Question 1

The manager at the Atlantic Organization reported $225,000 in Administration Activity.The manager reported that the cost-allocation base was 32,000 in direct manufacturing-labor hours.
Required:
Compute the direct manufacturing labor-hours.
A)$7.00
B)$7.03
C)$7.10
D)$7.15
E)$7.25

Accepted Answer

B)[($225,000 / 32,000)] = $7.03 per direct manufacturing labor

Question 2

The Ready Corporation reported the following information:

Compute the budgeted indirect cost rate for each activity.
A)$4,001;$45.10;$308;$5
B)$4,010;$50.25;$310;$6
C)$4,110;$51.50;$325;$7
D)$4,250;$52.50;$350;$8
E)$4,375;$58.50;$400;$9

Accepted Answer

E)
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Question 3

Homogeneous cost pools and the choice of cost-allocation bases,when tied to the cost hierarchy,provide managers with less confidence when they assign the activity and product cost numbers from the activity-based costing system.

Accepted Answer

Homogeneous cost pools and the choice of cost-allocation bases,when tied to the cost hierarchy provide managers with greater confidence when they assign the activity and product cost numbers from the activity-based costing system.

Question 4

In the cause-and-effect relationship between allocation base and activity cost in indirect costing systems,the indirect costs of operating modeling machines ________ with molding machine-hours.
A)decrease
B)increase
C)simplify
D)subtract
E)deteriorate

Accepted Answer

In the cause-and-effect relationship between allocation base and activity cost in indirect costing systems, as the allocation base (molding machine-hours) increases, the indirect costs of operating modeling machines also increase proportionately. Therefore, the correct choice is B, increase.

Question 5

The auditor at the Yarn Shoppe needs to determine whether it is beneficial to implement a simple costing system using a single indirect-cost pool,or an ABC system.Review and compare the following information:
  
Required:
The goal of the accountant is to trace more costs as direct costs,create a homogeneous cost pool,and to implement a cost-allocation base that has a cause-and-effect relationship with costs in the cost pool.Which system should the auditor at the Yarn Shoppe implement? Why?

Accepted Answer

The answer of The auditor at the Yarn Shoppe needs...

Question 6

The more cost pools that managers develop the less allocations are necessary to calculate activity costs for each cost pool.

Accepted Answer

The more cost pools that managers develop the more allocations are necessary to calculate activity costs for each cost pool,which increases the chances of misidentifying the costs of different activity cost pools.

Question 7

The strength of the cause-and-effect relationship between the cost-allocation base and the cost pools are the same across cost pools.

Accepted Answer

The strength of the cause-and-effect relationship between the cost-allocation base and the cost pools is that it varies across cost pools.

Question 8

Identifying the cost-allocation bases defines the number of activity pools into which costs must be grouped into the ABC system.

Accepted Answer

Identifying the cost-allocation bases is a crucial step in creating an activity-based costing (ABC) system. The cost-allocation bases help determine the number and types of activity pools that must be defined to allocate costs accurately to products, services, or customers. Therefore, the statement is true.

Question 9

When incorrect cost-allocation bases are used ________.
A)activity-cost information is accurate and available
B)activity-cost information can be misleading
C)activity-cost information is most useful
D)activity-cost information is more practical
E)activity-cost information is the optimal solution

Accepted Answer

Incorrect cost-allocation bases result in misleading activity-cost information, which can lead to incorrect decision-making and inefficient resource allocation.

Question 10

Management accountants use the cost hierarchy to first calculate the total costs of each product and then they derive per-unit costs by dividing total costs by the number of units produced.

Accepted Answer

The cost hierarchy is a common tool used by management accountants to allocate costs to products or services. It involves grouping costs into different categories based on their level of traceability to the product or service being produced. By first calculating the total costs of each product and then dividing by the number of units produced, management accountants are able to derive per-unit costs for each product.

Question 11

The manager at the Petersburg Organization reported $380,000 in distribution activity.The cost-allocation base is 52,000 cubic feet of material delivered to the New Jersey plant.
Required:
Compute the amount per cubic foot of product delivered.
A)$7.30
B)$192.60
C)$328,000
D)$432,000
E)$450,000

Accepted Answer

A)[($380,000 / 52,000)] = $7.30 per cubic foot delivered

Question 12

The main costs and limitations of activity-based systems are ________.
A)measurements necessary to implement it
B)cost associated with the new technology
C)employees and manpower to implement it
D)time associated with implementing the system
E)measurements of managerial opinions and time

Accepted Answer

The answer of The main costs and limitations of activity-based...

Question 13

Which of the following is not a sign of when an activity-based costing system would likely provide the manager with the most benefits?
A)Significant amounts of indirect costs are allocated using only one or two cost pools.
B)All or most indirect costs are identified as output unit-level costs.
C)Products make diverse demands on resources because of differences in volume,process steps,batch size,or complexity.
D)Products that a company is will suite to make and sell show small profits,whereas products that a company is less suited to produce and sell show large profits.
E)Operations staff that agrees with all of the reported costs of manufacturing and marketing products and services.

Accepted Answer

Operations staff agreeing with reported costs does not necessarily indicate the need for an activity-based costing system. The other options suggest situations where an activity-based costing system would likely provide the manager with the most benefits.

Question 14

Which of the following is not true about the benefits and costs of activity-based costing systems?
A)It requires managers to estimate the cost of activity pools.
B)It requires few calculations to determine costs of products and services.
C)It requires many calculations to determine costs of products and services.
D)The activity cost rates need to be updated frequently.
E)The managers can misidentify the time spent implementing the system.

Accepted Answer

Activity-based costing systems require many calculations to determine costs of products and services, as it involves estimating the cost of activity pools and assigning them to products or services using cost drivers. The activity cost rates also need to be updated frequently, and there is a risk that managers can misidentify the time spent implementing the system. Option B is not true because activity-based costing systems require a considerable amount of calculations to accurately determine costs.

Question 15

Managers can choose the level of detail they choose to use in a costing system when they evaluate the expected costs of the system against the expected benefits that result from better decisions.

Accepted Answer

Managers have the flexibility to determine the level of detail in their costing system based on the balance of costs versus benefits.

Question 16

Why is it important for managerial accountants to identify the cost-allocation bases?

Accepted Answer

The answer of Why is it important for managerial accountants...

Question 17

All costs can be directly identified with a particular activity.

Accepted Answer

Some costs can be directly identified with a particular activity.Other costs need to be allocated across activities.

Question 18

The Chesapeake Organization reported $400,000 of indirect-cost pool in design activity.The manager reported a cost-allocation base of 110 parts per square feet.
Required:
Compute the amount of design activity per part-square foot.
A)$3,000.22
B)$3,025.25
C)$3,636.36
D)$399,890
E)$400,110

Accepted Answer

C)[($400,000 / 110)] = $3,636.36 per part-square foot

Question 19

Which of the following is not a behavioral issue that managers consider when they implement activity-based costing systems?
A)Gaining support of top management and creating a sense of urgency for the ABC effort.
B)Creating a guiding coalition of managers throughout the value chain for the ABC effort.
C)Education and training employees in ABC as a basis for employee empowerment.
D)Seeking only small short-run success as proof that the ABC implementation is yielding results.
E)Seeking only large long-run success as proof that the ABC implementation is yielding results.

Accepted Answer

Managers typically focus on achieving both short-term and long-term successes to demonstrate the effectiveness of ABC systems, rather than only seeking large long-term successes.

Question 20

In the cause-and-effect relationship between allocation base and activity cost,the distribution costs ________ with cubic feet of packages delivered.
A)decrease
B)increase
C)simplify
D)subtract
E)deteriorate

Accepted Answer

The allocation base in this scenario is cubic feet of packages delivered. As the number of cubic feet of packages delivered increases, so does the distribution cost. Therefore, the distribution costs increase with cubic feet of packages delivered.

Quiz 6: Activity-Based Costing and Activity-Based Management

The manager at the Atlantic Organization reported $225,000 in Administration Activity.The manager reported that the cost-allocation base was 32,000 in direct manufacturing-labor hours. Required: Compute the direct manufacturing labor-hours.

The Ready Corporation reported the following information: Compute the budgeted indirect cost rate for each activity.

Homogeneous cost pools and the choice of cost-allocation bases,when tied to the cost hierarchy,provide managers with less confidence when they assign the activity and product cost numbers from the activity-based costing system.

In the cause-and-effect relationship between allocation base and activity cost in indirect costing systems,the indirect costs of operating modeling machines ________ with molding machine-hours.

The more cost pools that managers develop the less allocations are necessary to calculate activity costs for each cost pool.

The strength of the cause-and-effect relationship between the cost-allocation base and the cost pools are the same across cost pools.

Identifying the cost-allocation bases defines the number of activity pools into which costs must be grouped into the ABC system.

When incorrect cost-allocation bases are used ________.

Management accountants use the cost hierarchy to first calculate the total costs of each product and then they derive per-unit costs by dividing total costs by the number of units produced.

The manager at the Petersburg Organization reported $380,000 in distribution activity.The cost-allocation base is 52,000 cubic feet of material delivered to the New Jersey plant. Required: Compute the amount per cubic foot of product delivered.

The main costs and limitations of activity-based systems are ________.

Which of the following is not a sign of when an activity-based costing system would likely provide the manager with the most benefits?

Which of the following is not true about the benefits and costs of activity-based costing systems?

Managers can choose the level of detail they choose to use in a costing system when they evaluate the expected costs of the system against the expected benefits that result from better decisions.

Why is it important for managerial accountants to identify the cost-allocation bases?

All costs can be directly identified with a particular activity.

The Chesapeake Organization reported $400,000 of indirect-cost pool in design activity.The manager reported a cost-allocation base of 110 parts per square feet. Required: Compute the amount of design activity per part-square foot.

Which of the following is not a behavioral issue that managers consider when they implement activity-based costing systems?

In the cause-and-effect relationship between allocation base and activity cost,the distribution costs ________ with cubic feet of packages delivered.