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Exam 5: Activity-Based Costing and Activity-Based Management

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Question 21

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Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows: Tiger Pride's managers have decided to revise their current assignment of overhead costs to reflect the following ABC cost information: Under the revised ABC system, the activity-cost driver rate for the supervision activity is ________.

A) $1.70
B) $2.70
C) $2.16
D) $1.2

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Question 22

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Extreme Manufacturing Company provides the following ABC costing information: The above activities are used by Departments A and B as follows: How much of the account billing cost will be assigned to Department B?

A) $220,000
B) $110,000
C) $24,750
D) $33,000

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Question 23

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When allocating the total indirect cost pool to cost pools such as setup costs including depreciation and maintenance costs of setup equipment, wages of setup employees, and allocation of supervisors is called a second-stage allocation.

Answer the following questions using the information below: Eagle Eye Company produces two types of lenses-L7 and L9. What is the total costs assigned to L9 (b) under single indirect-cost pool system?

Explain how activity-based costing systems can provide more accurate product costs than traditional cost systems.

If companies increase market share in a given product line because their reported costs are less than their actual costs, they will become more profitable in the long run.

Columbus Company provides the following ABC costing information: The above activities used by their three departments are: How much of the total cost will be assigned to the Plowing Department?

ABC systems help managers to ________.

The risk of peanut-butter costing rises when broad averages are used across multiple products without managers considering the true amounts of resources consumed in the making of each product.

Dartmouth Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled: Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the deluxe model?

For a business that offers customers a store where product can be purchased and picked up or a delivery service that can ship the product directly to the customer, which of the following would most likely be the best cost allocation base for distribution costs?

Department costing systems always properly recognize how resources are used by products as they require the creation of multiple indirect cost pools.

Canton Corp. manufactures two sizes of ceramic paperweights, regular and jumbo. The following information applies to their expectations for the planning period: Expected direct costs amounts to $942,000 for the period. Support cost requirements of both products are substantially different from one another. Canton uses an ABC costing system. The setups activity-cost driver rate is ________.

Dartmouth Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and cost information has been compiled: Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming an activity-based costing system is used, what is the total amount of overhead costs assigned to the standard model?

Canton's Corp. manufactures two sizes of ceramic paperweights, regular and jumbo. The following information applies to their expectations for the planning period: Expected direct costs amounts to $928,000 for the period. Support cost requirements of both products are substantially different from one another. Canton's uses an ABC costing system. The inspections activity-cost driver rate is ________.

ABC reveals opportunities to reduce costs on nonvalue added activities.

ABC systems create ________.

ABC system are likely to provide the most benefits to a company with significant amounts of indirect costs that are allocated using just one or two costs pools and products that make diverse demands on resources.

________ is considered while choosing a cost allocation base for activity costs in ABC costing.

Recognizing ABC information is not always perfect because ________.