Question 1

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

Accepted Answer

Unit-level activities are performed for every unit that is produced, such as assembling or packaging.

Question 2

In general,duration drivers are more accurate measures of the consumption of resources than transaction drivers.

Accepted Answer

Duration drivers measure the actual amount of time a resource is consumed, providing a more accurate indicator of resource usage than transaction drivers which only measure the number of transactions or events that occur.

Question 3

Which of the following is not a limitation of activity-based costing?
A)Maintaining an activity-based costing system is more costly than maintaining a traditional direct labor-based costing system.
B)Changing from a traditional direct labor-based costing system to an activity-based costing system changes product margins and other key performance indicators used by managers.Such changes are often resisted by managers.
C)In practice,most managers insist on fully allocating all costs to products,customers,and other costing objects in an activity-based costing system.This results in overstated costs.
D)More accurate product costs may result in increasing the selling prices of some products.

Accepted Answer

An activity-based costing system is more costly to maintain than a traditional costing system.Activity-based costing produces numbers,such as product margins,that are at odds with the numbers produced by traditional costing systems.

Question 4

Transaction drivers usually take more effort to record than duration drivers.

Accepted Answer

The answer of Transaction drivers usually take more effort to...

Question 5

The costs of a particular department should not be split up among activity cost pools in an activity-based costing system.

Accepted Answer

The costs of a department can be allocated to various activity cost pools in an activity-based costing system, as it helps in identifying the drivers of cost for each activity and assigning costs accordingly.

Question 6

Personnel administration is an example of (an):
A)Unit-level activity.
B)Batch-level activity.
C)Product-level activity.
D)Organization-sustaining activity.

Accepted Answer

Organization-sustaining activities are carried out regardless of which customers are served,which products are produced,how many batches are run,or how many units are made.

Question 7

In activity-based costing,there are a number of activity cost pools,each of which is allocated to products and other costing objects using its own unique measure of activity.

Accepted Answer

Activity-based costing does have different activity cost pools, and each of them is allocated using their own unique measures of activity.

Question 8

A transaction driver is:
A)An event that causes a transaction to begin.
B)A measure of the amount of time required to perform an activity.
C)An event that causes a transaction to end.
D)A simple count of the number of times an activity occurs.

Accepted Answer

A transaction driver is a simple count of the number of times an activity occurs.

Question 9

The practice of assigning the costs of idle capacity to products can result in unstable unit product costs.

Accepted Answer

Assigning the costs of idle capacity to products can result in unstable unit product costs because the amount of idle capacity can vary over time, causing the cost assigned to products to fluctuate. This can make it difficult to accurately calculate the cost of goods sold and accurately price products.

Question 10

Even departmental overhead rates will not correctly assign overhead costs in situations where a company has a range of products that differ in volume,lot size,or complexity of production.

Accepted Answer

Departmental overhead rates are only effective in assigning overhead costs when the products have similar characteristics. If the products have differences in volume, lot size, or complexity of production, the overhead costs cannot be accurately assigned using departmental overhead rates.

Question 11

Would the following activities at a manufacturer of canned soup be best classified as unit-level,batch-level,product-level,or organization-sustaining activities? 
A)Option A
B)Option B
C)Option C
D)Option D

Accepted Answer

Product-level activities relate to specific products that must be carried out regardless of how many units are produced and sold or batches run.Batch-level activities are performed each time a batch of goods is handled or processed regardless of how many units are in the batch.The amount of resource consumed depends on the number of batches run rather than on the number of units in the batch.

Question 12

An activity-based costing system should include all of the activities carried out in an organization because any simplification will inevitably result in inaccuracy.

Accepted Answer

An activity-based costing system should focus on significant activities that drive costs, as including all activities can be inefficient and may not significantly improve accuracy.

Question 13

Customer-level activities relate to specific customers and are not tied to any specific products.

Accepted Answer

Customer-level activities include activities such as marketing, sales, customer service, and support. These activities are focused on serving the needs of individual customers and building relationships with them, rather than on specific products.

Question 14

Organization-sustaining activities are activities of the general organization that support specific products.

Accepted Answer

Organization-sustaining activities are activities of the general organization that support the overall operations and functioning of the organization, not specific products.

Question 15

Activity-based costing is a costing method that is designed to provide managers with product cost information for external financial reports.

Accepted Answer

Activity-based costing is designed to provide managers with product cost information for internal decision-making purposes rather than external financial reports.

Question 16

Which of the following activities would be classified as a batch-level activity?
A)Setting up equipment.
B)Designing a new product.
C)Training employees.
D)Milling a part required for the final product.

Accepted Answer

Batch-level activities are performed each time a batch of goods is handled or processed,regardless of how many units are in the batch.The amount of resource consumed depends on the number of batches run rather than on the number of units in the batch.

Question 17

A duration driver is:
A)A simple count of the number of times an activity occurs.
B)An activity measure that is used for the life of the company.
C)A measure of the amount of time required to perform an activity.
D)An activity measure that is used for the life of an activity-based costing system.

Accepted Answer

A duration driver is a measure of the amount of time required to perform an activity.

Question 18

In activity-based costing,some manufacturing costs may be excluded from product costs.

Accepted Answer

Activity-based costing focuses on identifying and assigning costs to specific activities, rather than allocating costs based on overall production volume. As a result, some manufacturing costs that are not directly related to the production of a specific product may be excluded from the product cost calculation. For example, costs related to plant maintenance or facility rent may be considered indirect costs and not allocated to individual products.

Question 19

Managing and sustaining product diversity requires many more overhead resources such as production schedulers and product design engineers than managing and sustaining a single product.The costs of these resources can be accurately allocated to products on the basis of direct labor-hours.

Accepted Answer

The costs of overhead resources like production schedulers and product design engineers are not accurately allocated based solely on direct labor-hours, as these resources are not directly tied to labor time and may be better allocated using activity-based costing methods.

Question 20

Costs classified as batch-level costs should depend on the number of batches processed rather than on the number of units produced,the number of units sold,or other measures of volume.

Accepted Answer

Batch-level costs are costs that are incurred for each batch produced, regardless of the number of units within the batch. These costs include things like setup costs, inspection costs, and other costs associated with producing a batch. Therefore, they should be dependent on the number of batches processed, rather than on the number of units produced or sold.

Quiz 6: Activity-Based Costing: a Tool to Aid Decision Making