ABC systems create ________.
a) homogeneous activity-related cost pools
b) activity-cost pools containing many direct costs
c) activity-cost pools with a broad focus
d) one large cost pool
a) homogeneous activity-related cost pools
Which of the following statements is true of ABC systems?
a) ABC systems assume all costs are variable costs.
b) ABC systems classify some direct costs as indirect costs and some indirect costs as direct costs.
c) ABC systems are time-driven cost systems.
d) ABC systems provide valuable information to managers beyond accurate product costs.
Chess Woods Limited produces two products: wooden chess pieces and wooden inlaid chess boards. Under their traditional cost system using one cost driver (direct manufacturing labor hours), the cost of a set of wooden chess pieces is $325.00. An analysis o
b) indirect costs
Recognizing ABC information is not always perfect because ________.
a) it mostly uses far too many indirect cost pools than what is actually required
b) it never measures how the resources of an organization are used
c) it balances the need for better inf
c) it balances the need for better information against the costs of creating a complex system
Effectiveness is ________.
a) the relative amount of inputs used to achieve a given output level
b) is a practice whereby managers focus more closely on areas that are not operating as expected and less closely on areas that are
c) the continuous process
d) the degree to which a predetermined objective or target is met
Excellent Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2018, manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.
For 2018 Excellent Printers has
c) Money Managers is grossly under billed for the job, while other jobs will be unfairly over billed
A favorable efficiency variance for direct materials might indicate that ________.
a) management hired underskilled workers
b) work is scheduled efficiently
c) lower-quality materials were purchased
d) there is an unexpected increase in direct labor rates
b) work is scheduled efficiently
Product-cost cross-subsidization means that:
a) when a company undercosts one of its products, it will overcost at least one of its other products
b) when one product is overcosted, it results in more than one other product being overcosted
c) when a comp
a) when a company undercosts one of its products, it will overcost at least one of its other products
For a business that offers customers a store where product can be purchased and picked up or a delivery service that can ship the product directly to the customer, which of the following would most likely be the best cost allocation base for distribution
b) number of pounds of product shipped or delivered
With traditional costing systems, products manufactured in small batches and in small annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related drivers.
a) fairly costed
b) ignored
c) undercosted
d)
c) undercosted
Which of the following is a sign that an ABC system will provide benefits?
a) All the products produced are similar and sell in equal proportions (sales mix)
b) All or most indirect costs are treated as output-unit level costs.
c) There are relatively few
b) All or most indirect costs are treated as output-unit level costs.
Which of the following statements is true of activity-based costing?
a) Activity based costing is more suited to companies with high product diversity than companies with single product line.
b) Activity based costing broadly averages or spreads the cost
a) Activity based costing is more suited to companies with high product diversity than companies with single product line.
Which of the following is a reason that has accelerated the demand for refinements to the costing system?
a) The declining demand for customized products has led managers to decrease the variety of products and services their companies offer.
b) The use o
b) The use of product and process technology has led to an increase in indirect costs and a decrease in direct costs.
For a company with diverse products, undercosting overhead of a product will lead to product-cross -subsidization which means that:
a) direct costs of another product are misallocated
b) indirect costs of another product are misallocated
c) direct materia
b) indirect costs of another product are misallocated
An unfavorable efficiency variance for direct manufacturing labor might indicate that ________.
a) more higher-skilled workers were scheduled than planned
b) lower-quality materials were purchased
c) work is scheduled inefficiently
d) there is unexpected
c) work is scheduled inefficiently
It is usually difficult to find good cost driver (cause-and-effect relationship) between ________ and a cost allocation base.
a) unit-level costs
b) batch-level costs
c) product-sustaining costs
d) facility-sustaining costs
d) facility-sustaining costs
Which of the following is the correct formula for the materials price variance?
(Actual quantity of input used - Budgeted quantity of input allowed for actual output) x Budgeted price of input
(Actual price of input - Budgeted price of input) x Budgeted q
(Actual price of input - Budgeted price of input) x Actual quantity of input
A flexible budget ________.
is developed at the end of the period
is another name for management by exception
is based on the budgeted level of output
provides favorable operating results
is developed at the end of the period
Using activity-cost rates rather than department indirect-cost rates to allocate costs results in different product costs when ________.
there are several homogeneous cost pools
a single activity accounts for a sizable portion of department costs
differen
there are several homogeneous cost pools
A favorable efficiency variance for direct manufacturing labor indicates that ________.
less direct manufacturing labor-hours were used during production than planned for actual output
a lower wage rate than planned was paid for direct labor
more direct m
less direct manufacturing labor-hours were used during production than planned for actual output
The emphasis on variance analysis and its use in performance evaluation must be such that:
Management should stretch resources to meet goals even if continuous improvement and quality suffers
management should set targets that challenge but are reasonably
management should set targets that challenge but are reasonably achievable and require creativity and resourcefulness by personnel held accountable
Which of the following could be a reason for a favorable material price variance?
the purchasing manager bargaining effectively with suppliers
the personnel manager hiring underskilled workers
the purchasing manager giving orders for small quantity to red
the purchasing manager bargaining effectively with suppliers
Service companies, in particular, find great value from ABC because a vast majority of their cost structure is composed of ________ costs.
factory
committed
prime
indirect
indirect
Which of the following is true of variance?
A small variance or zero variance definitively reveals efficient performance.
Managers' performance must be evaluated solely on single variance.
Managers should not simply interpret a favorable variance as good
Managers should not simply interpret a favorable variance as good but should understand why the variance occurred.
An unfavorable sales-volume variance could result from ________.
an inappropriate assignment of labor or machines to specific jobs
an inefficiency of a purchasing manager in bargaining with suppliers
competitors taking market share
a decrease in actual se
competitors taking market share
Which of the following cost and cost allocation base have a strong cause and effect relationship?
quality control costs and the number of inspections
administration costs and cubic feet
machine maintenance and setup hours
setup costs and square feet
quality control costs and the number of inspections
A flexible budget ________.
is another name for management by exception
is based on the budgeted level of output
is developed at the end of the period
provides favorable operating results
is developed at the end of the period
If a sales-volume variance was caused by poor-quality products, then the ________ would be in the best position to explain the variance.
sales supervisor
financial supervisor
logistic manager
production manager
production manager
Refining a cost system involves which of the following?
Seeking an easier and more cost effective way to calculate average costs
classifying as many costs as indirect costs as is feasible
creating as many cost pools as possible to capture all costs
identi
identifying the activities involved in a process and understanding how those activities consume resources
It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that ________.
total costs reflect market price
there is high likelihood of cross-subsidizing of product costs
value-added costs can be
product-pricing errors are minimal
Which of the following is a sign that an ABC system may be useful for an organization?
Significant amounts of indirect costs are allocated using multiple cost pools.
Operations staff disagrees with accountants about the costs of manufacturing and marketin
Operations staff disagrees with accountants about the costs of manufacturing and marketing products and services.
It only makes sense to implement an ABC system when ________.
it traces more costs as direct costs
its benefits exceed its implementation costs
a single product is produced in bulk
production process is labor-intensive
its benefits exceed its implementation costs
Chess Woods Limited produces two products: wooden chess pieces and wooden inlaid chess boards. Under their traditional cost system using one cost driver (direct manufacturing labor hours), the cost of a set of wooden chess pieces is $325.00. An analysis o
The costing results for chess pieces under the new system depend on the adequacy and quality of the estimated cost drivers and costs used by the system.
In a flexible budget ________.
fixed costs are kept at the same level of static budget
fixed costs are calculated proportionately for the actual level of sales
variable costs are calculated proportionately for the budgeted level of sales
variable costs ar
fixed costs are kept at the same level of static budget ---- aint correct
Which of the following is true of variance?
A small variance or zero variance definitively reveals efficient performance.
Managers should not simply interpret a favorable variance as good but should understand why the variance occurred.
Managers' performa
Managers should not simply interpret a favorable variance as good but should understand why the variance occurred.
Variance analysis should be used ________.
to punish employees that do not meet standards
as the sole source of information for performance evaluation
to set the standards which are very easy to achieve to encourage employees to focus on meeting standards
to understand why variances arise and to improve future performance
Lavender Company is a logistics company and has recently implemented ABC system. Using activity-based information, it decides to reduce the bulkiness of the packages delivered, thereby reducing costs. This suggests that ABC system helps managers in ______
process-improvement
One reason for assigning selling and distribution costs to products for analytical purposes is ________.
that all direct costs must be assigned
to justify a varied product-mix
to ensure that all costs are considered
that these costs should be included in
to ensure that all costs are considered
Cannady produces six products. Under their traditional cost system using one cost driver, SR6 costs $168.00 per unit. An analysis of the activities and their costs revealed that three cost drivers would be used under the new ABC system. The new cost of SR
less than
When "available time" (i.e., setup-hours) is used to calculate a cost of a resource and to allocate costs to cost objects , the system is called:
process costing
job costing
time-driven activity based costing
hybrid costing
time-driven activity based costing
For a manufacturing firm that produces multiple families of products requiring various combinations of different types of parts, what would be the best allocation base for human resource adminstration costs?
direct labor hours
number of parts purchased
el
direct labor hours
Standard cost per output unit for each variable direct cost input is calculated by multiplying ________.
actual input allowed for one output unit by actual price per input unit
standard input allowed for one output unit by actual price per input unit
stan
standard input allowed for one output unit by standard price per input unit
The flexible-budget variance for direct cost inputs can be further subdivided into a ________.
static-budget variance and a price variance
sales-volume variance and an efficiency variance
static-budget variance and a sales-volume variance
price variance a
price variance and an efficiency variance
Which of the following is a reason that has accelerated the demand for refinements to the costing system?
The increasing competition in product markets has led to an increase in contribution margin resulting in a decrease of break even point.
The use of p
The use of product and process technology has led to an increase in indirect costs and a decrease in direct costs.
It is difficult for firms to find appropriate benchmarks because differences can exist across companies in their strategies, inventory costing methods, depreciation methods, and so on.
True
False
True
The flexible budget contains ________.
actual costs for actual output
static budget amounts for planned output
actual costs for planned output
budgeted amounts for actual output
budgeted amounts for actual output
Put the following ABC implementation steps in order ________.
A Compute the allocation rates.
B Compute the total cost of the products.
C Identify the products that are the cost objects.
D Select the cost allocation bases.
CDAB
DACB
DBCA
BADC
CDAB
With traditional costing systems, products manufactured in small batches and in small annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related drivers.
ignored
fairly costed
overcosted
undercosted
undercosted
Activity-based costing information can be used for ________.
product-mix decisions
advertisement decisions
inventory valuation
pricing decisions
pricing decisions
Cost variances should be investigated ________.
when the variance is less than a certain percentage of budgeted costs, as determined by management
even though the cost of investigation exceeds the benefit as determined by management
when the variance is m
when the variance is more than a certain percentage of budgeted costs, as determined by management
An unfavorable variance indicates that ________.
the actual costs are less than the budgeted costs
the actual revenues exceed the budgeted revenues
the actual units sold are less than the budgeted units
the budgeted contribution margin is more than the ac
the actual units sold are less than the budgeted units
Midend's Camera Shop has prepared the following flexible budget for September and is in the process of interpreting the variances. F denotes a favorable variance and U denotes an unfavorable variance.
Flexible
Variances
Budget Price Efficiency
Material A
Material B
A master budget is ________.
a type of flexible budget once actual results are known
developed at the end of a period
based on the level of expected output at the start of the budget period
a budget which starts from a zero base
based on the level of expected output at the start of the budget period
A favorable variance can be automatically interpreted as "good news."
True
False
False
Johnson Company had planned for operating income of $10 million in the master budget with a contribution margin of $3 million, but actually achieved operating income of only $7 million and a contribution margin of $2.5 million.
The static-budget variance
The static-budget variance for operating income is $3 million unfavorable.
Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for the coming year:
Cost Pool Overhead Costs Cost driver Activity level
Supervision of direct labor $320,000 Direct labor-hours 800,000
M
Three activity-cost drivers because they best reflect the relative consumption of resources.
Management accountants use the cost hierarchy to first calculate the ________.
labor costs of each product and then they compute material costs
factory costs of each product and then they compute labor costs
total costs of each product and then they compu
total costs of each product and then they compute per-unit costs
Which of the following statements about ABC is not true?
ABC should be implemented solely by the accountants as they are the guardians of the accounting information system
Although implementation of ABC can be a refinement of a cost system, it has its lim
ABC should be implemented solely by the accountants as they are the guardians of the accounting information system
Which of the following items will be same for a flexible budget and a master budget?
total expected revenues
total variable cost
total contribution margin
total expected fixed costs
total expected fixed costs
A favorable price variance for direct manufacturing labor might indicate that ________.
underskilled employees are being hired
unexpected increase in direct labor rates
employees were paid more than planned
congestion due to scheduling problems
underskilled employees are being hired
Which of the following has accelerated need for refined cost systems?
a shift toward increased direct costs
global monopolies
rising prices
intense competition
intense competition
A favorable variance indicates that ________.
budgeted costs are less than actual costs
budgeted contribution margin is more than the actual amount
actual revenues exceed budgeted revenues
actual operating income is less than the budgeted amount
actual revenues exceed budgeted revenues
An unfavorable flexible-budget variance for variable costs may be the result of ________.
selling output at a higher selling price than budgeted
selling less quantity compared to the budgeted
using more input quantities than were budgeted
paying lower pri
using more input quantities than were budgeted
Which variance is calculated using the formula (AQ - BQ) BP is the ________.
spending variance
efficiency variance
total flexible-budget variance
price variance
efficiency variance
Activity-based costing is most likely to yield benefits for companies ________.
with complex product design processes that vary significantly from product to product
with operations that remain fairly consistent across product lines
in a monopolistic mark
with complex product design processes that vary significantly from product to product
The fundamental cost objects of ABC are ________.
products
services
cost drivers
activities
activities
Efficiency is ________.
the continuous process of comparing a firm's performance levels against the best levels of performance in competing companies
the degree to which a predetermined objective or target is met
the difference between an actual input qua
the relative amount of inputs used to achieve a given output level
A single indirect-cost rate distorts product costs because ________.
it recognizes specific activities that are required to produce a product
competitive pricing is ignored
it assumes all costs are product costs
there is an assumption that all support act
there is an assumption that all support activities affect all products in a uniform way
Nonfinancial performance measures ________.
are rarely used to evaluate overall efficiency
are often the sole basis of a manager's performance evaluations
are usually used in combination with financial measures for control purposes
allow managers to make
are usually used in combination with financial measures for control purposes
Which variance is calculated by using the formula: (AP - BP) AQ is the ________.
material spending variance
price variance
total flexible-budget variance
efficiency variance
price variance
Using department indirect-cost rates to allocate costs will result in results similar to ABC if:
a single activity accounts for a small portion of the costs of the department
several activities cause a small portion of the costs of the department
a single
a single activity accounts for a sizable portion of the costs of the department
Which of the following statements is true of ABC systems?
ABC systems is valuable for pricing decisions but not for understanding, managing, and reducing costs in government institutions.
ABC systems are used by managers for strategic decisions rather tha
ABC systems are used by managers for strategic decisions rather than for inventory valuation in merchandising companies.
ABC and traditional systems are quite similar in ________.
the identification of cost pools
evaluating performance
the allocation of overheads
the treatment of direct costs
the treatment of direct costs
Activity-based costing (ABC) can eliminate cost distortions because ABC systems ________.
use a broad average to allocate all overhead costs
never consider interactions between different departments in assigning support costs
use single cost pool for all
establish a cause-and-effect relationship with the activities performed
Continuous improvement through the use of standard costs is the process of repeatedly identifying the causes of variances, taking corrective actions, and evaluating results.
False
True
True
Johnson Superior Products Inc. produces hospital equipment and the setup requirements vary from product to product. Johnson produces its products based on customer orders and uses ABC costing. In one of its indirect cost pools, setup costs and distributio
Johnson has failed to use the correct cost driver as the cost-allocation base for setup costs.
Top management compensation cost is an example of ________ in the cost hierarchy.
product-sustaining costs
batch-level costs
unit-level costs
facility-sustaining costs
facility-sustaining costs
Activity based costing system differs from traditional costing systems in the treatment of ________.
indirect costs
direct material costs
direct labor costs
prime costs
indirect costs
Which of the following can be a reason for a favorable price variance for direct materials?
workers taking less time to produce the products
less amount of material used during production than planned for actual output
a decrease in the price of materials
a decrease in the price of materials due to an oversupply of materials
A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis ________.
emphasizes how managers can achieve higher sales
can be used to eliminate nonvalue-added activities
is easy to anal
can be used to eliminate nonvalue-added activities
Aqua Company produces two products-Alpha and Beta. Alpha has a high market share and is produced in bulk. Production of Beta is based on customer orders and is custom designed. Also, 55% of Beta's cost is shared between design and setup costs, while Alpha
Aqua will overcost Alpha's indirect costs as it is using a single cost pool to allocate indirect costs.
The process by which a company's products or services are measured relative to the best possible levels of performance is known as ________.
efficiency
benchmarking
variance analysis
a standard costing system
benchmarking
The term for understanding why actual performance deviates from planned performance is.
favorable variance
variance calculation
organizational learning
continuous improvement
...
Which of the following statements is true of costing systems?
Single-indirect cost pool systems always result in overcosting of products.
Single-indirect cost pool systems classify some direct costs as indirect costs.
ABC systems always result in overcost
ABC systems classify some indirect costs as direct costs helping to improve processes
The goal of a properly constructed ABC system is to ________.
develop the best cost system that meets the cost/benefit test
have the most accurate cost system
identify more indirect costs
have separate allocation rates for each department
develop the best cost system that meets the cost/benefit test
ABC systems help managers to ________.
improve the inventory turnaround time
evaluate direct material costs more efficiently
identify new designs to reduce costs
value ending inventory more accurately
identify new designs to reduce costs
For a company which produce its products in batches, the CEO's salary is a(n) ________ cost.
batch-level
product-sustaining
output unit-level
facility-sustaining
facility-sustaining
Which of the following statements is true of a peanut-butter costing system?
A peanut-butter costing system assumes that all costs are variable.
A peanut-butter costing system broadly averages or spreads the cost of resources uniformly to cost objects.
In
A peanut-butter costing system broadly averages or spreads the cost of resources uniformly to cost objects.
When benchmarking, management accountants are most valuable when they ________.
provide complex mathematical analysis
present differences in the benchmarking data to management
provide insight into why costs or revenues differ across companies
highlight d
provide insight into why costs or revenues differ across companies
Benchmarking is a process ________.
in which overhead costs are absorbed into units of output, or 'jobs'
in which a firm's performance levels are compared against the best levels of performance in competing companies or in companies having similar process
in which a firm's performance levels are compared against the best levels of performance in competing companies or in companies having similar processes
Which of the following is a disadvantage of using the standards developed by a firm itself to develop a budget?
They are not based on realized benchmarks and can be unrealistic
A firm's inefficiencies will be part of the data.
The expected future changes
They are not based on realized benchmarks and can be unrealistic
Which of the following is an example of nonfinancial performance measure?
direct materials price variance
quantity discounts obtained on order of large quantity
percentage of products started and completed without requiring any rework
direct manufacturing
percentage of products started and completed without requiring any rework
A variance is ________.
the difference between actual variable cost per unit and standard fixed cost per unit
the difference between an actual result and a budgeted performance
the difference between actual fixed cost per unit and standard variable cost p
the difference between an actual result and a budgeted performance
Advanced Technology Products produces 10 different fastners. Each time a type of fastener is produced, the equipment must be stopped and items such as filters and drill bits must be changed, oil must be added to the equipment and some parts need lubricati
Batch-level costs
Which of the following is true with activity based cost accounting?
Chances of product-cost cross-subsidization are higher in activity-based costing compared to traditional costing systems.
The focus is on activities that account for a sizable fraction of
The focus is on activities that account for a sizable fraction of indirect costs .
Demand for refinements to the costing system has accelerated due to ________.
decrease in indirect costs
competition in product markets
decrease in product diversity
increase in direct costs
competition in product markets
An efficiency variance reflects the difference between ________.
a standard input quantity in a company and its main competitors
actual input quantities used last period and current period
an actual input quantity used in a company and its main competitor
an actual input quantity and a budgeted input quantity
Which of the following is true of refinement of a costing system?
While refining a costing system, companies should identify as many indirect costs as is economically feasible.
It is likely to yield the most decision-making benefits when direct costs are
It reduces the use of broad averages for assigning the cost of resources to cost objects.
A purchasing manager's performance is best evaluated using information such as
price and terms bargaining effectiveness, achievement of quality goals, and direct materials price variance
direct manufacturing labor flexible-budget variance
direct materials
price and terms bargaining effectiveness, achievement of quality goals, and direct materials price variance
Which of the following has accelerated need for refined cost systems?
global monopolies
rising prices
a shift toward increased direct costs
intense competition
intense competition
When benchmarking it is best when management accountants simply analyze the costs and allow management to provide the insight as to why the revenues and costs differ between companies.
True
False
False
________ costs support the organization as a whole.
Unit-level
Facility-sustaining
Product-sustaining
Batch-level
Facility-sustaining
Which of the following is true of refinement of a costing system?
It reduces the use of broad averages for assigning the cost of resources to cost objects.
It is likely to yield the most decision-making benefits when direct costs are a high percentage of
It reduces the use of broad averages for assigning the cost of resources to cost objects.
Which of the following is an example of nonfinancial performance measure?
direct materials price variance
percentage of products started and completed without requiring any rework
quantity discounts obtained on order of large quantity
direct manufacturing
percentage of products started and completed without requiring any rework
A master budget is ________.
developed at the end of a period
a budget which starts from a zero base
a type of flexible budget once actual results are known
based on the level of expected output at the start of the budget period
based on the level of expected output at the start of the budget period
It is usually difficult to find good cost driver (cause-and-effect relationship) between ________ and a cost allocation base.
batch-level costs
product-sustaining costs
facility-sustaining costs
unit-level costs
facility-sustaining costs
Which of the following statements is true of ABC systems?
ABC systems provide less insight than traditional systems into the management of the indirect costs.
Service companies find great value from ABC because a vast majority of their cost structure is c
ABC systems are used by managers for strategic decisions rather than for inventory valuation in merchandising companies.
The degree to which a predetermined objective or target is met is known as ________.
variance
efficiency
effectiveness
marking
effectiveness
Which of the following cost and cost allocation base have a strong cause and effect relationship?
quality control costs and the number of inspections
setup costs and square feet
machine maintenance and setup hours
administration costs and cubic feet
quality control costs and the number of inspections
Management by exception is a practice whereby managers focus more closely on ________.
areas not operating as anticipated and less closely on areas that are operating as anticipated
variances in the larger departments
unfavorable variances
activity-based
areas not operating as anticipated and less closely on areas that are operating as anticipated
Which of the following is a sign that an ABC system may be useful for an organization?
Significant amounts of indirect costs are allocated using multiple cost pools.
Products make similar demands on resources because of similarities in volume, process ste
Operations staff disagrees with accountants about the costs of manufacturing and marketing products and services.
Answer the following questions using the information below:
Chess Woods Limited produces two products: wooden chess pieces and wooden inlaid chess boards. Under their traditional cost system using one cost driver (direct manufacturing labor hours), the co
The costing results for chess pieces under the new system depend on the adequacy and quality of the estimated cost drivers and costs used by the system.
Which of the following is the correct formula for the materials price variance?
(Actual quantity of input used - Budgeted quantity of input allowed for actual output) x Actual price of input
(Actual price of input - Budgeted price of input) x Budgeted qua
(Actual price of input - Budgeted price of input) x Actual quantity of input
With traditional costing systems, products manufactured in small batches and in small annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related drivers.
undercosted
overcosted
fairly costed
ignored
undercosted
Activity based costing system differs from traditional costing systems in the treatment of ________.
indirect costs
direct labor costs
direct material costs
prime costs
indirect costs
A favorable variance can be automatically interpreted as "good news."
True
False
False
The flexible-budget variance for direct cost inputs can be further subdivided into a ________.
static-budget variance and a sales-volume variance
sales-volume variance and an efficiency variance
price variance and an efficiency variance
static-budget vari
price variance and an efficiency variance
Which of the following is the correct formula for the materials price variance?
(Actual quantity of input used - Budgeted quantity of input allowed for actual output) x Actual price of input
(Actual price of input - Budgeted price of input) x Actual quant
(Actual price of input - Budgeted price of input) x Actual quantity of input
Advanced Technology Products produces 10 different fastners. Each time a type of fastener is produced, the equipment must be stopped and items such as filters and drill bits must be changed, oil must be added to the equipment and some parts need lubricati
Batch-level costs
Answer the following questions using the information below:
These questions refer to flexible-budget variance formulas with the following descriptions for the variables: A = Actual; B = Budgeted; P = Price; Q = Quantity.
Which variance is calculated using
efficiency variance
Which of the following is a sign that an ABC system will provide benefits?
All or most indirect costs are treated as output-unit level costs.
All the products produced are similar and sell in equal proportions (sales mix)
There are relatively few indirect
All or most indirect costs are treated as output-unit level costs.
Which of the following reasons explain why ABC concepts may be of great value to service companies?
A significant portion of the cost structure of a service firm is composed of indirect costs
It promotes more accurate cost of goods sold reporting
It helps
A significant portion of the cost structure of a service firm is composed of indirect costs
When "available time" (i.e., setup-hours) is used to calculate a cost of a resource and to allocate costs to cost objects , the system is called:
process costing
job costing
hybrid costing
time-driven activity based costing
time-driven activity based costing
An unfavorable flexible-budget variance for variable costs may be the result of ________.
paying lower prices for inputs than were budgeted
using more input quantities than were budgeted
selling output at a higher selling price than budgeted
selling less
using more input quantities than were budgeted
A flexible budget ________.
provides favorable operating results
is another name for management by exception
is based on the budgeted level of output
is developed at the end of the period
is developed at the end of the period
Which of the following is an example of nonfinancial performance measure?
quantity discounts obtained on order of large quantity
percentage of products started and completed without requiring any rework
direct materials price variance
direct manufacturing
percentage of products started and completed without requiring any rework
Which of the following is true of variance?
Managers' performance must be evaluated solely on single variance.
Managers should not simply interpret a favorable variance as good but should understand why the variance occurred.
Managers should interpret a f
Managers should not simply interpret a favorable variance as good but should understand why the variance occurred.
________ are the costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced.
Facility-sustaining costs
Product-sustaining costs
Unit-level costs
Batch-level costs
Product-sustaining costs
Which of the following information is needed to prepare a flexible budget?
actual units sold
actual variable cost
actual selling price per unit
actual fixed cost
actual units sold
Answer the following questions using the information below:
These questions refer to flexible-budget variance formulas with the following descriptions for the variables: A = Actual; B = Budgeted; P = Price; Q = Quantity.
Which variance is calculated by us
price variance
Which of the following is a reason that has accelerated the demand for refinements to the costing system?
The increased of automated processes has led to the increase in direct manufacturing cost leading to a decrease in break even point.
The increasing c
The use of product and process technology has led to an increase in indirect costs and a decrease in direct costs.
In a flexible budget ________.
fixed costs are kept at the same level of static budget
fixed costs are calculated proportionately for the actual level of sales
variable costs are calculated proportionately for the budgeted level of sales
variable costs ar
variable costs are calculated proportionately for the budgeted level of sales
Johnson Superior Products Inc. produces hospital equipment and the setup requirements vary from product to product. Johnson produces its products based on customer orders and uses ABC costing. In one of its indirect cost pools, setup costs and distributio
Johnson has failed to use the correct cost driver as the cost-allocation base for setup costs.
Efficiency is ________.
the degree to which a predetermined objective or target is met
the continuous process of comparing a firm's performance levels against the best levels of performance in competing companies
the difference between an actual input qua
the relative amount of inputs used to achieve a given output level
Activity-based costing is most likely to yield benefits for companies ________.
with complex product design processes that vary significantly from product to product
in a monopolistic market
having nominal percentage of indirect costs
with operations that
with complex product design processes that vary significantly from product to product
Put the following ABC implementation steps in order ________.
A Compute the allocation rates.
B Compute the total cost of the products.
C Identify the products that are the cost objects.
D Select the cost allocation bases.
DACB
CDAB
DBCA
BADC
CDAB
Management accountants use the cost hierarchy to first calculate the ________.
labor costs of each product and then they compute material costs
factory costs of each product and then they compute labor costs
overhead costs of each product and then they co
total costs of each product and then they compute per-unit costs
Johnson Company had planned for operating income of $10 million in the master budget with a contribution margin of $3 million, but actually achieved operating income of only $7 million and a contribution margin of $2.5 million.
The flexible-budget varianc
The static-budget variance for operating income is $3 million unfavorable.
Benchmarking is a process ________.
which is based on calculating the breakeven point and analyzing the consequences of changes in various factors calculating the breakeven point
in which a firm's performance levels are compared against the best levels of
in which a firm's performance levels are compared against the best levels of performance in competing companies or in companies having similar processes
Activity based costing system differs from traditional costing systems in the treatment of ________.
direct material costs
prime costs
direct labor costs
indirect costs
indirect costs
Which of the following statements is true of costing systems?
Single-indirect cost pool systems always result in overcosting of products.
ABC systems classify some indirect costs as direct costs helping to improve processes
ABC systems always result in ov
ABC systems classify some indirect costs as direct costs helping to improve processes
A company has a policy "investigate all variances exceeding $3,000 or 15% of the budgeted cost, whichever is lower." There is a variance of $2,000 in repair and maintenance costs of $12,000. What does the company do in the given situation?
It should be co
It deserves more attention as it is more than 15% of total repair cost.
Top management compensation cost is an example of ________ in the cost hierarchy.
batch-level costs
product-sustaining costs
unit-level costs
facility-sustaining costs
facility-sustaining costs
Which of the following statements is true of activity-based costing?
The main advantage of activity-based costing over peanut-butter costing is the accurate distribution of all direct costs to the products.
Activity based costing is more suited to compani
Activity based costing is more suited to companies with high product diversity than companies with single product line.
Variance analysis should be used ________.
to punish employees that do not meet standards
to set the standards which are very easy to achieve to encourage employees to focus on meeting standards
as the sole source of information for performance evaluation
to understand why variances arise and to improve future performance
Facility-sustaining costs are the costs of activities ________.
undertaken to support individual products or services regardless of the number of units or batches in which the units are produced
that managers cannot trace to individual products or service
that managers cannot trace to individual products or services but that support the organization as a whole
Which of the following is the correct formula for the materials price variance?
(Actual price of input - Budgeted price of input) x Actual quantity of input
(Actual quantity of input used - Budgeted quantity of input allowed for actual output) x Budgeted
(Actual price of input - Budgeted price of input) x Actual quantity of input
The term for understanding why actual performance deviates from planned performance is.
organizational learning
favorable variance
continuous improvement
variance calculation
organizational learning
Johnson Superior Products Inc. produces hospital equipment and the setup requirements vary from product to product. Johnson produces its products based on customer orders and uses ABC costing. In one of its indirect cost pools, setup costs and distributio
Johnson has failed to use the correct cost driver as the cost-allocation base for setup costs.
________ costs support the organization as a whole.
Batch-level
Facility-sustaining
Product-sustaining
Unit-level
Facility-sustaining
Which of the following is a sign that an ABC system may be useful for an organization?
Significant amounts of indirect costs are allocated using multiple cost pools.
Operations staff disagrees with accountants about the costs of manufacturing and marketin
Operations staff disagrees with accountants about the costs of manufacturing and marketing products and services.
Which of the following is a reason that has accelerated the demand for refinements to the costing system?
The declining demand for customized products has led managers to decrease the variety of products and services their companies offer.
The increasing
The use of product and process technology has led to an increase in indirect costs and a decrease in direct costs.
Which of the following items will be same for a flexible budget and a master budget?
total expected revenues
total contribution margin
total expected fixed costs
total variable cost
total expected fixed costs
Answer the following questions using the information below:
Chess Woods Limited produces two products: wooden chess pieces and wooden inlaid chess boards. Under their traditional cost system using one cost driver (direct manufacturing labor hours), the co
The costing results for chess pieces under the new system depend on the adequacy and quality of the estimated cost drivers and costs used by the system.
The goal of a properly constructed ABC system is to ________.
identify more indirect costs
have the most accurate cost system
have separate allocation rates for each department
develop the best cost system that meets the cost/benefit test
develop the best cost system that meets the cost/benefit test
Overcosting a particular product may result in:
understating total product costs
pricing the product too low
operating efficiencies
pricing the product too high
pricing the product too high
Aqua Company produces two products-Alpha and Beta. Alpha has a high market share and is produced in bulk. Production of Beta is based on customer orders and is custom designed. Also, 55% of Beta's cost is shared between design and setup costs, while Alpha
Aqua will overcost Alpha's indirect costs as it is using a single cost pool to allocate indirect costs.
Which of the following is true of refinement of a costing system?
While refining a costing system, companies should identify as many indirect costs as is economically feasible.
It is likely to yield the most decision-making benefits when direct costs are
It reduces the use of broad averages for assigning the cost of resources to cost objects.
A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis ________.
emphasizes how managers can achieve higher sales
is easy to analyze and interpret
can be used to eliminate nonvalue
can be used to eliminate nonvalue-added activities
When benchmarking, management accountants are most valuable when they ________.
provide insight into why costs or revenues differ across companies
highlight differences in the benchmarking data to management
provide complex mathematical analysis
present d
provide insight into why costs or revenues differ across companies
Answer the following questions using the information below:
These questions refer to flexible-budget variance formulas with the following descriptions for the variables: A = Actual; B = Budgeted; P = Price; Q = Quantity.
Which variance is calculated using
efficiency variance
Answer the following questions using the information below:
Cannady produces six products. Under their traditional cost system using one cost driver, SR6 costs $168.00 per unit. An analysis of the activities and their costs revealed that three cost driver
the costing results for SR6 under the new system depend on the adequacy and quality of the estimated cost drivers and costs used by the system
The flexible-budget variance for direct cost inputs can be further subdivided into a ________.
price variance and an efficiency variance
sales-volume variance and an efficiency variance
static-budget variance and a price variance
static-budget variance an
price variance and an efficiency variance
________ are the costs of activities undertaken to support individual products or services regardless of the number of units or batches in which the units are produced.
Batch-level costs
Facility-sustaining costs
Product-sustaining costs
Unit-level costs
Product-sustaining costs
Benchmarking is a process ________.
in which a firm's performance levels are compared against the best levels of performance in competing companies or in companies having similar processes
in which overhead costs are absorbed into units of output, or 'job
in which a firm's performance levels are compared against the best levels of performance in competing companies or in companies having similar processes
Standard cost per output unit for each variable direct cost input is calculated by multiplying ________.
actual input allowed for one output unit by standard price per input unit
standard input allowed for one output unit by actual price per input unit
st
standard input allowed for one output unit by standard price per input unit
When "available time" (i.e., setup-hours) is used to calculate a cost of a resource and to allocate costs to cost objects , the system is called:
hybrid costing
process costing
job costing
time-driven activity based costing
time-driven activity based costing
With traditional costing systems, products manufactured in small batches and in small annual volumes may be ________ because batch-related and product-sustaining costs are assigned using unit-related drivers.
undercosted
overcosted
ignored
fairly costed
undercosted
Using department indirect-cost rates to allocate costs will result in results similar to ABC if:
several activities cause a small portion of the costs of the department
a single activity accounts for a sizable portion of the costs of the department
a sing
a single activity accounts for a sizable portion of the costs of the department