Question 1

A four-part cost hierarchy includes
A)market-sustaining costs.
B)research and development costs.
C)manufacturing-level costs.
D)output unit-level costs.
E)period costs.

Accepted Answer

The answer of A four-part cost hierarchy includes
A)market-sustaining costs.
B)research and...

Question 2

A costing system which focuses on individual event or tasks as the cost pool to be allocated is called
A)activity-based costing.
B)direct costing.
C)job costing.
D)process costing.
E)normal costing.

Accepted Answer

The answer of A costing system which focuses on individual...

Question 3

When using activity-based costing in a manufacturing setting,its distinctive feature is the focus on
A)activities as the fundamental cost objects.
B)minimizing the number of journal entries related to the manufacturing process.
C)minimizing manufacturing costs.
D)materials handling.
E)materials sorting.

Accepted Answer

Activity-based costing focuses on activities as the fundamental cost objects, meaning that costs are assigned to specific activities that contribute to the production process. This allows for a more accurate and detailed analysis of the costs of production, as opposed to simply allocating costs based on direct labor or machine hours.

Question 4

In a cost system that doe not consider the cost hierarchy unit-level measures can distort product costing because the demand for overhead resources may be driven by batch-level or product-sustaining activities.

Accepted Answer

Without considering the cost hierarchy, costs may be attributed to products based on their direct materials and labor costs only, neglecting the impact of overhead resources required for batch-level or product-sustaining activities. This can lead to inaccurate product costing and pricing decisions.

Question 5

If the cost of an activity increases with the quantity of items used,it is which of the following?
A)market-sustaining cost
B)output unit-level cost
C)batch-level cost
D)product-sustaining (service-sustaining)costs
E)facility-sustaining cost

Accepted Answer

This type of cost is known as output unit-level cost, which increases with the quantity of items produced or used. Market-sustaining cost, batch-level cost, product-sustaining (service-sustaining) costs, and facility-sustaining cost are not relevant to this description.

Question 6

Which of the following is NOT an activity under an ABC system?
A)an event
B)a task
C)a unit of work
D)a process
E)indirect cost

Accepted Answer

An indirect cost is a cost that cannot be directly traced to a specific product or service and is typically allocated based on a predetermined allocation rate. It is not considered an activity under an ABC system. The other options (event, task, unit of work, process) are all examples of activities that could be used in an ABC system.

Question 7

Using multiple unit-level cost drivers generally constitutes an effective activity-based cost system.

Accepted Answer

The answer of Using multiple unit-level cost drivers generally constitutes...

Question 8

If the cost of an activity increases with the number of purchase orders placed,rather than to the quantity of items purchased,it is which of the following?
A)market-sustaining cost
B)output unit-level cost
C)facility-sustaining cost
D)product-sustaining (service-sustaining)costs
E)batch-level cost

Accepted Answer

The cost that increases as the number of purchase orders is placed is a batch-level cost, which is incurred each time a batch of orders is processed. The other options do not match the scenario described in the question.

Question 9

In an activity-cost pool
A)a measure of the activity performed serves as the cost allocation base.
B)the costs have a cause-and-effect relationship with the cost-allocation base for that activity.
C)the cost pools are homogeneous over time.
D)costs in a cost pool can always be traced directly to products.
E)each pool pertains to a narrow and focused set of costs.

Accepted Answer

The answer of In an activity-cost pool
A)a measure of the...

Question 10

Which of the following statements is TRUE regarding activity-based costing systems?
A)ABC systems accumulate overhead costs by departments.
B)ABC costing systems are less complex and,therefore,less costly than traditional systems.
C)ABC costing systems can be used in manufacturing firms only.
D)ABC costing systems have multiple indirect cost allocation rates for each activity.
E)ABC systems provide a greater level of detail to understand how an organization uses its common inputs differently for distinct products.

Accepted Answer

ABC systems provide a greater level of detail to understand how an organization uses its common inputs differently for distinct products. This option is the only one that accurately describes one of the true statements regarding activity-based costing systems. The other options are either false or do not accurately describe ABC costing systems.

Question 11

Which of the following is NOT an activity under an ABC system?
A)designing products
B)engineering
C)setting up equipment
D)distributing products
E)customers

Accepted Answer

"Customers" is not an activity that can be assigned a cost in an ABC system. The other choices all involve activities that consume resources and can thus be assigned costs.

Question 12

Output unit-level costs cannot be determined unless you know how many units are in a given batch.

Accepted Answer

Output unit-level costs can be calculated by dividing the total cost of producing a batch by the number of units in that batch. However, the statement in the question suggests that unit-level costs cannot be determined without knowing the batch size, which is not true.

Question 13

Which of the following is relevant concerning cost hierarchies?
A)activity levels
B)determining whether costs are variable or fixed
C)costing on the value chain
D)separating inventoriable costs from period costs
E)minimum cost required for a particular process

Accepted Answer

The answer of Which of the following is relevant concerning...

Question 14

Engineering costs incurred to change product designs are which of the following?
A)market-sustaining costs
B)output unit-level costs
C)batch-level costs
D)product-sustaining (service-sustaining)costs
E)facility-sustaining costs

Accepted Answer

Engineering costs incurred to change product designs are considered product-sustaining costs, as they are necessary to support the continued production of a specific product or service.

Question 15

Which of the following statements does not represent the logic of an ABC system?
A)Activity cost allocation bases are the activity cost drivers of costs in the activity cost pools.
B)A strong cause-and-effect relationship between overhead costs and the cost allocation base is essential.
C)The requirement to measure cost allocation bases of different activities used by different products is essential.
D)The overhead used by different products is not important,as it is a fixed cost.
E)A greater level of detailed information concerning costs will help organizations be more efficient.

Accepted Answer

The statement "The overhead used by different products is not important, as it is a fixed cost" does not represent the logic of an ABC system, as ABC systems focus on allocating overhead costs to products based on the activities that consume those costs, rather than simply treating overhead as a fixed cost.

Question 16

Which of the following statements about activity-based costing is TRUE?
A)It does not affect cost control.
B)Indirect cost allocation bases are unlikely to be cost drivers.
C)It provides less information than traditional cost systems.
D)It provides similar results to traditional costing when one activity creates a substantial amount of total cost.
E)It provides similar results to traditional costing when different products use resources from different activities in different proportions.

Accepted Answer

The answer of Which of the following statements about activity-based...

Question 17

A cost accounting system should be revised when
A)the existing cost accounting system provides information that is representative of operations.
B)the existing cost accounting system could be updated,just to keep ahead.
C)the existing cost accounting system does not produce information that reflects the way various products use scarce resources.
D)management wants to change the system,even though the information is relevant and correct.
E)a new system would be easier to understand but would not be reliable.

Accepted Answer

A cost accounting system should be revised when it does not produce information that reflects the way various products use scarce resources. In this case, the existing system is not providing relevant information and needs to be updated in order to accurately reflect the costs associated with producing each product. The other options are not valid reasons for revising a cost accounting system.

Question 18

Resources sacrificed on activities undertaken to support product lines are which of the following?
A)market-sustaining costs
B)output unit-level costs
C)batch-level costs
D)facility-sustaining costs
E)product-sustaining (service-sustaining)costs

Accepted Answer

Resources sacrificed on activities undertaken to support product lines are known as product-sustaining costs, also referred to as service-sustaining costs. These costs are incurred to support the ongoing production and delivery of a specific product or service. Examples include advertising and promoting a product, maintaining a separate customer support team for a product, and developing specialized training programs for a product.

Question 19

Activity-based costing is a technique to improve the reliability of cost assignment
A)to work-in-process inventory.
B)from direct cost pools to distinct types of outputs.
C)from both direct and indirect cost pools to distinct types of outputs.
D)to all types of inventory.
E)from indirect cost pools to distinct types of outputs.

Accepted Answer

The answer of Activity-based costing is a technique to improve...

Question 20

If the cost of an activity increases with each hour of machine time,it is which of the following?
A)market-sustaining cost
B)output unit-level cost
C)batch-level cost
D)product-sustaining (service-sustaining)costs
E)facility-sustaining cost

Accepted Answer

The description matches the characteristics of an output unit-level cost, which increases as more units are produced or as machine time increases. It is not a market-sustaining cost as it does not relate to maintaining the market or distribution channels. It is not a batch-level cost as the cost does not change based on the number of batches produced. It is not a product-sustaining or service-sustaining cost as those costs relate to maintaining the product or service over its entire life cycle. It is not a facility-sustaining cost as it does not relate to maintaining the overall facility or infrastructure.

Quiz 5: Activity-Based Costing and Management

A four-part cost hierarchy includes

A costing system which focuses on individual event or tasks as the cost pool to be allocated is called

When using activity-based costing in a manufacturing setting,its distinctive feature is the focus on

In a cost system that doe not consider the cost hierarchy unit-level measures can distort product costing because the demand for overhead resources may be driven by batch-level or product-sustaining activities.

If the cost of an activity increases with the quantity of items used,it is which of the following?

Which of the following is NOT an activity under an ABC system?

Using multiple unit-level cost drivers generally constitutes an effective activity-based cost system.

If the cost of an activity increases with the number of purchase orders placed,rather than to the quantity of items purchased,it is which of the following?

In an activity-cost pool

Which of the following statements is TRUE regarding activity-based costing systems?

Which of the following is NOT an activity under an ABC system?

Output unit-level costs cannot be determined unless you know how many units are in a given batch.

Which of the following is relevant concerning cost hierarchies?

Engineering costs incurred to change product designs are which of the following?

Which of the following statements does not represent the logic of an ABC system?

Which of the following statements about activity-based costing is TRUE?

A cost accounting system should be revised when

Resources sacrificed on activities undertaken to support product lines are which of the following?

Activity-based costing is a technique to improve the reliability of cost assignment

If the cost of an activity increases with each hour of machine time,it is which of the following?