Question 1

Traditional costing systems were focused on product costing for service organisations.

Accepted Answer

A) True 
 B)False

Question 2

Reasons that managers may wish to reduce environmental costs include:

Accepted Answer

A)  appeal to shareholders concerned with the green reputation of companies in which they invest 
B)  reduce possible penalties for damage to environmental resources 
C)  reduce the costs of environmental lobbyists 
D)  a and b

Question 3

Activity based management used information from ABC to identify opportunities for improvements in profitability, efficiency and quality.

Accepted Answer

A) True 
 B)False

Question 4

Each cost pool in an ABC system has the same cost allocation rate.

Accepted Answer

A) True 
 B)False

Question 5

The accuracy of estimates used in the denominator does not affect the cost accuracy in an ABC system.

Accepted Answer

A) True 
 B)False

Question 6

Activity-based costing, compared to traditional costing, increases the accuracy of cost measurement by using multiple cost allocation bases for overhead.

Accepted Answer

A) True 
 B)False

Question 7

Which of the steps listed below normally occurs last when assigning costs in an ABC system?

Accepted Answer

A)  Assign costs to activity-based pools 
B)  Allocate activity costs to each cost object 
C)  Identify activities 
D)  Identify the relevant cost object

Question 8

Rhiannon is a customer of Inthenews Ltd. She consistently orders low-margin services, but requires extensive technical support from Inthenews Ltd. In employing ABM techniques to manage customer profitability, Inthenews' staff should:

Accepted Answer

A)  Reduce staff costs in their technical support area 
B)  Increase prices charged to other customers 
C)  Consider new approaches to providing services to Rhiannon 
D)  Increase the price charged for Rhiannon's orders

Question 9

No product warranties are likely to be associated with high customer service costs.

Accepted Answer

A) True 
 B)False

Question 10

Activity-based costing extends the focus of costing to products and other types of cost objects.

Accepted Answer

A) True 
 B)False

Question 11

Swim4Life provides swimming classes and training in South East Queensland. Swim4Life offers four training levels: Learn to Swim Baby, Learn to Swim Junior, Learn to Swim Senior, Swim Squad. In November 2019, the firm's information system produced the following data $$\begin{array} { | l | l | l | l | l | l | } 
\hline & \begin{array} { l } 
\text { No of Swirn } \
\text { Teachers }
\end{array} & \text { No of Students } & \text { Area Occupied } & \begin{array} { l } 
\text { Number of } \
\text { Classes }
\end{array} & \text { Direct Costs } \
\hline \text { Baby } & 4 & 20 & 10 \% & 108 & \$ 1,000 \
\hline \text { Jurior } & 3 & 24 & 40 \% & 94 & \$ 1,500 \
\hline \text { Serior } & 5 & 15 & 20 \% & 84 & \$ 3,000 \
\hline \text { Squad } & 3 & 9 & 30 \% & 48 & \$ 1,000 \
\hline
\end{array}$$ Regardless of level, students pay $15 per hour for lessons. Swim4Life also provides lessons to school students who come with their school during school hours. These lessons are provided at a discounted rate of $12 per child. However, during November no school's required lessons.
Costs associated with the Swim4Life operations for November 2019 included:
Facility rent $2,500
Provision of Life Savers $800
Utilities $1,100
Computer equipment depreciation $800
Advertising $400
Training $1,500
Assume Swim4Life allocates facility rent, and utilities on the basis of area occupied, computer equipment depreciation on the basis of number of students and training on the basis of number of swim teachers. Lifesaving is allocated based on the number of classes. Advertising is not allocated.
What is the total amount of profit generated by senior classes (assume all classes were fully booked) during November?

Accepted Answer

A)  $6,300 
B)  $3,300 
C)  $1,703 
D)  $4,703

Question 12

Costs associated with developing an ABC system most likely include:

Accepted Answer

A)  Reduced profits 
B)  Dissatisfied customers 
C)  Accounting and information system modifications 
D)  Increased wages for production line employees

Question 13

An activity is a:

Accepted Answer

A)  Direct cost 
B)  Type of task or function performed in an organisation 
C)  Cost object in conventional costing systems 
D)  All of the above

Question 14

Century Point is a modern business club in the inner city of Brisbane. It is owned by Silvera Property Holdings, which operates additional properties in Auckland, Christchurch and Singapore. Century Point has 6 separate areas each with corporate facilities for various membership groups. Also on premises is a gymnasium, restaurant, and pool. The business club is organised in 5 departments: front desk, housekeeping, food & beverage, and customer relations. As part of its operation, Century Point regularly incurs the following costs: 
General Manager's salary
Cleaning and maintenance costs
Utility costs
Depreciation on gym equipment
Advertising
Food and beverage costs
Depreciation on restaurant equipment
Administration salaries for the Silvera is best described as a(n) :

Accepted Answer

A)  Facility-sustaining cost 
B)  Organisation-sustaining cost 
C)  Product-sustaining cost 
D)  Batch-level cost

Question 15

Activity based costing cannot be used in service organisations.

Accepted Answer

A) True 
 B)False

Question 16

Employees can restrict the success of an ABC implementation by:

Accepted Answer

A)  Undermining training efforts 
B)  Providing biased information 
C)  Asking for a pay rise 
D)  a and b

Question 17

In an activity-based costing system, both organisation-sustaining and facility-sustaining activities are assumed to be unaffected by the number of customers.

Accepted Answer

A) True 
 B)False

Question 18

Activity-based costing information can be used to identify the relative cost of maintaining different customers. Managers can use that information, coupled with activity-based management techniques, to manage:

Accepted Answer

A)  Customer quality 
B)  Customer profitability 
C)  Delivery times 
D)  Supplier satisfaction.

Question 19

Recent survey findings suggest that ABC:

Accepted Answer

A)  are better integrated into budget and planning systems 
B)  support product and customer related decisions 
C)  result in better identification of cause and effect relationships 
D)  all of the above

Question 20

Swim4Life provides swimming classes and training in South East Queensland. Swim4Life offers four training levels: Learn to Swim Baby, Learn to Swim Junior, Learn to Swim Senior, Swim Squad. In November 2019, the firm's information system produced the following data $$\begin{array} { | l | l | l | l | l | l | } 
\hline & \begin{array} { l } 
\text { No of Swirn } \
\text { Teachers }
\end{array} & \text { No of Students } & \text { Area Occupied } & \begin{array} { l } 
\text { Number of } \
\text { Classes }
\end{array} & \text { Direct Costs } \
\hline \text { Baby } & 4 & 20 & 10 \% & 108 & \$ 1,000 \
\hline \text { Jurior } & 3 & 24 & 40 \% & 94 & \$ 1,500 \
\hline \text { Serior } & 5 & 15 & 20 \% & 84 & \$ 3,000 \
\hline \text { Squad } & 3 & 9 & 30 \% & 48 & \$ 1,000 \
\hline
\end{array}$$ Regardless of level, students pay $15 per hour for lessons. Only 5 swimmers can be supervised by the teacher in each lesson. Swim4Life also provides lessons to school students who come with their school during school hours. These lessons are provided at a discounted rate of $12 per child.
Costs associated with the Swim4Life operations for November 2019 included:
Facility rent $2,500
Provision of Life Savers $800
Utilities $1,100
Computer equipment depreciation $800
Advertising $400
Training $1,500
Which of these groups of costs are most likely to have a common cost driver?

Accepted Answer

A)  Advertising & computer equipment depreciation 
B)  Computer equipment depreciation & utilities 
C)  Utilities & lifesaving services 
D)  Utilities & facility rent

Exam 10: Activity Analysis: Costing and Management

Traditional costing systems were focused on product costing for service organisations.

Reasons that managers may wish to reduce environmental costs include:

Activity based management used information from ABC to identify opportunities for improvements in profitability, efficiency and quality.

Each cost pool in an ABC system has the same cost allocation rate.

The accuracy of estimates used in the denominator does not affect the cost accuracy in an ABC system.

Activity-based costing, compared to traditional costing, increases the accuracy of cost measurement by using multiple cost allocation bases for overhead.

Which of the steps listed below normally occurs last when assigning costs in an ABC system?

Rhiannon is a customer of Inthenews Ltd. She consistently orders low-margin services, but requires extensive technical support from Inthenews Ltd. In employing ABM techniques to manage customer profitability, Inthenews' staff should:

No product warranties are likely to be associated with high customer service costs.

Activity-based costing extends the focus of costing to products and other types of cost objects.

Costs associated with developing an ABC system most likely include:

An activity is a:

Activity based costing cannot be used in service organisations.

Employees can restrict the success of an ABC implementation by:

In an activity-based costing system, both organisation-sustaining and facility-sustaining activities are assumed to be unaffected by the number of customers.

Activity-based costing information can be used to identify the relative cost of maintaining different customers. Managers can use that information, coupled with activity-based management techniques, to manage:

Recent survey findings suggest that ABC: