Question 1

In general,low-volume products (and services)have a lower degree of complexity associated with them.Low-volume products may have just as much complexity as higher-volume products.Complexity is a function of the product and its design,not its volume.

Accepted Answer

A) True 
 B)False  False

Question 2

A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted)  Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year:  If the company uses traditional costing and allocates overhead using direct labor cost,what is the cost of each unit of Job 102?

Accepted Answer

A)  $340.
B)  $392.
C)  $440.
D)  $520. B

Question 3

A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted)  Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year:  If the company uses activity-based costing (ABC),how much overhead cost should be assigned to Job 101?

Accepted Answer

A)  $1,300.
B)  $2,000.
C)  $5,000.
D)  $5,600. A

Question 4

A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted)  Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year:  If the company uses traditional costing and allocates overhead using direct labor cost,how much overhead cost should be assigned to Job 101?

Accepted Answer

A)  $1,300.
B)  $2,000.
C)  $5,000.
D)  $5,600.

Question 5

Terri Martin,CPA provides bookkeeping and tax services to her clients.She charges a fee of $60 per hour for bookkeeping and $90 per hour for tax services.Martin estimates the following costs for the upcoming year:  Operating profits declined last year and Ms.Martin has decided to use activity-based costing (ABC)procedures to evaluate her hourly fees.She gathered the following information from last year's records:  What is the total cost allocated to the bookkeeping services using activity-based costing?

Accepted Answer

A)  $24,000.
B)  $33,000.
C)  $35,000.
D)  $44,000.

Question 6

Management estimates that it costs $500 to analyze and close a commercial loan.This amount has been included in the $250,000 of indirect costs.How much of the $250,000 indirect costs should be allocated to the Consumer Department?

Accepted Answer

A)  $50,000.
B)  $90,000.
C)  $160,000.
D)  $200,000.

Question 7

Scottso Enterprises has identified the following overhead costs and cost drivers for the coming year:  Budgeted direct labor cost was $200,000 and budgeted direct material cost was $800,000.The following information was collected on three jobs that were completed during the month:  If the company uses activity-based costing (ABC),how much overhead cost should be assigned to Job B-32?

Accepted Answer

A)  $4,200.
B)  $2,600.
C)  $2,960.
D)  $3,480.

Question 8

The electricity used for production machinery would be classified as a:

Accepted Answer

A)  volume-related activity.
B)  batch-related activity.
C)  product-related activity.
D)  facility-related activity.

Question 9

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows:  Department D has recently purchased and installed new computerized equipment for Product X.This equipment will increase the overhead costs by $2,700 and decrease labor costs (due to time savings)in Department D by $3.00 per case.Machine hours will not change.If Smelly uses departmental rates,what are the product costs per case for Product X assuming Departments C and D use direct labor hours and machine hours as their respective allocation bases?

Accepted Answer

A)  $80.00.
B)  $74.00.
C)  $69.50.
D)  $79.50.

Question 10

Volume-based costing allocates indirect product costs based on the volume of output,using such allocation bases as direct labor hours,machine hours,or the amount of direct material used in the production process.Activity-based costing (ABC)has consistently shown that Volume-based costing ___________ the cost of high volume products and ______________ the cost of low volume products.

Accepted Answer

A)  Option a
B)  Option b
C)  Option c
D)  Option d

Question 11

A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted)  Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year:  If the company uses activity-based costing (ABC),how much overhead cost should be assigned to Job 103?

Accepted Answer

A)  $1,300.
B)  $2,000.
C)  $5,000.
D)  $5,600.

Question 12

Activity-based costing (ABC)can be applied to administrative activities (e.g. ,purchasing)but not to marketing activities.ABC can be used in marketing as well as administrative activities.

Accepted Answer

A) True 
 B)False

Question 13

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows:  If Smelly changes its allocation basis to machine hours,what is the total product cost per case for Product J?

Accepted Answer

A)  $161.50.
B)  $169.30.
C)  $182.44.
D)  $183.36.

Question 14

Which of the following measures is used by activity-based costing (ABC)systems as an allocation base for allocating overhead costs to the units produced?

Accepted Answer

A)  Volume-related activities.
B)  Batch-related activities.
C)  Product-related activities.
D)  Facility-related activities.
E)  All of these are used by ABC systems.

Question 15

The single-stage cost allocation system uses a plantwide rate because the cost pool is the entire plant.In the plantwide allocation method,the cost pool is the entire plant.

Accepted Answer

A) True 
 B)False

Question 16

Management estimates that it costs $500 to analyze and close a commercial loan.This amount has been included in the $250,000 of indirect costs.How much of the $250,000 indirect costs should be allocated to the Commercial Department?

Accepted Answer

A)  $40,000.
B)  $50,000.
C)  $90,000.
D)  $120,000.

Question 17

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows:  If Smelly changes its overhead allocation to departmental rates,what is the product cost per case for Product J assuming Departments C and D use direct labor hours and machine hours as their respective allocation bases?

Accepted Answer

A)  $169.30.
B)  $161.50.
C)  $166.00.
D)  $182.44.

Question 18

Smelly Perfume Company manufactures and distributes several different products.The company currently uses a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour.Cindy is the department manager of Department C which produces Products J and P.Department C has $16,200 in traceable overhead.Diane is the department manager of Department D which manufactures Product X.Department D has $11,100 in traceable overhead.The product costs (per case of 24 bottles)and other information are as follows:  Department D has recently purchased and installed new computerized equipment for Product X.This equipment will increase the overhead costs by $2,700 and decrease labor costs (due to time savings)in Department D by $3.00 per case.Machine hours will not change.If Smelly uses a plantwide rate based on machine hours,what is the revised product cost per case for Product X?

Accepted Answer

A)  $74.00.
B)  $82.50.
C)  $69.50.
D)  $79.50.

Question 19

Zela Company is preparing its annual profit plan.As part of its analysis of the profitability of individual products,the controller estimates the amount of overhead that should be allocated to the individual product lines from the information provided below.(CMA based)  Budgeted material handling costs: $50,000 Under an activity-based costing (ABC)system,the materials handling costs allocated to one unit of specialty windows would be:

Accepted Answer

A)  $1,875.00.
B)  $937.50.
C)  $312.50.
D)  $1,500.00.

Question 20

Direct labor cost (DLC)and direct labor hours (DLH)are examples of volume-related cost drivers in the cost hierarchy.Both DLC and DLH change as volume changes.

Accepted Answer

A) True 
 B)False

Exam 9: Activity-Based Costing

In general,low-volume products (and services)have a lower degree of complexity associated with them.Low-volume products may have just as much complexity as higher-volume products.Complexity is a function of the product and its design,not its volume.

Management estimates that it costs $500 to analyze and close a commercial loan.This amount has been included in the $250,000 of indirect costs.How much of the $250,000 indirect costs should be allocated to the Consumer Department?

The electricity used for production machinery would be classified as a:

Activity-based costing (ABC)can be applied to administrative activities (e.g. ,purchasing)but not to marketing activities.ABC can be used in marketing as well as administrative activities.

Which of the following measures is used by activity-based costing (ABC) systems as an allocation base for allocating overhead costs to the units produced?

The single-stage cost allocation system uses a plantwide rate because the cost pool is the entire plant.In the plantwide allocation method,the cost pool is the entire plant.

Management estimates that it costs $500 to analyze and close a commercial loan.This amount has been included in the $250,000 of indirect costs.How much of the $250,000 indirect costs should be allocated to the Commercial Department?

Direct labor cost (DLC)and direct labor hours (DLH)are examples of volume-related cost drivers in the cost hierarchy.Both DLC and DLH change as volume changes.