Question 1

What is cross-subsidization and when is it most likely to occur?

Accepted Answer

Cross-subsidization is the assignment of

Question 2

Compare and contrast traditional organization-based costing with activity-based costing.

Accepted Answer

Procedurally, ABC is not a new method fo

Question 3

The activity-based resource usage model improves managerial control and decision making such as

Accepted Answer

A)  the best way to use excess activity capacity in the system. 
B)  maximization of individual unit performance. 
C)  increasing the allocation of costs. 
D)  focusing on managing costs rather than activities. 
A)  the best way to use excess activity capacity in the system. 
B)  maximization of individual unit performance. 
C)  increasing the allocation of costs. 
D)  focusing on managing costs rather than activities.

Question 4

Figure 3
The Overdale plant has two categories of overhead: maintenance and inspection. Costs expected for these categories for the coming year are as follows:
The plant currently applies overhead using direct labour hours and expected capacity of 80,000 direct labour hours. The following data has been assembled for use in developing a bid for a proposed job:
   Total expected machine hours for all jobs during the year are 40,000, and the total expected number of inspections is 2,500.
-Refer to Figure 3 above. Using activity-based costing and the appropriate cost drivers, the total cost of the potential job would be

Accepted Answer

A)  £9,230 
B)  £8,180 
C)  £2,250 
D)  £1,680 
A)  £9,230 
B)  £8,180 
C)  £2,250 
D)  £1,680

Question 5

Figure 1 A company usually processes 20,000 orders at a total cost of £300,000. During the year, only 16,000 orders were processed.
Refer to Figure 1. What is the cost of unused activity?

Accepted Answer

A)  £300,000 
B)  £240,000 
C)  £30 
D)  £60,000 
A)  £300,000 
B)  £240,000 
C)  £30 
D)  £60,000

Question 6

Briefly discuss the problem with the unit-level approach to cost estimation and discuss some of the errors that may occur.

Accepted Answer

When cost estimation is limited to the v

Question 7

Ernest, SA., has identified the following overhead costs and cost drivers for next year:
The following are two of the jobs completed during the year:
   The company's normal activity is 32,000 direct labour hours. (Round amounts to two decimal places.)
Required:
   
a.
Determine the unit cost for each job using direct labour hours to apply overhead.
b.
Determine the unit cost for each job using the four cost drivers.
c.
Which method produces the more accurate cost assignment? Why?

Accepted Answer

The answer of Ernest, SA., has identified the following overhead...

Question 8

What is the initial step in implementing an activity-based costing system?

Accepted Answer

A)  assigning costs to activities 
B)  assigning costs to products 
C)  identifying activities and attributes 
D)  dividing activity costs by activity drivers 
A)  assigning costs to activities 
B)  assigning costs to products 
C)  identifying activities and attributes 
D)  dividing activity costs by activity drivers

Question 9

Zipp Company manufactures two products (X and Y). The overhead costs (£84,000) have been divided into three cost pools that use the following activity cost drivers: What is the allocation rate per packing order using activity-based costing?

Accepted Answer

A)  £15,000 
B)  £60 
C)  £7,500 
D)  £200 
A)  £15,000 
B)  £60 
C)  £7,500 
D)  £200

Question 10

Owens Ltd. produces specially machined parts. The parts are produced in batches in one continuous manufacturing process. Each part is custom produced and requires special engineering design activity (based on customer specifications). Once the design is completed, the equipment can be set up for batch production. Once the batch is completed, a sample is taken and inspected to see if the parts are within the tolerances allowed. Thus, the manufacturing process has four activities: engineering, setups, machining, and inspecting. In addition, there is a sustaining process with two activities: providing utilities (plantwide) and providing space. Costs have been assigned to each activity using direct tracing and resource drivers: Activity drivers for each activity have been identified and their practical capacities listed:
  The costs of facility-level activities are assigned using machine hours.
What is(are) the facility-level activity(ies)?

Accepted Answer

A)  providing utilities 
B)  providing space 
C)  inspecting 
D)  both a and b 
A)  providing utilities 
B)  providing space 
C)  inspecting 
D)  both a and b

Question 11

_____ is(are) the cost of acquiring activity capacity.

Accepted Answer

A)  Joint costs 
B)  Resource spending 
C)  Absorption costing 
D)  Variable costing 
A)  Joint costs 
B)  Resource spending 
C)  Absorption costing 
D)  Variable costing

Question 12

Spear Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are as follows: Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour hours. 20,000 direct labour hours are budgeted for next year.
The company has been asked to submit a bid for a proposed job. The plant manager feels that obtaining this job would result in new business in future years. Usually bids are based upon full manufacturing cost plus 15 percent. Estimates for the proposed job are as follows:
  In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based activity driver, direct labour hours. The plant manager has heard of a new way of applying overhead that uses cost pools and activity drivers. Expected activity for the four activity drivers that would be used are:
  If material moves are used to assign material handling costs, the amount of material handling costs allocated to the proposed job would be

Accepted Answer

A)  £180. 
B)  £170. 
C)  £147. 
D)  £60. 
A)  £180. 
B)  £170. 
C)  £147. 
D)  £60.

Question 13

If activity-based costing is used, insurance on the plant would be classified as a

Accepted Answer

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

Question 14

Resources that are only purchased precisely at the time the resource is needed are called

Accepted Answer

A)  committed resources 
B)  flexible resources 
C)  scarce resources 
D)  none of the above 
A)  committed resources 
B)  flexible resources 
C)  scarce resources 
D)  none of the above

Question 15

Basing overhead allocation solely on volume

Accepted Answer

A)  will undercost high-volume products and overcost low-volume products 
B)  will overcost high-volume products and undercost low-volume products 
C)  is the sole basis of the activity-based costing model 
D)  All of the above are correct. 
A)  will undercost high-volume products and overcost low-volume products 
B)  will overcost high-volume products and undercost low-volume products 
C)  is the sole basis of the activity-based costing model 
D)  All of the above are correct.

Question 16

The use of unit-based activity drivers to assign costs tends to

Accepted Answer

A)  overcost low-volume products. 
B)  overcost high-volume products. 
C)  undercost all products. 
D)  overcost all products. 
A)  overcost low-volume products. 
B)  overcost high-volume products. 
C)  undercost all products. 
D)  overcost all products.

Question 17

Hill Manufacturing uses an activity-based costing system. The company produces Model A and Model B. Information concerning the two products is as follows:
Required:

Accepted Answer

The answer of Hill Manufacturing uses an activity-based costing system....

Question 18

An activity-based costing system uses which of the following procedures?

Accepted Answer

A)  Overhead costs are traced to departments, then costs are traced to products. 
B)  Overhead costs are traced to activities, then costs are traced to products. 
C)  Overhead costs are traced directly to products. 
D)  All overhead costs are expensed as incurred. 
A)  Overhead costs are traced to departments, then costs are traced to products. 
B)  Overhead costs are traced to activities, then costs are traced to products. 
C)  Overhead costs are traced directly to products. 
D)  All overhead costs are expensed as incurred.

Question 19

The activity-based approach to break-even costing emphasizes

Accepted Answer

A)  fixed and variable cost behaviour 
B)  unit and nonunit cost behaviour 
C)  product and period cost behaviour 
D)  value chain cost behaviour 
A)  fixed and variable cost behaviour 
B)  unit and nonunit cost behaviour 
C)  product and period cost behaviour 
D)  value chain cost behaviour

Question 20

All of the following are nonunit-based activity drivers EXCEPT

Accepted Answer

A)  number of setups. 
B)  number of direct labour hours. 
C)  number of inspections. 
D)  number of material moves. 
A)  number of setups. 
B)  number of direct labour hours. 
C)  number of inspections. 
D)  number of material moves.

What is cross-subsidization and when is it most likely to occur?

Compare and contrast traditional organization-based costing with activity-based costing.

The activity-based resource usage model improves managerial control and decision making such as

Figure 1 A company usually processes 20,000 orders at a total cost of £300,000. During the year, only 16,000 orders were processed. Refer to Figure 1. What is the cost of unused activity?

Briefly discuss the problem with the unit-level approach to cost estimation and discuss some of the errors that may occur.

What is the initial step in implementing an activity-based costing system?

Zipp Company manufactures two products (X and Y). The overhead costs (£84,000) have been divided into three cost pools that use the following activity cost drivers: What is the allocation rate per packing order using activity-based costing?

_____ is(are) the cost of acquiring activity capacity.

If activity-based costing is used, insurance on the plant would be classified as a

Resources that are only purchased precisely at the time the resource is needed are called

Basing overhead allocation solely on volume

The use of unit-based activity drivers to assign costs tends to

Hill Manufacturing uses an activity-based costing system. The company produces Model A and Model B. Information concerning the two products is as follows: Required:

An activity-based costing system uses which of the following procedures?

The activity-based approach to break-even costing emphasizes

All of the following are nonunit-based activity drivers EXCEPT

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Pricing Decisions and Profitability Analysis

Capital Investment Decisions

Cost Assignment

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis

Divisional Financial Performance Measurement

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Performance Management

Filters

Exam 8: Activity-Based Costing

What is cross-subsidization and when is it most likely to occur?

Compare and contrast traditional organization-based costing with activity-based costing.

The activity-based resource usage model improves managerial control and decision making such as

Figure 1 A company usually processes 20,000 orders at a total cost of £300,000. During the year, only 16,000 orders were processed. Refer to Figure 1. What is the cost of unused activity?

Briefly discuss the problem with the unit-level approach to cost estimation and discuss some of the errors that may occur.

What is the initial step in implementing an activity-based costing system?

Zipp Company manufactures two products (X and Y). The overhead costs (£84,000) have been divided into three cost pools that use the following activity cost drivers: What is the allocation rate per packing order using activity-based costing?

_____ is(are) the cost of acquiring activity capacity.

If activity-based costing is used, insurance on the plant would be classified as a

Resources that are only purchased precisely at the time the resource is needed are called

Basing overhead allocation solely on volume

The use of unit-based activity drivers to assign costs tends to

Hill Manufacturing uses an activity-based costing system. The company produces Model A and Model B. Information concerning the two products is as follows: Required:

An activity-based costing system uses which of the following procedures?

The activity-based approach to break-even costing emphasizes

All of the following are nonunit-based activity drivers EXCEPT

Introduction to Management Accounting

An Introduction to Cost Terms and Concepts

Cost-Volume-Profit Analysis

Measuring Relevant Costs and Revenues for Decision-Making

Pricing Decisions and Profitability Analysis

Capital Investment Decisions

Cost Assignment

The Budgeting Process

Management Control Systems

Standard Costing and Variance Analysis

Divisional Financial Performance Measurement

Transfer Pricing in Divisionalized Companies

Cost Management

Strategic Performance Management

Filters