Question 1

Culver, Inc. produces two different products (Product V3 and Product G8)  using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The activity drivers are used as follows:  The activity rate for Inspection is $750 per batch. What is the total cost of Inspection?

Accepted Answer

A)   $11,250
B)   $33,750
C)   $45,000
D)   $75,000E) A) and B)
F) A) and C)

Question 2

Pima, Inc. manufactures calculators that sell for $40 each. Each calculator uses $15 in direct materials and $5 in direct labor per unit. Pima has two activities: Machining, which is applied at the rate of $4 per machine hour, and Finishing, which is applied at the rate of $20 per batch. This month, Pima made 400 calculators, using 1,000 machine hours in 40 batches. What is the total manufacturing cost for one calculator?

Accepted Answer

A)   $20
B)   $25
C)   $27
D)   $32E) B) and C)
F) A) and C)

Question 3

Washington, Inc. produces two different products (Product C and Product 2)  using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $750,000, while the cost of Inspection is $90,000. The activity drivers are used as follows:  What is the activity rate for Machining?

Accepted Answer

A)   $187.50 per machine hour
B)   $166.67 per machine hour
C)   $250.00 per machine hour
D)   $5750.00 per machine hourE) B) and C)
F) B) and D)

Question 4

Volume-based cost systems tend to:

Accepted Answer

A)   Under-cost low-volume products and under-cost high-volume products.
B)   Under-cost low-volume products and over-cost high-volume products.
C)   Over-cost low-volume products and under-cost high-volume products.
D)   Over-cost low-volume products and over-cost high-volume products.E) B) and D)
F) B) and C)

Question 5

Activity-based costing is not appropriate for service providers since they do not have manufacturing overhead that needs to be assigned to products

Accepted Answer

A) True 
 B)False

Question 6

When is a volume-based cost system appropriate for a service company?

Accepted Answer

A)   A volume-based cost system is always appropriate for a service company.
B)   A volume-based cost system is never appropriate for a service company.
C)   A volume-based cost system is appropriate for a service company when certain customers require more attention and a higher level of service than other customers.
D)   A volume-based cost system is appropriate for a service company when every customer places a similar demand on the company's resources.E) C) and D)
F) A) and B)

Question 7

GG's Personal Training Services is owned by Gina Garfield. Gina provides personal training and coaching to individuals or small groups using the local fitness facility and pool. Gina rents the group training room at the local fitness facility or the pool for scheduled classes. For one-on-one training, she meets clients at the fitness facility where she is a member. Gina is currently learning Zumba and plans to offer a Zumba class in the group training room on Wednesday mornings starting next month. To advertise this class and all her other services, Gina developed a company Facebook page. The development of the Facebook page is considered a ___________ activity for GG's.

Accepted Answer

A)   facility-level
B)   service-level
C)   group-level
D)   customer-levelE) C) and D)
F) B) and D)

Question 8

How is activity-based management related to activity-based costing?

Accepted Answer

A)   Activity based management is another term for activity based costing.
B)   Activity based management is used when activity based costing is not feasible.
C)   Activity based management bases improvements to operations and reductions in costs on activity based costing data.
D)   Activity based management is not related to activity based costing.E) A) and B)
F) B) and D)

Question 9

A volume-based cost system is likely to assign more manufacturing overhead costs to products:

Accepted Answer

A)   that are more complex or difficult to manufacture than others.
B)   that sell more units than others.
C)   with higher per-unit materials costs than others.
D)   with more activity costs than others.E) A) and D)
F) None of the above

Question 10

Garfield Personal Training Services is owned by Gina Garfield. Gina provides personal training and coaching to individuals or small groups using the local fitness facility and pool. Gina rents the group training room at the local fitness facility or the pool for scheduled classes. For one-on-one training, she meets clients at the fitness facility where she is a member. Gina is currently learning Zumba and plans to offer a Zumba class in the group training room on Wednesday mornings starting next month. The first scheduled Zumba class is considered a ___________ activity for Garfield.

Accepted Answer

A)   facility-level
B)   service-level
C)   group-level
D)   customer-levelE) None of the above
F) A) and B)

Question 11

The first step in ABC is:

Accepted Answer

A)   to calculate a manufacturing overhead rate.
B)   to form activity cost pools.
C)   to select a cost driver for each activity cost pool.
D)   to identify and classify activities.E) A) and B)
F) None of the above

Question 12

Appraisal or inspection costs are costs that:

Accepted Answer

A)   are incurred to prevent quality problems from occurring in the first place.
B)   are incurred to identify defective products before products are shipped to the customer.
C)   result from defects that are caught before the product is shipped to the customer.
D)   occur when a defective product makes its way into the hands of the customer.E) B) and D)
F) B) and C)

Question 13

Linden, Inc. uses a 5,000 square foot factory space that it rents for $2,500 a month for all its manufacturing activities. Linden has decided to switch to an activity-based costing system, and has identified its activities as follows: Preparation and Setup, Machining, Finishing, and Quality Control. 500 square feet of the factory are used for machining, while 2,000 square feet (each)  are used for Preparation and Setup and Quality Control. Finishing uses 500 square feet. When assigning indirect costs to each activity, how much factory rent should be assigned to the Preparation and Setup cost pool?

Accepted Answer

A)   $250
B)   $500
C)   $1,000
D)   $2,000E) A) and B)
F) B) and D)

Question 14

Which of the following statements is not correct about how an ABC system might be adapted to provide managers with sustainability-related information that would affect the triple bottom line?

Accepted Answer

A)   The system could capture and report information about workplace safety, then allocate it to activities, then to various products produced.
B)   The system could capture and report information about greenhouse gas emissions, then allocate it to activities, then services provided.
C)   The system can only capture and report cost information, so it only affects the "profit" part of the triple bottom line.
D)   The system can capture and report information about employee retention, particularly for diversity initiatives, then allocate it to activities, products, and services.E) A) and B)
F) B) and D)

Question 15

An activity that is performed to support a specific product line is a(n) :

Accepted Answer

A)   batch-level activity.
B)   facility-level activity.
C)   product-level activity.
D)   unit-level activity.E) All of the above
F) A) and D)

Question 16

External failure costs occur _________ a defective product makes its way to the customer, while internal failure costs occur ______ a defective product makes its way to the customer.

Accepted Answer

A)   before, before
B)   before, after
C)   after, before
D)   after, afterE) A) and D)
F) C) and D)

Question 17

Calverton, Inc. produces two different products (Standard and Luxury)  using two different activities: Machining, which uses machine hours as an activity driver, and Inspection, which uses number of batches as an activity driver. The cost of Machining is $500,000, while the cost of Inspection is $30,000. Standard is assigned $150,000 in Machining cost, and $22,500 in Inspection cost. What proportion of Inspection activity is used by Standard?

Accepted Answer

A)   25%
B)   33%
C)   67%
D)   75%E) A) and B)
F) B) and D)

Question 18

Using the activity-proportion method results in:

Accepted Answer

A)   higher cost allocations than the activity rate method.
B)   lower cost allocations than the activity rate method.
C)   the same cost allocations as the activity rate method.
D)   higher or lower cost allocations than the activity rate method, depending on the circumstances.E) None of the above
F) B) and D)

Question 19

Cricket Company has identified seven activities as part of its manufacturing process and chosen corresponding activity drivers for each activity. The chart below lists the total cost of each activity, the proportion of activity driver used for each of Cricket's two products, and the activity cost assigned to each product. Fill in the blanks below:
Activity
Cost
Activity Driver
Proportion used by
Activity Cost: Prod. 1
Activity Cost: Prod. 2
Prod. 1
Prod. 2
Design
$20,000
Design time
40%
60%
a.
b.
Preparation
$12,000
Labor hours
30%
c.
$3,600
d.
Machining
$45,000
Machine hours
e.
f.
$27,000
g.
Finishing
h.
Batches
40%
i.
$10,000
j.
Inspection
k.
Units
l.
m.
$9,000
$6,000
Packaging
n.
Orders
o.
25%
$13,500
p.
Shipping
$5,000
Packages
70%
q.
r.
$1,500

Accepted Answer

a. $8,000 = $20,000 × 40%
b. $12,000 = $...

Question 20

Sonora, Inc. is launching a new product that it estimates will sell for $25 per unit. Annual demand is estimated to be 70,000 units. Sonora estimates that using its current manufacturing technology, it can manufacture the units for $23 per unit, but if it purchases a new machine, the units can be manufactured for $22 per unit. Sonora has a target profit of 20% return on sales. Under target costing, what is the target cost for the new product?

Accepted Answer

A)   $20
B)   $22
C)   $23
D)   $25E) A) and B)
F) All of the above

Exam 4: Activity-Based Cost Management

Volume-based cost systems tend to:

Correct Answer
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Correct Answer
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External failure costs occur ___ a defective product makes its way to the customer, while internal failure costs occur a defective product makes its way to the customer.

Correct Answer
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Correct Answer
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a. $8,000 = $20,000 × 40%
b. $12,000 = $...
View Answer

Activity-based costing is not appropriate for service providers since they do not have manufacturing overhead that needs to be assigned to products

Correct Answer
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Correct Answer
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A volume-based cost system is likely to assign more manufacturing overhead costs to products:

Correct Answer
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Correct Answer
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Correct Answer
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An activity that is performed to support a specific product line is a(n) :

Correct Answer
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Correct Answer
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Using the activity-proportion method results in:

Correct Answer
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Correct Answer
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Appraisal or inspection costs are costs that:

Correct Answer
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Correct Answer
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The first step in ABC is:

Correct Answer
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Correct Answer
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When is a volume-based cost system appropriate for a service company?

Correct Answer
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Which of the following statements is not correct about how an ABC system might be adapted to provide managers with sustainability-related information that would affect the triple bottom line?

Correct Answer
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How is activity-based management related to activity-based costing?

Correct Answer
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Exam 4: Activity-Based Cost Management

Volume-based cost systems tend to:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

External failure costs occur _________ a defective product makes its way to the customer, while internal failure costs occur ______ a defective product makes its way to the customer.

Correct AnswerverifiedShow Answer

Correct Answerverifieda. $8,000 = $20,000 × 40%b. $12,000 = $...View AnswerShow Answer

Activity-based costing is not appropriate for service providers since they do not have manufacturing overhead that needs to be assigned to products

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A volume-based cost system is likely to assign more manufacturing overhead costs to products:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An activity that is performed to support a specific product line is a(n) :

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Using the activity-proportion method results in:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Appraisal or inspection costs are costs that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The first step in ABC is:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When is a volume-based cost system appropriate for a service company?

Correct AnswerverifiedShow Answer

Which of the following statements is not correct about how an ABC system might be adapted to provide managers with sustainability-related information that would affect the triple bottom line?

Correct AnswerverifiedShow Answer

How is activity-based management related to activity-based costing?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

External failure costs occur ___ a defective product makes its way to the customer, while internal failure costs occur a defective product makes its way to the customer.

Correct Answer
verified

Correct Answer
verified
a. $8,000 = $20,000 × 40%
b. $12,000 = $...
View Answer

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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