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Exam 4: Activity-Based Costing and Cost Management

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Question 31

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

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 C)
F) C) and D)

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Question 32

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Lincoln,Inc. ,which uses a volume-based cost system,produces cat condos that sell for $90 each.Direct materials cost $15 per unit,and direct labor costs $10 per unit.Manufacturing overhead is applied at a rate of 200% of direct labor cost.Nonmanufacturing costs are $27 per unit.What is the gross profit margin for the cat condos?

A) 20.0%
B) 50.0%
C) 62.5%
D) 80.0%

E) A) and B)
F) C) and D)

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Question 33

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To assign activity costs using the activity proportion method,multiply the activity rate by the activity requirements of each individual product.To assign activity costs using the activity proportion method,multiply the total activity cost by the activity proportion for each product.

A large company that uses activity based costing would do which of the following?

Which of the following sets just-in-time systems apart from traditional manufacturing systems?

Jefferson,Inc.produces two different products (Product 5 and Product Z) 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.Usage of the activity drivers are as follows: What proportion of Inspection activity is used by Product Z?

An activity that is performed to benefit the organization as a whole is a(n)

When a traditional,volume-based costing system is used,which of the following products is most likely to suffer from cost distortion?

Jackson,Inc.produces two different products (Product 5 and Product Z) 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.Product uses 20% of total machine hours and 75% of total batches.What is the total Inspection cost assigned to Product 5?

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 Luxury?

The purpose of Stage 1 allocations is to

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 gross profit for one calculator?

The only difference between a volume-based cost system and an ABC system is how the methods assign indirect costs to products.Both systems trace direct costs to products;the only difference is how they treat indirect costs.

Which of the following is the best example of a unit-level activity?

Monroe,Inc.randomly selects ten units from each production run to be inspected for quality,regardless of the size of the production run.The inspection of these units would most likely be classified as a

The gross margin does not take into account

Which of the following would be considered a non-volume-based cost driver?

An activity cost driver is

Jackson,Inc.produces two different products (Product 5 and Product Z) 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.Product 5 uses 20% of total machine hours and 75% of total batches.What is the total Inspection cost assigned to Product Z?

To compute an activity rate,divide the total activity cost by the total activity driver.This is the formula for an activity rate.