Question 1

Activity-based costing normally allocates overhead costs

Accepted Answer

A)  to products only.
B)  more accurately than traditional costing systems.
C)  to services, where as traditional costing systems normally allocate overhead costs to products.
D)  based on no more than three cost drivers.

Question 2

Current trends in manufacturing include less direct labour and more overhead.

Accepted Answer

A) True 
 B)False

Question 3

Hammock Company manufactures two models of its hammock, the Superior and the Deluxe.The Superior model requires 10,000 direct labour hours and the Deluxe requires 40,000 direct labour hours.The company produces 4,000 units of the Superior model and 1,000 units of the Deluxe model each year.The company produces the Superior model in batch sizes of 200, while it produces the Deluxe model in batch sizes of 100.The company expects to incur $120,000 of total setup costs this year.How much of the setup costs are allocated to the Superior model using ABC costing?

Accepted Answer

A)  $80,000
B)  $60,000
C)  $24,000
D)  $100,000

Question 4

What might be a reason to not change from a traditionally-based costing system to an activity-based costing system?

Accepted Answer

A)  Products or services are similar in volume and activity
B)  Support services are spread evenly throughout the company's activities
C)  Overhead is a low component of the overall cost
D)  All of the above are valid reasons

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

A good cost driver should have a high correlation with

Accepted Answer

A)  the actual number of units produced.
B)  the actual consumption of overhead costs.
C)  the actual number of products produced.
D)  the actual consumption of direct costs.

Question 7

The primary benefit of ABC is it provides

Accepted Answer

A)  faster management decisions.
B)  enhanced control over overhead costs.
C)  more cost pools.
D)  more accurate product costing.

Question 8

Which of the following is a unit-level activity?

Accepted Answer

A)  Cleaning the paint sprayer when switching from one colour of paint to another
B)  Paint used in the manufacturing process
C)  Test-marketing to see which colour of paint customers prefer
D)  Painting the executive offices

Question 9

Use the following information to answer questions 
Poodle Company manufactures two products, Mini A and Maxi B.Poodle's overhead costs consist of setting up machines, $800,000; machining, $2,000,000; and inspecting, $600,000.Information on the two products is: 
-Overhead applied to Maxi B using traditional costing using direct labour hours is

Accepted Answer

A)  $1,280,000.
B)  $1,664,000.
C)  $1,700,000.
D)  $2,125,000.

Question 10

Which of the following is true of activity-based costing?

Accepted Answer

A)  More cost pools
B)  Same base as traditional costing
C)  Less costly to use
D)  Eliminates arbitrary allocations

Question 11

Which best describes the flow of overhead costs in an activity-based costing system?

Accepted Answer

A)  Overhead costs  direct labour cost or hours  products
B)  Overhead costs  products
C)  Overhead costs  activity cost pools  cost drivers  products
D)  Overhead costs  machine hours  products

Question 12

Which of the following is a product-level activity?

Accepted Answer

A)  Regulatory approval of a new prescription drug
B)  An advertisement campaign that focuses on the large number of products the company produces
C)  Equipment cleaning between batches
D)  Material handling

Question 13

Machining is a non-value-added activity.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Traditional costing systems use multiple predetermined overhead rates.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a limitation of activity-based costing?

Accepted Answer

A)  More cost pools
B)  Less control over overhead costs
C)  Poorer management decisions
D)  Some arbitrary allocations continue

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

In traditional costing systems, overhead is generally applied based on

Accepted Answer

A)  direct labour for job-order costing, and machine hours for process-costing.
B)  direct material for job-order costing, and direct labour for process-costing.
C)  Factory usage for both job-order costing and process-costing.
D)  units of production.

Question 19

The presence of any of the following factors would suggest a switch to ABC except when

Accepted Answer

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.

Question 20

Which of the following factors would suggest a switch to activity-based costing?

Accepted Answer

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

Exam 5: Activity-Based-Costing

The primary benefit of ABC is it provides

Correct Answer
verified

Which best describes the flow of overhead costs in an activity-based costing system?

Correct Answer
verified

Which of the following factors would suggest a switch to activity-based costing?

Correct Answer
verified

A good cost driver should have a high correlation with

Correct Answer
verified

Which of the following is a limitation of activity-based costing?

Correct Answer
verified

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

Correct Answer
verified

Which of the following is a product-level activity?

Correct Answer
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Which of the following is a unit-level activity?

Correct Answer
verified

What might be a reason to not change from a traditionally-based costing system to an activity-based costing system?

Correct Answer
verified

Which of the following is true of activity-based costing?

Correct Answer
verified

Traditional costing systems use multiple predetermined overhead rates.

Correct Answer
verified

Activity-based costing normally allocates overhead costs

Correct Answer
verified

Current trends in manufacturing include less direct labour and more overhead.

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

Machining is a non-value-added activity.

Correct Answer
verified

The presence of any of the following factors would suggest a switch to ABC except when

Correct Answer
verified

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.

Correct Answer
verified

In traditional costing systems, overhead is generally applied based on

Correct Answer
verified

Exam 5: Activity-Based-Costing

The primary benefit of ABC is it provides

Correct AnswerverifiedShow Answer

Which best describes the flow of overhead costs in an activity-based costing system?

Correct AnswerverifiedShow Answer

Which of the following factors would suggest a switch to activity-based costing?

Correct AnswerverifiedShow Answer

A good cost driver should have a high correlation with

Correct AnswerverifiedShow Answer

Which of the following is a limitation of activity-based costing?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a product-level activity?

Correct AnswerverifiedShow Answer

Which of the following is a unit-level activity?

Correct AnswerverifiedShow Answer

What might be a reason to not change from a traditionally-based costing system to an activity-based costing system?

Correct AnswerverifiedShow Answer

Which of the following is true of activity-based costing?

Correct AnswerverifiedShow Answer

Traditional costing systems use multiple predetermined overhead rates.

Correct AnswerverifiedShow Answer

Activity-based costing normally allocates overhead costs

Correct AnswerverifiedShow Answer

Current trends in manufacturing include less direct labour and more overhead.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Machining is a non-value-added activity.

Correct AnswerverifiedShow Answer

The presence of any of the following factors would suggest a switch to ABC except when

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

In traditional costing systems, overhead is generally applied based on

Correct AnswerverifiedShow Answer

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