ACC 560 Week 4 Quiz – Strayer University NEW

ACC/560 WEEK 4 QUIZ – STRAYER NEW
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WEEK 4 QUIZ 3: CHAPTER 4

TRUE-FALSE STATEMENTS
1. Traditional costing systems use multiple predetermined overhead rates.

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

2. Traditionally, overhead is allocated based on direct labor cost or direct labor hours.

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

3. Current trends in manufacturing include less direct labor and more overhead.

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

4. Activity-based costing allocates overhead to multiple cost pools and assigns the cost pools to products using cost drivers.

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

5. A cost driver does not generally have a direct cause-effect relationship with the resources consumed.

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

6. The first step in activity-based costing is to assign overhead costs to products, using cost drivers.

Ans:, LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

7. To achieve accurate costing, a high degree of correlation must exist between the cost driver and the actual consumption of the activity cost pool.

Ans:, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

8. Low-volume products often require more special handling than high-volume products.

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

9. When overhead is properly assigned in ABC, it will usually decrease the unit cost of high-volume products.

Ans:, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

10. ABC leads to enhanced control over overhead costs.

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

11. ABC usually results in less appropriate management decisions.

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

12. ABC is generally more costly to implement than traditional costing.

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

13. ABC eliminates all arbitrary cost allocations.

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

14. ABC is particularly useful when product lines differ greatly in volume and manufacturing complexity.

Ans:, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

15. ABC is particularly useful when overhead costs are an insignificant portion of total costs.

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

16. Activity-based management focuses on reducing costs and improving processes.

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

17. Any activity that increases the cost of producing a product is a value-added activity.

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

18. Engineering design is a value-added activity.

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

19. Non-value-added activities increase the cost of a product but not its perceived value.

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

20. Machining is a non-value-added activity.

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

21. Not all activities labeled non-value-added are totally wasteful, nor can they be totally eliminated.

Ans:, LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

22. The overall objective of installing ABC in service firms is no different than it is in a manufacturing company.

Ans:, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

23. What sometimes makes implementation of activity-based costing difficult in service industries is that a smaller proportion of overhead costs are company-wide costs.

Ans:, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

24. The general approach to identifying activities, activity cost pools, and cost drivers is used by a service company in the same manner as a manufacturing company.

Ans:, LO: 8, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

25. Plant management is a batch-level activity.

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

26. Painting is a product-level activity.

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a27. Just-in-time strives to eliminate inventories by using a pull approach.

Ans:, LO: 9, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a28. Quality control is less important in just-in-time than in traditional manufacturing philosophies.

Ans:, LO: 9, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a29. Inventory storage costs are reduced in just-in-time processing.

Ans:, LO: 9, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a30. Rework costs typically increase in just-in-time processing.

Ans:, LO: 9, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

MULTIPLE CHOICE QUESTIONS
31. Which of the following is not typical of traditional costing systems?
a. Use of a single predetermined overhead rate.
b. Use of direct labor hours or direct labor cost to assign overhead.
c. Assumption of correlation between direct labor and incurrence of overhead cost.
d. Use of multiple cost drivers to allocate overhead.

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

32. In traditional costing systems, overhead is generally applied based on
a. direct labor.
b. machine hours.
c. direct material dollars.
d. units of production.

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

33. An activity that has a direct cause-effect relationship with the resources consumed is a(n)
a. cost driver.
b. overhead rate.
c. cost pool.
d. product activity.

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

34. Which best describes the flow of overhead costs in an activity-based costing system?
a. Overhead costs  direct labor cost or hours  products
b. Overhead costs  products
c. Overhead costs  activity cost pools  cost drivers  products
d. Overhead costs  machine hours  products

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

35. The costs that are easiest to trace directly to products are
a. direct materials and direct labor.
b. direct labor and overhead.
c. direct materials and overhead.
d. none of the above; all three costs are equally easy to trace to the product.

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

36. Often the most difficult part of computing accurate unit costs is determining the proper amount of _________ to assign to each product, service, or job.
a. direct materials
b. direct labor
c. overhead
d. direct materials and direct labor

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

37. Predetermined overhead rates in traditional costing are often based on
a. direct labor cost for job order costing and machine hours for process costing.
b. machine hours for job order costing and direct labor cost for process costing.
c. multiple bases for job order costing and direct labor cost for process costing.
d. multiple bases for both job order costing and process costing.

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

38. Direct labor is sometimes the appropriate basis for assigning overhead cost to products. It is appropriate to use direct labor when which of the following is true?
(1) Direct labor constitutes a significant part of total product cost.
(2) A high correlation exists between direct labor and changes in the amount of overhead costs.
a. (1) only
b. (2) only
c. Either (1) or (2)
d. Both (1) and (2)

Ans:, LO: 1, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

39. Advances in computerized systems, technological innovation, global competition, and automation have changed the manufacturing environment drastically by
a. increasing direct labor costs and increasing overhead costs.
b. increasing direct labor costs and decreasing overhead costs.
c. decreasing direct labor costs and decreasing overhead costs.
d. decreasing direct labor costs and increasing overhead costs.

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

40. Activity-based costing
a. allocates overhead to activity cost pools, and it then assigns the activity cost pools to products and services by means of cost drivers.
b. accumulates overhead in one cost pool, then assigns the overhead to products and services by means of a cost driver.
c. assigns activity cost pools to products and services, then allocates overhead back to the activity cost pools.
d. allocates overhead directly to products and services based on activity levels.

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

41. Ordering materials, setting up machines, assembling products, and inspecting products are examples of
a. cost drivers.
b. overhead cost pools.
c. direct labor costs.
d. nonmanufacturing activities.

Ans:, LO: 1, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

42. An “Ordering and Receiving Materials” cost pool would most likely have as a cost driver:
a. machine hours.
b. number of setups.
c. number of purchase orders.
d. number of inspection tests.

Ans:, LO: 1, Bloom: K, Difficulty: Medium, Min: 3, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

43. Daffodil Company produces two products, Flower and Planter. Flower is a high-volume item totaling 20,000 units annually. Planter is a low-volume item totaling only 6,000 units per year. Flower requires one hour of direct labor for completion, while each unit of Planter requires 2 hours. Therefore, total annual direct labor hours are 32,000 (20,000 + 12,000). Expected annual manufacturing overhead costs are $800,000. Daffodil uses a traditional costing system and assigns overhead based on direct labor hours. Each unit of Planter would be assigned overhead of
a. $25.00.
b. $30.77.
c. $50.00.
d. need more information to compute.

Ans:, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

44. Sitwell Corporation manufactures titanium and aluminum tennis racquets. Sitwell’s total overhead costs consist of assembly costs and inspection costs. The following information is available:
Cost Titanium Aluminum Total Cost
Assembly 500 mach. hours 500 mach. hours $45,000
Inspections 350 150 $75,000
2,100 labor hours 1,900 labor hours

Sitwell is considering switching from one overhead rate based on labor hours to activity-based costing.
Total overhead costs assigned to titanium racquets, using a single overhead rate, are

a. $60,000.
b. $63,000.
c. $75,000.
d. $84,000.

Ans:, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

45. Sitwell Corporation manufactures titanium and aluminum tennis racquets. Sitwell’s total overhead costs consist of assembly costs and inspection costs. The following information is available:
Cost Titanium Aluminum Total Cost
Assembly 500 mach. hours 500 mach. hours $45,000
Inspections 350 150 $75,000
2,100 labor hours 1,900 labor hours

Sitwell is considering switching from one overhead rate based on labor hours to activity-based costing.
Using activity-based costing, how much assembly cost is assigned to titanium racquets?
a. $15,750.
b. $22,500.
c. $23,625.
d. $31,500.

Ans:, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

46. Sitwell Corporation manufactures titanium and aluminum tennis racquets. Sitwell’s total overhead costs consist of assembly costs and inspection costs. The following information is available:
Cost Titanium Aluminum Total Cost
Assembly 500 mach. hours 500 mach. hours $45,000
Inspections 350 150 $75,000
2,100 labor hours 1,900 labor hours

Sitwell is considering switching from one overhead rate based on labor hours to activity-based costing.
Using activity-based costing, how much inspections cost is assigned to titanium racquets?
a. $22,500.
b. $35,625.
c. $37,500.
d. $52,500.

Ans:, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

47. Sanborn Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year.

Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity
Ordering and Receiving Orders $ 120,000 500 orders
Machine Setup Setups 297,000 450 setups
Machining Machine hours 1,500,000 125,000 MH
Assembly Parts 1,200,000 1,000,000 parts
Inspection Inspections 300,000 500 inspections

If overhead is applied using traditional costing based on direct labor hours, the overhead application rate is
a. $9.60.
b. $12.00.
c. $15.00.
d. $34.17.

Ans:, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

48. Sanborn Industries has the following overhead costs and cost drivers. Direct labor hours are estimated at 100,000 for the year.

Activity Cost Pool Cost Driver Est. Overhead Cost Driver Activity
Ordering and Receiving Orders $ 120,000 500 orders
Machine Setup Setups 297,000 450 setups
Machining Machine hours 1,500,000 125,000 MH
Assembly Parts 1,200,000 1,000,000 parts
Inspection Inspections 300,000 500 inspections
If overhead is applied using activity-based costing, the overhead application rate for ordering and receiving is
a. $1.20 per direct labor hour.
b. $240 per order.
c. $0.12 per part.
d. $6,834 per order.

Ans:, LO: 2, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

49. The last step in activity-based costing is to
a. assign overhead costs to products, using overhead rates determined for each cost pool.
b. compute the activity-based overhead rate per cost driver.
c. identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools.
d. identify the cost driver that has a strong correlation to the activity cost pool.

Ans:, LO: 2, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

50. The first step in activity-based costing is to
a. assign overhead costs to products, using overhead rates determined for each
cost pool.
b. compute the activity-based overhead rate per cost driver.
c. identify and classify the activities involved in the manufacture of specific products, and allocate overhead to cost pools.
d. identify the cost driver that has a strong correlation to the activity cost pool.

Ans:, LO: 2, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

51. A well-designed activity-based costing system starts with
a. identifying the activity-cost pools.
b. computing the activity-based overhead rate.
c. assigning overhead costs to products.
d. analyzing the activities performed to manufacture a product.

Ans:, LO: 3, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

52. Which of the following is not an example of an activity cost pool?
a. Setting up machines
b. Machining
c. Inspecting
d. Machine hours

Ans:, LO: 3, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

53. An example of an activity cost pool is
a. machine hours.
b. setting up machines.
c. number of setups.
d. number of inspections.

Ans:, LO: 3, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

54. Estimated costs for activity cost pools and other item(s) are as follows:
Machining $800,000
Assembling 200,000
Advertising 450,000
Inspecting and testing 175,000
Total estimated overhead is
a. $1,000,000.
b. $1,175,000.
c. $1,450,000.
d. $1,625,000.

Ans:, LO: 3, Bloom: AP, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

55. An example of a cost which would not be assigned to an overhead cost pool is
a. indirect salaries.
b. freight-out.
c. depreciation.
d. supplies.

Ans:, LO: 3, Bloom: K, Difficulty: Medium, Min: 3, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

56. One of Hartman Company’s activity cost pools is inspecting, with estimated overhead of $140,000. Hartman produces throw rugs (700 inspections) and area rugs (1,300 inspections). How much of the inspecting cost pool should be assigned to throw rugs?
a. $49,000.
b. $70,000.
c. $75,384.
d. $140,000.

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 2, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

57. Which would be an appropriate cost driver for the machining activity cost pool?
a. Machine setups
b. Purchase orders
c. Machine hours
d. Inspections

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

58. Which would be an appropriate cost driver for the purchasing activity cost pool?
a. Machine setups
b. Purchase orders
c. Machine hours
d. Inspections

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

59. An activity-based overhead rate is computed as follows:
a. actual overhead divided by actual use of cost drivers.
b. estimated overhead divided by actual use of cost drivers.
c. actual overhead divided by estimated use of cost drivers.
d. estimated overhead divided by estimated use of cost drivers.

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

60. Use of activity-based costing will result in the development of
a. one overhead rate based on direct labor hours.
b. one plantwide activity-based overhead rate.
c. multiple activity-based overhead rates.
d. no overhead rates; overhead rates are not used in activity-based costing.

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

61. To use activity-based costing, it is necessary to know the
a. cost driver for each activity cost pool.
b. expected use of cost drivers per activity.
c. expected use of cost drivers per product.
d. all of the above.

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

62. To assign overhead costs to each product, the company
a. multiplies the activity-based overhead rates per cost driver by the number of cost drivers expected to be used per product.
b. multiplies the overhead rate by the number of direct labor hours used on each product.
c. assigns the cost of each activity cost pool in total to one product line.
d. multiplies the rate of cost drivers per estimated cost for the cost pool by the estimated cost for each cost pool.

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

63. As compared to a low-volume product, a high-volume product
a. usually requires less special handling.
b. is usually responsible for more overhead costs per unit.
c. requires relatively more machine setups.
d. requires use of direct labor hours as the primary cost driver to ensure proper allocation of overhead.

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

64. Assigning overhead using ABC will usually
a. decrease the cost per unit for low volume products as compared to a traditional overhead allocation.
b. increase the cost per unit for low volume products as compared to a traditional overhead allocation.
c. provide less accurate cost per unit for low volume products than will traditional costing.
d. result in the same cost per unit for low volume products as does traditional costing.

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

65. Companies that switch to ABC often find they have
a. been overpricing some products.
b. possibly losing market share to competitors.
c. been sacrificing profitability by underpricing some products.
d. all of the above.

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

66. Comparing the U.S. to Japan,
a. activity-based costing is used less than in the U.S.
b. U.S. companies show a stronger preference to volume measures such as direct labor hours to assign overhead costs.
c. labor cost reduction is less of a priority in the U.S.
d. developing more accurate product costs is less of a priority in the U.S.

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

67. For its inspecting cost pool, Davidson, Inc. expected overhead cost of $300,000 and 4,000 inspections. The actual overhead cost for that cost pool was $360,000 for 5,000 inspections. The activity-based overhead rate used to assign the costs of the inspecting cost pool to products is
a. $60 per inspection.
b. $72 per inspection.
c. $75 per inspection.
d. $90 per inspection.

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

68. Addison Company manufactures two products, Regular and Supreme. Addison’s overhead costs consist of machining, $2,500,000; and assembling, $1,250,000. Information on the two products is:
Regular Supreme
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000
Overhead applied to Regular using traditional costing using direct labor hours is
a. $1,075,000.
b. $1,500,000.
c. $2,250,000.
d. $2,675,000.

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

69. Addison Company manufactures two products, Regular and Supreme. Addison’s overhead costs consist of machining, $2,500,000; and assembling, $1,250,000. Information on the two products is:
Regular Supreme
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000
Overhead applied to Supreme using traditional costing using direct labor hours is
a. $1,075,000.
b. $1,500,000.
c. $2,250,000.
d. $2,675,000.

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

70. Addison Company manufactures two products, Regular and Supreme. Addison’s overhead costs consist of machining, $2,500,000; and assembling, $1,250,000. Information on the two products is:
Regular Supreme
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000
Overhead applied to Regular using activity-based costing is
a. $1,075,000.
b. $1,500,000.
c. $2,250,000.
d. $2,675,000.

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

71. Addison Company manufactures two products, Regular and Supreme. Addison’s overhead costs consist of machining, $2,500,000; and assembling, $1,250,000. Information on the two products is:
Regular Supreme
Direct labor hours 10,000 15,000
Machine hours 10,000 30,000
Number of parts 90,000 160,000
Overhead applied to Supreme using activity-based costing is
a. $1,075,000.
b. $1,500,000.
c. $2,250,000.
d. $2,675,000.

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

72. Teller, Inc. produces 3 products: P1, Q2, and R3. P1 requires 400 purchase orders, Q2 requires 600 purchase orders, and R3 requires 1,000 purchase orders. Teller has identified an ordering and receiving activity cost pool with allocated overhead of $180,000 for which the cost driver is purchase orders. Direct labor hours used on each product are 50,000 for P1, 40,000 for Q2, and 110,000 for R3. How much ordering and receiving overhead is assigned to each product?
P1 Q2 R3
a. $60,000 $60,000 $60,000
b. $45,000 $36,000 $99,000
c. $36,000 $54,000 $90,000
d. $40,500 $45,000 $94,500

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

73. Hagar Co. computed an overhead rate for machining costs ($1,500,000) of $15 per machine hour. Machining costs are driven by machine hours. If computed based on direct labor hours, the overhead rate for machining costs would be $30 per direct labor hour. The company produces two products, Cape and Chap. Cape requires 60,000 machine hours and 20,000 direct labor hours, while Chap requires 40,000 machine hours and 30,000 direct labor hours. Using activity-based costing, machining costs assigned to each product is
Cape Chap
a. $600,000 $900,000
b. $750,000 $750,000
c. $800,000 $700,000
d. $900,000 $600,000

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

74. Wilder Company manufactures two models of its banjo, the Basic and the Luxury. The Basic model requires 10,000 direct labor hours and the Luxury requires 30,000 direct labor hours. The company produces 3,400 units of the Basic model and 600 units of the Luxury model each year. The company inspects one Basic for every 100 produced, and inspects one Luxury for every 10 produced. The company expects to incur $84,600 of total inspecting costs this year. How much of the inspecting costs should be allocated to the Basic model using ABC costing?
a. $21,150
b. $30,600
c. $42,300
d. $71,910

Ans:, LO: 4, Bloom: AP, Difficulty: Hard, Min: 4, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

75. Ben Gordon, Inc. manufactures 2 products, wheels and seats. The company has estimated its overhead in the assembling department to be $330,000. The company produces 300,000 wheels and 600,000 seats each year. Each wheel uses 2 parts, and each seat uses 3 parts. How much of the assembly overhead should be allocated to wheels?
a. $ 82,500.
b. $110,000.
c. $132,000
d. $141,428.

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

76. Clemson Co. incurs $700,000 of overhead costs each year in its three main departments, machining ($400,000), inspections ($200,000) and packing ($100,000). The machining department works 4,000 hours per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year. Information about Clemson’s two products is as follows:
Product X Product Y
Machining hours 1,000 3,000
Inspections 100 500
Orders packed 350 650
Direct labor hours 1,700 1,800

If traditional costing based on direct labor hours is used, how much overhead is assigned to Product X this year?
a. $168,334
b. $242,308
c. $340,000
d. $350,000

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

77. Clemson Co. incurs $700,000 of overhead costs each year in its three main departments, machining ($400,000), inspections ($200,000) and packing ($100,000). The machining department works 4,000 hours per year, there are 600 inspections per year, and the packing department packs 1,000 orders per year. Information about Clemson’s two products is as follows:
Product X Product Y
Machining hours 1,000 3,000
Inspections 100 500
Orders packed 350 650
Direct labor hours 1,700 1,800

Using ABC, how much overhead is assigned to Product X this year?
a. $168,334
b. $242,308
c. $340,000
d. $350,000

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

78. A company incurs $2,700,000 of overhead each year in three departments: Ordering and Receiving, Mixing, and Testing. The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs 1,500 tests per year in producing 200,000 drums of Goo and 600,000 drums of Slime. The following data are available:
Department Expected use of Driver Cost
Ordering and Receiving 2,000 $ 800,000
Mixing 50,000 1,000,000
Testing 1,500 900,000

MC 78. (Cont.)

Production information for Goo is as follows:
Department Expected use of Driver
Ordering and Receiving 400
Mixing 20,000
Testing 500

Compute the amount of overhead assigned to Goo.
a. $ 675,000
b. $ 860,000
c. $1,054,764
d. $1,350,000

Ans:, LO: 4, Bloom: AP, Difficulty: Hard, Min: 4, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

79. A company incurs $2,700,000 of overhead each year in three departments: Ordering and Receiving, Mixing, and Testing. The company prepares 2,000 purchase orders, works 50,000 mixing hours, and performs 1,500 tests per year in producing 200,000 drums of Goo and 600,000 drums of Slime. The following data are available:
Department Expected use of Driver Cost
Ordering and Receiving 2,000 $ 800,000
Mixing 50,000 1,000,000
Testing 1,500 900,000

Production information for Slime is as follows:
Department Expected use of Driver
Ordering and Receiving 1,600
Mixing 30,000
Testing 1,000

Compute the amount of overhead assigned to Slime.
a. $1,350,000
b. $1,645,234
c. $1,840,000
d. $2,025,000

Ans:, LO: 4, Bloom: AP, Difficulty: Hard, Min: 4, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

80. One of Hatch Company’s activity cost pools is machine setups, with estimated overhead of $300,000. Hatch produces sparklers (400 setups) and lighters (600 setups). How much of the machine setup cost pool should be assigned to sparklers?
a. $300,000
b. $120,000
c. $150,000
d. $180,000

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

81. Which would be an appropriate cost driver for the ordering and receiving activity cost pool?
a. Machine setups
b. Purchase orders
c. Machine hours
d. Inspections

Ans:, LO: 4, Bloom: AP, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

82. As compared to a high-volume product, a low-volume product
a. usually requires less special handling.
b. is usually responsible for more overhead costs per unit.
c. requires relatively fewer machine setups.
d. requires use of direct labor hours as the primary cost driver to ensure proper allocation of overhead.

Ans:, LO: 4, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

83. In Japan,
a. activity-based costing is used more than in the U.S.
b. companies prefer volume measures such as direct labor hours to assign overhead costs.
c. labor cost reduction is less of a priority.
d. developing more accurate product costs is more of a priority.

Ans:, LO: 4, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

84. Johnstone Company manufactures two products, Board 12 and Case 165. Johnstone’s overhead costs consist of setting up machines, $1,600,000; machining, $3,600,000; and inspecting, $1,200,000. Information on the two products is:
Board 12 Case 165
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700

Overhead applied to Board 12 using traditional costing using direct labor hours is
a. $2,400,000.
b. $3,072,000.
c. $3,340,000.
d. $3,840,000.

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

85. Johnstone Company manufactures two products, Board 12 and Case 165. Johnstone’s overhead costs consist of setting up machines, $1,600,000; machining, $3,600,000; and inspecting, $1,200,000. Information on the two products is:
Board 12 Case 165
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700

MC 85. (Cont.)

Overhead applied to Case 165 using traditional costing using direct labor hours is
a. $2,560,000.
b. $3,072,000.
c. $3,340,000.
d. $4,000,000.

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

86. Johnstone Company manufactures two products, Board 12 and Case 165. Johnstone’s overhead costs consist of setting up machines, $1,600,000; machining, $3,600,000; and inspecting, $1,200,000. Information on the two products is:
Board 12 Case 165
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700

Overhead applied to Board 12 using activity-based costing is
a. $2,400,000.
b. $3,072,000.
c. $3,328,000.
d. $3,840,000.

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

87. Johnstone Company manufactures two products, Board 12 and Case 165. Johnstone’s overhead costs consist of setting up machines, $1,600,000; machining, $3,600,000; and inspecting, $1,200,000. Information on the two products is:
Board 12 Case 165
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700

Overhead applied to Case 165 using activity-based costing is
a. $2,560,000.
b. $3,072,000.
c. $3,328,000.
d. $4,000,000.

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

88. Wallace Computer Company produces three products: Earth, Wind, and Fire. Earth requires 80 machine setups, Wind requires 60 setups, and Fire requires 180 setups. Wallace has identified an activity cost pool with allocated overhead of $720,000 for which the cost driver is machine setups. How much overhead is assigned to each product?
Earth Wind Fire
a. $240,000 $240,000 $240,000
b. $150,000 $112,500 $337,500
c. $180,000 $135,000 $405,000
d. $135,000 $240,000 $345,000

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

89. Sofa Company manufactures two models of its couch, the Mini and the Maxi. The Mini model requires 10,000 direct labor hours and the Maxi model requires 40,000 direct labor hours. The company produces 4,000 units of the Mini model and 1,000 units of the Maxi model each year. The company produces the Mini model in batch sizes of 200, while it produces the Maxi model in batch sizes of 100. The company expects to incur $240,000 of total setup costs this year. How much of the setup costs are allocated to the Mini model using ABC costing?
a. $160,000
b. $120,000
c. $48,000
d. $200,000

Ans:, LO: 4, Bloom: AP, Difficulty: Hard, Min: 4, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

90. Mask Company manufactures two products, pillows and comforters. The company has estimated its overhead in the order-processing department to be $480,000. The company produces 50,000 pillows and 80,000 comforters each year. Pillow production requires 25,000 machine hours, comforter production requires 50,000 machine hours. The company places raw materials orders 10 times per month, 2 times for raw materials for pillows and the remainder for raw materials for comforters. How much of the order processing overhead should be allocated to comforters?
a. $240,000
b. $320,000
c. $295,386
d. $384,000

Ans:, LO: 4, Bloom: AP, Difficulty: Hard, Min: 4, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

91. Berg Company incurs $320,000 overhead costs each year in its three main departments, setup ($20,000), machining ($220,000), and packing ($80,000). The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year. Information about Berg’s two products is as follows:
Product A1 Product B1
Number of setups 20 20
Machining hours 1,000 4,000
Orders packed 150 350
Number of products manufactured 600 400

MC 91. (Cont.)

If machining hours are used as a base, how much overhead is assigned to Product A1 each year?

a. $64,000
b. $160,000
c. $110,000
d. $96,000

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

92. Berg Company incurs $320,000 overhead costs each year in its three main departments, setup ($20,000), machining ($220,000), and packing ($80,000). The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year. Information about Berg’s two products is as follows:
Product A1 Product B1
Number of setups 20 20
Machining hours 1,000 4,000
Orders packed 150 350
Number of products manufactured 600 400

Using ABC, how much overhead is assigned to Product A1 each year?
a. $160,000
b. $242,000
c. $ 64,000
d. $ 78,000

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

93. Berg Company incurs $320,000 overhead costs each year in its three main departments, setup ($20,000), machining ($220,000), and packing ($80,000). The setup department performs 40 setups per year, the machining department works 5,000 hours per year, and the packing department packs 500 orders per year. Information about Berg’s two products is as follows:
Product A1 Product B1
Number of setups 20 20
Machining hours 1,000 4,000
Orders packed 150 350
Number of products manufactured 600 400

Using ABC, how much overhead is assigned to Product B1 each year?
a. $160,000
b. $128,000
c. $242,000
d. $256,000

Ans:, LO: 4, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

94. A company incurs $2,400,000 of overhead each year in three departments: Processing, Packaging, and Testing. The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of Oil and 600,000 drums of Sludge. The following data are available:

Department Expected Use of Driver Cost
Processing 800 $1,000,000
Packaging 200,000 1,000,000
Testing 2,000 400,000

Production information for the two products is as follows:
Oil Sludge
Department Expected Use of Driver Expected Use of Driver
Processing 300 500
Packaging 120,000 80,000
Testing 1,600 400

The amount of overhead assigned to Oil is
a. $1,200,000.
b. $1,295,000.
c. $1,105,000.
d. $ 920,000.

Ans:, LO: 4, Bloom: AP, Difficulty: Hard, Min: 4, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

95. A company incurs $2,400,000 of overhead each year in three departments: Processing, Packaging, and Testing. The company performs 800 processing transactions, 200,000 packaging transactions, and 2,000 tests per year in producing 400,000 drums of Oil and 600,000 drums of Sludge. The following data are available:
Department Expected Use of Driver Cost
Processing 800 $1,000,000
Packaging 200,000 1,000,000
Testing 2,000 400,000

Production information for the two products is as follows:
Oil Sludge
Department Expected Use of Driver Expected Use of Driver
Processing 300 500
Packaging 120,000 80,000
Testing 1,600 400

The amount of overhead assigned to Sludge is
a. $1,200,000.
b. $1,105,000.
c. $1,295,000.
d. $ 920,000.

Ans:, LO: 4, Bloom: AP, Difficulty: Hard, Min: 4, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

96. Volcker, Inc. manufactures recliners for the hotel industry. It has two products, the Heater and the Massager, and total overhead is $1,580,000. The company plans to manufacture 400 Heaters and 100 Massagers this year. In manufacturing the recliners, the company must perform 600 material moves for the Heater and 400 for the Massager; it processes 900 purchase orders for the Heater and 700 for the Massager; and the company’s employees work 1,400 direct labor hours on the Heater product and 3,400 on the Massager. Volcker’s total material handling costs are $1,000,000 and its total processing costs are $580,000. Using ABC, how much overhead would be assigned to the Heater product?
a. $ 790,000
b. $ 926,250
c. $ 653,750
d. $1,119,166

Ans:, LO: 4, Bloom: AP, Difficulty: Hard, Min: 4, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

97. Which of the following is a limitation of activity-based costing?
a. More cost pools
b. Less control over overhead costs
c. Poorer management decisions
d. Some arbitrary allocations continue

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

98. Which of the following factors would suggest a switch to activity-based costing?
a. Product lines similar in volume and manufacturing complexity.
b. Overhead costs constitute a significant portion of total costs.
c. The manufacturing process has been stable.
d. Production managers use data provided by the existing system.

Ans:, LO: 5, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

99. Which of the following is true of activity-based costing?
a. More cost pools
b. Same base as traditional costing
c. Less costly to use
d. Eliminates arbitrary allocations

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

100. The primary benefit of ABC is it provides
a. better management decisions.
b. enhanced control over overhead costs.
c. more cost pools.
d. more accurate product costing.

Ans:, LO: 5, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

101. Which of the following is not a benefit of activity-based costing?
a. More accurate product costing
b. Enhanced control over overhead costs
c. Better management decisions
d. Less costly to use

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

102. Each of the following is a limitation of activity-based costing except that
a. it can be expensive to use.
b. it is more complex than traditional costing.
c. more cost pools are used.
d. some arbitrary allocations continue.

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

103. The presence of any of the following factors would suggest a switch to ABC except when
a. product lines differ greatly in volume.
b. overhead costs constitute a minor portion of total costs.
c. the manufacturing process has changed significantly.
d. production managers are ignoring data provided by the existing system.

Ans:, LO: 5, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

104. Which of the following is a limitation of activity-based costing?
a. More cost pools
b. Less control over overhead costs
c. ABC can be expensive to use
d. Poorer management decisions

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

105. Which of the following is true about activity-based costing?
a. Less cost pools
b. Same base as traditional costing
c. More costly to use
d. Eliminates arbitrary allocations

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

106. Each of the following is a limitation of activity-based costing except that
a. it can be expensive to use.
b. it decreases control over overhead costs
c. it is complex and can be difficult to understand
d. some arbitrary allocations continue.

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

107. The presence of any of the following factors would suggest a switch to ABC except when
a. product lines differ greatly in volume.
b. overhead costs constitute a major portion of total costs.
c. the manufacturing process has changed significantly.
d. production managers are using data provided by the existing system

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

108. Activity-based costing uses
a. one plantwide pool and a single cost driver.
b. departmental pools and a single cost driver.
c. numerous cost pools and numerous cost drivers.
d. one plantwide pool and numerous cost drivers

Ans:, LO: 5, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

109. Which of the following statements is false?
a. ABC can weaken control over overhead costs.
b. Under ABC, companies can trace many overhead costs directly to activities.
c. ABC allows some indirect costs to be identified as direct costs.
d. managers become more aware of their responsibility to control the activities that generate costs.

Ans:, LO: 5, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

110. Which of the following is a value-added activity?
a. Inventory storage
b. Machining
c. Building maintenance
d. Bookkeeping

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

111. Which of the following is a value-added activity?
a. Inventory control
b. Inspections
c. Packaging
d. Repair of machines

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

112. Which of the following is a non-value-added activity?
a. Inventory control
b. Machining
c. Assembly
d. Painting

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

113. Which of the following is a non-value-added activity?
a. Painting
b. Finishing
c. Packaging
d. Building maintenance

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

114. A non-value-added activity in a service enterprise is
a. providing legal research.
b. delivering packages.
c. consulting.
d. bookkeeping.

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

115. A value-added activity in a service enterprise is
a. performing landscaping services.
b. reception.
c. billing.
d. ordering supplies.

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

116. Non-value-added activities
a. should be minimized or eliminated.
b. involve those activities that are essential to a company’s operations.
c. increase both the cost and perceived value of a product.
d. cannot be differentiated from value-added activities.

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

117. Value-added activities
a. increase the perceived worth of a product or service to customers.
b. involve those activities that are essential to a company’s operations.
c. include engineering design, machining, and assembly.
d. all of the above.

Ans:, LO: 6, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

118. Which of the following is a value-added activity?
a. Engineering design
b. Machinery repair
c. Inventory storage
d. Inspections

Ans:, LO: 6, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

119. Which of the following is a non-value-added activity?
a. Engineering design
b. Machining
c. Inspection
d. Packaging

Ans:, LO: 6, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

120. A non-value-added activity in a service enterprise is
a. taking appointments.
b. traveling.
c. advertising.
d. all of these.

Ans:, LO: 6, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

121. Value-added activities
a. should be minimized or eliminated.
b. involve those activities that are essential to a company’s operations.
c. add cost to a product without affecting selling price.
d. cannot be differentiated from non-value-added activities.

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

122. All of the following are examples of a value-added activity in a service company except
a. delivering packages by a delivery service.
b. ordering supplies.
c. performing surgery.
d. providing legal research for legal services.

Ans:, LO: 6, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

123. Which of the following is not a facility-level activity?
a. Plant management
b. Product design
c. Personnel administration
d. Training

Ans:, LO: 7, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

124. Which of the following is not a product-level activity?
a. Product design
b. Engineering changes
c. Inventory management
d. Equipment setups

Ans:, LO: 7, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

125. Which of the following is not a batch-level activity?
a. Engineering changes
b. Equipment setups
c. Inspection
d. Materials handling

Ans:, LO: 7, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

126. Which of the following is not a unit-level activity?
a. Purchase ordering
b. Assembling
c. Painting
d. Sewing

Ans:, LO: 7, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

127. Which of the following is a batch-level activity?
a. Plant management
b. Product design
c. Equipment setups
d. Assembling

Ans:, LO: 7, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

128. Which of the following is not a facility-level activity?
a. Plant depreciation
b. Property taxes
c. Engineering changes
d. Utilities

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

129. Which of the following is not a product-level activity?
a. Product design
b. Engineering changes
c. Material handling
d. Inventory management

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

130. Which of the following is not a batch-level activity?
a. Purchase ordering
b. Equipment setups
c. Inspection
d. Assembling

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

131. Which of the following is not a unit-level activity?
a. Drilling
b. Cutting
c. Sanding
d. Inspecting

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

132. Which of the following is a unit-level activity?
a. Painting
b. Purchase ordering
c. Inspection
d. Material handling

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

133. Which of the following is a batch-level activity?
a. Assembling
b. Product design
c. Engineering changes
d. Purchase ordering

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

134. Which of the following is a product-level activity?
a. Equipment setups
b. Product design
c. Property taxes
d. Utilities

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

135. Which of the following is a facility-level activity?
a. Engineering changes
b. Product design
c. Property taxes
d. Inspection

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

136. Activities required to support or sustain an entire production process are called
a. unit-level activities.
b. batch-level activities.
c. product-level activities.
d. facility-level activities.

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

137. Which would be a cost driver for a facility-level activity?
a. Number of setups
b. Number of product designs
c. Square footage
d. Number of purchase orders

Ans:, LO: 7, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

138. Activity-based costing has been found to be useful in each of the following service industries except
a. airlines.
b. railroads.
c. hotels.
d. ABC has been useful in all of these industries.

Ans:, LO: 8, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

139. Activity-based costing is used in
Service industries Manufacturing industries
a. Yes No
b. Yes Yes
c. No Yes
d. No No

Ans:, LO: 8, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

140. In service industries
a. activities cannot be labeled as value-added or non-value-added.
b. the overall objective of ABC is different than in manufacturing industries.
c. a larger proportion of overhead costs are company-wide costs.
d. activity cost pools cannot be identified.

Ans:, LO: 8, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

141. Activity-based costing is used by
a. accounting firms.
b. law firms.
c. consulting firms.
d. all of the above.

Ans:, LO: 8, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

142. Austin Accounting Services estimates for next year revenues of $2,000,000, direct labor of $400,000, and overhead of $700,000. Under traditional costing, overhead is applied to audit jobs using the rate of
a. 35% of revenues.
b. 20% of revenues.
c. 56% of direct labor.
d. 175% of direct labor.

Ans:, LO: 8, Bloom: AP, Difficulty: Easy, Min: 2, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

143. Port Accounting performs two types of services, Audit and Tax. Port’s overhead costs consist of computer support, $240,000; and legal support, $120,000. Information on the two services is:
Audit Tax
Direct labor cost $50,000 $100,000
CPU minutes 40,000 10,000
Legal hours used 200 800

Overhead applied to audit services using traditional costing is
a. $120,000.
b. $144,000.
c. $216,000.
d. $240,000.

Ans:, LO: 8, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

144. Port Accounting performs two types of services, Audit and Tax. Port’s overhead costs consist of computer support, $240,000; and legal support, $120,000. Information on the two services is:
Audit Tax
Direct labor cost $50,000 $100,000
CPU minutes 40,000 10,000
Legal hours used 200 800

Overhead applied to tax services using traditional costing is
a. $120,000.
b. $144,000.
c. $216,000.
d. $240,000.

Ans:, LO: 8, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

145. Port Accounting performs two types of services, Audit and Tax. Port’s overhead costs consist of computer support, $240,000; and legal support, $120,000. Information on the two services is:
Audit Tax
Direct labor cost $50,000 $100,000
CPU minutes 40,000 10,000
Legal hours used 200 800

MC 145. (Cont.)

Overhead applied to audit services using activity-based costing is
a. $120,000.
b. $144,000.
c. $216,000.
d. $240,000.

Ans:, LO: 8, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

146. Port Accounting performs two types of services, Audit and Tax. Port’s overhead costs consist of computer support, $240,000; and legal support, $120,000. Information on the two services is:
Audit Tax
Direct labor cost $50,000 $100,000
CPU minutes 40,000 10,000
Legal hours used 200 800

Overhead applied to tax services using activity-based costing is
a. $120,000.
b. $144,000.
c. $216,000.
d. $240,000.

Ans:, LO: 8, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

147. Port Accounting performs two types of services, Audit and Tax. Port’s overhead costs consist of computer support, $240,000; and legal support, $120,000. Information on the two services is:
Audit Tax
Direct labor cost $50,000 $100,000
CPU minutes 40,000 10,000
Legal hours used 200 800

Port Accounting performs tax services for Cathy Kane. Direct labor cost is $1,200; 600 CPU minutes were used; and 1 legal hour was used. What is the total cost of the Kane job using activity-based costing?
a. $2,880
b. $3,000
c. $4,080
d. $4,200

Ans:, LO: 8, Bloom: AP, Difficulty: Medium, Min: 3, AACSB: Analytic, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

148. Activity-based costing has been found to be useful in each of the following service industries except
a. banks.
b. hospitals.
c. telephone companies.
d. ABC has been useful in any of these industries.

Ans:, LO: 8, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

149. What sometimes makes implementation of activity-based costing difficult in service industries is
a. the labeling of activities as value-added.
b. identifying activities, activity cost plus, and cost drivers.
c. that a larger proportion of overhead costs are company-wide costs.
d. attempting to reduce or eliminate non-value-added activities.

Ans:, LO: 8, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

150. All of the following statements are correct except that
a. activity-based costing has been widely adopted in service industries.
b. the objective of installing ABC in service firms is different than it is in a manufacturing firm.
c. a larger proportion of overhead costs are company-wide costs in service industries.
d. the general approach to identifying activities and activity cost pools is the same in a service company as in a manufacturing company.

Ans:, LO: 8, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

151. The use of activity-based costing in service industries
a. has the same objective as in manufacturing.
b. results in improved costing of services provided.
c. uses cost pools to assign overhead.
d. all of these.

Ans:, LO: 8, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a152. Just-in-time processing
a. is based on a just-in-case philosophy.
b. results in a push approach.
c. minimizes inventory storage and waiting time.
d. all of these.

Ans:, LO: 9, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a153. An element of just-in-time processing is
a. dependable suppliers who are willing to deliver on short notice.
b. a multi-skilled workforce.
c. a total quality control system.
d. all of these.

Ans:, LO: 9, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a154. Which of the following is not a benefit of just-in-time processing?
a. Control of significant inventory balances
b. Enhanced product quality
c. Reduction of rework costs
d. Production cost savings

Ans:, LO: 9, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a155. Which account is used in just-in-time processing?
a. Raw Materials Inventory
b. Work-in-Process Inventory
c. Merchandise Inventory
d. Raw and In-Process Inventory

Ans:, LO: 9, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a156. Under just-in-time processing, all of the following are received or completed “just in time” except
a. finished goods.
b. raw materials.
c. subassembly parts.
d. supplies.

Ans:, LO: 9, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a157. Just-in-time processing
a. is based on a just-in-case philosophy.
b. results in higher inventory amounts.
c. eliminates the push approach.
d. all of the above.

Ans:, LO: 9, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a158. Just-in-time processing
a. results in the opposite of a just-in-case philosophy.
b. results in a pull approach.
c. minimizes inventory storage and waiting time.
d. all of the above.

Ans:, LO: 9, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a159. An important element of just-in-time processing is
a. dependable suppliers who are willing to deliver on short notice.
b. a specialized workforce.
c. less emphasis on a quality control system.
d. all of the above.

Ans:, LO: 9, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a160. Which of the following is a limitation of just-in-time processing?
a. Significant reduction of manufacturing inventories
b. Less emphasis on product quality
c. Higher production costs
d. None of the above

Ans:, LO: 9, Bloom: C, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a161. Which account is not used in just-in-time processing?
a. Accounts Payable
b. Work-in-Process Inventory
c. Finished Goods Inventory
d. Raw and In-Process Inventory

Ans:, LO: 9, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt

a162. In the pull approach
a. subassembly parts are manufactured and stored just in case they are needed later in the manufacturing process.
b. Finished goods are completed and stored just in case unexpected and rush customer orders are received.
c. the manufacturing process begins with a customer placing an order.
d. None of the above.

Ans:, LO: 9, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Cost Mgmt