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Exam 4: Activity-Based Costing and Cost Management

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Question 31

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Sherman,Inc.manufactures chainsaws that sell for $58.Each chainsaw uses $10 in direct materials and $3 in direct labor per unit.Sherman has two activities: Machining,which is applied at the rate of $2 per machine hour,and Finishing,which is applied at the rate of $20 per batch.This month,Sherman made 200 chainsaws,using 1,000 machine hours in 40 batches.What is the total manufacturing cost for one chainsaw?

A) $13
B) $14
C) $27
D) $30

E) All of the above
F) B) and D)

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Question 32

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

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

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Question 33

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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:

Each individual indirect cost should be assigned to one activity when forming activity cost pools.

A volume-based allocation measure is directly related to the number of units produced or the number of customers served.

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 Inspection cost assigned to Product X?

GG's Personal Training Services is owned by Gina Garfield.Gina provides personal training and coaching to individuals or small groups using the local fitness facility and pool.Gina rents the group training room at the local fitness facility or the pool for scheduled classes.For one-on-one training,she meets clients at the fitness facility where she is a member.Gina is currently learning Zumba and plans to offer a Zumba class in the group training room on Wednesday mornings starting next month.To advertise this class and all her other services,Gina developed a company Facebook page.The development of the Facebook page is considered a ________ activity for GG's.

Volume-based cost systems tend to:

Culver,Inc.produces two different products (Product V3 and Product G8) 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 drivers are used as follows: The activity rate for Machining is $67.50 per machine hour.What is the total cost of Machining?

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 A?

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 Standard?

Life cycle cost management takes into consideration the fact that costs and revenues:

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

Using non-volume-based activity drivers allows activity-based costing to:

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

Linden,Inc.uses a 5,000 square foot factory space that it rents for $2,500 a month for all its manufacturing activities.Linden has decided to switch to an activity-based costing system,and has identified its activities as follows: Preparation and Setup,Machining,Finishing,and Quality Control.500 square feet of the factory are used for machining,while 2,000 square feet (each) are used for Preparation and Setup and Quality Control.Finishing uses 500 square feet.When assigning indirect costs to each activity,how much factory rent should be assigned to the Preparation and Setup cost pool?

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

External failure costs occur ________ a defective product makes its way to the customer,while internal failure costs occur ________ a defective product makes its way to the customer.

The activity-rate method involves:

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