Deck 5: Activity-Based Costing and Management

Question 1

Product diversity means that products consume overhead activities in systematically different proportions.

Answer 1

True

Question 2

Activity analysis is the effort expended to identify those factors that are the root causes of activity costs.

Answer 2

False

Question 3

Resource drivers are factors that measure the consumption of resources by product.

Answer 3

False

Question 4

A work distribution matrix is derived from an interview or a written survey.

Question 5

The consumption ratio is the amount of each activity consumed by a product.

Question 6

One of the three major dimensions of measuring activity performance is quality.

Question 7

Activity inputs are the resources consumed by the activity in producing its output.

Question 8

One of the questions answered by activity analysis should be "What activities are done?"

Question 9

An activity-based costing system first assigns costs to activities and then to cost objects.

Question 10

A volume-based costing system emphasizes direct tracing and driver tracing.

Question 11

Factors that measure the consumption of activities by products and other cost objects are value-added costs.

Question 12

Discretionary activities are necessary to comply with legal mandates.

Question 13

The value-added standard is the waste-free component of the value-added activity.

Question 14

To calculate an activity rate, the practical capacity of each activity must be determined.

Question 15

An activity dictionary lists the activities in an organization along with some critical activity attributes.

Question 16

Unit-level activities are performed each time a unit is produced.

Question 17

Activities necessary to remain in business are called valuable activities.

Question 18

Activity drivers should be classified as either unit-level or nonunit-level.

Question 19

Costs that are caused by the inefficient performance of value-added activities are value added costs.

Question 20

Activity attributes are financial and nonfinancial information items that describe individual activities.

Question 21

_________________________ assigns costs to activities and then costs to cost objects.

Question 22

____________________ are financial and nonfinancial information items that describe individual activities.

Question 23

When a new product can be designed to use components already being used by other products this is known as ________________.

Question 24

Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.

Question 25

_____________________ are factors that measure the consumption of activities by products and other cost objects and can be classified as either unit-level or nonunit-level.

Question 26

The ___________________ is calculated by taking the amount of the activity driver per product and dividing it by total driver quantity.

Question 27

______________ is concerned with doing the activity right the first time it is performed.

Question 28

A defective product is one that does conform to specifications.

Question 29

When products consume overhead activities in systematically different proportion due to such things as product size, product complexity, setup time and size of batches this is known as _________________.

Question 30

___________________ are performed each time a unit is produced.

Question 31

A focus on cost reduction instead of cost assignment and emphasizing the maximization of systemwide performance is known as _______________________.

Question 32

A company will sometimes use a ____________________ which identifies the amount of labor consumed by each activity.

Question 33

Velocity is the length of time that it takes to produce a unit of output from the time raw materials are received until the good is delivered.

Question 34

Activity elimination focuses on nonvalue-added activities.

Question 35

One way to improve efficiency is to produce higher activity output with higher cost.

Question 36

Tracing ________________ costs to suppliers can enable managers to choose the true low-cost supplier.

Question 37

Accurate ___________________ allow managers to make better pricing decisions, customer-mix decisions, and other customer-related decisions that improve profitability.

Question 38

_________________________ is a system-wide, integrated approach that focuses management's attention on activities with the objective of improving customer value and profit achieved by providing this value.

Question 39

Zero defects means that most products conform to specifications.

Question 40

A ____________________ is classified as value-added provided it simultaneously meets three conditions.

Question 41

Witness Manufacturing produces two types of cameras: 35mm and digital.The cameras are produced using one continuous process.Four activities have been identified: machining, setups, receiving, and packing.Resource drivers have been used to assign costs to each activity.The overhead activities, their costs, and the other related data are as follows:

- Calculate the consumption ratio for setups on the digital cameras.(Note: Round answer to two decimal places.)

A) 0.56
B) 0.80
C) 0.45
D) 0.69
E) 0.50

Question 42

Alpha Technology produces two products: a high end laptop under the label Excellent Laptops and an inexpensive desktop under the label Outstanding Computers.The two products use two overhead activities, with the following costs:
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production.



- Calculate the overhead cost per unit for Excellent Laptops using a plantwide rate based on direct labor costs.(Note: Round answer to two decimal places.)

A) $9.63 per laptop
B) $22.45 per laptop
C) $4.25 per laptop
D) $7.22 per laptop
E) $7.50 per laptop

Question 43

Alpha Technology produces two products: a high end laptop under the label Excellent Laptops and an inexpensive desktop under the label Outstanding Computers.The two products use two overhead activities, with the following costs:
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production.



-Calculate Outstanding Computer's consumption ratio for setup hours.(Note: Round answer to two decimal places.)

A) 0.48
B) 0.45
C) 0.90
D) 0.25
E) 0.75

Question 44

Activity drivers can be classified as either ____ or ____.

A) unit-level; nonunit-level
B) exact; inexact
C) inputs; outputs
D) right; wrong

Question 45

____ is present whenever products have different consumption ratios for different overhead activities.

A) Environmental costs
B) Activity sharing
C) Product diversity
D) Activity inputs
E) Control costs

Question 46

Rizzo Manufacturing produces two types of cameras: 35mm and digital.The cameras are produced using one continuous process.Four activities have been identified: machining, setups, receiving, and packing.Resource drivers have been used to assign costs to each activity.The overhead activities, their costs, and the other related data are as follows:
Calculate an activity rate for packing based on packing orders.

A) $9.00 per packing order
B) $10.00 per packing order
C) $8.00 per packing order
D) $60.00 per packing order
E) $1.20 per packing order

Question 47

Activities necessary to remain in business are known as _____________________.

Question 48

Ringing Solutions produces 12,000 units of a cell phone.The production requires prime costs of $400,000, uses 2,500 machine hours, and takes 1,800 setup hours.The activity rates are $50 per machine hour and $130 per setup hour.What is the unit cost of a cell phone? (Note: Round answer to two decimal places.)

A) $60.15
B) $40.35
C) $63.25
D) $100.65
E) $30.55

Question 49

Alpha Technology produces two products: a high end laptop under the label Excellent Laptops and an inexpensive desktop under the label Outstanding Computers.The two products use two overhead activities, with the following costs:
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production.



- Calculate the overhead cost per unit for each of Outstanding Computer's computer using overhead rates based on machine hours and setup hours.(Note: Round answer to two decimal places.)

A) $6.10 per unit
B) $3.99 per unit
C) $5.75 per unit
D) $4.88 per unit

Question 50

Setups, material handling, and inspection are all possible examples of

A) product diversity.
B) unit level overhead activities.
C) nonunit-level overhead activities.
D) sustainable development.
E) None of these.

Question 51

Witness Manufacturing produces two types of cameras: 35mm and digital.The cameras are produced using one continuous process.Four activities have been identified: machining, setups, receiving, and packing.Resource drivers have been used to assign costs to each activity.The overhead activities, their costs, and the other related data are as follows:

- Using an activity rate for receiving based on receiving orders, assign receiving costs to the 35mm cameras.

A) $1,802
B) $1,605
C) $2,001
D) $1,209
E) $4,007

Question 52

Using only unit-based activity drivers to assign nonunit-related overhead costs can cause

A) product diversity.
B) distorted product costs.
C) efficiency.
D) activity sharing.
E) None of these.

Question 53

A(n) ____ ratio measures the proportion of an activity consumed by a product.

A) production
B) consumption
C) efficiency
D) quality
E) usage

Question 54

The activity driver for the shipping activity of Withstand Inc.is the number of orders shipped.Product A uses 30 orders, and Product B uses 70 orders.Calculate the consumption ratios for each product.(Note: Round answer to two decimal places.)

A) 0.25; 0.75
B) 0.65; 0.35
C) 0.30; 0.70
D) 0.20; 0.80

Question 55

A costing system that first assigns costs to activities and then to products is

A) activity-based costing.
B) job-order costing.
C) activity-based management.
D) volume based costing.
E) nonunit-level costing.

Question 56

Receiving provides 12,000 receiving hours and costs $60,000 per year.What is the activity rate for receiving?

A) $14 per receiving hour
B) $5 per receiving hour
C) $4 per receiving hour
D) $4.50 per receiving hour
E) cannot be determined from this information

Question 57

The moving activity of Alpha Inc.has an expected cost of $200,000.Expected direct labor hours are 50,000, and the expected number of moves is 90,000.What is the best activity rate for moving? (Note: Round answer to two decimal places.)

A) $4.50 per move
B) $1.33 per move
C) $4.30 per move
D) $2.22 per move

Question 58

A list of activities accompanied by information that describes each activity is an activity ____.

A) manifesto
B) diary
C) journal
D) dictionary
E) note

Question 59

____ costs in many firms represent a much higher percentage of product costs than direct labor.

A) Nonvalue-added
B) Failure
C) Overhead
D) Appraisal
E) Control

Question 60

Witness Manufacturing produces two types of cameras: 35mm and digital.The cameras are produced using one continuous process.Four activities have been identified: machining, setups, receiving, and packing.Resource drivers have been used to assign costs to each activity.The overhead activities, their costs, and the other related data are as follows:

-
Calculate the total overhead assigned to the 35mm cameras, using only machine hours to calculate a plantwide rate.(Note: Round the plantwide rate to two decimal places.)

A) $132,667
B) $72,333
C) $60,200
D) $75,130
E) $80,040

Question 61

The receiving department of Owen has three activities: unloading, counting goods, and inspecting.Unloading requires a forklift that is leased for $15,000 per year.The forklift is used only for unloading.The fuel for the forklift is $2,000 per year.Inspection requires special testing equipment that has a depreciation of $500 per year and an operating cost of $1,000 per year.Receiving has four employees who each have an average salary of $35,000 per year.The work distribution matrix for the receiving personnel is as follows:

-
Calculate the cost for inspection.

A) $56,000
B) $54,000
C) $50,500
D) $52,000

Question 62

Workshape Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors.The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders.Both types of distributors purchase the same product.The customer activities and costs for the previous quarter are as follows:

- Calculate the activity rate for servicing goods.(Note: Round answer to two decimal places.)

A) $1,089.25 per service call
B) $750.10 per service call
C) $680.50 per service call
D) $1,000.54 per service call
E) $672.41 per service call

Question 63

To calculate an activity rate, the ____ of each activity must be determined.

A) practical capacity
B) expenditure level
C) processing ratio
D) value

Question 64

Rollo Company has developed cost formulas for the drivers of the following production activities:

The budgeted inspection cost for 20 setups is

A) $175,860.
B) $40,000.
C) $34,000.
D) $30,000.

Question 65

Workshape Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors.The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders.Both types of distributors purchase the same product.The customer activities and costs for the previous quarter are as follows:

- Calculate the total customer cost for the JIT distributors.(Note: Round the activity rates and activity costs to the nearest dollar.)

A) $487,560
B) $362,890
C) $612,370
D) $250,020
E) $448,730

Question 66

Which of the following is not a possible source of customer diversity?

A) sales support
B) order frequency
C) delivery frequency
D) geographic distance
E) Pricing

Question 67

The receiving department of Owen has three activities: unloading, counting goods, and inspecting.Unloading requires a forklift that is leased for $15,000 per year.The forklift is used only for unloading.The fuel for the forklift is $2,000 per year.Inspection requires special testing equipment that has a depreciation of $500 per year and an operating cost of $1,000 per year.Receiving has four employees who each have an average salary of $35,000 per year.The work distribution matrix for the receiving personnel is as follows:

-
Calculate the cost of unloading.

A) $50,500
B) $56,000
C) $52,000
D) $54,000

Question 68

Workshape Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors.The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders.Both types of distributors purchase the same product.The customer activities and costs for the previous quarter are as follows:

- Calculate the activity rate for selling goods.(Note: Round answer to two decimal places.)

A) $2,583.33 per sales call
B) $3,550.66 per sales call
C) $2,200.50 per sales call
D) $4,800.40 per sales call
E) $9,400.60 per sales call

Question 69

____ can help a company become more competitive by providing more accurate cost data.

A) Unit-based costing
B) Volume-based costing
C) Kaizen costing
D) Production costing
E) Activity-based costing

Question 70

A(n) ____ is derived from the interview process (or written survey).

A) work distribution matrix
B) activity explanation matrix
C) driver consumption matrix
D) value analysis matrix
E) tracing matrix

Question 71

In an activity dictionary, types of resources consumed is an example of a(n)

A) activity sharing.
B) quality.
C) activity attribute.
D) allocation.

Question 72

Last year, Stevita Inc.shipped 3,000,000 kilograms of goods to customers at a cost of $2,400,000.If an individual customer orders 20,000 kilograms and produces $400,000 of revenue (total revenue is $40 million), the amount of shipping cost assigned to the customer using activity-based costing would be

A) $16,000.
B) $8,000.
C) $24,000.
D) $4,000.
E) $60,000.

Question 73

Workshape Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors.The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders.Both types of distributors purchase the same product.The customer activities and costs for the previous quarter are as follows:

- Calculate the total customer cost for the non-JIT distributors.(Note: Round the activity rates and activity costs to the nearest dollar.)

A) $150,025
B) $122,500
C) $175,200
D) $147,030
E) $178,791

Question 74

____ is the length of time required to produce one product; ____ is the number of units that can be produced in a given period of time.

A) Cycle time; velocity
B) Velocity; cycle time
C) Activity time; cycle production
D) Cycle time; activity output
E) Velocity; cycle production

Question 75

____ are assigned using direct tracing and resource drivers.

A) Resources
B) Costs
C) Profits
D) Materials
E) Products

Question 76

Workshape Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors.The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders.Both types of distributors purchase the same product.The customer activities and costs for the previous quarter are as follows:

-
Calculate the activity rate for processing sales orders.(Note: Round answer to two decimal places.)

A) $330.09 per sales order
B) $525.33 per sales order
C) $275.76 per sales order
D) $301.89 per sales order
E) $342.43 per sales order

Question 77

A company has two inspectors, each earning a salary of $75,000.One inspector works exclusively on inspecting parts received from outside suppliers, while the other spends 30% of her time inspecting parts and 70% of her time inspecting final products.How much labor cost should be assigned to the activity, inspecting parts?

A) $100,000
B) $95,000
C) $75,000
D) $96,275
E) $97,500

Question 78

The receiving department of Owen has three activities: unloading, counting goods, and inspecting.Unloading requires a forklift that is leased for $15,000 per year.The forklift is used only for unloading.The fuel for the forklift is $2,000 per year.Inspection requires special testing equipment that has a depreciation of $500 per year and an operating cost of $1,000 per year.Receiving has four employees who each have an average salary of $35,000 per year.The work distribution matrix for the receiving personnel is as follows:

-
Calculate the cost of counting.

A) $54,000
B) $56,000
C) $52,000
D) $50,500

Question 79

All of the following are supplier-driven activities except

A) receiving.
B) purchasing.
C) efficiency.
D) inspection of incoming components.

Question 80

Interviews and surveys are used to identify

A) cycle time.
B) velocity.
C) control costs.
D) costs.
E) activities.