Deck 7: Activity-Based Costing: a Tool to Aid Decision Making

Question 1

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

A) Maintaining an activity-based costing system is more costly than maintaining a traditional direct labour-based costing system.
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.Such changes are often resisted by managers.
C) 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.
D) More accurate product costs may result in increasing the selling prices of some products.

Answer 1

D

Question 2

What is a transaction driver?

A) An event that causes a transaction to begin.
B) A measure of the amount of time required to perform an activity.
C) An event that causes a transaction to end.
D) A simple count of the number of times an activity occurs.

Answer 2

D

Question 3

Which of the following statements about overhead allocation based on volume alone is correct?

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

Answer 3

B

Question 4

(Appendix 7A)Why would an activity-based costing system that is designed for internal decision making NOT conform to generally accepted accounting principles?

A) Some manufacturing costs (i.e. ,the costs of idle capacity and organization-sustaining costs)will not be assigned to products.
B) Some non-manufacturing costs are assigned to products.
C) First-stage allocations may be based on subjective interview data.
D) All of the above.

Question 5

Why may departmental overhead rates NOT correctly assign overhead costs?

A) Because of the use of direct labour hours in allocating overhead costs to products rather than machine time or quantity of materials.
B) Because of the high correlation between direct labour hours and the incurrence of overhead costs.
C) Because of the over-reliance 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) Because of the difficulties associated with identifying cost pools for the first stage of the allocation process.

Question 6

How much cost,in total,would be allocated in the first-stage allocation to the Order Size activity cost pool?

A) $29,000.
B) $84,000.
C) $188,000.
D) $348,000.

Question 7

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) Organization-sustaining activity.

Question 8

Costs incurred at which of the following activity levels should NOT be allocated to products for decision-making purposes?

A) Unit-level activities.
B) Batch-level activities.
C) Product-level activities.
D) Organization-sustaining activities.

Question 9

Arranging for a shipment of a number of different products to a customer is an example of an activity at which of the following levels?

A) Unit-level activity.
B) Batch-level activity.
C) Customer-level activity.
D) Organization-sustaining activity.

Question 10

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 11

Setting up equipment is an example of an activity at which of the following levels?

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

Question 12

The cost per unit of Product B under activity-based costing is closest to which of the following?

A) $24.10.
B) $16.60.
C) $35.38.
D) $31.90.

Question 13

The cost per unit of Product A under activity-based costing is closest to which of the following?

A) $6.00.
B) $8.63.
C) $9.60.
D) $13.80.

Question 14

How much cost,in total,would be allocated in the first-stage allocation to the Customer Support activity cost pool?

A) $120,000.
B) $255,000.
C) $282,000.
D) $390,000.

Question 15

What is a duration driver?

A) A simple count of the number of times an activity occurs.
B) An activity measure that is used for the life of the company.
C) A measure of the amount of time required to perform an activity.
D) An activity measure that is used for the life of an activity-based costing system.

Question 16

Worker recreational facilities are examples of costs that would ordinarily be considered to be incurred at which of the following activity levels?

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

Question 17

Which of the following activity levels is an example of the clerical activity associated with processing purchase orders to produce an order for a standard product?

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

Question 18

Testing a prototype of a new product is an example of an activity at which of the following levels?

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

Question 19

How much cost,in total,should NOT be allocated to orders and customer support in the second stage of the allocation process if the activity-based costing system is used for internal decision making?

A) $0.
B) $60,000.
C) $84,000.
D) $120,000.

Question 20

How much cost,in total,would be allocated in the first-stage allocation to the Order Size activity cost pool?

A) $150,000.
B) $234,000.
C) $255,000.
D) $360,000.

Question 21

How much cost,in total,would be allocated in the first-stage allocation to the Customer Support activity cost pool?

A) $164,000.
B) $389,500.
C) $494,000.
D) $615,000.

Question 22

To the nearest whole dollar,how much wages and salaries cost would be allocated to a customer who placed eight orders in a year?

A) $7,392.
B) $9,548.
C) $11,704.
D) $14,784.($114,000/3,000)* 8 + ($228,000/20)* 1 = $11,704

Question 23

How much cost,in total,would be allocated in the first-stage allocation to the Customer Support activity cost pool?

A) $116,000.
B) $304,500.
C) $428,000.
D) $493,000.

Question 24

How much cost,in total,would be allocated in the first-stage allocation to the Order Size activity cost pool?

A) $123,000.
B) $222,000.
C) $307,500.
D) $492,000.

Question 25

To the nearest whole dollar,how much wages and salaries cost would be allocated to a customer who placed eight orders in a year?

A) $7,474.
B) $9,191.
C) $10,908.
D) $14,948.

Question 26

How much cost,in total,should not be allocated to orders and customer support in the second stage of the allocation process if the activity-based costing system is used for internal decision making?

A) $0.
B) $82,000.
C) $104,000.
D) $164,000.

Question 27

To the nearest whole dollar,how much wages and salaries cost would be allocated to a customer who placed four orders in a year? Do not round intermediate calculations.

A) $7,124.
B) $8,859.
C) $10,595.
D) $14,248.

Question 28

What would be the total overhead cost per order according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Filling Orders activity cost pool?

A) $18.50.
B) $23.50.
C) $27.75.
D) $37.00.

Question 29

What would be the total overhead cost per customer according to the activity-based costing system,rounded to the nearest whole dollar? In other words,what would be the overall activity rate for the Customer Support activity cost pool?

A) $11,100.
B) $12,950.
C) $13,800.
D) $14,800.

Question 30

What would be the total overhead cost per customer according to the activity-based costing system,rounded to the nearest whole dollar? In other words,what would be the overall activity rate for the Customer Support activity cost pool?

A) $10,800.
B) $12,600.
C) $13,650.
D) $14,400.

Question 31

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

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

Question 32

What would be the total overhead cost per customer according to the activity-based costing system,rounded to the nearest whole dollar? In other words,what would be the overall activity rate for the Customer Support activity cost pool?

A) $11,700.
B) $12,350.
C) $12,667.
D) $13,000.

Question 33

What would be the total overhead cost per order according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Filling Orders activity cost pool?

A) $48.00.
B) $49.67.
C) $52.00.
D) $56.00.

Question 34

How much cost,in total should not be allocated to orders and customer support in the second stage of the allocation process if the activity-based costing system is used for internal decision making?

A) $0.
B) $60,000.
C) $80,000.
D) $120,000.

Question 35

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

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

Question 36

How much cost,in total,should not be allocated to orders and customer support in the second stage of the allocation process if the activity-based costing system is used for internal decision making?

A) $0.
B) $58,000.
C) $68,000.
D) $116,000.

Question 37

The predetermined overhead rate under the traditional costing system is closest to which of the following?

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

Question 38

What would be the total overhead cost per order according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Filling Orders activity cost pool?

A) $273.00.
B) $292.50.
C) $302.00.
D) $312.00

Question 39

How much cost,in total,would be allocated in the first-stage allocation to the Order Size activity cost pool?

A) $210,000.
B) $240,000.
C) $255,000.
D) $300,000.

Question 40

How much cost,in total,would be allocated in the first-stage allocation to the Customer Support activity cost pool?

A) $180,000.
B) $255,000.
C) $280,000.
D) $330,000.

Question 41

The cost per unit of Product A is closest to which of the following?

A) $27.91.
B) $56.38.
C) $141.04.
D) $70.52.

Question 42

The cost per unit of Product B is closest to which of the following?

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

Question 43

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

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

Question 44

The total annual production cost for Product B is closest to which of the following?

A) $37,816.
B) $107,802.
C) $65,231.
D) $70,000.

Question 45

What would be the total overhead cost per bouquet according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Making Bouquets activity cost pool?

A) $1.35.
B) $1.73.
C) $1.79.
D) $2.10.

Question 46

The predetermined overhead rate under the traditional costing system is closest to which of the following?

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

Question 47

The overhead cost per unit of Product A is closest to which of the following?

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

Question 48

The activity rate under the activity-based costing system for Activity 3 is closest to which of the following?

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

Question 49

The activity rate for Activity 3 is closest to which of the following?

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

Question 50

The activity rate under the activity-based costing system for Activity 2 is closest to which of the following?

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

Question 51

What would be the total overhead cost per bouquet according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Making Bouquets activity cost pool?

A) $0.90.
B) $1.05.
C) $1.10.
D) $1.20.

Question 52

The overhead cost per unit of Product G under activity-based costing is closest to which of the following?

A) $4.00.
B) $28.66.
C) $2.59.
D) $10.04.

Question 53

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

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

Question 54

What would be the total overhead cost per delivery according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Deliveries activity cost pool?

A) $6.00
B) $6.60
C) $6.80
D) $7.20

Question 55

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

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

Question 56

The overhead cost per unit of Product S under activity-based costing is closest to which of the following? Do not round intermediate calculations.

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

Question 57

(Appendix 7A)The predetermined overhead rate (i.e. ,activity rate)for Activity 2 under the activity-based costing system is closest to which of the following?

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

Question 58

The total production cost per unit of Product D under activity-based costing is closest to which of the following?

A) $16.15.
B) $12.87.
C) $16.37.
D) $16.57.

Question 59

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

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

Question 60

The overhead cost per unit of Product P under activity-based costing is closest to which of the following?

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

Question 61

(Appendix 7A)The predetermined overhead rate (i.e. ,activity rate)for Activity 2 under the activity-based costing system is closest to:

A) $22.60
B) $54.84
C) $58.76
D) $36.73

Question 62

According to the activity-based costing system,what was the total cost (including the costs of raw ingredients)of the function mentioned above,rounded to the nearest whole dollar?

A) $1,370.
B) $1,520.
C) $2,020.
D) $2,220.

Question 63

(Appendix 7A)The unit product cost of product U86Y under the company's traditional costing system is closest to:

A) $71.15
B) $55.50
C) $75.86
D) $38.00

Question 64

According to the activity-based costing system,what is the total profit margin for this function?

A) ($70).
B) ($20).
C) $80.
D) $230.

Question 65

(Appendix 7A)The manufacturing overhead that would be applied to a unit of product R58G under the company's traditional costing system is closest to:

A) $6.74
B) $16.10
C) $22.84
D) $2.90

Question 66

(Appendix 7A)The manufacturing overhead that would be applied to a unit of product R09O under the activity-based costing system is closest to:

A) $113.46
B) $255.00
C) $141.54
D) $17.28

Question 67

Which of the following types of costs present the greatest difficulty in efforts to trace them to products and services?

A) Unit-level costs
B) Batch-level costs
C) Product/service-level costs
D) Organization-sustaining costs

Question 68

(Appendix 7A)The total cost of a unit of product P85G under the company's traditional costing system is closest to:

A) $146.97
B) $102.58
C) $101.69
D) $80.50

Question 69

What would be the total overhead cost per bouquet according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Making Bouquets activity cost pool?

A) $2.48.
B) $2.75.
C) $2.83.
D) $3.03.

Question 70

According to the activity-based costing system,what was the total cost (including the costs of raw ingredients)of the function mentioned above,rounded to the nearest whole dollar?

A) $505.
B) $655.
C) $1,155.
D) $1,355.

Question 71

According to the activity-based costing system,what is the total profit margin for this function?

A) $1,365.
B) $540.
C) $1,040.
D) $1,190.

Question 72

According to the activity-based costing system,what was the total cost (including the costs of raw ingredients)of the function mentioned above,rounded to the nearest whole dollar?

A) $910.
B) $1,060.
C) $1,560.
D) $1,760.

Question 73

What would be the total overhead cost per delivery according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Deliveries activity cost pool?

A) $24.00.
B) $26.50.
C) $27.00.
D) $30.00.

Question 74

(Appendix 7A)The overhead cost per unit of Product B under the traditional costing system is closest to:

A) $22.38
B) $13.56
C) $73.74
D) $15.20

Question 75

(Appendix 7A)The overhead cost per unit of Product B under the activity-based costing system is closest to: (Do not round intermediate calculations)

A) $73.74
B) $56.62
C) $22.38
D) $47.52

Question 76

(Appendix 7A)The total cost of a unit of product C43S under the activity-based costing system is closest to:

A) $165.34
B) $233.26
C) $162.22
D) $105.34

Question 77

According to the activity-based costing system,what is the total profit margin for this function?

A) ($165).
B) ($115).
C) ($15).
D) $135.

Question 78

(Appendix 7A)The unit product cost of product M91F under the activity-based costing system is closest to:

A) $95.20
B) $121.57
C) $216.77
D) $197.95

Question 79

What would be the total overhead cost per delivery according to the activity-based costing system,rounded to the nearest whole cent? In other words,what would be the overall activity rate for the Deliveries activity cost pool?

A) $3.93.
B) $4.71.
C) $4.93.
D) $5.50.

Question 80

(Appendix 7A)The predetermined overhead rate under the traditional costing system is closest to:

A) $89.11
B) $101.84
C) $47.52
D) $122.91