity costs are avoidable.

As the amount of work performed by a cost pool is reduced, resource costs classified as avoidable will continue unchanged.

Activity based costing traces resources to cost pools based on a common type of work performed by those resources.

The most important criterion in accurate cost allocations is:

A company is considering the implementation of an activity-based costing and management program. The company:

The presence of idle capacity in a machine center results in the loss of both managed and committed capacity costs.

Management at Integrated Controls, Inc., has identified a reduction of competitive cost in a critical machine center as a key objective. Which of the following tactics would be successful in reducing competitive cost?

If a cost pool contains resources shared with other cost pools, use of the shared resources will have to be estimated and not traced.

Atmel, Inc., manufactures and sells two products. Data with regard to these products is given below. Total budgeted machine hours are 100,000. The budgeted overhead costs are shown below. Using activity-based costing, the per-unit overhead cost allocation of receiving costs for product A is:

Managed capacity costs differ from committed capacity costs in that:

Business Planning and Analysis: An Integrative Framework for Management Accounting

Measuring and Evaluating Performance

Defining and Using Cost Estimates

Understanding the Management Process

Planning in the Product Domain

Assessing and Improving Product Profitability

Setting Process Expectations

Evaluating and Improving Process Performance

Setting Performance Expectations at the Entity Level

Setting Performance Expectations in Large, Complex Organizations

Evaluating and Improving Entity Performance

Setting and Achieving Targets in the Customer Domain

Strategic Cost Management and the Value Chain Domain

Filters