Deck 3: Activity-Based Management

Question 1

What is the firststep in the activity analysis process used to implement Activity Based Management?

A)Chart,from start to finish,the activities used to complete the product or service
B)Classify activities as value-added or non-value-added
C)Eliminate non-value-added activities
D)Continuously improve and reevaluate the efficiency of value-added activities or replace them with more efficient activities

Answer 1

A

Question 2

Which of the following is a non-value added cost?

A)Running machines.
B)Performing surgeries.
C)Waiting for work.
D)Speaking to customers.

Answer 2

C

Question 3

Activity-based costing assigns more costs to items produced in __________ than traditional methods do.

A)small runs
B)medium runs
C)large runs
D)extra large runs

Answer 3

A

Question 4

Activity-based management starts with which of the following?

A)activity benefit analysis.
B)activity cost cutting.
C)activity-based costing.
D)activity analysis.

Question 5

The value chain begins with which of the following?

A)supplier.
B)research and development.
C)design.
D)production.

Question 6

What is the final step in the activity analysis process used to implement Activity Based Management?

A)Chart,from start to finish,the activities used to complete the product or service.
B)Classify activities as value-added or non-value-added.
C)Eliminate non-value-added activities.
D)Continuously improve and reevaluate the efficiency of value-added activities or replace them with more efficient activities.

Question 7

What do managers use to analyze the cost-generating and revenue-generating components of a company's activities?

A)Low cost solution
B)Critical path
C)Value chain
D)Optimal solution

Question 8

Activity-based management starts with activity analysis.The four steps in activity analysis are:

The value-added activities identified in Step 2 make up the

A)low cost solution.
B)critical path.
C)value chain.
D)optimal solution.

Question 9

Which of the following is an example of non-value added activities?

A)Storage.
B)Moving items.
C)Waiting for work.
D)All of the answers are correct.

Question 10

Which of the following are not examples of non-value-added costs?

A)Storage
B)Moving items
C)Waiting for work
D)Production

Question 11

The value chain is a linked set of value-creating activities leading from

A)supplier to marketing.
B)research and development to distribution.
C)design to customer service.
D)raw material sources to the ultimate end use of the goods or services produced.

Question 12

Which of the following is an example of a non-value-added cost?

A)Storage
B)Moving items
C)Waiting for work
D)All of the above are non-value-added costs.

Question 13

The value chain ends with which of the following?

A)production.
B)marketing.
C)distribution.
D)customer service.

Question 14

What is the thirdstep in the activity analysis process used to implement Activity Based Management?

A)Chart,from start to finish,the activities used to complete the product or service.
B)Classify activities as value-added or non-value-added.
C)Eliminate non-value-added activities.
D)Continuously improve and reevaluate the efficiency of value-added activities or replace them with more efficient activities.

Question 15

For which one of the following activities is it more difficult to obtain reasonable measures to allocate the costs?

A)Indirect labor
B)Machine setups
C)Plant administration
D)Quality control inspections

Question 16

What provides a systematic way for organizations to evaluate the processes that they use to produce goods and services for their customers?

A)Cost-benefit analysis
B)Activity analysis
C)Process evaluation and review technique
D)Flow charting

Question 17

Which of the following is a systematic way for organizations to identify and eliminate activities that add costs but not value to the product?

A)customer profitability analysis.
B)activity analysis.
C)systems analysis.
D)cost-based analysis.

Question 18

Bush Enterprises adopts Strategic activity-based costing and management techniques which would most likely shift the mix of activities and products away from

A)less profitable to more profitable applications.
B)less complex to more complex applications.
C)high volume to low volume applications.
D)less prestigious to more prestigious applications.

Question 19

What is the secondstep in the activity analysis process used to implement Activity Based Management?

A)Chart,from start to finish,the activities used to complete the product or service.
B)Classify activities as value-added or non-value-added.
C)Eliminate non-value-added activities.
D)Continuously improve and reevaluate the efficiency of value-added activities or replace them with more efficient activities.

Question 20

Which term describes the costs of activities that the company can eliminate without reducing product quality,performance,or value?

A)non-value-performance-quality-added costs.
B)non-value-added costs.
C)non-performance-added costs.
D)non-quality-added costs.

Question 21

The major cost pool(s)for activity-based costing is/are

A)the "plant."
B)the department.
C)the activity center.
D)the "plant" and the department.

Question 22

Which is not an example of a cost driver?

A)General and administrative expenses.
B)Machine hours.
C)Number of inspections.
D)Number of different customers.

Question 23

Which of the following statements is true concerning activity-based costing (ABC)?

A)ABC can distort product costs.
B)ABC fails to recognize that the demand for overhead activities is driven by product-sustaining activities.
C)ABC permits management to focus on the increased efficiencies and better resource utilization.
D)ABC first assigns costs to products,then to cost pools.

Question 24

How does activity-based management treats fixed costs?

A)As costs which vary directly with volume.
B)As costs which cannot be controlled over the long-run.
C)As costs which may vary for reasons other than volume.
D)As sunk costs which have no future economic benefit.

Question 25

Which of the following does not represent how managers make cost-benefit decisions as to the use of activity analysis or traditional costing methods?

A)They reject activity analysis and stay with the simpler traditional method.
B)They use activity-based costing because they want information that will help them be competitive.
C)They use traditional costing as a special analysis,but not as an ongoing information system.
D)They use activity-based costing as a special analysis,but not as an ongoing information system.

Question 26

Activity-based costing first assigns costs to

A)activities.
B)products.
C)departments.
D)plants

Question 27

Which of the following statements is true concerning how companies benefit from using an activity-based accounting system?

A)They have had few changes in activities over time and few corresponding changes have been made in the accounting system.
B)They have low overhead costs.
C)They have a narrow range of products.
D)They have wide variations in the volume of individual production runs and setups are costly (i.e. ,complex production methods).

Question 28

How are overhead costs accumulated in an activity-based costing system?

A)in a single,plant-wide pool.
B)by departments.
C)in pools established by identified cost drivers.
D)in facility-level activities.

Question 29

Bush Enterprises adopts Strategic activity-based costing and management techniques which would most likely result in

A)adding surcharges for particular customers
B)"firing" some customers
C)seeking to serve more profitable customers
D)All of the answers are correct.

Question 30

The major cost pool(s)for traditional methods is/are

A)the "plant."
B)the employees.
C)the activity center.
D)the management team.

Question 31

Thefirst step in activity-based costing (ABC)is to

A)identify the activities that consume resources,and assign costs to those activities.
B)identify the cost driver(s)associated with each activity.
C)compute a cost rate per cost driver unit.
D)assign costs to products by multiplying the cost driver rate by the volume of cost drivers consumed by the product.

Question 32

Which of the following statement accurately describes activity-based costing (ABC)?

A)ABC considers the entire plant to be one cost pool.
B)ABC uses a separate cost pool for each department.
C)ABC uses a cost pool for each activity center.
D)ABC uses a cost pool for each industry.

Question 33

Which of the following represents the thirdstep in activity based costing?

A)Identify the activities that consume resources and assign costs to those activities.
B)Identify the cost drivers associated with each activity.
C)Compute a cost rate per cost driver unit.
D)Assign cost to products by multiplying the cost driver rate times the volume of cost driver consumed by the product.

Question 34

Activity-based costing first assigns costs to activities,then to

A)the products based on each product's use of activities.
B)the plant based on each plant's use of activities.
C)the departments based on each department's use of activities.
D)the industry based on each industry's use of activities.

Question 35

Traditional cost allocation methods include which of the following?

A)plantwide allocation,only.
B)department allocation,only.
C)activity-based costing.
D)plantwide and department allocation.

Question 36

Which statement is true in an activity-based costing environment?

A)Managers do not need to know product costs.
B)Companies use departmental overhead rates.
C)Companies compute the rate for each cost driver in each activity center.
D)Companies compute the rate for up to three cost drivers in each activity center.

Question 37

Which of the following is the secondstep in activity based costing?

A)Identify the activities that consume resources and assign costs to those activities.
B)Identify the cost drivers associated with each activity.
C)Compute a cost rate per cost driver unit.
D)Assign cost to products by multiplying the cost driver rate times the volume of cost driver consumed by the product.

Question 38

The second step in Activity-based costing (ABC)is to identify the cost driver(s)associated with each activity.Cost drivers usually relate to

A)volume of production.
B)hours used in production.
C)marketing process.
D)All of the answers are correct.

Question 39

In what way(s)do managers make cost-benefit decisions as to the use of activity analysis or traditional costing methods?

A)They reject activity analysis and stay with the simpler traditional method.
B)They use activity-based costing because they want information that will help them be competitive.
C)They use activity-based costing as a special analysis,but not as an ongoing information system.
D)All of the answers are correct.

Question 40

Which of the following reflects the simplest allocation method for a factory?

A)The department allocation method.
B)The unit cost allocation method.
C)The plantwide allocation method.
D)The use of activity-based costing.

Question 41

Which of the following is not a step accountants must follow in activity-based costing?

A)Identify the activities that consume resources and assign costs to them.
B)Identify the cost drivers associated with each activity.
C)Compute a cost rate per cost driver.
D)Compute the variance between the estimated cost driver and the actual cost driver.

Question 42

Managers usually decide which cost driver to use based upon which of the following factors?

A)Causal relation.
B)Cost considerations.
C)Generally accepted costing techniques.
D)Uniform cost driver standards.

Question 43

Which of the following is not a step in activity based costing?

A)Identify the departments that consume resources and assign costs to those departments.
B)Identify the cost drivers associated with each activity.
C)Compute a cost rate per cost driver unit.
D)Assign cost to products by multiplying the cost driver rate times the volume of cost driver consumed by the product.

Question 44

Marshall Manufacturing Co.
Marshall Manufacturing Co.uses an activity-based costing system.The company has gathered the following information concerning various cost pools and activity drivers;

The following data was collected and is specific to Item No.824.

Refer to Marshall Manufacturing Co.What would be the amount of quality inspection cost allocated to Item No.824?

A)$2,500
B)$ 125
C)$1,000
D)$ 250

Question 45

Which statement best describes an activity center?

A)An organizational command post from which management controls activity.
B)A unit of the organization that performs a set of tasks.
C)A think-tank where managers select value-added activities.
D)A part of the organization that has been designated for in depth study of specific activities.

Question 46

Resources used for an activity are measured by the

A)cost driver rate times the cost driver volume.
B)resources supplied to an activity.
C)expenditures for the activity.
D)unused resource capacity.

Question 47

Which of the following is the primary criterion for selecting a cost driver?

A)Causal relation.
B)Benefits received.
C)Reasonableness.
D)Fairness.

Question 48

Marshall Manufacturing Co.
Marshall Manufacturing Co.uses an activity-based costing system.The company has gathered the following information concerning various cost pools and activity drivers;

The following data was collected and is specific to Item No.824.

Refer to Marshall Manufacturing Co.What would be the unit cost for the materials handling activity at Marshall Manufacturing Co.?

A)$ 4.00
B)$80.00
C)$ 2.00
D)$ 1.00

Question 49

Which of the following are resources supplied to an activity in activity-based costing?

A)the expenditures for the activity.
B)actual resource usage.
C)estimated resource usage.
D)unused resource capacity.

Question 50

The use of activity-based costing and activity-based management have resulted in

A)less need to maintain good relationships with suppliers.
B)overhead costs being reduced substantially.
C)increased number of supervisory personnel being hired.
D)All of the answers are correct.

Question 51

Which formula correctly identifies the predetermined indirect cost rate in an activity-based costing system?

A)Actual indirect cost divided by the actual volume of the allocation base.
B)Estimated indirect cost divided by the actual volume of the allocation base.
C)Actual cost divided by the estimated volume of the allocation base.
D)Estimated indirect cost divided by the estimated volume of the allocation base.

Question 52

Marshall Manufacturing Co.
Marshall Manufacturing Co.uses an activity-based costing system.The company has gathered the following information concerning various cost pools and activity drivers;

The following data was collected and is specific to Item No.824.

Refer to Marshall Manufacturing Co.What would be the amount of machine setup cost allocated to Item No.824?

A)$40,000
B)$ 8,000
C)$ 2,500
D)$ 2,000

Question 53

Activity-based management can reduce customer response time by all of the following,except for

A)identifying those activities that consume the most resources.
B)making activities more efficient.
C)identifying non-value added activities.
D)identifying fraudulent activities.

Question 54

Often the most interesting and challenging step(s)of activity-based costing (ABC)which also require(s)the manager to know the product is to

A)identify the activities that consume resources,and assign costs to those activities.
B)identify the cost driver(s)associated with each activity.
C)compute a cost rate per cost driver unit.
D)assign costs to products by multiplying the cost driver rate by the volume of cost drivers consumed by the product.

Question 55

Marshall Manufacturing Co.
Marshall Manufacturing Co.uses an activity-based costing system.The company has gathered the following information concerning various cost pools and activity drivers;

The following data was collected and is specific to Item No.824.

Refer to Marshall Manufacturing Co.What would be the unit cost for the inspection activity on Item No.824?

A)$ 4.00
B)$80.00
C)$ 5.00
D)$ 1.00

Question 56

One of the lessons of activity-based costing (ABC)is that costs depend on

A)volume of the product,only.
B)complexity of the product,only.
C)volume and complexity of the product.
D)factors other than the volume or complexity of the product.

Question 57

Activity-based costing (ABC)assigns costs first to

A)activities,then to the products based on each product's use of activities.
B)products,then to the activities based on each activity's use of products.
C)services,then to the activities based on each service's use of activities.
D)None of the above answers is correct.

Question 58

Which of the following is not a step in activity based costing?

A)Identify the activities that consume resources and assign costs to those activities.
B)Identify the cost drivers associated with each activity.
C)Compute a cost rate per department or plant.
D)Assign cost to products by multiplying the cost driver rate times the volume of cost driver consumed by the product.

Question 59

Which one of the following activities is appropriate as a cost driver for material handling costs?

A)Number of direct labor hours used
B)Number of machine hours used
C)Number of raw material moves
D)Number of units produced

Question 60

The last step in activity-based costing (ABC)is to

A)identify the activities that consume resources,and assign costs to those activities.
B)identify the cost driver(s)associated with each activity.
C)compute a cost rate per cost driver unit.
D)assign costs to products by multiplying the cost driver rate by the volume of cost drivers consumed by the product.

Question 61

Gem Systems
Gem Systems uses an activity-based costing system.The company has gathered the following information concerning various cost pools and activity drivers;

The following data was collected and is specific to Job 150.

Refer to Gem Systems.Calculate the unit cost for the Material Handling activity cost pool.

A)$5.00
B)$25.00
C)$10.00
D)$ 3.50

Question 62

Which of the following costs are capacity-sustaining activities in the product cost hierarchy?

A)Product testing.
B)Energy to run machines.
C)Heat and lighting.
D)Direct Materials.

Question 63

In traditional costing systems overhead costs are allocated on volume of production or sales,.This methodology fails to take into consideration that the demand for overhead activities is also driven by which of the following?

A)Outside contracting activities.
B)Indirect labor activities.
C)Short-term labor activities.
D)Batch-related and product-sustaining activities.

Question 64

The cost hierarchy can be used to organize cost information for decision-making.Which cost isnot part of the product cost hierarchy of expenses?

A)Capacity-sustaining.
B)Product-sustaining.
C)Customer-sustaining.
D)Employee-sustaining.

Question 65

Marshall Manufacturing Co.
Marshall Manufacturing Co.uses an activity-based costing system.The company has gathered the following information concerning various cost pools and activity drivers;

The following data was collected and is specific to Item No.824.

Refer to Marshall Manufacturing Co.What is the cost of one unit of item 824?

A)$ 3.75
B)$116.25
C)$ 23.75
D)None of the above

Question 66

The cost hierarchy can be used to organize cost information for decision-making.Which cost ispart of the product cost hierarchy of expenses?

A)Capacity-sustaining.
B)Department-sustaining.
C)Plant-sustaining.
D)Employee-sustaining.

Question 67

Gem Systems
Gem Systems uses an activity-based costing system.The company has gathered the following information concerning various cost pools and activity drivers;

The following data was collected and is specific to Job 150.

Refer to Gem Systems.Calculate the product cost of one unit of Job 150.

A)$11.74
B)$13.00
C)$ 8.74
D)$16.74

Question 68

Gem Systems
Gem Systems uses an activity-based costing system.The company has gathered the following information concerning various cost pools and activity drivers;

The following data was collected and is specific to Job 150.

Refer to Gem Systems.What is the amount of machine handling cost allocated to Job 150?

A)$ 1,000
B)$ 5,000
C)$25,000
D)None of the above

Question 69

Marshall Manufacturing Co.
Marshall Manufacturing Co.uses an activity-based costing system.The company has gathered the following information concerning various cost pools and activity drivers;

The following data was collected and is specific to Item No.824.

Refer to Marshall Manufacturing Co.What would be the unit cost for the machine setup activity at Marshall Manufacturing Co.?

A)$ 4.00
B)$80.00
C)$ 2.00
D)$20.00

Question 70

In comparison to an activity-based costing system,traditional allocation systems would most likely distort which of the following costs?

A)product costs.
B)activity costs.
C)department costs.
D)plant costs.

Question 71

Which of the following costs are capacity-sustaining activities in the product cost hierarchy?

A)Product specification.
B)Building depreciation and rent.
C)Product testing.
D)Machine setups.

Question 72

Which of the following costs are not capacity-sustaining activities in the product cost hierarchy?

A)Plant management.
B)Building depreciation and rent.
C)Heat and lighting.
D)Market research.

Question 73

Activity-based management and costing cannot be applied to marketing in order to

A)identify the marketing activities needed to service each customer or order more appropriately.
B)determine the variability in marketing costs across customer types and distribution.
C)support activity-based management by encouraging the elimination of accounts with high processing costs.
D)eliminate plantwide discretionary fixed costs.

Question 74

The cost hierarchy can be used to organize cost information for decision-making.Which cost isnot part of the product cost hierarchy of expenses?

A)Capacity-sustaining.
B)Product-sustaining.
C)Customer-sustaining.
D)Vendor-sustaining.

Question 75

Gem Systems
Gem Systems uses an activity-based costing system.The company has gathered the following information concerning various cost pools and activity drivers;

The following data was collected and is specific to Job 150.

Refer to Gem Systems.Calculate the unit cost for the Electricity Costs activity cost pool.

A)$15.00
B)$ 3.50
C)$ 3.00
D)$ 5.00

Question 76

Which of the following are not capacity-sustaining activities in the product cost hierarchy?

A)Plant management.
B)Building depreciation and rent.
C)Direct materials.
D)Heating and lighting.

Question 77

Gem Systems
Gem Systems uses an activity-based costing system.The company has gathered the following information concerning various cost pools and activity drivers;

The following data was collected and is specific to Job 150.

Refer to Gem Systems.What is the amount of electricity cost allocated to Job 150?

A)$ 1,000
B)$15,000
C)$ 3,000
D)$ 5,000

Question 78

Which term refers to categorizing costs according to whether they are capacity,product,customer,batch,or unit costs?

A)The cost hierarchy.
B)Activity-based costing.
C)Traditional costing.
D)None of the answers is correct.

Question 79

Which of the following costs are not customer activities in the product cost hierarchy?

A)Plant management.
B)Promotion.
C)Customer records.
D)Market research.

Question 80

Which of the following would be considered a capacity-sustaining activityin the product cost hierarchy?

A)Plant management,building depreciation,rent,heating and lighting,market research,and customer records.
B)Market research,customer records,and promotion.
C)Machine setups and quality inspections.
D)Energy to run machines and direct materials.