The major limitation of volume-based costing systems is the use of volume-based:
A.
Criteria.
B.
Standards.
C.
Rates.
D.
Variances.
E.
Restrictions.
C. rates
2.
Volume-based rates produce inaccurate product cost when:
A.A large portion of factory overhead cost is not volume-based.
B.Firms produce a diverse mix of products.
C.Large volumes of a product are manufactured.
D.Both a lack of volume-based overhead an
D.
Both a lack of volume-based overhead and there is a large range of products.
If the usage of project activities is not proportional to the number of units produced, then some managers will be overcharged and others undercharged under the:
A.
Activity-based costing
B.
Volume-based costing
C.
Overhead costing
D.
Process costing
B.
Volume-based costing
4.
Volume-based overhead rates may cause undesirable strategic effects such as:
A.
Incorrect decisions.
B.
Unprofitable cross-subsidization of products.
C.
Ineffective management of operations for process improvement.
D.
All of these answer choices are co
D.
All of these answer choices are correct.
Activity-based costing (ABC) differs from other costing approaches in that it more accurately measures the cost of activities that are:
A.
Not proportional to the volume of outputs produced.
B.
Directly proportional to the volume of outputs produced.
C.
I
A.
Not proportional to the volume of outputs produced.
In performing activity analysis during the design of an activity-based costing (ABC) system, the management accountant studies:
A.
The cost drivers and managers in the plant.
B.
The advice of operation-level managers.
C.
The resources, activities, and cos
C.
The resources, activities, and cost drivers in the operation.
Effective implementation of activity-based costing (ABC) requires:
A.
Normally the assistance of a consultant.
B.
A sophisticated and expensive computer system.
C.
Support of top management and key employees.
D.
Capturing properly the complexity of the da
C. Support of top management and key employees
8.
Elimination of low-value-added activities in a firm should:
A.
Be discouraged because of potential harmful effects.
B.
Not affect customer value.
C.
Not have priority because low-value-added activities have little effect on a firm's performance.
D.
Hav
B. Not affect costumer value
When gathering activity data, which of the following would not be a question that ABC project team members typically ask employees or managers?
A.
Time spent performing the activity
B.
Resources required for the activity
C.
Where the activity takes place
C. where the activity takes place
Successful activity-based costing (ABC) implementation depends upon the firm:
A.
Having support of consultants with needed expertise.
B.
Having a thorough activity analysis.
C.
Starting with a relatively simple system.
D.
Having well-trained managers.
E.
C. Starting with a relatively simple system
A measure of the quantity of resources consumed by an activity is:
A.
A quantity driver.
B.
A resource consumption cost driver.
C.
Not a cost driver.
D.
An activity consumption cost driver.
E.
A consumption cost driver.
B. A resource consumption cost driver
12. A measure of frequency and intensity of demands placed on activities by cost objects is:
A. A quantity driver.
B. A resource consumption cost driver.
C. Not a cost driver.
D. An activity consumption cost driver.
E. A consumption cost driver.
D. An activity consumption cost driver.
An activity that is performed for each unit of production is a(n):
A.
Product-level activity.
B.
Facility-level activity.
C.
Unit-level activity.
D.
Performance-level activity.
E.
Batch-level activity.
C. Unit level activity
An activity that is performed to support the production of a new custom-order product is a:
A.
Product-level activity.
B.
Facility-level activity.
C.
Unit-level activity.
D.
Customer-support activity.
E.
Batch-level activity.
A. Product level activity
Which one of the following is not a unit-level cost driver?
A.
Direct labor hours.
B.
Direct material dollars.
C.
Machine hours.
D.
Production orders.
D. Production orders
The management of activities to improve the value received by the customer and the competitiveness of the organization is:
A.
Cost driver analysis.
B.
Customer profitability analysis.
C.
Activity-based management.
D.
Performance measurement.
E.
Activity a
C.
Activity-based management.
17.
The examination of the efficiency of each of a firm's activities is:
A.
Activity analysis.
B.
Pareto analysis.
C.
Activity-based management.
D.
Performance measurement.
E.
Attribute-based management.
A.
Activity analysis
18.
Which one of the following is a high value-added activity?
A.
Set-up.
B.
Rework.
C.
Repair.
D.
Storage.
E.
Processing.
E. Processing
19.
In regard to selling activities, which one of the following would not be a cost driver for selling expense?
A.
Number of invoices.
B.
Number of sales calls.
C.
Number of production runs.
D.
Number of shipments.
C.
Number of production runs.
Which one of the following is not a recommendation for a successful implementation of ABC/M?
A.
Obtain support of management and personnel.
B.
Complete an activity analysis.
C.
Start with a relatively simple system.
D.
Use ABC/M on a job that will succeed
E.
All of these answer choices are features of successful ABC/M implementations.
Which of the following activities is a facility-level activity?
A.
Plant management salaries.
B.
Depreciation on a highly specialized piece of production equipment.
C.
Direct labor.
D.
Product design.
E.
Materials handling.
A.
Plant management salaries.
64.
C.
$6,500.
1. $160,000 � 3,200 pounds = $50 per pound of direct materials
2. $50 � 130 pounds = $6,500
63.
C.
$1,600.
1. ($160,000 + $13,260 + $1,380 + $10,560) � 2,315 budgeted hours = $80 per direct labor hour
2. $80 � 20 Direct labor hours = $1,600 = Manufacturing overhead for Job #971
65
E.
$1,020.
1. $13,260 � 390 set-ups = $34
2. $34 � 30 setups = $1,020
66.
1. $1,380 � 30,000 machine hours = $.046 per machine hour
2. $.046 � 15,000 machine hours = $690
67.
10560/160 inspections = 66 per inspection
66*15 inspections = 990
68.
6,500 + $1,020 + $690 + $990 = $9,200
69.
$1,349,040 � [(10,000 � $17.52) + (16,000 � $13.14)] = 3.5
70.
3.5 Predetermined rate * 17.52 = 61.32
71.
$13.14 � 350% = $45.99
72.
404712/2409=$168
168*969=162792
162792/10000 Annual Sales per High F unit=16.28 per unit
73.
269,808/12848=21
21*5648= 118608
118608/10000=11.86
74.
1. $539,616 � 33,726 machine hours = $16 per machine hour
2. $16 � 20,286 = $324,576
3. $324,576 � 10,000 High F units = $32.46
75.
1. $134,904 � 26,400 = $5.11
2. ($5.11 � 12,000) � 10,000 = $6.13
76.
$16.28 + $11.86 + $32.46 + $6.13 = $66.73
ignore 77 -80
...
81.
$15.12 + $9.45 + $13.44 + $4.60 = $42.61
82.
64800/1080= 60
60*175=10500
83
1. $132,000 � 1,100 = $120 per machine hour
2. $120 � 180 = $21,600
84
1. $900 � 30 = $30 per batch
2. $30 � 5 batches = $150
85
1. $48,000 � 4,000 direct labor hours = $12 per labor hour
2. $12 � 650 labor hours = $7,800
86
($10,500 + $21,600 + $150 + $7,800) � 1,000 = $40.05
87
1. $78,000 � 1,200 = $65 per inspection2. $65 � 375 = $24,375
89
1. $1200 � 50 = $24 per batch
2. $24 � 8 batches = $192
91
ABC costing helps an organization implement its strategy through all of the following means except:
A.
Providing accurate cost information.
B.
Identifying the most profitable products and customers.
C.
Helping improve cycle time.
D.
Identifying value a
C.
Helping improve cycle time.
If Activity X had a budgeted cost of $125,000 and a budgeted activity consumption of 10,000 engineering hours, what would the activity consumption rate be?
A.
$10 per hour.
B.
$12.50 per hour.
C.
$0.08 per hour.
D.
0.10 per hour.
12.50
Customer lifetime value is a type of analysis used to:
A.
Assess the ethical practices of each salesperson-customer relationship.
B.
Assess the current profit potential of a customer.
C.
Assess the long term profit potential of a customer.
D.
Assess the c
C.
Assess the long term profit potential of a customer.
The cost of unused capacity can be determined using ABC costing for the purpose of:
A.
Determining more accurately the ABC costs.
B.
Helping managers plan the short and longer-term use of the operating resources.
C.
Determining product profitability.
D.
C
B.
Helping managers plan the short and longer-term use of the operating resources.
Multistage ABC is used when:
A.
There are many departments in the organization.
B.
Management wants a higher level of accuracy from the ABC calculations.
C.
There are complex relationships among the activities.
D.
To simplify the ABC calculations.
E.
Ther
C.
There are complex relationships among the activities.
An adaptation of ABC costing that simplifies ABC by assigning resource costs directly to cost objects is called:
A.
Activity analysis.
B.
Multistage ABC.
C.
Time-Driven ABC.
D.
Resource Consumption Accounting.
E.
Customer profitability analysis.
C.
Time-Driven ABC.
101
1. $632,400 � 4,800 direct labor hours = $131.75 per direct labor hour
2. $131.75 � 336 hours = $44,268
Time-driven ABC provides a direct way to measure:
A.
Production efficiency.
B.
Unused capacity.
C.
Product line profitability.
D.
Value-adding activities.
E.
Customer value.
B.
Unused capacity.
Important concepts in resource consumption accounting include all of the following except:
A.
Variable costing.
B.
Resource interrelationships.
C.
Activity interrelationships.
D.
Detail level cost information.
E.
Treatment of idle capacity.
C.
Activity interrelationships.
In the context of ABC, cross-subsidization refers to:
A.
Production departments subsidizing each other.
B.
Costing inaccuracies which affect the relative profitability of products.
C.
Cross-selling products lines, which affect customer profitability.
D.
E
B.
Costing inaccuracies which affect the relative profitability of products.
The Time Equation is used in ABC to:
A.
Track the implementation of the ABC system.
B.
Assess the amount of time required for each activity, in determining the application rate.
C.
Incorporate complexities in the application of ABC.
D.
Plan for the implem
C.
Incorporate complexities in the application of ABC.
102
1. $632,400 � 12,000 = $52.70 per machine hour
2. $52.70 � 830 machine hours = $43,741
107
$8,000 + $7,272 + $19,200 + $9,960 = $44,432
108
1. ($168,640 + $127,840 + $554,400 + $1,078,000) � $514,368 = $3.75 per direct-labor dollar
2. $514,368 � 8,037 hours = $64 per hour for labor
3. $64 per hour � 30 direct labor hours � $3.75 overhead per labor dollar = $7,200
109
1. ($168,640 + $127,840 + $554,400 + $1,078,000) � 8,037 = $240 per direct-labor hour
2. $240 � 40 direct labor hours = $9,600
Service and not-for-profit organizations often:
A.
Have ABC systems which are similar to those of manufacturing firms.
B.
Do not have changeable outputs.
C.
Are unable to benefit from ABC costing.
D.
Do not have ABC systems which are similar to those of m
Do not have ABC systems which are similar to those of manufacturing firms.
Customer profitability analysis:
A.
Always shows that the company with the highest total sales generates the highest net customer profit.
B.
Always shows that the company with the lowest total sales generates the lowest net customer profit.
C.
Produces th
Helps identify actions that affect customer profitability
A company using a volume-based overhead assignment (allocation) method will tend to:
A.
Overstate the cost of low volume products.
B.
Understate the cost of low volume products.
C.
Understate the cost of high volume products.
D.
Understate the cost of all
Understate the cost of low volume products.
Which of the following is a batch-level cost driver?
A.
Output units.
B.
Number of engineering change orders.
C.
Number of materials handling transactions.
D.
Square feet of plant area occupied.
E.
Number of employees.
C.
Number of materials handling transactions.
Which of the following activities is a facility-level activity?
A.
Materials handling.
B.
Plant maintenance.
C.
Product inspection.
D.
Design engineering.
E.
Purchase orders.
B
In an organization that makes furniture, which of the following is a high value-added activity?
A.
Using direct materials in production.
B.
Inspecting production.
C.
Storing finished goods inventory.
D.
Moving work-in-process inventory between work statio
A
Overhead costs are allocated to cost objects in an activity-based costing system in the following manner:
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
B
Which of the following is a batch-level cost driver?
A.
Output units.
B.
Number of employees.
C.
Number of orders.
D.
Number of parts.
E.
Machine hours.
C
28
D
A volume-based rate is an appropriate overhead application base when:
A.
Several well-differentiated products are manufactured.
B.
Direct labor costs are large.
C.
Direct material costs are large relative to direct labor costs incurred.
D.
Only one produc
D
Which of the following would likely be the most appropriate cost driver of electric power used by machines?
A.
Number of units.
B.
Machine size.
C.
Number of machine hours.
D.
Number of production runs.
E.
Purchase cost of machines.
C
Using a volume-based overhead rate based on machine hours to assign manufacturing overhead to a product line that uses relatively few machine hours is likely to:
A.
Overapply overhead to the product line.
B.
Underapply overhead to the product line.
C.
Und
B
Which of the following is an example of a high-value-added activity?
A.
Shipping the customer's order.
B.
Scheduling the customer order for production.
C.
Inspecting goods to ensure the right quantity is being shipped.
D.
E-mailing a customer to assure th
A
Engineering change orders, maintenance of equipment used in manufacturing, and product design costs are examples of:
A.
Unit costs.
B.
Batch costs.
C.
Product-level costs.
D.
Facility-level costs.
E.
Unit, batch, and customer-sustaining costs, respectivel
C
In an activity-based costing system, overhead costs are divided into separate:
A.
Cost objects.
B.
Activity cost pools.
C.
Resource consumption and activity consumption cost drivers.
D.
Product-line cost pools.
E.
Plantwide or departmental cost pools.
B
35.
Which of the following would likely be the most appropriate cost driver to allocate machine set-up costs to products?
A.
Machine hours.
B.
Direct labor hours.
C.
Number of production runs.
D.
Number of products.
E.
Number of purchase orders.
C
A firm has many products, some produced in an automated production process and some produced in a manual production process. Using direct labor hours to assign manufacturing overhead to a product manufactured with a highly automated process is likely to:
B
Activity-based costing for manufacturing operations is used to assign:
A.
Direct material and direct labor costs to products.
B.
Direct labor and manufacturing overhead costs to products.
C.
Manufacturing overhead costs to products.
D.
Selling and general
C
38.
The use of activity-based costing is most appropriate for:
A.
Firms that manufacture multiple product lines.
B.
Firms that have very low manufacturing overhead costs relative to other costs of production.
C.
Firms with high levels of production activi
A
39.
Which of the following is a benefit of activity-based costing?
A.
Reduced overhead costs.
B.
More accurate measures of production volume.
C.
Facilitate better product pricing decisions.
D.
Having fewer cost drivers than volume-based costing systems.
E
C
Which of the following is not normally associated with activity-based costing?
A.
Activity cost pools.
B.
Multiple cost drivers.
C.
Reduction of non-value-adding costs.
D.
High direct labor costs relative to manufacturing overhead costs.
E.
Improved decis
D
41.
Which of the following is not considered a benefit of activity-based costing?
A.
Decreased production activity levels.
B.
Improved understanding of cost of capacity.
C.
A better understanding of processes.
D.
Improved planning.
E.
Improved strategic d
A
42.
Which of the following would be the most appropriate cost driver to allocate factory electricity costs to products?
A.
Machinery depreciation expense.
B.
Machinery maintenance work orders.
C.
Machinery down-time.
D.
Machine hours.
E.
Machine productiv
D
Which of the following activity cost pools would most likely be allocated based on the number of production runs?
A.
Machinery set-up costs.
B.
Raw materials warehousing costs.
C.
Factory heating costs.
D.
Factory janitorial costs.
E.
Indirect labor costs
A
Which of the following is most likely to be the cost driver for the packaging and shipping activity?
A.
Number of setups.
B.
Number of components.
C.
Number of orders.
D.
Hours of testing.
E.
Number of production runs.
C
45.
Activity-based costing systems:
A.
Accumulate overhead costs by departments.
B.
Are less complex and therefore less costly than volume-based systems.
C.
Can be used in manufacturing firms only.
D.
Have separate overhead rates for each activity.
E.
Eli
D
Which of the following is not true regarding activity-based costing (ABC) systems?
A.
ABC can provide more accurate product costs.
B.
ABC identifies more costs as indirect costs than do traditional volume-based systems.
C.
ABC is likely to be more time-co
B
All of the following are low-value-added activities except:
A.
Processing.
B.
Reworking.
C.
Moving.
D.
Inspection.
E.
Warranty service.
A
48.
B
Purchase order, set-up, and inspection costs are examples of:
A.
Unit-level costs.
B.
Batch-level costs.
C.
Product-level costs.
D.
Facility-level costs.
E.
Department-level costs.
B
Which of the following would not be considered a facility-level activity?
A.
Providing security for the plant.
B.
Factory property taxes and insurance.
C.
Closing the books each month.
D.
Placing purchase orders.
D
Costs at the unit-level of activity should be allocated to products using cost drivers that are:
A.
Customer-oriented.
B.
Design-related.
C.
Volume-related.
D.
Product-related.
E.
Order-related.
C
If a costing system uses a single base to allocate overhead costs that are results of several production activities:
A.
Products that use relatively more of this base tend to be undercosted.
B.
Products that use relatively less of this base tend to be ove
C
Procurement costs such as costs of placing orders for materials and paying suppliers are usually classified as:
A.
Output-unit-level costs.
B.
Batch-level costs.
C.
Product-level costs.
D.
Facility-level costs.
E.
Vendor costs.
B
The cost of sales visits is a:
A.
Customer unit-level cost.
B.
Customer batch-level cost.
C.
Customer-sustaining cost.
D.
Distribution-channel cost.
E.
Sales-sustaining cost.
C
55.
Freight charges based on number of units shipped to customers is a:
A.
Customer unit-level cost.
B.
Customer batch-level cost.
C.
Customer-sustaining cost.
D.
Distribution-channel cost.
E.
Sales-level cost.
A
56.
Processing sales returns and allowances is usually classified as a:
A.
Customer unit-level cost.
B.
Customer batch-level cost.
C.
Customer-sustaining cost.
D.
Distribution-channel cost.
E.
Sales-level cost.
B
57.
Invoicing cost is an example of a:
A.
Customer unit-level cost.
B.
Customer batch-level cost.
C.
Customer-sustaining cost.
D.
Distribution-channel cost.
E.
Sales-level cost.
B
The cost to process monthly statements is an example of a:
A.
Customer unit-level cost.
B.
Customer batch-level cost.
C.
Customer-sustaining cost.
D.
Distribution-channel cost.
E.
Sales-level cost.
C
The costs of operating a regional warehouse is an example of a:
A.
Customer unit-level cost.
B.
Customer batch-level cost.
C.
Customer-sustaining cost.
D.
Distribution-channel cost.
E.
Sales-level cost.
D
General corporate sales expenditures are:
A.
Customer unit-level costs.
B.
Customer batch-level costs.
C.
Customer-sustaining costs.
D.
Distribution-channel costs.
E.
Sales-sustaining costs.
E
The general sales manager's salary is an example of a:
A.
Customer unit-level cost.
B.
Customer batch-level cost.
C.
Customer-sustaining cost.
D.
Distribution-channel cost.
E.
Sales-sustaining cost.
E
Which of the following is a description of categorizing related customer costs into cost pools on the basis of cost drivers?
A.
Customer revenue analysis.
B.
Customer cost analysis.
C.
Customer profitability analysis.
D.
Customer value assessment.
E.
Cust
B