Deck 6: Cost-Volume-Profit Relationships

Question 1

Purchase order processing is an example of a:

A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.

Answer 1

B

Question 2

Human resource management is an example of an activity at which of the following levels?

A) Unit-level activity.
B) Product-level activity.
C) Batch-level activity.
D) Facility-level activity.

Answer 2

D

Question 3

Batch-level activities are performed each time a batch is handled or processed,regardless of how many units are in the batch.

Answer 3

True

Question 4

Testing a prototype of a new product is an example of a:

A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.

Question 5

When there are batch-level or product-level costs,in comparison to a traditional cost system,an activity-based costing system ordinarily will shift costs from high-volume to low-volume products.

Question 6

Departmental overhead rates applied on the basis of a volume measure such as direct labour-hours or machine-hours will eliminate any distortions in unit costs due to product diversity.

Question 7

Which of the following would be classified as a product-level activity?

A) Machine setup for a batch of a standard product.
B) Cafeteria facilities available to and used by all employees.
C) Human resource management.
D) Advertising a product.

Question 8

An activity-based costing system is generally easier to set up and run than a traditional cost system.

Question 9

Predetermined activity rates in activity-based costing are computed by dividing estimated activity costs by the estimated activity volume for each activity cost pool.

Question 10

Facility-level costs can be easily and accurately allocated to different products using activity-based costing.

Question 11

Activity-based costing uses a number of activity cost pools,each of which is allocated to products on the basis of direct labour-hours.

Question 12

Activity-based costing is only useful in allocating manufacturing overhead costs.

Question 13

Setting up equipment is an example of a:

A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.

Question 14

Activity-based management involves focusing on activities to eliminate waste.

Question 15

Using activity-based costing is not useful in determining costs of quality.

Question 16

Unit-level activities are performed each time a unit is made.

Question 17

When activity-based costing is used,the flow of costs through the accounts is similar to a system using one plantwide overhead application rate other than the overhead costs are applied using multiple predetermined overhead rates.

Question 18

In activity-based costing,a plantwide overhead rate is used to apply overhead to products.

Question 19

Departmental overhead rates may not correctly assign overhead costs due to:

A) the use of direct labour-hours in allocating overhead costs to products rather than machine time or quantity of materials used.
B) the high correlation between direct labour-hours and the incurrence of overhead costs.
C) overreliance on volume as a basis for allocating overhead costs where products differ regarding the number of units produced,lot size,or complexity of production.
D) difficulties associated with identifying cost pools for the first stage of the allocation process.

Question 20

In the initial stages of a quality improvement process,there usually will be immediate reductions in total quality costs.

Question 21

The overhead cost per unit of Product S under activity-based costing is closest to:

A) $1.83.
B) $1.98.
C) $5.00.
D) $10.00.

Question 22

Matt Company uses activity-based costing.The company has two products: A andB.The annual production and sales of Product A are 8,000 units and of Product B are 6,000 units.There are three activity cost pools,with estimated total cost and expected activity as follows: The cost per unit of Product A under activity-based costing is closest to:

A) $2.40.
B) $3.90.
C) $6.60.
D) $10.59.

Question 23

The clerical activity associated with processing purchase orders to produce an order for a standard product is an example of a:

A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.

Question 24

Suki Company uses activity-based costing to compute product costs for external reports.The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool.Estimated costs and activities for the current year are presented below for the three activity cost pools: Actual activity for the current year was as follows: The amount of overhead applied for Activity 3 during the year was closest to

A) $30,026.50.
B) $35,773.45.
C) $36,107.00.
D) $36,112.00.

Question 25

Parts administration is an example of a:

A) unit-level activity.
B) batch-level activity.
C) product-level activity.
D) facility-level activity.

Question 26

Westin Company uses activity-based costing to compute product costs for external reports.The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool.Estimated costs and activities for the current year are presented below for the three activity cost pools: Actual activity for the current year was as follows: The amount of overhead applied for Activity 2 during the year was closest to:

A) $12,205.50.
B) $12,360.00.
C) $12,460.00.
D) $16,905.75.

Question 27

Paul Company has two products: A andB.The company uses activity-based costing.The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: The activity rate under the activity-based costing system for Activity 3 is closest to:

A) $19.47.
B) $28.87.
C) $58.40.
D) $70.45.

Question 28

Overhead allocation based on volume alone:

A) is a key aspect of the activity-based costing model.
B) will systematically overcost high-volume products and undercost low-volume products.
C) will systematically overcost low-volume products and undercost high-volume products.
D) must be used for external financial reporting.

Question 29

The predetermined overhead rate (i.e. ,activity rate)for Activity 1 under the activity-based costing system is closest to:

A) $13.17.
B) $24.15.
C) $28.97.
D) $83.66.

Question 30

The overhead cost per unit of Product B under the activity-based costing system is closest to

A) $26.09.
B) $35.28.
C) $38.16.
D) $50.66.

Question 31

The overhead cost per unit of Product B under the traditional costing system is closest to:

A) $5.49.
B) $11.45.
C) $26.09.
D) $50.66.

Question 32

The overhead cost per unit of Product B under the traditional costing system is closest to:

A) $2.63.
B) $4.32.
C) $7.49.
D) $54.13.

Question 33

The overhead cost per unit of Product A under the activity-based costing system is closest to:

A) $11.24.
B) $70.79.
C) $81.20.
D) $86.97.

Question 34

The predetermined overhead rate per DLH under the traditional costing system is closest to:

A) $9.15.
B) $19.08.
C) $43.48.
D) $84.43.

Question 35

Selena Company has two products: A andB.The company uses activity-based costing.The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: The activity rate under the activity-based costing system for Activity 3 is closest to:

A) $18.53.
B) $21.67.
C) $46.33.
D) $65.00.

Question 36

The activity rate under the activity-based costing system for Activity 3 is closest to:

A) $29.32.
B) $30.00.
C) $33.33.
D) $41.53.

Question 37

Bridget Company uses activity-based costing.The company has two products: A andB.The annual production and sales of Product A are 2,000 units and of Product B are 3,000 units.There are three activity cost pools,with estimated total cost and expected activity as follows: The cost per unit of Product A under activity-based costing is closest to:

A) $6.40.
B) $8.63.
C) $9.60.
D) $13.80.

Question 38

The predetermined overhead rate per DLH under the traditional costing system is closest to:

A) $13.17.
B) $21.60.
C) $37.46.
D) $270.66.

Question 39

The cost of worker recreational facilities is an example of a cost that would ordinarily be considered to be

A) unit-level.
B) batch-level.
C) product-level.
D) facility-level.

Question 40

The predetermined overhead rate (i.e. ,activity rate)for Activity 2 under the activity-based costing system is closest to:

A) $9.15.
B) $10.23.
C) $51.99.
D) $86.93.

Question 41

The overhead cost per unit of Product P under activity-based costing is closest to:

A) $4.00.
B) $6.88.
C) $10.00.
D) $30.16.

Question 42

Assuming that actual activity turns out to be the same as expected activity,the total amount of overhead cost allocated to Product X would be closest to:

A) $196,800.
B) $234,000.
C) $272,600.
D) $274,000.

Question 43

The total debits to the Manufacturing Overhead account during the year were closest to:

A) $124,254.
B) $124,494.
C) $125,055.
D) $125,667.

Question 44

The total credits to the Manufacturing Overhead account during the year were closest to:

A) $116,661.
B) $116,923.
C) $116,943.
D) $120,133.

Question 45

The total amount of overhead cost allocated to Product X during the year would be closest to:

A) $224,000.
B) $796,400.
C) $972,450.
D) $1,145,000.

Question 46

The activity rate for Activity 3 is closest to:

A) $26.67.
B) $56.74.
C) $116.18.
D) $119.72.

Question 47

The activity rate under the activity-based costing system for Activity 2 is closest to:

A) $16.00.
B) $21.97.
C) $26.67.
D) $89.33.

Question 48

The activity rate for the batch setup activity cost pool is closest to:

A) $26.10.
B) $29.40.
C) $70.40.
D) $234.90.

Question 49

The activity rate computed at the beginning of the year for the batch setup activity cost pool is closest to:

A) $42.40.
B) $49.80.
C) $74.80.
D) $381.60.

Question 50

The activity rate for Activity 2 is closest to

A) $10.25.
B) $16.77.
C) $24.91.
D) $26.36.

Question 51

The activity rate for the batch setup activity cost pool is closest to:

A) $33.90.
B) $56.50.
C) $74.50.
D) $84.80.

Question 52

Assuming that the actual overhead costs of the three pools totalled $746,000 and actual activity was equal to expected activity,what would be the required entry to the Cost of Goods Sold account?

A) $600 credit.
B) $600 debit
C) $800 credit.
D) $800 debit.

Question 53

The overhead cost per unit of Product B is closest to:

A) $17.69.
B) $41.58.
C) $74.73.
D) $81.53.

Question 54

Assuming that actual activity turns out to be the same as expected activity,the total amount of overhead cost allocated to Product X would be closest to:

A) $296,100.
B) $298,000.
C) $339,000.
D) $372,600.

Question 55

The entry to the Cost of Goods Sold account at the end of the year was (round your final answer to nearest dollar value):

A) $801 credit.
B) $801 debit.
C) $1,173 credit.
D) $1,173 debit.

Question 56

The overhead cost per unit of Product A is closest to:

A) $22.70.
B) $47.89.
C) $57.20.
D) $59.23.

Question 57

The activity rate for the batch setup activity cost pool is closest to:

A) $39.10.
B) $68.40.
C) $77.90.
D) $91.20.

Question 58

The total debits to the Manufacturing Overhead account during the year were closest to:

A) $116,661.
B) $116,923.
C) $116,943.
D) $120,133.

Question 59

Assuming that actual activity turns out to be the same as expected activity,the total amount of overhead cost allocated to Product X would be closest to:

A) $235,000.
B) $316,600.
C) $357,500.
D) $563,000.

Question 60

The total credits to the Manufacturing Overhead account during the year were closest to:

A) $124,254.
B) $124,494.
C) $125,055.
D) $125,667.

Question 61

The amount of cost assigned to the receiving activity is?

Question 62

The manufacturing overhead for the year is underapplied or overapplied by:

A) ($15,450).
B) $15,450.
C) $30,900.
D) ($30,900).

Question 63

The total amount of overhead cost allocated to Product X during the year would be closest to:

A) $1,209,450.
B) $1,573,800.
C) $1,580,000.
D) $1,628,000.

Question 64

The debits to the Manufacturing Overhead control account during the year (prior to closing out the balance)would have totalled:

A) $1,917,000.
B) $1,929,650.
C) $1,932,200.
D) $1,942,300.

Question 65

Which of the following is not a limitation of activity-based costing?

A) More accurate product costs may result in better decisions.
B) Changing from a traditional direct labour based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers.
C) Implementing an activity based costing system is more costly than implementing a traditional direct labour-based costing system.
D) In practice,most managers insist on fully allocating all costs to products,customers,and other costing objects in an activity based costing system.This results in overstated costs.

Question 66

Which of the following would not be considered categories of quality costs?

A) Prevention costs.
B) External failure costs.
C) Direct material costs.
D) Appraisal costs.

Question 67

If total overapplied or underapplied overhead is closed to the Cost of Goods Sold account at the end of each year,the entry to Cost of Goods Sold would have been:

A) $33,000 credit.
B) $33,000 debit.
C) $66,000 credit.
D) $66,000 debit.

Question 68

Which of the following would be classified as a product-level activity?

A) Machine setups for standard products.
B) Cafeteria facilities used by all employees.
C) Personnel administration.
D) Testing product prototypes.

Question 69

IBM is conducting a prototype testing of its newest product.This is an example of an activity at which level?

A) Product level activity.
B) Batch level activity.
C) Unit level activity.
D) Facility level activity.

Question 70

The credits to the Manufacturing Overhead control account during the year (prior to closing out the balance)would have totalled:

A) $1,917,000.
B) $1,929,650.
C) $1,932,300.
D) $1,942,300.

Question 71

The credits to the Manufacturing Overhead control account during the year (prior to closing out the balance)would have totalled:

A) $3,064,400.
B) $3,076,500.
C) $3,097,400.
D) $3,130,400.

Question 72

Which of the following would be considered as a prevention cost?

A) Inspection of completed products prior to shipment to customers.
B) Supplier management.
C) Rework costs.
D) Scrap costs.

Question 73

An activity-based costing that is designed for internal decision making may not conform to generally accepted accounting principles.Which of the following would cause that to be the case?

A) Direct manufacturing costs for labour and material are included.
B) Indirect manufacturing costs for indirect materials are included.
C) Some non-manufacturing costs are assigned to products.
D) Indirect manufacturing costs for indirect labour are included.

Question 74

The activity rate computed at the beginning of the year for the batch setup activity cost pool is closest to:

A) $54.50.
B) $71.80.
C) $74.00.
D) $197.60.

Question 75

Which of the following would not be considered as an internal failure cost?

A) Quality training.
B) Investigation of cause of failure.
C) Rework costs.
D) Scrap costs.

Question 76

The credits to the Manufacturing Overhead control account during the year (prior to closing out the balance)would have totalled:

A) $2,202,600.
B) $2,218,050.
C) $2,233,500.
D) $2,249,700.

Question 77

The activity rate computed at the beginning of the year for the batch setup activity cost pool is closest to:

A) $64.80.
B) $86.40.
C) $109.70.
D) $259.20.

Question 78

The total amount of overhead cost allocated to Product X during the year would be closest to:

A) $768,000.
B) $1,201,300.
C) $1,535,000.
D) $1,814,000.

Question 79

The debits to the Manufacturing Overhead control account during the year (prior to closing out the balance)would have totalled:

A) $2,202,600.
B) $2,218,050.
C) $2,223,500.
D) $2,249,700.

Question 80

The debits to the Manufacturing Overhead control account during the year (prior to closing out the balance)would have totalled:

A) $3,064,400.
B) $3,076,500.
C) $3,097,400.
D) $3,130,400.