Question 1

Portland, Inc. has formed four activity cost pools: Product Design, Machining and Production, Machine Setup, and Inspection. Gina Taylor, Production Manager at Portland, oversees processes that are considered part of Machining and Production, Machine Setup, and Inspection. Taylor's salary should be:

Accepted Answer

A)   assigned to the activity she spends the most time on.
B)   considered as a separate activity.
C)   expensed in the period incurred.
D)   allocated among Machining and Production, Machine Setup, and Inspection.E) C) and D)
F) B) and D)

Question 2

Elmwood 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 amount of activity driver used for each of Elmwood's two products, the activity rate, and the activity cost assigned to each product. Fill in the blanks below:
Activity
Cost
Activity Driver
Driver Usage
Activity Rate
Activity Cost: Prod. 1
Activity Cost: Prod. 2
Prod. 1
Prod. 2
Design
$20,000
Design time
1,600 hours
2,400 hours
a.
b.
c.
Preparation
$12,000
Labor hours
3,000 hours
d.
e.
$6,000
f.
Machining
$45,000
Machine hours
g.
h.
$9.00/hour
$27,000
i.
Finishing
j.
Batches
100
150
$100/batch
k.
l.
Inspection
m.
Units
n.
o.
$4/unit
$8,000
$6,000
Packaging
p.
Orders
q.
50
$90/order
$13,500
r.
Shipping
$5,000
Packages
70
s.
t.
u.
$1,500

Accepted Answer

a. $5.00 = $20,000/(1,600 + 2,400)
b. $8...

Question 3

Which of the following is most likely to be true of the manufacturing overhead costs assigned to a product with relatively low volume and high complexity?

Accepted Answer

A)   An ABC system will assign more manufacturing overhead costs to the product than a volume-based system.
B)   A volume-based system will assign more manufacturing overhead costs to the product than an ABC system.
C)   An ABC system will assign the same manufacturing overhead costs to the product as a volume-based system.
D)   An ABC system will assign manufacturing overhead costs to the product, while a volume-based system will not.E) A) and B)
F) None of the above

Question 4

Which type of quality cost would a firm most want to eliminate or reduce as much as possible?

Accepted Answer

A)   Prevention costs
B)   Appraisal or inspection costs
C)   Internal failure costs
D)   External failure costsE) C) and D)
F) A) and B)

Question 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 Machining activity is used by Luxury?

Accepted Answer

A)   30%
B)   33%
C)   67%
D)   70%E) None of the above
F) B) and C)

Question 6

Total quality management aims to improve quality by doing all of the following except:

Accepted Answer

A)   reducing and eliminating errors.
B)   streamlining activities.
C)   continuously improving the production process.
D)   eliminating non-value-added costs.E) B) and C)
F) A) and D)

Question 7

Which of the following best defines a batch-level activity?

Accepted Answer

A)   An activity that is performed for a specific customer
B)   An activity that is performed to support a specific product line
C)   An activity that is performed for each individual unit
D)   An activity that is performed for a group of units all at onceE) A) and C)
F) None of the above

Question 8

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. The activity drivers are used as follows:  What proportion of Machining activity is used by Product 5?

Accepted Answer

A)   20%
B)   33%
C)   67%
D)   75%E) A) and B)
F) B) and D)

Question 9

Which of the following statements is correct about the differences between a volume-based cost system and an ABC system?

Accepted Answer

A)   The only difference is how the methods assign indirect costs to products.
B)   The only difference is how the methods assign direct costs to products.
C)   The methods assign both direct and indirect costs differently to products.
D)   There is no difference in how the methods assign direct or indirect costs to products.E) B) and C)
F) A) and D)

Question 10

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

Accepted Answer

A)   Human resources
B)   Research and development
C)   Painting a final product
D)   Product testingE) A) and B)
F) A) and C)

Question 11

If the total activity cost were unknown, it could be calculated by:

Accepted Answer

A)   Dividing the total activity driver by the activity rate.
B)   Multiplying the total activity driver by the activity rate.
C)   Adding the total activity driver to the activity rate.
D)   Subtracting the activity rate from the total activity driver.E) B) and D)
F) A) and B)

Question 12

Prevention costs are incurred to prevent quality problems from occurring in the first place

Accepted Answer

A) True 
 B)False

Question 13

The activity-rate method involves:

Accepted Answer

A)   dividing the total activity driver by the total activity cost.
B)   calculating the proportion of each activity driver used by each product.
C)   calculating an activity rate that is similar to the predetermined overhead rate.
D)   multiplying the total activity cost by the total activity driver.E) None of the above
F) B) and C)

Question 14

Internal failure 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) A) and B)
F) A) and C)

Question 15

How is the cost of a batch-level activity similar to the cost of a unit-level activity?

Accepted Answer

A)   Both are incurred for each individual unit.
B)   Both decrease as production volume increases.
C)   Both increase as production volume increases.
D)   Both are incurred for a group of units all at once.E) A) and B)
F) C) and D)

Question 16

External failure 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) A) and B)
F) C) and D)

Question 17

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 Machining cost assigned to Product Z?

Accepted Answer

A)   $7,500
B)   $22,500
C)   $375,000
D)   $400,000E) A) and D)
F) C) and D)

Question 18

Pecan Inc. produces water valves. Overhead costs have been identified as follows:  Pecan makes 3 models of valves with the following details:  Required:
a. Calculate the activity rate for each activity.
b. Determine the amount of indirect costs assigned to each of the products.

Accepted Answer

The answer of Pecan Inc. produces water valves. Overhead costs...

Question 19

One side benefit of JIT is that:

Accepted Answer

A)   the accounting system is more complicated.
B)   the company maintains more connections with suppliers since it uses more of them.
C)   the accounting system is simplified.
D)   it enables accountants to be measurement experts.E) A) and C)
F) B) and C)

Question 20

Lynwood, Inc. produces two different products (Product A and Product X)  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 rate for Machining is $125 per machine hour, and the activity rate for Inspection is $500 per batch. The activity drivers are used as follows:  What is the amount of Machining cost assigned to Product X?

Accepted Answer

A)   $22,500
B)   $125,000
C)   $375,000
D)   $500,000E) B) and D)
F) A) and B)

Exam 4: Activity-Based Cost Management

Correct Answer
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One side benefit of JIT is that:

Correct Answer
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Correct Answer
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If the total activity cost were unknown, it could be calculated by:

Correct Answer
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Correct Answer
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How is the cost of a batch-level activity similar to the cost of a unit-level activity?

Correct Answer
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Which of the following statements is correct about the differences between a volume-based cost system and an ABC system?

Correct Answer
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Total quality management aims to improve quality by doing all of the following except:

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

Correct Answer
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Which type of quality cost would a firm most want to eliminate or reduce as much as possible?

Correct Answer
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The activity-rate method involves:

Correct Answer
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Correct Answer
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Internal failure costs are costs that:

Correct Answer
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Pecan Inc. produces water valves. Overhead costs have been identified as follows: Pecan makes 3 models of valves with the following details: Required: a. Calculate the activity rate for each activity. b. Determine the amount of indirect costs assigned to each of the products.

Correct Answer
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Portland, Inc. has formed four activity cost pools: Product Design, Machining and Production, Machine Setup, and Inspection. Gina Taylor, Production Manager at Portland, oversees processes that are considered part of Machining and Production, Machine Setup, and Inspection. Taylor's salary should be:

Correct Answer
verified

Which of the following best defines a batch-level activity?

Correct Answer
verified

Prevention costs are incurred to prevent quality problems from occurring in the first place

Correct Answer
verified

Correct Answer
verified
a. $5.00 = $20,000/(1,600 + 2,400)
b. $8...
View Answer

External failure costs are costs that:

Correct Answer
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Which of the following is most likely to be true of the manufacturing overhead costs assigned to a product with relatively low volume and high complexity?

Correct Answer
verified

Exam 4: Activity-Based Cost Management

Correct AnswerverifiedShow Answer

One side benefit of JIT is that:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the total activity cost were unknown, it could be calculated by:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

How is the cost of a batch-level activity similar to the cost of a unit-level activity?

Correct AnswerverifiedShow Answer

Which of the following statements is correct about the differences between a volume-based cost system and an ABC system?

Correct AnswerverifiedShow Answer

Total quality management aims to improve quality by doing all of the following except:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which type of quality cost would a firm most want to eliminate or reduce as much as possible?

Correct AnswerverifiedShow Answer

The activity-rate method involves:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Internal failure costs are costs that:

Correct AnswerverifiedShow Answer

Pecan Inc. produces water valves. Overhead costs have been identified as follows: Pecan makes 3 models of valves with the following details: Required: a. Calculate the activity rate for each activity. b. Determine the amount of indirect costs assigned to each of the products.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following best defines a batch-level activity?

Correct AnswerverifiedShow Answer

Prevention costs are incurred to prevent quality problems from occurring in the first place

Correct AnswerverifiedShow Answer

Correct Answerverifieda. $5.00 = $20,000/(1,600 + 2,400)b. $8...View AnswerShow Answer

External failure costs are costs that:

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Which of the following is most likely to be true of the manufacturing overhead costs assigned to a product with relatively low volume and high complexity?

Correct AnswerverifiedShow Answer

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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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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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
verified
a. $5.00 = $20,000/(1,600 + 2,400)
b. $8...
View Answer

Correct Answer
verified

Correct Answer
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