ACC 350 Week 6 Quiz – Strayer
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Quiz 4 Chapter 5
Activity-Based Costing and
Activity-Based Management
1)
A
top-selling product might actually result in losses for the company.
2)
Companies
that undercost products will most likely lose market share.
3)
If
companies increase market share in a given product line because their reported
costs are less than their actual costs, they will become more profitable in the
long run.
4)
As
product diversity and indirect costs increase, it is usually best to switch
away from an activity based cost system to a broad averaging system.
5)
If a
company undercosts one of its products, then it will overcost at least one of
its other products.
6)
Direct
costs plus indirect costs equal total costs.
7)
When
refining a costing system, a company should classify as many costs as possible
as indirect costs.
8)
In a
homogeneous cost pool, all costs have a similar cause-and-effect relationship
with the cost-allocation base.
9)
Indirect
labor and distribution costs would most likely be in the same activity-cost
pool.
10)
Activity-based
costing helps identify various activities that explain why costs are
incurred.
11)
Direct
tracing of costs improves cost accuracy.
12)
A
cost-allocation base is a necessary element when using a strategy that will
refine a costing system.
13)
An
activity-based costing system is necessary for costing services that are
similar.
14)
Traditional
systems are likely to undercost complex products with lower production
volume.
15)
For
activity-based cost systems, activity costs are assigned to products in the
proportion of the demand they place on activity resources.
16)
Unit-level
measures can distort product costing because the demand for overhead resources
may be driven by batch-level or product-sustaining activities.
17)
Output
unit-level costs cannot be determined unless you know how many units are in a
given batch.
18)
Using
multiple unit-level cost drivers generally constitutes an effective
activity-based cost system.
19)
Misleading
cost numbers are larger when unit-level assignments and the alternative
activity-cost-driver assignments are proportionately similar to each
other.
20)
Availability
of reliable data and measures should be considered when choosing a
cost-allocation base.
21)
When
designing a costing system, it is easiest to calculate total costs first, and
then per-unit costs.
22)
ABC
systems attempt to trace more costs as direct costs.
23)
ABC
systems create homogeneous cost pools linked to different activities.
24)
ABC
systems seek a cost allocation base that has a cause-and-effect relationship
with costs in the cost pool.
25)
For
service organizations, activity-based cost systems may be used to clarify
appropriate cost assignments.
26)
ABC
reveals opportunities for improving the way work is done.
27)
Activity-based
management refers to the use of information derived from ABC analysis to
analyze and improve operations.
28)
Information
derived from an ABC analysis might be used to eliminate nonvalue-added
activities.
29)
ABC
costing systems are primarily for use in manufacturing and marketing and not
for design engineering.
30)
Department-costing
systems are a further refinement of ABC systems.
31)
ABC
systems are useful in manufacturing, but not in the merchandising or service
industries.
32)
Costing
systems with multiple cost pools are considered ABC systems.
33)
Regarding
department wide systems, the benefits of an ABC system must be balanced against
its costs and limitations.
34)
ABC
systems always provide decision-making benefits that exceed implementation
costs.
35)
The
primary costs of an ABC system are the measurements necessary to implement the
system.
36)
Simply
because activity-based costing systems employ more activity-cost drivers, they
provide more accurate product costs than traditional systems.
37)
If
products are alike, then for costing purposes:
A)
a simple
costing system will yield accurate cost numbers
B)
an
activity-based costing system should be used
C)
multiple
indirect-cost rates should be used
D)
varying
demands will be placed on resources
38)
Undercosting
a particular product may result in:
A)
loss of
market share
B)
lower
profits
C)
operating
inefficiencies
D)
understating
total product costs
39)
Overcosting
of a product is MOST likely to result from:
A)
misallocating
direct labor costs
B)
overpricing
the product
C)
undercosting
another product
D)
understating
total product costs
40)
A
company produces three products; if one product is overcosted then:
A)
one
product is undercosted
B)
one or
two products are undercosted
C)
two
products are undercosted
D)
no
products are undercosted
41)
Misleading
cost numbers are MOST likely the result of misallocating:
A)
direct
material costs
B)
direct
manufacturing labor costs
C)
indirect
costs
D)
All of
these answers are correct.
42)
An
accelerated need for refined cost systems is due to:
A)
global
monopolies
B)
rising
prices
C)
intense
competition
D)
a shift
toward increased direct costs
43)
The use
of a single indirect-cost rate is more likely to:
A)
undercost
high-volume simple products
B)
undercost
low-volume complex products
C)
undercost
lower-priced products
D)
Both B
and C are correct.
44)
Uniformly
assigning the costs of resources to cost objects when those resources are
actually used in a nonuniform way is called:
A)
overcosting
B)
undercosting
C)
peanut-butter
costing
D)
department
costing
45)
Refining
a cost system includes:
A)
classifying
as many costs as indirect costs as is feasible
B)
creating
as many cost pools as possible
C)
identifying
the activities involved in a process
D)
seeking
a lesser level of detail
46)
Greater
indirect costs are associated with:
A)
specialized
engineering drawings
B)
quality
specifications and testing
C)
inventoried
materials and material control systems
D)
All of
these answers are correct.
47)
Design
of an ABC system requires:
A)
that the
job bid process be redesigned
B)
that a
cause-and-effect relationship exists between resource costs and individual
activities
C)
an
adjustment to product mix
D)
Both B
and C are correct.
48)
ABC
systems create:
A)
one
large cost pool
B)
homogenous
activity-related cost pools
C)
activity-cost
pools with a broad focus
D)
activity-cost
pools containing many direct costs
49)
Logical
cost allocation bases include:
A)
cubic
feet of packages moved to measure distribution activity
B)
machine
hours to measure setup activity
C)
direct
manufacturing labor hours to measure designing activity
D)
All of
these answers are correct.
50)
ABC
systems:
A)
highlight
the different levels of activities
B)
limit
cost drivers to units of output
C)
allocate
costs based on the overall level of activity
D)
generally
undercost complex products
51)
A single
indirect-cost rate may distort product costs because:
A)
there is
an assumption that all support activities affect all products
B)
it
recognizes specific activities that are required to produce a product
C)
costs
are not consistently recorded
D)
it fails
to measure the correct amount of total costs
52)
Traditional
cost systems distort product costs because:
A)
they do
not know how to identify the appropriate units
B)
competitive
pricing is ignored
C)
they
emphasize financial accounting requirements
D)
they
apply average support costs to each unit of product
53)
Which of
the following statements about activity-based costing is NOT true?
A)
Activity-based
costing is useful for allocating marketing and distribution costs.
B)
Activity-based
costing is more likely to result in major differences from traditional costing
systems if the firm manufactures only one product rather than multiple
products.
C)
Activity-based
costing seeks to distinguish batch-level, product-sustaining, and
facility-sustaining costs, especially when they are not proportionate to one
another.
D)
Activity-based
costing differs from traditional costing systems in that products are not
cross-subsidized.
54)
Activity-based
costing (ABC) can eliminate cost distortions because ABC:
A)
develops
cost drivers that have a cause-and-effect relationship with the activities
performed
B)
establishes
multiple cost pools
C)
eliminates
product variations
D)
recognizes
interactions between different departments in assigning support costs
55)
Product
lines that produce different variations (models, styles, or colors) often
require specialized manufacturing activities that translate into:
A)
fewer
indirect costs for each product line
B)
decisions
to drop product variations
C)
a
greater number of direct manufacturing labor cost allocation rates
D)
greater
overhead costs for each product line
Answer
the following questions using the information below:
Merriman
Company provides the following ABC costing information:
Activities Total Costs Activity-cost drivers
Account
inquiry hours $400,000 10,000 hours
Account
billing lines $280,000 4,000,000 lines
Account
verification accounts $150,000 40,000 accounts
Correspondence
letters $ 50,000 4,000 letters
Total costs $880,000
The
above activities are used by Departments A and B as follows:
Department A Department B
Account
inquiry hours 2,000 hours 4,000 hours
Account
billing lines 400,000 lines 200,000 lines
Account
verification accounts 10,000 accounts 8,000 accounts
Correspondence
letters 1,000 letters 1,600 letters
56)
How much
of the account inquiry cost will be assigned to Department A?
A)
$80,000
B)
$400,000
C)
$160,000
D)
None of
these answers are correct.
57)
How much
of the account billing cost will be assigned to Department B?
A)
$28,000
B)
$280,000
C)
$14,000
D)
None of
these answers are correct.
58)
How much
of account verification costs will be assigned to Department A?
A)
$30,000
B)
$37,500
C)
$150,000
D)
$10,000
59)
How much
of correspondence costs will be assigned to Department B?
A)
$1,600
B)
$12,500
C)
$50,000
D)
$20,000
60)
How much
of the total costs will be assigned to Department A?
A)
$158,000
B)
$80,000
C)
$224,000
D)
$880,000
61)
How much
of the total costs will be assigned to Department B?
A)
$158,000
B)
$80,000
C)
$224,000
D)
$880,000
62)
Dalrymple
Company produces a special spray nozzle. The budgeted indirect total cost of
inserting the spray nozzle is $80,000. The budgeted number of nozzles to be
inserted is 40,000. What is the budgeted indirect cost allocation rate for this
activity?
A)
$0.50
B)
$1.00
C)
$1.50
D)
$2.00
63)
Activity-based
costing is most likely to yield benefits for companies with all of the
following characteristics EXCEPT:
A)
numerous
products that consume different amounts of resources
B)
operations
that remain fairly consistent
C)
a highly
competitive environment, where cost control is critical
D)
accessible
accounting and information systems expertise to maintain the system
64)
Each of
the following statements is true EXCEPT:
A)
traditional
product costing systems seek to assign all manufacturing costs to products
B)
ABC
product costing systems seek to assign all manufacturing costs to products
C)
traditional
product costing systems are more refined than an ABC system
D)
cost
distortions occur when a mismatch (incorrect association) occurs between the
way indirect costs are incurred and the basis for their assignment to
individual products
Answer
the following questions using the information below:
Happy
Valley Land and Snow Company provides the following ABC costing information:
Activities Total Costs Activity-cost drivers
Labor
hours $160,000 8,000 hours
Gas $18,000 6,000 gallons
Invoices $20,000 2,500 invoices
Total costs $198,000
The
above activities used by their three departments are:
Lawn Department Bush Department Plowing Department
Labor
hours 2,500 hours 1,200 hours 4,300
hours
Gas 1,500 gallons 800 gallons 3,700 gallons
Invoices 1,600 invoices 400 invoices 500
invoices
65)
How much
of the labor cost will be assigned to the Lawn Department?
A)
$50,000
B)
$12,800
C)
$20,000
D)
None of
these answers are correct.
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