Question 1

In activity-based costing (ABC), wages paid to an assembly-line worker would most likely be classified as:
A) overhead.
B) a product-level cost.
C) direct labor.
D) a facility-level cost.

Accepted Answer

Wages paid to an assembly-line worker would be directly attributed to the production of the specific product being assembled and, therefore, would be considered a direct labor cost. Overhead, product-level costs, and facility-level costs are all indirect costs, which are not directly tied to the production of a specific product.

Question 2

Which of the following would most likely be a batch-levelcost?
A) Factory rent
B) Quality control
C) Energy costs for factory machinery
D) Research and development costs for a new product line

Accepted Answer

Quality control is typically a batch-level cost as it is incurred for each batch produced. Factory rent and energy costs for machinery are more likely to be considered facility-level costs, and research and development costs are often considered product-level costs.

Question 3

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs would most likely be a product-level cost?
A) A package product design cost for a new product line
B) A machine setup cost
C) Depreciation on the factory building
D) Energy costs for factory machinery

Accepted Answer

A package product design cost for a new product line is a product-level cost as it directly relates to the development of a specific product line. Machine setup costs, depreciation on the factory building, and energy costs for factory machinery are all overhead costs and not specific to any one particular product.

Question 4

Troxler Inc. produces various types of floor rugs with many different designs. They typically produce at least 200 rugs with a single machine setup. A cost incurred to sustain the overall manufacturing process is called a(n):
A) product-level cost.
B) batch-level cost.
C) unit-level cost.
D) facility-level cost.

Accepted Answer

Facility-level costs are incurred to sustain the overall manufacturing process and are not dependent on the number of units, batches, or products produced.

Question 5

Activity-based costing is a method of cost allocation that is useful for assigning ____ costs to products or services.
A) direct materials
B) direct labor
C) overhead
D) direct materials and direct labor

Accepted Answer

Activity-based costing is designed to allocate indirect or overhead costs to products or services based on the activities that contribute to those costs. This method is more accurate than traditional methods that allocate overhead based on a single predetermined rate, as it recognizes the diverse activities that can generate overhead costs. Direct materials and direct labor costs are typically assigned using other methods, such as job costing or process costing.

Question 6

____ are procedures or processes that cause work to be accomplished.
A) Unit-level costs
B) Overhead costs
C) Activities
D) Batch-level costs

Accepted Answer

Activities are procedures or processes that cause work to be accomplished.

Question 7

Troxler Inc. produces various types of floor rugs with many different designs. They typically produce at least 200 rugs with a single machine setup. A cost incurred each time a new rug design is developed is called a(n):
A) product-level cost.
B) batch-level cost.
C) unit-level cost.
D) facility-level cost.

Accepted Answer

Product-level costs are incurred for activities related to specific products, such as developing a new rug design.

Question 8

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs wouldmost likely be a facility-level cost?
A) A package product design cost for a new product line
B) A machine setup cost
C) Depreciation on the factory building
D) Utility costs for factory machinery

Accepted Answer

Facility-level costs are costs incurred to support the entire production process or facility. Depreciation on the factory building is a facility-level cost as it is incurred to support the production process as a whole. A package product design cost (A) is a product-level cost, as it is specific to one product. Machine setup cost (B) is a batch-level cost as it is incurred each time a batch of product is manufactured. Utility costs for factory machinery (D) are a unit-level cost, as they are incurred for each unit of product produced.

Question 9

Troxler Inc. produces various types of floor rugs with many different designs. They typically produce at least 200 rugs with a single machine setup. A cost incurred each time a machine is set up is called a(n):
A) product-level cost.
B) batch-level cost.
C) unit-level cost.
D) facility-level cost.

Accepted Answer

The cost incurred each time a machine is set up is called a batch-level cost.

Question 10

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs would most likely be a unit-level cost?
A) A package product design cost
B) A machine setup cost
C) Depreciation on the factory building
D) Energy costs for factory machinery

Accepted Answer

Unit-level costs are those that are directly tied to the production of each unit. Energy costs for factory machinery are a prime example of a unit-level cost since the energy is consumed with each unit produced. The other options do not fit this description as package product design costs are typically incurred before the production process, machine setup costs may apply to multiple units, and depreciation on the factory building is a fixed cost that doesn't change based on the number of units produced.

Question 11

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs would most likely be a batch-level cost?
A) A package product design cost for a new product line
B) A machine setup cost
C) Depreciation on the factory building
D) Energy costs for factory machinery

Accepted Answer

A machine setup cost is a classic example of a batch-level cost because it occurs every time a new batch or production run is started. This cost only applies to a specific batch and not to the entire production process. Choices A, C, and D are all examples of other types of costs. A package product design cost is a product-level cost, depreciation on the factory building is a facility-level cost, and energy costs for factory machinery are unit-level costs.

Question 12

Which of the following would most likely be a product-level cost?
A) Salaries related to purchasing and receiving
B) Quality control costs
C) Energy costs for factory machinery
D) Research and development costs for a new product line

Accepted Answer

Research and development costs for a new product line are directly associated with the creation and improvement of a specific product, making them a product-level cost.

Question 13

Which of the following statements associated with traditional overhead allocation is true?
A) A traditional overhead allocation method is the most accurate in automated environments with diverse products.
B) A traditional overhead allocation method can also be referred to as activity-based costing.
C) A traditional overhead allocation method provides the most accurate product cost information.
D) A traditional overhead allocation method usually uses one or two volume-based cost drivers.

Accepted Answer

Traditional overhead allocation methods typically use volume-based cost drivers, such as direct labor hours or machine hours, to allocate overhead costs to products. While they may be simple to implement, they can result in inaccurate product cost information, particularly in more complex and diverse production environments. Activity-based costing (ABC) is a more accurate method of overhead allocation that considers multiple cost drivers and activities that consume resources. Therefore, option B - "A traditional overhead allocation method can also be referred to as activity-based costing" is incorrect. Option A - "A traditional overhead allocation method is the most accurate in automated environments with diverse products" and option C - "A traditional overhead allocation method provides the most accurate product cost information" are incorrect because traditional overhead allocation methods are less accurate compared to activity-based costing.

Question 14

Which of the following types of costs are usually not allocated to products?
A) Unit-level costs
B) Batch-level costs
C) Facility-level costs
D) Product-level costs

Accepted Answer

Facility-level costs, also known as facility-sustaining costs, are usually not allocated to products as they are costs incurred to maintain a facility's overall functioning and are not directly related to producing a specific product. Examples of such costs are rent, property taxes, and facility maintenance expenses. In contrast, unit-level costs, batch-level costs, and product-level costs are all types of costs that can be allocated to products.

Question 15

As companies experience a shift from labor-intensive operations to automated operations, which of the following costs becomes more difficult to trace to products?
A) Administrative costs
B) Direct labor costs
C) Direct material costs
D) Overhead costs

Accepted Answer

As companies automate, overhead costs, which include expenses like machinery maintenance and utilities, become more complex and harder to allocate directly to specific products compared to direct labor and materials.

Question 16

Troxler Inc. produces various types of floor rugs with many different designs. They typically produce at least 200 rugs with a single machine setup. A cost incurred every time an individual rug is produced is called a(n):
A) product-level cost.
B) batch-level cost.
C) unit-level cost.
D) facility-level cost.

Accepted Answer

Unit-level costs are costs that are incurred for every unit produced. Since the cost mentioned is incurred every time an individual rug is produced, it is considered a unit-level cost.

Question 17

Traditional overhead allocation methods as opposed to activity-based allocation methods work best when:
A) there are many different volume-based cost drivers.
B) most costs are unit-level costs.
C) overhead can be estimated.
D) most costs are facility-level costs.

Accepted Answer

Traditional overhead allocation methods work best when the majority of costs are unit-level costs. This is because the traditional method allocates overhead costs to products based on a single volume-based cost driver, typically machine hours or labor hours. When the majority of costs are unit-level costs, the traditional method provides a reasonably accurate estimate of the cost of producing each unit. However, when costs are primarily driven by activities, facilities, or resources other than labor or machines, activity-based allocation methods may provide a more accurate allocation of overhead costs.

Question 18

Which of the following would most likely be a facility-level cost?
A) Depreciation on factory equipment
B) Depreciation on factory building
C) Depreciation of engineering equipment
D) Depreciation of setup equipment

Accepted Answer

Depreciation on factory building is a facility-level cost because it pertains to the building where the entire facility operates, which typically includes the production processes and other related operations. The other options, such as A, C, and D, pertain to specific types of equipment or tools that may be used within the facility, but they do not necessarily relate to the entire facility. Thus, they are not considered facility-level costs.

Question 19

Which of the following statements is true regarding activity-based costing (ABC)?
A) It is based on the concept that a single cost driver can drive all overhead costs.
B) It is based on the concept that activities drive overhead costs.
C) It is based on the concept that unit-level costs drive all overhead costs.
D) It is based on the concept that either the number of direct labor or machine hours incurred drives all overhead costs.

Accepted Answer

Activity-based costing (ABC) is based on the concept that activities (including non-unit-level activities) drive overhead costs. It seeks to allocate overhead costs more accurately by identifying the specific activities that are responsible for causing overhead costs and then tracing these costs to particular products, services, or customers based on the amount of activity each uses. ABC addresses the limitations of traditional cost accounting, which often over or under allocates overhead costs because it assumes all overhead costs are caused by a single cost driver (such as direct labor hours) and ignores the fact that different products or services may consume overhead resources at different rates.

Question 20

Which of the following would most likely be a unit-level cost?
A) Factory insurance
B) Quality control
C) Lubricants used on factory machinery
D) Research and development costs for a new product line

Accepted Answer

Lubricants used on factory machinery would most likely be a unit-level cost because it is directly related to the production of a specific unit or product.

Quiz 4: Activity-Based Costing

In activity-based costing (ABC) , wages paid to an assembly-line worker would most likely be classified as:

Which of the following would most likely be a batch-levelcost?

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs would most likely be a product-level cost?

Troxler Inc. produces various types of floor rugs with many different designs. They typically produce at least 200 rugs with a single machine setup. A cost incurred to sustain the overall manufacturing process is called a(n) :

Activity-based costing is a method of cost allocation that is useful for assigning ____ costs to products or services.

____ are procedures or processes that cause work to be accomplished.

Troxler Inc. produces various types of floor rugs with many different designs. They typically produce at least 200 rugs with a single machine setup. A cost incurred each time a new rug design is developed is called a(n) :

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs wouldmost likely be a facility-level cost?

Troxler Inc. produces various types of floor rugs with many different designs. They typically produce at least 200 rugs with a single machine setup. A cost incurred each time a machine is set up is called a(n) :

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs would most likely be a unit-level cost?

Herndon Brothers Inc. produces a variety of "all natural" household cleaning supplies that it manufactures and distributes to various grocery stores along the west coast. Which of the following types of costs would most likely be a batch-level cost?

Which of the following would most likely be a product-level cost?

Which of the following statements associated with traditional overhead allocation is true?

Which of the following types of costs are usually not allocated to products?

As companies experience a shift from labor-intensive operations to automated operations, which of the following costs becomes more difficult to trace to products?

Troxler Inc. produces various types of floor rugs with many different designs. They typically produce at least 200 rugs with a single machine setup. A cost incurred every time an individual rug is produced is called a(n) :

Traditional overhead allocation methods as opposed to activity-based allocation methods work best when:

Which of the following would most likely be a facility-level cost?

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

Which of the following would most likely be a unit-level cost?