Deck 10: Activity Analysis: Costing and Management

Question 1

Activity-based costing, compared to traditional costing, increases the accuracy of cost measurement by using multiple cost allocation bases for overhead.

Answer 1

A

Question 2

Activity based costing cannot be used in service organisations.

Answer 2

B

Question 3

Activity-based costing extends the focus of costing to products and other types of cost objects.

Answer 3

A

Question 4

Unit level costs are performed for every unit of product and the cost is proportional to the number of units produced.

Question 5

Activity based costing uses one cost pool to allocate costs.

Question 6

Activity based costing attempts to trace costs more accurately to products or other cost objects.

Question 7

Direct labour was a common allocation base in traditional costing systems.

Question 8

A takeaway shop invests in a marketing campaign to advertise the launch of a new hamburger called the Monster Burger. This is an example of a product sustaining cost.

Question 9

The cost hierarchy helps identify activities and assign costs to activities in an activity based costing system.

Question 10

Allocation bases should reflect the cost object's use of resources.

Question 11

In an activity-based costing system, both organisation-sustaining and facility-sustaining activities are assumed to be unaffected by the number of customers.

Question 12

Materials handling is an example of an activity for a manufacturing organisation

Question 13

Finance costs would most likely be an example of an organisation sustaining cost in an ABC system.

Question 14

Traditional costing systems were focused on product costing for service organisations.

Question 15

Administration-sustaining is a category in the cost hierarchy in ABC.

Question 16

Activity based costing focuses on the activities that cause costs to be incurred.

Question 17

Additional costs that result from customising products to meet individual customer specifications are most likely to be customer sustaining costs.

Question 18

Both activity-based costing and traditional costing allocate direct costs to cost objects.

Question 19

Modern manufacturing organisations tend to have less reliance on direct labour resources.

Question 20

Batch level costs are determined by the number of units in the batch.

Question 21

Rework and waste are considered to be non-valued added activities.

Question 22

The first step in ABC is to identify the relevant cost object.

Question 23

No product warranties are likely to be associated with high customer service costs.

Question 24

From the perspective of the customer, value added activities increase the worth of an entity's goods or service.

Question 25

When applying ABC concepts to the determination of product costs, the total costs will be greater than under a traditional costing approach.

Question 26

Resources supplied and resources consumed are the same in organisations using activity based management.

Question 27

Activity based costing relies on information from activity based management.

Question 28

Activity based management used information from ABC to identify opportunities for improvements in profitability, efficiency and quality.

Question 29

Activity based management can be used to manage constrained resources.

Question 30

Activity based management should not be used to change required activities.

Question 31

Each cost pool in an ABC system has the same cost allocation rate.

Question 32

Each cost pool in an ABC system has at least one allocation base.

Question 33

In ABC multiple cost pools are used and each has the same cost driver.

Question 34

To identify activities in an organisation it may be necessary to use accounting records and employee estimates.

Question 35

Activity-based management and activity-based costing are the same thing.

Question 36

All customers are equally profitable to an individual entity.

Question 37

Environmental protection costs are usually outside the control of managers.

Question 38

In an ABC system costs are first assigned to cost pools, then to cost objects.

Question 39

ABC can be used to separate committed costs from flexible costs.

Question 40

Characteristics of customers with high service costs include purchasing small quantities or requiring flexible delivery times.

Question 41

The risk of mismeasurement decreases when costs are allocated instead of traced to an ABC cost pool.

Question 42

The allocation bases used in conventional costing systems are more likely to be cost drivers than those used in ABC systems.

Question 43

For small manufacturing firms, ABC systems that combine complex technology with flexible manufacturing practices are most successful.

Question 44

The accuracy of estimates used in the denominator does not affect the cost accuracy in an ABC system.

Question 45

ABC are proven to be successful in all types of businesses.

Question 46

In ABC systems value added activities are more likely to be identified and eliminated from operations.

Question 47

Accountants need to consider cost benefit trade-offs when choosing activities and cost drivers in an ABC system.

Question 48

In time-driven ABC the cost driver rate is calculated as cost per time unit of capacity multiplied by unit times of activity.

Question 49

ABC systems measure the flow of resources in an entity.

Question 50

The accuracy of ABC systems may be reduced if employees provide misleading or incorrect information.

Question 51

Successful ABC implementations are typically accompanied by top management support, links to strategy and performance evaluation.

Question 52

The costs of designing and implementing an ABC system include training and consulting fees.

Question 53

When the number of ABC cost pools increase the risk of measurement error is higher.

Question 54

As the number of activities increase in an ABC system, measurement error also tends to increase.

Question 55

There is little evidence to suggest that ABC systems improve return on assets in entities that use it.

Question 56

Time-driven ABC is considered to be more accurate and less costly than ABC.

Question 57

Time-driven ABC provides more informed decision making in regards to the best use of practical capacity.

Question 58

The benefits of ABC may be achieved through the process of collecting the required information, and embedding ABC into the costing system may be unnecessary.

Question 59

Generally the costs of ABC are higher when there are fewer activities in the businesses processes.

Question 60

It is impossible to identify the exact amount of cost associated with each activity when using allocated costs.

Question 61

Century Point is a modern business club in the inner city of Brisbane. It is owned by Silvera Property Holdings, which operates additional properties in Auckland, Christchurch and Singapore. Century Point has 6 separate areas each with corporate facilities for various membership groups. Also on premises is a gymnasium, restaurant, and pool. The business club is organised in 5 departments: front desk, housekeeping, food & beverage, and customer relations. As part of its operation, Century Point regularly incurs the following costs:
General Manager's salary
Cleaning and maintenance costs
Utility costs
Depreciation on gym equipment
Advertising
Food and beverage costs
Depreciation on restaurant equipment
Which cost listed above is most likely to be a unit level cost?

A) Food and Beverage costs
B) Utility costs
C) Housekeeping supplies
D) General manager's salary

Question 62

Multiple cost pools and cost objects is a feature of :

A) Traditional costing systems
B) Direct allocation costing systems
C) Activity based costing
D) a and b

Question 63

How are direct and overhead costs assigned to cost objects under activity based costing systems?
$\begin{array}{llcc}\underline{\text {Direct Costs}}&\underline{\text { Overhead Costs}}\end{array}$

a. $\begin{array}{ll}\text { Allocate } &\quad \text { Trace }\end{array}$


b. $\begin{array}{llcc} \text { Trace }&\quad\quad\text { Allocate }\end{array}$


c. $\begin{array}{llcc}\text { Allocate }&\quad\text { Allocate }\end{array}$


d. $\begin{array}{llcc}\text { Trace }&\quad\quad\text { Trace }\end{array}$

A) A
B) B
C) C
D) D

Question 64

The salary of the manager of Information Technology Services in a multinational organisation is:

A) an organisation-sustaining cost
B) a facility-sustaining cost
C) a customer-sustaining cost
D) a product-sustaining cost

Question 65

Century Point is a modern business club in the inner city of Brisbane. It is owned by Silvera Property Holdings, which operates additional properties in Auckland, Christchurch and Singapore. Century Point has 6 separate areas each with corporate facilities for various membership groups. Also on premises is a gymnasium, restaurant, and pool. The business club is organised in 5 departments: front desk, housekeeping, food & beverage, and customer relations. As part of its operation, Century Point regularly incurs the following costs:
General Manager's salary
Cleaning and maintenance costs
Utility costs
Depreciation on gym equipment
Advertising
Food and beverage costs
Depreciation on restaurant equipment
Administration salaries for the Silvera is best described as a(n) :

A) Facility-sustaining cost
B) Organisation-sustaining cost
C) Product-sustaining cost
D) Batch-level cost

Question 66

Compared to an activity-based costing system, a traditional costing system usually involves:

A) Fewer cost pools
B) More cost pools
C) Larger cost pools
D) a and c

Question 67

Complex operating functions cannot be incorporated into a time driven ABC system.

Question 68

Century Point is a modern business club in the inner city of Brisbane. It is owned by Silvera Property Holdings, which operates additional properties in Auckland, Christchurch and Singapore. Century Point has 6 separate areas each with corporate facilities for various membership groups. Also on premises is a gymnasium, restaurant, and pool. The business club is organised in 5 departments: front desk, housekeeping, food & beverage, and customer relations. As part of its operation, Century Point regularly incurs the following costs:
General Manager's salary
Cleaning and maintenance costs
Utility costs
Depreciation on gym equipment
Advertising
Food and beverage costs
Depreciation on restaurant equipment
From the perspective of Silvera, advertising specifically for Century Point is best described as a(n):

A) Unit-level cost
B) Customer-sustaining cost
C) Product-sustaining cost
D) Batch-level cost

Question 69

Cost accounting systems have adapted over time to accommodate changes in:

A) operational environments
B) technology
C) management reporting requirements
D) all of the above

Question 70

ABC has been found to be helpful in increasing the accuracy of overhead cost allocation in manufacturing firms.

Question 71

Activity based costing uses a cost ______________ to help identify activities and assign costs to activities.

A) allocation
B) sustaining
C) control
D) hierarchy

Question 72

Evidence suggests that when combined with other initiatives such as total quality management and just in time production methods, ABC can produce improved financial performance.

Question 73

Manufacturing firm managers generally believe that ABC provides less support for financial, operational and strategic decisions.

Question 74

Time driven ABC uses a standardized cost per time unit of capacity in its model.

Question 75

Roberts Ltd allocates overhead to cost objects using a two-stage process. From this information, we can infer that Roberts Ltd:

A) Uses a traditional costing system
B) Uses an activity-based costing system
C) Has more than one product
D) May be using either a traditional or an activity-based costing system

Question 76

Manufacturing overhead costs include:

A) Direct material costs
B) Direct labour costs
C) Sales commissions
D) Production facility costs

Question 77

Century Point is a modern business club in the inner city of Brisbane. It is owned by Silvera Property Holdings, which operates additional properties in Auckland, Christchurch and Singapore. Century Point has 6 separate areas each with corporate facilities for various membership groups. Also on premises is a gymnasium, restaurant, and pool. The business club is organised in 5 departments: front desk, housekeeping, food & beverage, and customer relations. As part of its operation, Century Point regularly incurs the following costs:
General Manager's salary
Cleaning and maintenance costs
Utility costs
Depreciation on gym equipment
Advertising
Food and beverage costs
Depreciation on restaurant equipment
If Century Point is the cost object, which of the following best describes the cleaning and maintenance costs.

A) Batch-level cost
B) Customer-sustaining cost
C) Facility-sustaining cost
D) Organisation-sustaining cost

Question 78

Which statement about costing systems is true?

A) Due to technology and mass production, labour related allocation bases are sometimes considered arbitrary.
B) Traditional costing systems use a three stage cost allocation process.
C) Labour related allocation bases should never be used in service organisations.
D) Activity based costing does not use machine hours or other volume based allocation bases.

Question 79

Century Point is a modern business club in the inner city of Brisbane. It is owned by Silvera Property Holdings, which operates additional properties in Auckland, Christchurch and Singapore. Century Point has 6 separate areas each with corporate facilities for various membership groups. Also on premises is a gymnasium, restaurant, and pool. The business club is organised in 5 departments: front desk, housekeeping, food & beverage, and customer relations. As part of its operation, Century Point regularly incurs the following costs:
General Manager's salary
Cleaning and maintenance costs
Utility costs
Depreciation on gym equipment
Advertising
Food and beverage costs
Depreciation on restaurant equipment
Century Point has been approached by a leading law firm to provide a specialised membership for their employees. Costs associated with this membership would best be described as:

A) Unit Level
B) Product Sustaining
C) Facility Sustaining
D) Customer Sustaining

Question 80

An activity is a:

A) Direct cost
B) Type of task or function performed in an organisation
C) Cost object in conventional costing systems
D) All of the above