Exam Questions Activity Costing & Lean Quality Tietz Ch.4

Managerial Accounting, 6e (Braun et al.)

Chapter 4 Activity-Based Costing, Lean Operations, and the Costs of Quality

4.1 Develop and use departmental overhead rates to allocate indirect costs

1) When overhead is allocated to every product using the same manufacturing overhead rate, this rate is called the departmental overhead rate.

Diff: 1

LO: 4-1

EOC: S4-1

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

2) With increased competition, managers need more accurate estimates of product costs in order to set prices and to identify the most profitable products.

Diff: 1

LO: 4-1

EOC: S4-1

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

3) The plantwide overhead cost allocation rate is computed by dividing the estimated total manufacturing overhead costs by the estimated total quantity of the cost allocation base.

Diff: 2

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

4) To determine the amount of overhead allocated, the overhead rate is divided by the cost driver.

Diff: 2

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

5) Using departmental overhead rates is generally less accurate than using a single plantwide overhead rate.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

6) Cost distortion occurs when some products are overcosted while other products are undercosted by the cost allocation system.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

7) As a result of cost distortion, some products will be overcosted while other products will be undercosted.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

8) Companies often refine their cost allocation systems to minimize the amount of cost distortion caused by the simpler cost allocation systems.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

9) Companies that use departmental overhead rates trace direct materials and direct labor to cost objects just as they would in a traditional costing system.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

10) Only manufacturers can use refined costing systems to allocate manufacturing overhead.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

11) Refined costing systems can be used to allocate any indirect costs to any cost objects.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

12) Merchandising and service companies, as well as governmental agencies, can use refined cost allocation systems to provide their managers with better cost information.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

13) A plantwide overhead rate is calculated by dividing the estimated total manufacturing overhead costs for the year by estimated total amount of the allocation base for the year.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

14) A plantwide overhead rate is calculated by multiplying the estimated total manufacturing overhead costs for the year by estimated total amount of the allocation base for the year.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

15) If a company's plantwide overhead rate is allocated based on direct labor hours, then each job will be allocated manufacturing overhead based on the total direct labor hours incurred on the job, regardless of the manufacturing department in which those hours were incurred.

Diff: 2

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

16) One condition that favors using a departmental overhead rate, rather than plantwide overhead rates, is that different departments incur different amounts and types of manufacturing overhead.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

17) One condition that favors using plantwide overhead rates, rather than departmental overhead rates, is that different jobs or products use the departments to a different extent.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

18) A departmental overhead rate is calculated by dividing the total estimated departmental overhead cost pool by the estimated total amount of the department's cost allocation base.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

19) The plantwide overhead cost allocation rate is computed by dividing the estimated total manufacturing overhead costs of the department by the estimated total quantity of the department's cost allocation base.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

20) If a company uses departmental overhead allocation rates, then the amount of manufacturing overhead allocated to the job is equal to the plantwide overhead rate multiplied by the actual use of the cost allocation base.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

21) The allocation base selected for each department should be the cost driver of the costs in the departmental overhead pool.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

22) Direct labor hours would be the most appropriate cost allocation base for a Machining Department that uses machine robotics extensively.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

23) Departmental overhead rates typically do a better job of matching each department's overhead costs to the products that use the department's resources than do plantwide overhead rates.

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

24) When a company has established separate manufacturing overhead rates for each department, it is using

A) departmental overhead rates.

B) cost distortion.

C) a plantwide overhead rate.

D) none of the above

Diff: 1

LO: 4-1

EOC: S4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

25) Which of the following is a result of cost distortion?

A) Overcosting of all products

B) Undercosting of all products

C) Accurate costing of all products

D) Overcosting of some products and undercosting of other products

Diff: 1

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

26) When calculating a departmental overhead rate, what should the numerator be?

A) Total estimated amount of the departmental allocation base

B) Total estimated departmental overhead cost pool

C) Total estimated amount of manufacturing overhead for the factory

D) Actual quantity of the departmental allocation base used by the job

Diff: 1

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

27) When calculating a departmental overhead rate, what should the denominator be?

A) Total estimated amount of the departmental allocation base

B) Total estimated departmental overhead cost pool

C) Total estimated amount of manufacturing overhead for the factory

D) Actual quantity of the departmental allocation base used by the job

Diff: 1

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

28) When calculating the total amount of manufacturing overhead to allocate to a particular job, the company would multiply each departmental overhead rate by ________ and then ________ together the allocated amounts from each department.

A) the actual amount of the departmental allocation based used by the job; multiply

B) the actual amount of the plantwide allocation based used by the job; add

C) the actual amount of the departmental allocation based used by the job; add

D) the actual amount of the plantwide allocation based used by the job; multiply

Diff: 2

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

29) Which of the following condition(s) favors using departmental overhead rates in place of a plantwide overhead rate?

A) Different departments incur different amounts and types of manufacturing overhead.

B) Different jobs or products use the departments to a different extent.

C) Both of the above

D) Neither of the above

Diff: 1

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

30) What will the use of departmental overhead rates generally result in?

A) The use of a separate cost allocation base for each department in the factory

B) The use of a single cost allocation base

C) The use of a single overhead cost pool for the factory

D) The use of separate cost allocation base for each activity in the factory

Diff: 1

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

31) Cabinets Unlimited uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: Assembly and Sanding. The Assembly Department uses a departmental overhead rate of $50 per machine hour, while the Sanding Department uses a departmental overhead rate of $25 per direct labor hour. Job 603 used the following direct labor hours and machine hours in the two departments:

The cost for direct labor is $30 per direct labor hour and the cost of the direct materials used by Job 603 is $1,500.

How much manufacturing overhead would be allocated to Job 603 using the departmental overhead rates?

A) $675

B) $530

C) $920

D) $480

Diff: 1

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

32) Cabinets Unlimited uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: Assembly and Sanding. The Assembly Department uses a departmental overhead rate of $45 per machine hour, while the Sanding Department uses a departmental overhead rate of $25 per direct labor hour. Job 542 used the following direct labor hours and machine hours in the two departments:

The cost for direct labor is $35 per direct labor hour and the cost of the direct materials used by Job 542 is $1,200.

What was the total cost of Job 542 if Lucas Industries used the departmental overhead rates to allocate manufacturing overhead?

A) $1,585

B) $2,055

C) $2,120

D) $1,550

Diff: 2

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

33) Cast Iron Fabrication allocates manufacturing overhead to each job using departmental overhead rates. The company's operations are divided into a casting department and a finishing department. The casting department uses a departmental overhead rate of $54 per machine hour, while the finishing department uses a departmental overhead rate of $27 per direct labor hour. Job A216 used the following direct labor hours and machine hours in the two departments:

The cost for direct labor is $37 per direct labor hour and the cost of the direct materials used by Job A216 is $1,800.

How much manufacturing overhead would be allocated to Job A216 using the departmental overhead rates?

A) $459

B) $614

C) $1,566

D) $486

Diff: 1

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

34) Cast Iron Fabrication allocates manufacturing overhead to each job using departmental overhead rates. The company's operations are divided into a casting department and a finishing department. The casting department uses a departmental overhead rate of $53 per machine hour, while the finishing department uses a departmental overhead rate of $27 per direct labor hour. Job A216 used the following direct labor hours and machine hours in the two departments:

The cost for direct labor is $32 per direct labor hour and the cost of the direct materials used by Job A216 is $1,900.

What was the total cost of Job A216 if Cast Iron Fabrication used the departmental overhead rates to allocate manufacturing overhead?

A) $2,060

B) $2,540

C) $3,024

D) $3,236

Diff: 2

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

35) Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1,000 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plant-wide overhead rate to allocate its $7,560,000 of annual manufacturing overhead. Of this amount, $2,250,000 is associated with the Large Bag line, $3,416,000 is associated with the Medium Bag line, and $1,894,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 36,000 machine hours: 13,600 in the Large Bag line, 15,700 in the Medium Bag line, and 6,700 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs.

The plant-wide manufacturing overhead rate would be closest to (Round your final answer to the nearest cent.)

A) $62.50 per machine hour.

B) $165.44 per machine hour.

C) $217.58 per machine hour.

D) $210.00 per machine hour.

Diff: 1

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

36) Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 500 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plantwide overhead rate to allocate its $8,598,000 of annual manufacturing overhead. Of this amount, $2,150,000 is associated with the Large Bag line, $3,417,000 is associated with the Medium Bag line, and $3,031,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 41,000 machine hours: 12,100 in the Large Bag line, 14,500 in the Medium Bag line, and 14,400 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs.

The departmental manufacturing overhead rate for the Small Bag line would be closest to (Round your final answer to the nearest cent.)

A) $209.71 per machine hour.

B) $210.49 per machine hour.

C) $177.69 per machine hour.

D) $235.66 per machine hour.

Diff: 1

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

37) Cooper's Bags Company manufactures cloth grocery bags to be sold to grocery stores and other retailers. Cooper's Bags Company sells the bags in cases of 1,300 bags. The bags come in three sizes: Large, Medium, and Small. Currently, Cooper's Bags Company uses a single plantwide overhead rate to allocate its $8,731,000 of annual manufacturing overhead. Of this amount, $2,180,000 is associated with the Large Bag line, $3,412,000 is associated with the Medium Bag line, and $3,139,000 is associated with the Small Bag line. Cooper's Bags Company is currently running a total of 44,000 machine hours: 13,600 in the Large Bag line, 15,900 in the Medium Bag line, and 14,500 in the Small Bag line. Cooper's Bags Company uses machine hours as the cost driver for manufacturing overhead costs.

Which product line(s) have been overcosted or undercosted by using the plantwide manufacturing overhead rate?

A) Large Bags has been undercosted; Medium and Small have been overcosted.

B) Large, Medium, and Small Bags have all been overcosted.

C) Large, Medium, and Small Bags have all been undercosted.

D) Large Bags has been overcosted; Medium and Small have been undercosted.

Diff: 3

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

38) Off the Beaten Path Running Company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. They feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming year:

Manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department. Based on this information, what is the departmental manufacturing overhead rate for the machining and finishing department, respectively? (Round any intermediary calculations and your final answer to the nearest cent.)

A) $1.20 per machine hour and $7.50 per direct labor hour

B) $1.09 per machine hour and $1.52 per direct labor hour

C) $1.00 per machine hour and $1.25 per direct labor hour

D) $12.50 per machine hour and $7.14 per direct labor hour

Diff: 2

LO: 4-1

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

39) Off the Beaten Path Running Company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. They feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming year:

Manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department.

At the end of the year, the following information was gathered related to the production of the trail running shoes and running apparel:

How much manufacturing overhead will be allocated to the trail running shoes? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A) $521,250

B) $521,164

C) $802,500

D) $200,000

Diff: 3

LO: 4-1

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

40) Off the Beaten Path Running Company has started to produce running apparel in addition to the trail running shoes that they have manufactured for years. They feel that a departmental overhead rate would best reflect their overall manufacturing overhead usage. Based on research the following information was gathered for the upcoming year:

Manufacturing overhead is driven by machine hours for the machining department and direct labor hours for the finishing department.

At the end of the year, the following information was gathered related to the production of the trail running shoes and running apparel:

How much manufacturing overhead will be allocated to running apparel? (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)

A) $172,500

B) $171,014

C) $600,000

D) $150,000

Diff: 3

LO: 4-1

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

41) The Sweetheart Corporation uses departmental overhead rates to allocate its manufacturing overhead to jobs. The company has two departments: cutting and painting. The Cutting Department uses a departmental overhead rate of $12 per machine hour, while the Painting Department uses a departmental overhead rate of $17 per direct labor hour. Job 422 used the following direct labor hours and machine hours in the two departments:

The cost for direct labor is $20 per direct labor hour and the cost of the direct materials used by Job 422 is $800.

Required: What was the total cost of Job 422 if the Sweetheart Corporation used the departmental overhead rates to allocate manufacturing overhead?

Diff: 3

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

42) Showcase Company manufactures display cases to be sold to retail stores. The cases come in three sizes: Large, Medium, and Small. Currently, Showcase Company uses a single plant-wide overhead rate to allocate its $3,357,800 of annual manufacturing overhead. Of this amount, $820,000 is associated with the Large Case line, $1,276,800 is associated with the Medium Case line, and $1,261,000 is associated with the Small Case line. Showcase Company is currently running a total of 33,000 machine hours: 10,000 in the Large Case line, 13,300 in the Medium Case line, and 9,700 in the Small Case line. Showcase Company uses machine hours as the cost driver for manufacturing overhead costs.

Required:

a. Calculate the plant-wide manufacturing overhead rate.

b. Calculate the departmental overhead rate for each of the three departments listed.

c. Which product line(s) have been overcosted by using the plant-wide manufacturing overhead rate? By how much per machine hour? Which product line(s) have been undercosted by using the plant-wide manufacturing overhead rate? By how much per machine hour?

Diff: 3

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

43) Digital Technologies manufactures three types of computers for a well-known national brand. The three types are: laptops, desktops, and tablets. Currently, Digital uses a single plant-wide overhead rate to allocate its $1,667,250 of annual manufacturing overhead. Of this amount, $562,000 is associated with laptops, $492,000 is associated with desktops, and $612,750 is associated with tablets. Digital is currently using a total of 22,150 machine hours: 7,500 for laptops, 8,200 for desktops, and 6,450 for tablets. Digital uses machine hours to allocate overhead costs.

Required:

a. Calculate the plant-wide manufacturing overhead rate.

b. Calculate the departmental overhead rate for each of the three departments listed.

c. Which product line(s) have been overcosted by using the plant-wide manufacturing overhead rate? By how much per machine hour? Which product line(s) have been undercosted by using the plant-wide manufacturing overhead rate? By how much per machine hour?

Diff: 3

LO: 4-1

EOC: S4-17A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

4.2 Develop and use activity-based costing (ABC) to allocate indirect costs

1) As compared to traditional volume-based costing using a single plantwide overhead rate, activity-based costing (ABC) is a more refined costing system that reduces cost distortion.

Diff: 1

LO: 4-2

EOC: S4-5

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

2) Traditional costing systems are generally more accurate than ABC costing.

Diff: 1

LO: 4-2

EOC: S4-5

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

3) It is easier to allocate indirect costs to the products that actually caused those costs if an ABC system is used rather than a traditional costing system.

Diff: 1

LO: 4-2

EOC: S4-5

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

4) Companies that use ABC trace direct materials and direct labor to cost objects just as would be done using traditional costing systems.

Diff: 1

LO: 4-2

EOC: S4-5

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

5) Companies that use ABC allocate all costs including direct materials, direct labor and manufacturing overhead to the product based on an activity cost allocation rate.

Diff: 1

LO: 4-2

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

6) Two main benefits of ABC are (1) more accurate product cost information and (2) more detailed information on the costs of activities and the drivers of those costs.

Diff: 1

LO: 4-2

EOC: S4-5

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

7) The cost allocation rate for each activity is equal to the total estimated activity cost pool divided by the total estimated activity allocation base.

Diff: 1

LO: 4-2

EOC: S4-5

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

8) Facility-level activities and costs are incurred for every individual unit.

Diff: 1

LO: 4-2

EOC: S4-8

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

9) Unit-level activities and costs are incurred for every single unit.

Diff: 2

LO: 4-2

EOC: S4-8

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

10) The cost of inspecting and packaging each unit the company produces would be considered a facility-level activity cost.

Diff: 1

LO: 4-2

EOC: S4-8

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

11) Batch-level activities and costs are incurred again each time a batch is produced.

Diff: 1

LO: 4-2

EOC: S4-8

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

12) Machine set-up would be considered a batch-level cost.

Diff: 1

LO: 4-2

EOC: S4-8

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

13) Product-level activities and costs are incurred for a particular product, regardless of the number of units or batches of the product produced.

Diff: 1

LO: 4-2

EOC: S4-8

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

14) The cost to research and develop, design and market new models would be considered a product-level cost.

Diff: 1

LO: 4-2

EOC: S4-8

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

15) The cost to design and market new models would be considered a facility-level cost.

Diff: 1

LO: 4-2

EOC: S4-8

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

16) Facility-level activities and costs are incurred no matter how many units, batches, or products are produced in the plant.

Diff: 1

LO: 4-2

EOC: S4-8

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

17) The cost of maintenance on the entire production plant would be considered a facility-level cost.

Diff: 1

LO: 4-2

EOC: S4-8

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

18) The cost of depreciation, insurance, and property tax on the entire production plant would be considered a facility-level cost.

Diff: 1

LO: 4-2

EOC: S4-8

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

19) ABC generally causes the least amount of cost distortion among products because indirect costs are allocated to the products based on

A) types of activities used by the product.

B) the extent to which the activities are used.

C) both A and B

D) none of the above

Diff: 1

LO: 4-2

EOC: S4-7

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

20) The first step in developing an ABC system is

A) calculate an activity cost allocation rate for each activity.

B) allocate the costs to the cost object using the activity cost allocation rates.

C) select an allocation base for each activity.

D) identify the primary activities and estimate a total cost pool for each.

Diff: 1

LO: 4-2

EOC: S4-7

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

21) In using an ABC system, all of the following steps are performed before the company's year begins except

A) identify the primary activities and estimate a total cost pool for each.

B) select an allocation base for each activity.

C) allocate the costs to the cost object using the activity cost allocation rates.

D) calculate an activity cost allocation rate for each activity.

Diff: 1

LO: 4-2

EOC: S4-7

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

22) Four basic steps are used in an ABC system. List the proper order of these steps, which are currently scrambled below:

a. Identify the primary activities and estimate a total cost pool for each.

b. Allocate the costs to the cost object using the activity cost allocation rates.

c. Select an allocation base for each activity.

d. Calculate an activity cost allocation rate for each activity.

A) c, a, b, d

B) a, c, d, b

C) b, a, c, d

D) a, d, c, b

Diff: 1

LO: 4-2

EOC: S4-7

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

23) The use of which of the following costing systems is most likely to reduce cost distortion to a minimum?

A) Plantwide overhead rate

B) Departmental overhead allocation rates

C) Traditional costing system

D) Activity-based costing

Diff: 1

LO: 4-2

EOC: S4-7

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

24) Which of the following does ABC take into account?

A) The types of manufacturing activities used by the product

B) The extent to which the manufacturing activities are used by the product

C) Both A and B

D) Neither A nor B

Diff: 1

LO: 4-2

EOC: S4-7

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

25) Machine set-up would most likely be classified as a ________ cost.

A) batch-level

B) unit-level

C) product-level

D) facility-level

Diff: 1

LO: 4-2

EOC: S4-7

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

26) Research and development would most likely be classified as a ________ cost.

A) unit-level

B) batch-level

C) facility-level

D) product-level

Diff: 1

LO: 4-2

EOC: S4-7

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

27) Using factory utilities would most likely be classified as a ________ cost.

A) unit-level

B) batch-level

C) facility-level

D) product-level

Diff: 1

LO: 4-2

EOC: S4-7

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

28) Molding and sanding each unit of product would most likely be classified as a ________ cost.

A) unit-level

B) batch-level

C) product-level

D) facility-level

Diff: 1

LO: 4-2

EOC: S4-7

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

29) All of the following are considered to be part of the cost hierarchy often used to implement ABC, with the exception of

A) production-level activity.

B) batch-level activity.

C) product-level activity.

D) unit-level activity.

Diff: 1

LO: 4-2

EOC: S4-7

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

30) In ABC, how is the activity allocation rate computed?

A) The total estimated activity allocation base is divided by the total estimated activity cost pool.

B) The total estimated activity cost pool is divided by the total estimated activity allocation base.

C) The total estimated activity allocation base is multiplied by the total estimated activity cost pool.

D) You take the total estimated activity allocation base and subtract the total estimated total activity cost pool.

Diff: 1

LO: 4-2

EOC: S4-6

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

31) In developing an ABC system, what is the last step?

A) Identify the primary activities and estimate a total cost pool for each.

B) Select an allocation base for each activity.

C) Allocate the costs to the cost object using the activity cost allocation rates.

D) Calculate an activity cost allocation rate for each activity.

Diff: 1

LO: 4-2

EOC: S4-6

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

32) All of the following describe an ABC system except

A) ABC systems may only be used by service companies.

B) ABC systems can create more accurate product costs.

C) ABC systems are more complex and costly than traditional costing systems.

D) ABC systems are used in both manufacturing and nonmanufacturing companies.

Diff: 1

LO: 4-2

EOC: E4-18A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

33) Which of the following can be used in conjunction with activity-based costing?

A) Job costing

B) Process costing

C) Both A and B

D) Neither A nor B

Diff: 2

LO: 4-2

EOC: E4-18A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

34) Which of the following systems focuses on activities as the fundamental cost objects and uses the costs of those activities as building blocks for compiling the indirect costs of products and other cost objects?

A) Job costing

B) Activity-based costing

C) Process costing

D) Product costing

Diff: 2

LO: 4-2

EOC: E4-18A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

35) Using traditional costing instead of ABC costing might lead to all of the following except

A) cutting back on high-volume products that appear unprofitable.

B) expanding low-volume products that appear profitable.

C) raising the selling price of low-volume products.

D) raising the selling price of high-volume products.

Diff: 2

LO: 4-2

EOC: E4-18A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

36) Which of the following is not likely to be a cost driver of activities associated with determining product cost?

A) Number of material requisitions

B) Number of cost accountant's labor hours

C) Number of product inspections

D) Number of production orders

Diff: 1

LO: 4-2

EOC: E4-18A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

37) Which of the following is most likely to be the cost driver for the packaging and shipping activity?

A) Number of setups

B) Number of orders shipped

C) Number of units produced

D) Hours of testing

Diff: 1

LO: 4-2

EOC: E4-18A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

38) Which of the following is not an activity in an ABC system that determines the cost of a manufactured product?

A) Machining

B) Inspecting

C) Accounting

D) Materials handling

Diff: 1

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

39) Regarding activity-based costing systems, which of the following statements is true?

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 have separate indirect cost allocation rates for each activity.

D) ABC costing systems can be used in manufacturing firms only.

Diff: 1

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

40) Which of the following does activity-based costing consider to be the fundamental cost object?

A) Direct labor hours

B) Activities

C) Direct materials

D) Finished goods

Diff: 1

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

41) O&G Company manufactures console tables and uses an activity-based costing system. Each console table consists of 30 separate parts totaling $250 in direct materials, and requires 5.0 hours of machine time to produce. Additional information follows:

What is the cost of materials handling per console table?

A) $60

B) $90

C) $14

D) $12

Diff: 2

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

42) O&G Company manufactures console tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each console table consists of 30 separate parts totaling $210 in direct materials and requires 3.0 hours of machine time to produce. Additional information follows:

What is the cost of machining per console table?

A) $21.00

B) $60.00

C) $16.20

D) $162.00

Diff: 2

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

43) O&G Company manufactures console tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each console tables consists of 40 separate parts totaling $260 in direct materials and requires 4.0 hours of machine time to produce. Additional information follows:

What is the cost of assembling per console table?

A) $120

B) $32

C) $11

D) $200

Diff: 2

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

44) O&G Company manufactures console tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each console table consists of 40 separate parts totaling $250 in direct materials and requires 5.0 hours of machine time to produce. Additional information follows:

What is the number of finished console tables?

A) 25

B) 200

C) 467

D) Cannot be determined from the information given

Diff: 2

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

45) O&G Company manufactures console tables and uses an activity-based costing system to allocate all manufacturing conversion costs. Each console table consists of 20 separate parts totaling $210 in direct materials and requires 7.0 hours of machine time to produce. The company incurs no direct labor costs. Additional information follows:

What is the total manufacturing cost per console table?

A) $348.60

B) $138.60

C) $343.60

D) $96.00

Diff: 2

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

46) The Press Go Corporation manufactures and assembles remote control toys. The company uses an activity-based costing system to allocate all manufacturing conversion costs. Each toy consists of 10 separate parts totaling $145 in direct materials and requires 2.0 hours of machine time to produce. Additional information follows:

What is the cost of materials handling per toy?

A) $47.50

B) $55.00

C) $5.50

D) $12.00

Diff: 2

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

47) The Press Go Corporation manufactures and assembles remote control toys. The company uses an activity-based costing system to allocate all manufacturing conversion costs. Each toy consists of 10 separate parts totaling $135 in direct materials and requires 4.0 hours of machine time to produce. Additional information follows:

What is the cost of machining per toy?

A) $16.00

B) $40.00

C) $52.00

D) $19.00

Diff: 2

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

48) The Press Go Corporation manufactures and assembles remote control toys. The company uses an activity-based costing system to allocate all manufacturing conversion costs. Each toy consists of 30 separate parts totaling $125 in direct materials and requires 3.0 hours of machine time to produce. Additional information follows:

What is the cost of assembling per toy?

A) $18.00

B) $23.25

C) $15.00

D) $112.50

Diff: 2

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

49) The Press Go Corporation manufactures and assembles remote control toys. The company uses an activity-based costing system to allocate all manufacturing conversion costs. Each toy consists of 15 separate parts totaling $125 in direct materials and requires 2.0 hours of machine time to produce. Additional information follows:

What is the number of finished toys?

A) 20

B) 100

C) 250

D) Cannot be determined from the information given

Diff: 2

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

50) Hang Ten Company manufactures surf boards and uses an activity-based costing system to allocate all manufacturing conversion costs. Each surfboard consists of 30 separate parts totaling $175 in direct materials, and requires 6.0 hours of machine time to produce. The company incurs no direct labor costs. Additional information follows:

What is the total manufacturing cost per surfboard?

A) $327.25

B) $224.25

C) $392.50

D) $18.00

Diff: 2

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

51) Telecom uses activity-based costing to allocate all manufacturing conversion costs. Telecom produces cellular telephones; each phone has $30.00 of direct materials, includes 20 parts and requires 2 hours of machine time. Additional information follows:

What is the cost of materials handling per phone?

A) $4

B) $14

C) $30

D) $100

Diff: 2

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

52) Telecom uses activity-based costing to allocate all manufacturing conversion costs. Telecom produces cellular telephones; each phone has $20.00 of direct materials, includes 50 parts and requires 3 hours of machine time. Additional information follows:

What is the cost of machining per phone?

A) $6

B) $200

C) $9

D) $175

Diff: 2

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

53) Telecom uses activity-based costing to allocate all manufacturing conversion costs. Telecom produces cellular telephones; each phone has $40.00 of direct materials, includes 20 parts and requires 3 hours of machine time. Additional information follows:

What is the cost of assembling per phone?

A) $12

B) $18

C) $10

D) $60

Diff: 2

LO: 4-2

EOC: E4-18A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

54) Maple Company manufactures bookshelves and uses an activity-based costing system. The following information is provided for the month of May:

Each bookshelf consists of 7 parts. The direct materials cost per bookshelf is $28.

What is the cost of materials handling and assembling per bookshelf? (Round all calculations to the nearest cent.)

A) $4.35

B) $15.80

C) $13.97

D) $9.62

Diff: 3

LO: 4-2

EOC: E4-18A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

55) Maple Company manufactures bookshelves and uses an activity-based costing system to allocate all manufacturing conversion costs. The company incurs no direct labor costs. The following information is provided for the month of May:

Each bookshelf consists of 10 parts. The direct materials cost per bookshelf is $21.

What is the total manufacturing cost per bookshelf? (Round all calculations to the nearest cent.)

A) $18.67

B) $16.02

C) $39.67

D) $37.02

Diff: 3

LO: 4-2

EOC: E4-18A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

56) Relax, Don't Do It Company manufactures lawn chairs using an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of June:

Each lawn chair consists of 8 parts; the total direct materials cost per lawn chair is $13.

What is the total cost of materials handling and assembling for each lawn chair? (Round intermediate and the final answer to the nearest cent.)

A) $64.14

B) $43.57

C) $35.14

D) $22.14

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

57) Relax, Don't Do It Company manufactures lawn chairs using an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of June:

Each lawn chair consists of 6 parts; the total direct materials cost per lawn chair is $20.

What is the total cost of packaging per lawn chair? (Round intermediate and the final answer to the nearest cent.)

A) $24.50

B) $13.58

C) $10.00

D) $4.50

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

58) Relax, Don't Do It Company manufactures lawn chairs using an activity-based costing system to allocate all manufacturing conversion costs. The company incurs no direct labor costs. The following information is provided for the month of June:

Each lawn chair consists of 5 parts; the total direct materials cost per lawn chair is $15.

What is the total manufacturing cost per lawn chair? (Round intermediate and the final answer to the nearest cent.)

A) $30.04

B) $13.04

C) $15.04

D) $28.04

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

59) Bell, Biv, and Devoe Company had the following activities, estimated indirect activity costs, and allocation bases:

The company uses activity-based costing.

The above activities are used by Departments P and Q as follows:

What is the cost per driver unit for the account inquiry activity? (Round all answers to two decimal places.)

A) $1.62

B) $9.47

C) $7.89

D) $38.73

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

60) Bell, Biv, and Devoe Company had the following activities, estimated indirect activity costs, and allocation bases:

The company uses activity-based costing.

The above activities are used by Departments P and Q as follows:

What is the cost per driver unit for the account billing activity? (Round all answers to two decimal places.)

A) $5.83

B) $1.63

C) $42.55

D) $1.90

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

61) Potter & Weasley Company had the following activities, estimated indirect activity costs, and allocation bases:

Potter & Weasley uses activity based costing.

The above activities are used by Departments P and Q as follows:

What is the cost per driver unit for the account verification activity? (Round all answers to two decimal places.)

A) $1.79

B) $1.32

C) $6.04

D) $8.89

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

62) Bell, Biv, and Devoe Company had the following activities, estimated indirect activity costs, and allocation bases:

The company uses activity-based costing.

The above activities are used by Departments P and Q as follows:

What is the cost per driver unit for the correspondence activity? (Round all answers to two decimal places.)

A) $8.22

B) $1.57

C) $35.24

D) $40.48

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

63) Bell, Biv, and Devoe Company had the following activities, estimated indirect activity costs, and allocation bases:

The company uses activity-based costing.

The above activities are used by Departments P and Q as follows:

How much of the account inquiry cost will be assigned to Department Q? (Do not round intermediate calculations and round the final answer to the nearest dollar.)

A) $5,348

B) $33,423

C) $13,369

D) $6,500

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

64) Bell, Biv, and Devoe Company had the following activities, estimated indirect activity costs, and allocation bases:

The company uses activity-based costing.

The above activities are used by Departments P and Q as follows:

How much of the correspondence cost will be assigned to Department P? (Do not round intermediate calculations and round the final answer to the nearest dollar.)

A) $7,000

B) $1,600

C) $1,400

D) $1,857

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

65) Bell, Biv, and Devoe Company had the following activities, estimated indirect activity costs, and allocation bases:

The company uses activity-based costing.

The above activities are used by Departments P and Q as follows:

How much of the account verification costs will be assigned to Department P? (Do not round intermediate calculations and round the final answer to the nearest dollar.)

A) $10,175

B) $12,175

C) $7,632

D) -$290

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

66) Snap Company uses ABC to account for its manufacturing process.

Snap Company expects to produce 2,640 servers. Snap Company also expects to use 11,000 parts and have 40 setups.

The allocation rate for materials handling will be ________. (Round all answers to two decimal places.)

A) $4.91

B) $5.72

C) $20.45

D) $8.34

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

67) Snap Company uses ABC to account for its manufacturing process.

Snap Company expects to produce 2,400 servers. Snap Company also expects to use 12,000 parts and have 40 setups.

The allocation rate for machine setups is

A) $7.07.

B) $650.

C) $244.

D) $378.

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

68) Snap Company uses ABC to account for its manufacturing process.

Snap Company expects to produce 2,110 servers. Snap Company also expects to use 14,000 parts and have 30 setups.

The allocation rate for packaging is ________. (Round all answers to two decimal places.)

A) $3.86

B) $16.11

C) $7.30

D) $7.01

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

69) OP Technologies Manufacturing manufactures small parts and uses an activity-based costing system.

The following parts were produced in October with the following information:

Total manufacturing overhead costs for part A is

A) $12,150.

B) $7,850.

C) $15,150.

D) $10,850.

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

70) OP Technologies Manufacturing manufactures small parts and uses an activity-based costing system.

The following parts were produced in October with the following information:

Total manufacturing costs for part B is

A) $6,600.

B) $24,600.

C) $15,100.

D) $33,100.

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

71) OP Technologies Manufacturing manufactures small parts and uses an activity-based costing system.

The following parts were produced in October with the following information:

Total manufacturing costs for part C is

A) $27,750.

B) $32,100.

C) $36,750.

D) $23,100.

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

72) OP Technologies Manufacturing manufactures small parts and uses an activity-based costing system.

The following parts were produced in October with the following information:

Total unit costs for Part A is closest to ________. (round to two decimal points)

A) $6.60

B) $17.22

C) $7.03

D) $5.15

Diff: 3

LO: 5-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

73) OP Technologies Manufacturing manufactures small parts and uses an activity-based costing system.

The following parts were produced in October with the following information:

Total unit cost for part B is closest to ________. (rounded to two decimal places)

A) $5.86

B) $7.19

C) $7.42

D) $4.76

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

74) OP Technologies Manufacturing manufactures small parts and uses an activity-based costing system.

The following parts were produced in October with the following information:

Total assembly fees for part B is

A) $1,350.

B) $16,200.

C) $3,825.

D) $850.

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

75) OP Technologies Manufacturing manufactures small parts and uses an activity-based costing system.

The following parts were produced in October with the following information:

Total packaging fees for all three parts is

A) $32,400.

B) $43,200.

C) $18,750.

D) $16,200.

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

76) All Things Auto uses an activity-based costing system to assign costs in its auto-parts division.

The following units were produced in December with the following information:

Total manufacturing costs for Part 001 is

A) $5,525.

B) $2,400.

C) $9,025.

D) $5,900.

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

77) All Things Auto uses an activity-based costing system to assign costs in its auto-parts division.

The following units were produced in December with the following information:

Total manufacturing costs for Part 002 is

A) $15,450.

B) $4,200.

C) $12,200.

D) $23,450.

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

78) All Things Auto uses an activity-based costing system to assign costs in its auto-parts division.

The following units were produced in December with the following information:

Total manufacturing costs for Part 003 is

A) $36,125.

B) $22,300.

C) $46,125.

D) $32,300.

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

79) All Things Auto uses an activity-based costing system to assign costs in its auto-parts division.

The following units were produced in December with the following information:

Total unit costs for Part 001 is closest to ________. (round to two decimal points)

A) $10.24

B) $21.61

C) $11.79

D) $6.59

Diff: 3

LO: 5-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

80) All Things Auto uses an activity-based costing system to assign costs in its auto-parts division.

The following units were produced in December with the following information:

Total unit cost for Part 002 is closest to ________. (rounded)

A) $3.39

B) $5.21

C) $7.78

D) $1.96

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

81) All Things Auto uses an activity-based costing system to assign costs in its auto-parts division.

The following units were produced in December with the following information:

Total assembly fees for Part 002 is

A) $2,000.

B) $1,050.

C) $800.

D) $2,800.

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

82) All Things Auto uses an activity-based costing system to assign costs in its auto-parts division.

The following units were produced in December with the following information:

Total packaging fees for all three parts is

A) $27,300.

B) $23,400.

C) $12,425.

D) $12,250.

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

83) Hudson Corporation, a manufacturer of a variety of products, uses an activity-based costing system. Information from its system for the year for all products follows:

Activity cost pool Total cost Total activity

The company makes 430 of its product B63 a year, which requires a total of 31 machine hours, 12 inspection hours, and 21 orders. Product B63 requires $45.70 in direct materials per unit and $57.20 in direct labor per unit. Product B63 sells for $285 per unit. What is the profit margin in total for Product B63? (Round all answers to two decimal places.)

A) $102.23

B) $43,958.75

C) $120,889.48

D) $76,745.38

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

84) Collin Company manufactures small appliances and uses an activity-based costing system. Information from its system for the year for all products follows:

Activity cost pool Total cost Total activity

The company makes 875 of its stand mixers a year, which requires a total of 27 machine hours, 15 inspection hours, and 9 orders. The stand mixer requires $16.00 in direct materials per unit and $10.50 in direct labor per unit. The stand mixer sells for $160 per unit. What is the profit margin in total for the stand mixer? (Do not round intermediary calculations and round your final answer to the nearest cent.)

A) $139,977.76

B) $26.50

C) $23,187.50

D) $115,566.24

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

85) Zelda Corporation manufactures several different products and uses an activity-based costing system. Information from its system for the year for all products follows:

Activity cost pool Total cost Total activity

The annual production and sales of one of its products, the Zinger, are 600 units. The following data relate to the production and sales of Zingers in the most recent year:

What is the average cost of one Zinger? (Round all answers to two decimal places.)

A) $27.96

B) $155.17

C) $224.43

D) $204.65

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

86) Benjamin Company manufactures a wide variety of products and uses an activity-based costing system. Data from its activity-based costing system for all products follows:

Activity cost pool Total cost Total activity

What is the engineering cost pool rate per engineering hour? (Round the answer to the nearest dollar.)

A) $11

B) $31

C) $67

D) $81

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

87) Salvatore LLC provides a wide variety of legal services and uses an activity-based costing system. Data from its activity-based costing system for all services follows:

Activity cost pool Total cost Total activity

The cost pool activity rate for client meetings is

A) $55.12 per meeting hour.

B) $8.58 per meeting hour.

C) $26.65 per meeting hour.

D) $88.76 per meeting hour.

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

88) Pierce and Pierce, Attorneys at Law, provide a variety of legal services. The law firm uses an activity-based costing system and has developed the following activity pool cost rates:

Activity cost pool Activity rate

Cost and activity data related to two clients is as follows:

How much overhead cost would be allocated to Client 82 using the activity-based costing system?

A) $697

B) $9,696

C) $2,853

D) $34,850

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

89) Fellow & Associates is a CPA firm that offers assurance and consulting services. The firm uses an activity-based costing system and has developed the following activity pool cost rates:

Activity cost pool Activity rate

Cost and activity data related to two clients is as follows:

How much overhead cost would be allocated to Client 867 using the activity-based costing system?

A) $341

B) $18,028

C) $6,510

D) $19,437

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

90) Evolve Advertising is an advertising agency. The firm uses an activity-based costing system to allocate overhead costs to its services. Information about the firm's activity cost pool rates follows:

Activity cost pool Activity rate

Bella Gaming Company was a client of Evolve Advertising. Recently, 9 administrative assistant hours, 6 partner hours, and 12 reports were incurred for the Bell Gaming Company account.

Using the activity-based costing system, how much overhead cost would be allocated to the Bell Gaming Company account?

A) $1,500

B) $912

C) $192

D) $5,184

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

91) Trailers R Us Company, which uses an activity-based costing system, produces travel trailers and boat trailers. The company allocates batch setup costs to the two products using the following basic data:

Total budgeted setup costs for the year are $152,400.

If the setup costs are allocated using direct labor hours, how much of the total setup costs would be allocated to boat trailers? (Round only your final answer.)

A) $152,400

B) $69,890

C) $332,317

D) $129,092

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

92) Trailers R Us Company, which uses an activity-based costing system, produces travel trailers and boat trailers. The company allocates batch setup costs to the two products using the following basic data:

Total budgeted setup costs for the year are $155,400.

If the setup costs are allocated using number of setups, how much of the total setup costs would be allocated to boat trailers?

A) $102,462

B) $52,938

C) $155,400

D) $401,308

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

93) Ring Inc. uses activity-based costing. The company produces two products: Clips and Rings. The expected annual production of Clips is 1,500 units, while the expected annual production of Rings is 1,900 units. There are three activity cost pools: Assembly, Testing, and Packing. The estimated costs and activities for each of these three activity pools follows:

Expected activity

Activity cost pool Estimated cost Clips Rings Total

The cost pool activity rate for Testing would be ________. (Round all answers to two decimal places.)

A) $18.51 per activity

B) $12.58 per activity

C) $39.27 per activity

D) $6.29 per activity

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

94) Ring Inc. uses activity-based costing. The company produces two products: Clips and Rings. The expected annual production of Clips is 1,800 units, while the expected annual production of Rings is 2,100 units. There are three activity cost pools: Assembly, Testing, and Packing. The estimated costs and activities for each of these three activity pools follows:

Expected activity

Activity cost pool Estimated cost Clips Rings Total

The overhead cost per unit of Rings would be closest to ________. (Round all answers to two decimal places.)

A) $10.21

B) $5.82

C) $6.79

D) $11.92

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

95) Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2,300 units, while 1,100 units of blenders are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Toasters require 1.25 direct labor hours per unit, while blenders require .75 direct labor hours per unit. The total estimated overhead for the period is $153,215. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:

Estimated Expected activity

overhead

Activity cost pool cost Toasters Blenders Total

The predetermined overhead allocation rate using the traditional costing system would be closest to

(Round all answers to two decimal places.)

A) $38.40 per direct labor hour.

B) $185.72 per direct labor hour.

C) $53.29 per direct labor hour.

D) $41.41 per direct labor hour.

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

96) Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2,100 units, while 1,100 units of blenders are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Toasters require 0.75 direct labor hours per unit, while blenders require 1 direct labor hours per unit. The total estimated overhead for the period is $151,815. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:

Estimated Expected activity

overhead

Activity cost pool cost Toasters Blenders Total

The overhead cost per Blender using the traditional costing system would be closest to

(Round all answers to two decimal places.)

A) $33.00.

B) $44.00.

C) $138.01.

D) $35.20.

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

97) Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2,400 units, while 1,200 units of blenders are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Toasters require 0.75 direct labor hours per unit, while blenders require 1 direct labor hours per unit. The total estimated overhead for the period is $150,915. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:

Estimated Expected activity

overhead

Activity cost pool cost Toasters Blenders Total

The cost pool activity rate for Engineering Costs would be closest to

(Round all answers to two decimal places.)

A) $13.53 per engineering hour.

B) $42.25 per engineering hour.

C) $18.40 per engineering hour.

D) $78.87 per engineering hour.

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

98) Vandalay Industries manufactures two products: toasters and blenders. The annual production and sales of toasters is 2,100 units, while 1,700 units of blenders are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Toasters require 0.75 direct labor hours per unit, while blenders require 1 direct labor hours per unit. The total estimated overhead for the period is $151,015. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:

Estimated Expected activity

overhead

Activity cost pool cost Toasters Blenders Total

The overhead cost per blender using an activity-based costing system would be closest to

(Round all answers to two decimal places.)

A) $30.91

B) $50.65

C) $88.83

D) $38.18

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

99) Rollergirl produces old-fashioned style roller skates and skateboards. The annual production and sales of roller skates is 900 units, while 1,790 skateboards are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Roller skates require 2.5 direct labor hours per unit, while skateboards require 3.25 direct labor hours per unit. The total estimated overhead for the period is $113,700. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools: (Round all answers to two decimal places.)

Estimated Expected activity

overhead

Activity cost pool cost Roller skates Skateboards Total

The predetermined overhead allocation rate using the traditional costing system would be closest to

(Round all answers to two decimal places.)

A) $19.54 per direct labor hour.

B) $50.53 per direct labor hour.

C) $42.27 per direct labor hour.

D) $14.09 per direct labor hour.

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

100) Rollergirl produces old-fashioned style roller skates and skateboards. The annual production and sales of roller skates is 1,000 units, while 1,780 skateboards are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Roller skates require 4.5 direct labor hours per unit, while skateboards require 1.25 direct labor hours per unit. The total estimated overhead for the period is $113,700. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:

Estimated Expected activity

overhead

Activity cost pool cost Roller skates Skateboards Total

The overhead cost per skateboard using the traditional costing system would be closest to

(Round all answers to two decimal places.)

A) $21.13.

B) $16.91.

C) $113.41.

D) $19.19.

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

101) Rollergirl produces old-fashioned style roller skates and skateboards. The annual production and sales of roller skates is 900 units, while 1,760 skateboards are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Roller skates require 1.5 direct labor hours per unit, while skateboards require 3.25 direct labor hours per unit. The total estimated overhead for the period is $114,400. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:

Estimated Expected activity

overhead

Activity cost pool cost Roller skates Skateboards Total

The cost pool activity rate for Engineering Costs would be closest to

(Round all answers to two decimal places.)

A) $14.78 per engineering hour.

B) $10.33 per engineering hour.

C) $12.89 per engineering hour.

D) $2.97 per engineering hour.

Diff: 1

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

102) Rollergirl produces old-fashioned style roller skates and skateboards. The annual production and sales of roller skates is 900 units, while 1,750 skateboards are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Roller skates require 4.5 direct labor hours per unit, while skateboards require 3.25 direct labor hours per unit. The total estimated overhead for the period is $114,500. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:

Estimated Expected activity

overhead

Activity cost pool cost Roller skates Skateboards Total

The overhead cost per skateboard using an activity-based costing system would be closest to

(Round all answers to two decimal places.)

A) $34.81.

B) $126.90.

C) $73.42.

D) $37.76.

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

103) Kepple Manufacturing currently uses a traditional costing system. The company allocates overhead to its two products, Zips and Dees, using a predetermined manufacturing overhead rate based on direct labor hours. Here is data related to the company's two products:

Information about the company's estimated manufacturing overhead for the year follows:

Total estimated manufacturing overhead for the year $2,794,370

Total estimated direct labor hours for the company for the year are 113,500 hours.

The company is evaluating whether it should use an activity-based costing system in place of its traditional costing system. Additional information about production needed for the activity-based costing system follows:

The amount of manufacturing overhead that would be allocated to one unit of Zips using the traditional costing system would be closest to ________. (Round all answers to two decimal places.)

A) $36.93

B) $24.62

C) $49.24

D) $34.58

Diff: 2

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

104) Cross Roads Manufacturing currently uses a traditional costing system. The company allocates overhead to its two products, Zips and Dees, using a predetermined manufacturing overhead rate based on direct labor hours. Here is data related to the company's two products:

Information about the company's estimated manufacturing overhead for the year follows:

Total estimated manufacturing overhead for the year $3,614,200

Total estimated direct labor hours for the company for the year are 114,250 hours.

The company is evaluating whether it should use an activity-based costing system in place of its traditional costing system. Additional information about production needed for the activity-based costing system follows:

The amount of manufacturing overhead that would be allocated to one unit of Dees using an activity-based costing system would be closest to ________. (Do not round intermediate calculations and round the final answer to the nearest cent.)

A) $103.26

B) $70.41

C) $59.35

D) $32.20

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

105) OP Pie Company makes dessert pies for national fast food chains. OP Pie Company is considering using ABC costing and has the following activity cost pools and information available:

OP Pie Company currently uses a plantwide overhead rate based on total estimated machine hours of 100,000 hours.

Based on the above information, what would the activity cost allocation rate be for mixing?

A) $4.71 per machine hour

B) $125.00 per batch

C) $0.02 per unit

D) $50.00 per batch

Diff: 1

LO: 4-2

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

106) OP Pie Company makes dessert pies for national fast food chains. OP Pie Company is considering using ABC costing and has the following activity cost pools and information available:

OP Pie Company currently uses a plantwide overhead rate based on total estimated machine hours of 100,000 hours.

Based on the above information, what would the activity cost allocation rate be for material handling?

A) $4.47 per machine hour

B) $105.00 per batch

C) $0.02 per unit

D) $31.25 per batch

Diff: 1

LO: 4-2

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

107) OP Pie Company makes dessert pies for national fast food chains. OP Pie Company is considering using ABC costing and has the following activity cost pools and information available:

OP Pie Company currently uses a plantwide overhead rate based on total estimated machine hours of 100,000 hours.

Based on the above information, what would the allocated cost for packaging be for Job 607 if Job 607 contains 5,300 units?

A) $106

B) $70,000

C) $6,625

D) $2,200

Diff: 2

LO: 4-2

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

108) OP Pie Company makes dessert pies for national fast food chains. OP Pie Company is considering using ABC costing and has the following activity cost pools and information available:

OP Pie Company currently uses a plantwide overhead rate based on total estimated machine hours of 100,000 hours.

Based on their estimates for ABC costing, what would the allocated cost for all overhead costs for Job 607 be, using the following information about the job?

# of units in the job = 4,900

# of units in each batch = 980

# of setups required to complete the job = 1

# of machine hours = 220

A) $410.44

B) $920.00

C) $1,037.44

D) $979.75

Diff: 3

LO: 4-2

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

109) OP Pie Company makes dessert pies for national fast food chains. OP Pie Company is considering using ABC costing and has the following activity cost pools and information available:

OP Pie Company currently uses a plantwide overhead rate based on total estimated machine hours of 100,000 hours.

The following information was gathered regarding Job 607:

# of units in the job = 4,900

# of units in each batch = 980

# of setups required to complete the job = 1

# of machine hours = 220

How much would the overhead be overcosted or undercosted if OP Pie Company continues to use the plantwide overhead rate as opposed to using ABC Costing?

A) $1,020.69 undercosted

B) $1,023.00 overcosted

C) $2.31 overcosted

D) $57.69 undercosted

Diff: 3

LO: 4-2

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

110) Inbound Corporation, a manufacturer of a variety of products, uses an activity-based costing system. Information from its system for the year for all products follows:

The corporation makes 750 of its product X14 a year, which requires a total of 55 machine hours, 20 inspection hours, and 18 orders. Product X14 requires $77.00 in direct materials per unit and $65.00 in direct labor per unit. Product X14 sells for $195 per unit.

Required:

a. Calculate the cost pool activity rate for each of the three activities.

b. How much manufacturing overhead would be allocated to Product X14 in total?

c. What is the profit margin in total for Product X14?

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

111) Finn Manufacturing manufactures several different products and uses an activity-based costing system. Information from its system for the year for all products follows:

The annual production and sales of one of its products, the Perch, are 1,500 units. The following data relate to the production and sales of Perches in the most recent year:

Required:

1. Calculate the activity cost pool rates for each of the three activity cost pools listed.

2. Calculate the average cost of one Perch.

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

112) Duquesne Incorporated recently implemented an activity-based costing system. Total results from all products manufactured in the current year are:

Activity cost pool Total cost Total activity

Assembly $7,500 1,500 machine-hours

Packaging $3,150 450 number of orders

Quality control inspections $900 200 number of inspections

Duquesne manufactures sprinkler heads for commercial applications. Annual production and sales of one of its heads, is 2,300. The following relates to the most recent year.

Annual machine hours 1,000

Annual number of orders 125

Annual number of inspections 400

Direct materials cost per unit $15.00

Direct labor cost per unit $5.00

Required:

1. Calculate the activity cost pool rates for each of the three activity cost pools listed.

2. Calculate the average cost of one sprinkler head.

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

113) Darrow & Darrow, Attorneys at Law, provide a variety of legal services. The law firm uses an activity-based costing system and has developed the following activity pool cost rates:

Cost and activity data related to two clients is as follows:

Required:

a. Calculate the amount of overhead that would be allocated to Client 245 using the activity-based costing system.

b. Calculate the amount of overhead that would be allocated to Client 367 using the activity-based costing system.

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

114) Columbia Corporation manufactures two products: Tricycles and Wagons. The annual production and sales of Tricycles is 2,200 units, while 1,750 units of Wagons are produced and sold. The company has traditionally used direct labor hours to allocate its overhead to products. Tricycles require 2 direct labor hours per unit, while Wagons require 1.5 direct labor hours per unit. The total estimated overhead for the period is $385,125. The company is looking at the possibility of changing to an activity-based costing system for its products. If the company used an activity-based costing system, it would have the following three activity cost pools:

Expected activity

Required:

a. Calculate the unit cost for a Wagon using the traditional system based on a single plantwide overhead rate (use direct labor hours as the cost driver).

b. Calculate the unit cost for a Wagon using the activity-based costing system.

Diff: 3

LO: 4-2

EOC: P4-39A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

115) The new manager at Sailboat Manufacturing oversees the manufacturing operations to ensure the effective manufacturing process of sails to accommodate the special-orders of sails they receive for sailboats. The manager compiled a report that contained the following data:

Sailboat Manufacturing

Compute the activity cost allocation rate for each of Sailboat Manufacturing's production activities listed in the report. What should the new manager understand about the cost allocation rates at Sailboat Manufacturing? How will the new manager use the activity cost allocation rates during the coming year at Sailboat Manufacturing?

Diff: 3

LO: 4-2

EOC: E4-19A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

4.3 Understand the benefits and limitations of ABC/ABM systems

1) ABC tends to increase the unit cost of low-volume products and decrease the unit cost of high-volume products.

Diff: 2

LO: 4-3

EOC: P4-40A

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

2) Traditional cost systems with a single-allocation base tend to overcost high-volume products and undercost low-volume products as compared to activity-based costing systems.

Diff: 2

LO: 4-3

EOC: P4-40A

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

3) There will be little benefit to using an activity-based costing system when products are vastly different from each other and consume different amounts of resources.

Diff: 1

LO: 4-3

EOC: P4-40A

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

4) Activity-based management refers to using activity-based cost information to make decisions that may increase profits while satisfying customers' needs.

Diff: 1

LO: 4-3

EOC: P4-40A

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

5) Managers often reap benefits by using ABC data in ABM to pinpoint opportunities to cut costs.

Diff: 1

LO: 4-3

EOC: P4-40A

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

6) ABC can be used in routine planning and control decisions as well as pricing, product mix and cost cutting decisions.

Diff: 1

LO: 4-3

EOC: P4-40A

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

7) The benefits of adopting ABC/ABM are higher for companies in more competitive markets.

Diff: 1

LO: 4-3

EOC: P4-40A

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

8) The movement of parts is considered a non-value-added activity.

Diff: 1

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

9) The storage of raw materials is considered a value-added activity.

Diff: 1

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

10) Inspection is considered a non-value-added activity.

Diff: 1

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

11) Non-value-added activities can be described as activities for which the customer is willing to pay.

Diff: 1

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

12) Waste activities is another name for non-value-added activities.

Diff: 1

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

13) Non-value-added activities are activities that neither enhance the customer's image of the product or service nor provide a competitive advantage.

Diff: 1

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

14) Value-added activities are activities that could be reduced or removed from the process with no ill effect on the end product or service.

Diff: 1

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

15) ABM stands for

A) activity-based management.

B) all but managers.

C) activity-based manufacturing.

D) activity biased management.

Diff: 1

LO: 4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

16) Non-value-added activities are

A) also called waste activities.

B) activities that neither enhance the customer's image of the product or service nor provide a competitive advantage.

C) activities that could be reduced or removed from the process with no ill effect on the end product or service.

D) All of the above

Diff: 1

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

17) Non-value-added activities include all of the following except

A) assembling the products.

B) movement of parts within the warehouse.

C) inspection of the product.

D) storing of raw materials.

Diff: 1

LO: 4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

18) Most companies adopt ABC in order to

A) cut costs.

B) get a more accurate price of products.

C) help make product mix decisions.

D) All of the above are correct.

Diff: 1

LO: 4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

19) The benefits of using the ABC costing system are higher if the company

A) has high indirect costs.

B) produces many different products that use differing amounts of resources.

C) has high indirect costs and produces many different products that use differing amounts of resources.

D) produces only one product.

Diff: 2

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

20) ABC can be used by which of the following companies?

A) Manufacturers

B) Merchandisers

C) Service Providers

D) All of these companies can use ABC.

Diff: 1

LO: 4-3

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

21) The costs of adopting ABC may be lower for some companies than for others. This situation may occur

A) when a company has the accounting and information system expertise to develop the system.

B) when a company has the information technology to record and compile cost driver data.

C) with either situation A or situation B.

D) in none of the above instances.

Diff: 1

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

22) The benefits of adopting ABC/ABM are higher for companies in competitive markets because

A) accounting/information system expertise is inexpensive to develop.

B) ABM can pinpoint opportunities for cost savings.

C) accurate product cost information is not as relevant for price setting.

D) companies in competitive markets have low indirect costs.

Diff: 1

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

23) Indications that a product cost system needs revision include

A) managers lose bids they expected to win and win bids they expected to lose.

B) employees do not believe the cost numbers are accurate.

C) the company uses a single-allocation-base system developed long ago.

D) all of the above.

Diff: 1

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

24) Which of the following is a sign that a product cost system is not working properly?

A) The cost system is fully depreciated.

B) The cost system was installed five years ago.

C) The cost system has multiple allocation bases.

D) Managers don't understand costs and profits.

Diff: 2

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

25) A system that focuses on activities as the fundamental cost object and uses the costs for these activities to compile indirect costs of goods and services is

A) appraisal costs.

B) value engineering.

C) activity-based costing.

D) prevention costs.

Diff: 1

LO: 4-3

EOC: S4-10

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

4.4 Describe lean operations

1) Customer response time is the time that lapses between the receipt of a customer order and delivery of the product or service.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

2) Lean thinking is a management strategy that includes maintaining large inventories.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

3) Lean thinking is a management philosophy that strives to create value by eliminating waste.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

4) Lean thinking involves carrying large amounts of inventory "just in case" something goes wrong.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

5) Lean companies typically arrange production activities into self-contained cells.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

6) Waste can be reduced by implementing shorter setup times.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

7) Lean companies typically cross-train employees to perform more than one task.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

8) One key element of lean production is to produce large batches.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

9) A lean company typically strives to lengthen the manufacturing cycle time.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

10) Lean thinking typically focuses on strengthening supply-chain management.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

11) Lean companies typically emphasize quality.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

12) Lean companies only include manufacturers since service providers and retailers cannot adopt lean operations.

Diff: 1

LO: 4-4

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

13) The eight wastes of traditional operations include all of the following except

A) defects.

B) overproduction.

C) waiting.

D) utilizing people to their full potential.

Diff: 2

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

14) A lean company aims to eliminate which of the following wastes of the traditional operating company?

A) Overproduction

B) Excess transportation

C) Movement

D) All of the above.

Diff: 1

LO: 4-4

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

15) Why are large amounts of inventory considered wasteful?

A) It ties up cash that could be used for other, more useful purposes.

B) Inventory could spoil, get broken or stolen, or become obsolete.

C) Storing inventory is very expensive.

D) All of the above are reasons large amounts of inventory are considered wasteful.

Diff: 1

LO: 4-4

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

16) Lean companies cross train their employees for all of the following reasons except

A) boosts morale.

B) lowers costs.

C) increases individual workloads.

D) empowers employees.

Diff: 1

LO: 4-4

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

17) Which of the following is a lean strategy?

A) Group like machines together.

B) Produce in smaller batches than a traditional system.

C) Maintain a higher level of inventory than a traditional system.

D) Lengthen setup times relative to a traditional system.

Diff: 2

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

18) Which of the following is true about lean thinking?

A) Customer orders drive the production process.

B) Inventory levels are maintained at high levels.

C) Raw materials are purchased in large quantities.

D) Finished goods are produced ahead of customers' orders to protect against running out of finished goods inventory.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

19) Which of the following is not a factor in the success of a lean company?

A) Short production cycle times

B) Continuous flow of production without interruptions

C) Inflexible production operations

D) The focus on quality

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

20) The management strategy designed to eliminate waste is called a(n)

A) traditional thinking.

B) lean thinking.

C) activity-based costing.

D) full costing.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

21) Which of the following items is not a characteristic of a lean company?

A) Machines are arranged by function.

B) Machine setup times are reduced.

C) Production is in small batches.

D) Employees are trained to operate more than one machine.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

22) A system in which companies purchase raw materials only when needed is called

A) ABC.

B) external failure costs.

C) internal failure costs.

D) JIT production.

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

23) Which term listed below describes a system where companies purchase raw materials when needed in production and complete finished goods when needed by customers?

A) Internal failure costs

B) Backflush costing

C) Just-in-time

D) External failure costs

Diff: 1

LO: 4-4

EOC: S4-11

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

4.5 Describe and use the costs of quality framework

1) The goal of total quality management (TQM) is to provide customers with inferior products and services.

Diff: 1

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

2) Appraisal costs are incurred to detect poor-quality goods or services.

Diff: 1

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

3) External failure costs occur when the company detects and corrects poor-quality goods or services after delivery to customers.

Diff: 1

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

4) External failure costs occur when the company detects and corrects poor-quality goods or services before delivery to customers.

Diff: 1

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

5) Inspection of incoming raw materials and production loss caused by downtime are examples of prevention costs.

Diff: 1

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

6) External failure costs occur when poor-quality goods or services are not detected until after delivery to customers.

Diff: 1

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

7) Product testing is an appraisal cost.

Diff: 1

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

8) An example of an appraisal cost is the cost of automating the production process.

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

9) The cost of training employees would be classified as a prevention cost.

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

10) An example of a prevention cost is the cost of redesigning the product to reduce its complexity.

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

11) Quality-related costs generally fall into four different categories, which include all of the following except

A) prevention costs.

B) appraisal costs.

C) internal failure costs.

D) transportation costs.

Diff: 2

LO: 4-5

EOC: S4-13

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

12) On a Cost of Quality report, which of the following cost items should be classified as a prevention cost?

A) Technical support provided to suppliers

B) Warranty expenses on defective products

C) Supervision of quality inspections

D) Net cost of spoiled units

Diff: 2

LO: 4-5

EOC: S4-13

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

13) On a Cost of Quality report, which of the following cost items should be classified as an internal failure cost?

A) Customer returns of defective products

B) Net cost of scrap

C) Training for quality control employees

D) Patent cost for a new product

Diff: 2

LO: 4-5

EOC: S4-13

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

14) Which of the following is an example of a cost item that should be classified as a prevention cost?

A) Maintenance of manufacturing machinery

B) Quality control checks

C) Rework costs

D) Warranty costs

Diff: 2

LO: 4-5

EOC: S4-13

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

15) Which of the following is an example of a cost item that should be classified as an internal failure cost?

A) Inspection costs

B) Employee training costs

C) Rework costs

D) Product return costs

Diff: 2

LO: 4-5

EOC: S4-13

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

16) Which of the following is an example of a cost item that should be classified as an external failure cost?

A) Tooling changes

B) Cost of a lost unit

C) Warranty claims

D) Cost to redesign product

Diff: 2

LO: 4-5

EOC: S4-13

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

17) If a company were to decrease its prevention costs by eliminating employee training, the company's external failure costs would most likely

A) increase.

B) decrease.

C) remain the same.

D) Unable to predict

Diff: 2

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

18) On a Cost of Quality report, which of the following cost items should be classified as an external failure cost?

A) Net cost of scrap

B) Technical support provided to suppliers

C) Customer returns of defective products

D) Supplies used in the quality inspection program

Diff: 2

LO: 4-5

EOC: S4-13

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

19) If a company were to increase its appraisal costs by inspecting more units as the units are completed, the company's external failure costs would most likely

A) decrease.

B) increase.

C) remain the same.

D) Unable to predict

Diff: 2

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

20) If a company were to increase its appraisal costs by inspecting more units as the units are in production (during production), the company's external failure costs would most likely

A) decrease.

B) increase.

C) not be affected.

D) Unable to predict

Diff: 2

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

21) The cost of testing incoming raw materials from a supplier would be classified as a(n) ________ cost.

A) appraisal

B) prevention

C) internal failure

D) external failure

Diff: 2

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

22) The cost of maintaining quality control testing equipment would be classified as a(n) ________ cost.

A) appraisal

B) prevention

C) internal failure

D) external failure

Diff: 1

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

23) The cost of downtime caused by quality problems with the raw materials would be classified as what type of cost?

A) Prevention cost

B) Appraisal cost

C) External failure cost

D) Internal failure cost

Diff: 1

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

24) The cost of fixing defective units found during the quality inspections would be classified as what type of cost?

A) Prevention cost

B) Appraisal cost

C) External failure cost

D) Internal failure cost

Diff: 1

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

25) The cost of training quality control supervisors who are responsible for overseeing the inspection of units would be classified as a(n) ________ cost.

A) appraisal

B) prevention

C) internal failure

D) external failure

Diff: 1

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

26) All of the following statements regarding total quality management are true except

A) TQM emphasizes educating, training, and cross training employees to increase and broaden their skills.

B) TQM is a formal effort to improve quality throughout an organization's value chain.

C) TQM extends horizontally across business functions in the value chain.

D) TQM increases time spent on rework and warranty work.

Diff: 2

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

27) Managers who practice total quality management

A) invest more resources at the front end of the value chain in research and development and design to produce a superior product.

B) invest more resources in inspecting and repairing products once they are produced.

C) practice both A and B.

D) practice neither A nor B.

Diff: 2

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

28) Which of the following is one of the four cost categories typically found on a Cost of Quality report?

A) Development costs

B) Inventory failure costs

C) Prevention costs

D) Marketing costs

Diff: 1

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

29) Costs incurred in detecting poor quality goods or services are what type of costs?

A) External failure costs

B) Appraisal costs

C) Internal failure costs

D) Prevention costs

Diff: 1

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

30) What type of costs are incurred to avoid poor quality goods or services in the first place?

A) Appraisal costs

B) External costs

C) Prevention costs

D) Internal failure costs

Diff: 1

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

31) The costs incurred when poor quality goods or services are detected and corrected before delivery to customers are called ________ costs.

A) appraisal

B) external failure

C) prevention

D) internal failure

Diff: 1

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

32) The costs incurred when poor quality goods or services are detected and corrected after delivery to customers are called ________ costs.

A) appraisal

B) external failure

C) prevention

D) internal failure

Diff: 1

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

33) The cost of inspection at various stages of production is an example of a(n)

A) prevention cost.

B) appraisal cost.

C) internal failure cost.

D) external failure cost.

Diff: 1

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

34) The cost of warranty work is an example of what type of cost?

A) Prevention cost

B) Appraisal cost

C) External failure cost

D) Internal failure cost

Diff: 2

LO: 4-5

EOC: S4-14

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

35) The cost of evaluating potential raw material suppliers is an example of what type of cost?

A) Prevention cost

B) Internal failure cost

C) External failure cost

D) Appraisal cost

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

36) The cost of installing improved production equipment and production processes is a(n) ________ cost.

A) external failure

B) internal failure

C) appraisal

D) prevention

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

37) The cost of product liability claims is an example of a(n) ________ cost.

A) appraisal

B) internal failure

C) external failure

D) prevention

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

38) The lost profits from lost customers are an example of what type of cost?

A) Prevention costs

B) Internal failure costs

C) External failure costs

D) Appraisal costs

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

39) The costs of training production personnel on their job tasks is an example of which of the following types of costs?

A) Internal failure costs

B) External failure costs

C) Appraisal costs

D) Prevention costs

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

40) Production loss caused by downtime is an example of a(n)

A) internal failure cost.

B) external failure cost.

C) prevention cost.

D) appraisal cost.

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

41) Costs incurred to detect poor-quality goods and services refer to

A) activity-based costing.

B) appraisal costs.

C) value engineering.

D) prevention costs.

Diff: 1

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

42) Costs incurred to avoid manufacturing poor-quality goods or services are considered to be

A) appraisal costs.

B) activity-based costing.

C) prevention costs.

D) value engineering.

Diff: 1

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

43) Costs incurred to avoid providing poor quality services would be considered to be

A) appraisal costs.

B) activity-based costing.

C) prevention costs.

D) value engineering.

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

44) Costs incurred to detect poor quality goods or services are

A) activity-based costing.

B) appraisal costs.

C) value engineering.

D) prevention costs.

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

45) Which of the following cost of quality categories represent the cost incurred to rework a product after the company detects a poor-quality product before the company delivers the product to a consumer?

A) Lean production

B) Value added activity

C) Internal failure costs

D) External failure costs

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

46) Which of the following cost of quality categories represent the cost incurred to detect poor quality goods or services prior to consumer delivery in the marketplace?

A) Appraisal costs

B) Value-added activity

C) External failure costs

D) Just-in-time production

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

47) Which of the following cost of quality categories represent the cost incurred to "re-inspect a reworked blender?"

A) Prevention costs

B) Internal failure costs

C) Appraisal costs

D) External failure costs

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

48) Which of the following cost of quality categories represent the cost incurred to provide "warranty repair on a juicer"?

A) Prevention costs

B) Appraisal costs

C) External failure costs

D) Internal failure costs

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

49) Which of the following cost of quality categories represents the cost incurred to "test toasters before a sale"?

A) Appraisal costs

B) Prevention costs

C) Internal failure costs

D) External failure costs

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

50) Which of the following cost of quality categories represent the cost incurred to seek and find a new supplier that can provide quality raw materials compared to the low-quality raw materials received from a current supplier?

A) Prevention costs

B) Appraisal costs

C) Internal failure costs

D) External failure costs

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

51) Which of the following cost of quality categories represent the cost incurred to rework a defective product before the product is shipped to a consumer?

A) Prevention costs

B) Appraisal costs

C) Internal failure costs

D) External failure costs

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

52) Which of the following cost of quality categories represent the cost incurred to perform preventative maintenance on machinery?

A) Appraisal costs

B) Prevention costs

C) Internal failure costs

D) External failure costs

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

53) Which of the following cost of quality categories represent the cost incurred lost profits from lost customers?

A) Prevention costs

B) Appraisal costs

C) External failure costs

D) Internal failure costs

Diff: 2

LO: 4-5

EOC: S4-12

AACSB: Reflective thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

54) The manager at Cyber Merchandising provided the following Cost of Quality Report to the managers at the quarterly meeting.

Cyber Merchandising

Cost of Quality Report

Year Ended December 1, 20XX

The manager at Cyber Merchandising reported that the percentage of total costs to quality incurred in each cost category. Which cost of quality in the Costs of Quality Report are the highest expenditures at the firm? Rank the cost of quality in order from the lowest percentage cost of quality to the highest percentage cost of quality category. What can the manager at Cyber Manufacturing do to reduce the costs spent on the total internal failure costs?

Diff: 3

LO: 4-5

EOC: E4-26A

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

55) The manager at Seaside International prepares a Cost of Quality report to report the following expenses:

Inspection of raw material costs $8,000

Warranty costs for warranty claims $200,000

Cost to dispose of rejected products $17,000

Train hourly manufacturing personnel $40,000

Recall of batch #2894 $170,000

Production losses due to machine malfunctions $21,000

Cost of defective products found at inspection audit $70,000

Inspecting products when halfway through the production process $26,000

What is the total cost of quality in the external failure cost category?

A) $170,000

B) $8,000

C) $208,000

D) $501,000

E) $370,000

Diff: 3

LO: 4-5

EOC: E4-37B

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

56) The manager at Steel Vessels Company organizes costs to prepare the Costs of Quality report. The manger compiled the following data:

Employee training $162,000

Warranty costs $185,000

Rework $254,000

Product testing $170,000

Cost of rejected units $30,000

Sales return processing costs $25,000

Lost profits from lost sales $770,000

Inspection at State I of Production $90,000

Preventative maintenance $101,000

Improved equipment $115,000

What of the following cost is the total cost of quality the manager should use to report the costs in the internal failure cost category?

A) $185,000

B) $170,000

C) $611,000

D) $254,000

E) $284,000

Diff: 3

LO: 4-5

EOC: E4-37B

AACSB: Analytical thinking

Learning Outcome: Describe activity-based costing and calculate the cost of a job using ABC concepts.

4.6 Analyze activity cost pools and cost drivers using data analytics tools

1) Correlation is an analytical tool to measure the relationship among at least 4 variables.

Diff: 2

LO: 4-6

AACSB: Reflective thinking

2) Correlations is a statistical measure that allows managers to examine the extent to which two variables fluctuate together.

Diff: 1

LO: 4-6

AACSB: Reflective thinking

3) When analyzing correlation coefficient, the stronger the relationship the closer the R-value is to zero.

Diff: 1

LO: 4-6

AACSB: Reflective thinking

4) The Excel CORREL function can easily calculate the correlation coefficient among several different variables to determine which variable may be best to use as an allocation base.

Diff: 1

LO: 4-6

AACSB: Reflective thinking

5) Correlation is not explained by which of the following statements?

A) Correlation is a statistical measure showing the strength of the relationship between two variables.

B) Correlation always explains the change in one variable as caused by another variable.

C) Correlation examines the extent to which two variables fluctuate together.

D) Correction examines whether two variables fluctuate in the same or different directions.

Diff: 1

LO: 4-6

AACSB: Reflective thinking

6) When the correlation coefficient is closer to the value of 1, it indicates that

A) the relationship between the two variables chosen is weak.

B) the relationship between the two variables is undeterminable.

C) the relationship between the two variables is strong.

D) the relationship between the two variables is neutral.

Diff: 1

LO: 4-6

AACSB: Reflective thinking

7) When the correlation coefficient is closer to the value of -1, it indicates that

A) the variables chosen move in opposite directions.

B) the relationship among the variables is undeterminable.

C) the variables chosen fluctuate in the same direction.

D) the variables have a neutral relationship.

Diff: 1

LO: 4-6

AACSB: Reflective thinking

8) The Excel function that one can use to determine the correlation coefficient is

A) Pivot tables.

B) Bar graphs.

C) CORREL.

D) DMAX.

Diff: 1

LO: 4-6

AACSB: Reflective thinking

9) Dawn Corp analyzed several potential allocation bases that drives material handling costs and finds that number of parts moved has a correlation coefficient of 0.96 while time spent moving parts has a correlation coefficient of 0.45. Based on this analysis, Dawn Corp should use which allocation base?

A) Number of parts moved

B) Time spent moving parts

C) Further analysis needs to be run, as neither of these are close enough to zero, which would indicate a perfect relationship among variables.

D) Either allocation base can be used because they are both greater than zero which indicates a great relationship in variables.

Diff: 2

LO: 4-6

AACSB: Analytical thinking

10) The CORREL function in Excel is an easy tool to use to determine the correlation coefficient among two variables. Describe the steps taken in order to use the Excel Correlation Function (CORREL).

Diff: 2

LO: 4-6

AACSB: Reflective thinking