Question 1

Activity-based costing refines the cost allocation process even more than traditional allocation costing systems.

Accepted Answer

Activity-based costing (ABC) refines the cost allocation process by identifying specific activities that drive costs and allocating those costs accordingly. This is a more detailed and accurate method than traditional allocation costing systems, which often rely on arbitrary cost drivers and broad cost pools.

Question 2

Which of the following is the most appropriate cost driver for allocating the cost of warranty services?

Accepted Answer

The number of service calls is the most appropriate cost driver for allocating the cost of warranty services because it directly relates to the level of demand for warranty services. The more service calls that are made, the more resources are used to provide warranty services. The other options (number of employees, number of materials purchased, number of machine hours) are not as directly related to the level of demand for warranty services.

Question 3

The main difference between activity-based costing and traditional costing systems is that activity-based costing uses a separate allocation base for each activity.

Accepted Answer

Activity-based costing recognizes that not all activities consume resources at the same rate and therefore uses different allocation bases (such as machine hours, number of setups, etc.) for each activity to allocate overhead costs more accurately. Traditional costing systems generally use a single allocation base (such as direct labor hours or machine hours) to allocate overhead costs to products, which may not accurately reflect the actual resource consumption of each product.

Question 4

Whirlwind Fan Company manufactures ceiling fans and uses an activity-based costing system.Each ceiling fan has 20 separate parts.The direct material cost is $90,and each ceiling fan requires 2.50 hours of machine time to manufacture.Additional information is as follows:

What is the cost of materials handling per ceiling fan? (Round any intermediate calculations and your final answer to two decimal places. )

Accepted Answer

A)Calculation of materials handling cost per unit:
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Question 5

Activity-based costing focuses on a single predetermined overhead rate for cost analysis.

Accepted Answer

Activity-based costing (ABC) does not focus on a single predetermined overhead rate. Instead, it identifies and assigns overhead costs to specific activities that consume resources, and then allocates those costs to products or services based on the amount of activity they require. This results in more accurate cost analysis and better decision-making.

Question 6

Which of the following is the last step in developing an activity-based costing system?

Accepted Answer

Allocating indirect costs to the cost object is the last step in developing an activity-based costing system. This involves assigning the total indirect costs of each activity to the cost object based on the quantity of the cost driver used by the cost object.

Question 7

Gizmo Company,a manufacturer of small appliances,had the following activities,allocated costs,and allocation bases:

The above activities are carried out at two of its regional offices.

What is the cost per hour for the account inquiry activity? (Round your answer to the nearest cent. )

Accepted Answer

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Question 8

Tranquility Company manufactures ceiling fans and uses an activity-based costing system.Each ceiling fan has 20 separate parts.The direct materials cost is $95 and each ceiling fan requires 2.50 hours of machine time to manufacture.There is no direct labor.Additional information is as follows:

What is the total manufacturing cost per ceiling fan? (Round any intermediate calculations and your final answer to the nearest cent. )

Accepted Answer

D)
Calculation of total manufacturing cost per ceiling fan:
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Question 9

Blade Breeze Company manufactures ceiling fans and uses an activity-based costing system.Each ceiling fan has 20 separate parts.The direct materials cost is $70,and each ceiling fan requires 2.50 hours of machine time to manufacture.Additional information is as follows:

What is the cost of machining per ceiling fan? (Round any intermediate calculations and your final answer to the nearest cent. )

Accepted Answer

A)
Calculation of machining cost per unit:
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Question 10

Which of the following statements is true of an activity-based costing system?

Accepted Answer

An activity-based costing system uses separate predetermined overhead allocation rates for each activity. This allows for more accuracy and precision in assigning costs to products or services. Traditional costing systems use a single predetermined overhead rate based on direct labor hours or machine hours, which can lead to cost distortions for products that require different activities or resources. Activity-based costing systems can be more complex and costly to implement, but they provide more accurate cost data for decision-making purposes.

Question 11

For each of the following activities,indicate an appropriate allocation base:

Accepted Answer

The answer of For each of the following activities,indicate an...

Question 12

Flannery Company,a manufacturer of small appliances,had the following activities,allocated costs,and allocation bases:

The above activities are carried out at two of its regional offices.

What is the cost per letter for the correspondence activity? (Round your answer to the nearest cent. )

Accepted Answer

A)
Cost of correspondence:
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Question 13

Room Chill Company manufactures ceiling fans and uses an activity-based costing system.Each ceiling fan has 20 separate parts.The direct materials cost is $85,and each ceiling fan requires 2.50 hours of machine time to manufacture.Additional information is as follows:

What is the cost of assembling per ceiling fan? (Round any intermediate calculations and your final answer to the nearest cent. )

Accepted Answer

B)
Calculation of assembly cost per unit:
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Question 14

Hernandez Company has the following activities in its manufacturing process:
  
Calculate the overhead rate for each activity.

Accepted Answer

The answer of Hernandez Company has the following activities in...

Question 15

Galley Company,a manufacturer of small kitchen appliances,had the following activities,allocated costs,and allocation bases:

The above activities are carried out at two of its regional offices.

What is the cost per line for the account billing activity? (Round your answer to the nearest cent. )

Accepted Answer

A)Cost of account billing:
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Question 16

Traditional costing systems employ multiple allocation rates for manufacturing overhead costs,but an activity-based costing system uses only one rate for allocating manufacturing overhead costs.

Accepted Answer

Activity-based costing systems use multiple cost pools and allocation rates to allocate manufacturing overhead costs based on the activities that drive those costs. This allows for a more accurate and precise allocation of costs compared to traditional costing systems that may use broad allocation rates across all products or departments.

Question 17

Goldberg Company,a manufacturer of small appliances,had the following activities,allocated costs,and allocation bases:

The above activities are carried out at two of its regional offices.

What is the cost per account for the account verification activity? (Round your answer to the nearest cent. )

Accepted Answer

D)Cost of account verification:
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Question 18

For a pharmaceutical company,the most suitable base for allocating research and development costs to the finished products would be the ________.

Accepted Answer

Since the main focus of a pharmaceutical company is to develop new and innovative products, the number of new patents filed would be the most suitable base for allocating research and development costs to the finished products. This measure captures the extent of innovation and R&D investments made by the company, which directly contributes to the value of its products. Other measures such as direct labor hours, cost of raw materials purchased, and number of set-ups do not capture the level of R&D investment and innovation involved in the product development process.

Question 19

In ABC systems,the best allocation base is the primary factor that causes the cost to increase or decrease.

Accepted Answer

In ABC systems, the best allocation base is the primary factor that causes the cost to increase or decrease as it reflects the activities that drive the costs.

Question 20

The first step in developing an activity-based costing system is to identify the activities that will be used to allocate the manufacturing overhead costs.

Accepted Answer

This is correct, the first step in developing an activity-based costing system is to identify the activities that will be used to allocate the manufacturing overhead costs.

Quiz 19: Cost Management Systems: Activity-Based, just-In-Time,

Activity-based costing refines the cost allocation process even more than traditional allocation costing systems.

Which of the following is the most appropriate cost driver for allocating the cost of warranty services?

The main difference between activity-based costing and traditional costing systems is that activity-based costing uses a separate allocation base for each activity.

Activity-based costing focuses on a single predetermined overhead rate for cost analysis.

Which of the following is the last step in developing an activity-based costing system?

Gizmo Company,a manufacturer of small appliances,had the following activities,allocated costs,and allocation bases: The above activities are carried out at two of its regional offices. What is the cost per hour for the account inquiry activity? (Round your answer to the nearest cent. )

Which of the following statements is true of an activity-based costing system?

For each of the following activities,indicate an appropriate allocation base:

Flannery Company,a manufacturer of small appliances,had the following activities,allocated costs,and allocation bases: The above activities are carried out at two of its regional offices. What is the cost per letter for the correspondence activity? (Round your answer to the nearest cent. )

Hernandez Company has the following activities in its manufacturing process: Calculate the overhead rate for each activity.

Galley Company,a manufacturer of small kitchen appliances,had the following activities,allocated costs,and allocation bases: The above activities are carried out at two of its regional offices. What is the cost per line for the account billing activity? (Round your answer to the nearest cent. )

Traditional costing systems employ multiple allocation rates for manufacturing overhead costs,but an activity-based costing system uses only one rate for allocating manufacturing overhead costs.

Goldberg Company,a manufacturer of small appliances,had the following activities,allocated costs,and allocation bases: The above activities are carried out at two of its regional offices. What is the cost per account for the account verification activity? (Round your answer to the nearest cent. )

For a pharmaceutical company,the most suitable base for allocating research and development costs to the finished products would be the ________.

In ABC systems,the best allocation base is the primary factor that causes the cost to increase or decrease.

The first step in developing an activity-based costing system is to identify the activities that will be used to allocate the manufacturing overhead costs.