ACC650
Module 3 - Week 3 Quiz Activity-Based Costing
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1. Activity-based
costing systems:
a. use a
single, volume-based cost driver.
assign overhead to
products based on the products' relative usage of direct labor.
often reveal products
that were under- or over-costed by traditional costing systems.
typically use fewer
cost drivers than more traditional costing systems.
have a tendency to
distort product costs.
2. Burgoon uses
an economic order quantity model and has determined an optimal order size of
500 units. Annual demand is 10,000 units, ordering costs are $50 per order, and
holding costs are $4 per unit. The reorder point is:
25 packages.
50 packages.
100 packages.
203 packages.
225 packages.
1. Feinstein,
Inc., an appliance manufacturer, is developing a new line of ovens that uses
controlled-laser technology. The research and testing costs associated with the
new ovens is said to arise from a:
unit-level activity.
batch-level activity.
product-sustaining
activity.
facility-level
activity.
competitive-level
activity.
2. Burgoon uses
an economic order quantity model and has determined an optimal order size of
500 units. Annual demand is 10,000 units, ordering costs are $50 per order, and
holding costs are $4 per unit. The reorder point is:
25 packages.
50 packages.
100 packages.
203 packages.
225 packages.
3. St. James, Inc., currently uses traditional
costing procedures, applying $800,000 of overhead to products Beta and Zeta on
the basis of direct labor hours. The company is considering a shift to
activity-based costing and the creation of individual cost pools that will use
direct labor hours (DLH), production setups (SU), and number of parts
components (PC) as cost drivers. Data on the cost pools and respective driver
volumes follow.
Product Pool No. 1 (Driver: DLH) Pool No. 2 (Driver: SU)
Pool No. 3 (Driver: PC)
Beta
1,200
45
2,250
Zeta
2,800
55
750
Pool Cost $160,000 $280,000 $360,000
4. In an
activity-based costing system, direct materials used would typically be
classified as a:
unit-level cost.
batch-level cost.
product-sustaining
cost.
facility-level cost.
matrix-level cost.
5. Consider the
following statements regarding traditional costing systems:
I. Overhead costs are applied to products on the basis of
volume-related measures.
II. All manufacturing costs are easily traceable to the
goods produced.
III. Traditional costing systems tend to distort unit
manufacturing costs when numerous goods are made that have widely varying
production requirements.
Which of the above statements is (are) true?
I only.
II only.
III only.
I and III.
II and III
6. Alaina's
customer service department follows up on customer complaints by telephone
inquiry. During a recent period, the department initiated 10,000 calls and
incurred costs of $312,000. Of these calls, 3,800 were for the company's
wholesale operation; the remainder were for the retail division. Costs
allocated to the wholesale operation are:
A. $0.
B. $31,200.
C. $118,560.
D. $193,440.
E. $203,000.
Costs $312,000
Total
calls 10,000
Cost
per call = 312,000 / 10,000
= $31.20
Wholesale
division calls 3,800
Retail
division cost = 3,800 x $31.20
=
$118,560
7. Which of the
following is classified as an inventory shortage cost?
Purchase order
preparation.
Production
disruption.
Lost sales and lost
customers.
Spoilage.
Production
disruption, lost sales, and lost customers.
8. During a
recent accounting period, Marty's shipping department processed 26 orders. Each
order typically takes four hours to complete; however, the average time
increased to five hours because of various departmental inefficiencies. If
shipping labor is paid $14 per hour, the company's non-value-added cost would
be:
$0.
$56.
$364.
$1,456.
$1,820.
9. St. James,
Inc., currently uses traditional costing procedures, applying $800,000 of
overhead to products Beta and Zeta on the basis of direct labor hours. The
company is considering a shift to activity-based costing and the creation of
individual cost pools that will use direct labor hours (DLH), production setups
(SU), and number of parts components (PC) as cost drivers. Data on the cost
pools and respective driver volumes follow.
Product Pool No. 1 (Driver: DLH) Pool No. 2 (Driver: SU)
Pool No. 3 (Driver: PC)
Beta 1,200 45 2,250
Zeta
2,800
55
750
Pool Cost $160,000 $280,000 $360,000
The overhead cost allocated to Beta by using traditional
costing procedures would be:
$240,000.
$356,000.
$444,000.
$560,000.
some other amount.
10. Inventory
holding costs typically include:
clerical costs of
purchase-order preparation.
costs of deterioration,
theft, or spoilage.
costs associated with
lost sales to customers.
forgone interest on
money tied up in inventory.
costs of
deterioration, theft, or spoilage and forgone interest on money tied up in
inventory.
11. At the
economic order quantity:
total annual
inventory costs, holding costs, and ordering costs are all minimized.
total annual
inventory costs and holding costs are minimized.
total annual
inventory costs are minimized, and holding costs equal ordering costs.
total annual
inventory costs are minimized, and holding costs exceed ordering costs.
total annual
inventory costs are minimized, and ordering costs exceed holding costs.
12. Aladin's
customer service department follows up on customer complaints by telephone inquiry.
During a recent period, the department initiated 7,000 calls and incurred costs
of $203,000. If 2,940 of these calls were for the company's wholesale operation
(the remainder were for the retail division), costs allocated to the wholesale
operation should amount to:
A. $0.
B. $29.
C. $85,260.
D. $117,740.
E. $203,000.
13. Alamo's
customer service department follows up on customer complaints by telephone
inquiry. During a recent period, the department initiated 7,000 calls and
incurred costs of $203,000. If 2,940 of these calls were for the company's
wholesale operation (the remainder were for the retail division), costs
allocated to the retail division should amount to:
A. $0.
B. $29.
C. $85,260.
D. $117,740.
E. $203,000.
Costs $203,000
Total
calls 7,000
Cost
per call = 203,000 / 7,000
= $29
Retail
division calls 4,060 (7,000 – 2,940)
Retail
division cost = 4,060 x $29
=
$117,740
14. St. James,
Inc., currently uses traditional costing procedures, applying $800,000 of overhead
to products Beta and Zeta on the basis of direct labor hours. The company is
considering a shift to activity-based costing and the creation of individual
cost pools that will use direct labor hours (DLH), production setups (SU), and
number of parts components (PC) as cost drivers. Data on the cost pools and
respective driver volumes follow.
Product Pool No. 1 (Driver: DLH) Pool No. 2 (Driver: SU)
Pool No. 3 (Driver: PC)
Beta
1,200
45 2,250
Zeta
2,800
55
750
Pool Cost $160,000 $280,000 $360,000
The overhead cost allocated to Zeta by using traditional
costing procedures would be:
$240,000.
$356,000.
$444,000.
$560,000.
some other amount.
15. Consider the following statements:
I. Product diversity creates costing problems because
diverse products tend to utilize manufacturing activities in different ways.
II. Overhead costs that are not incurred at the unit level
create costing problems because such costs do not vary with traditional
application bases such as direct labor hours or machine hours.
III. Product diversity typically exists when a single
product (e.g., a ballpoint pen) is made in different colors.
Which of the above statements is (are) true?
I only.
II only.
I and II.
I and III.
II and III.
16. Consider the following statements:
I. Product diversity creates costing problems because
diverse products tend to utilize manufacturing activities in different ways.
II. Overhead costs that are not incurred at the unit level
create costing problems because such costs do not vary with traditional
application bases such as direct labor hours or machine hours.
III. Product diversity typically exists when a single
product (e.g., a ballpoint pen) is made in different colors.
Which of the above statements is (are) true?
I only.
II only.
I and II.
I and III.
II and III.
Which of the following is classified as an inventory
shortage cost?
Purchase order
preparation.
Production
disruption.
Lost sales and lost
customers.
Spoilage.
Production
disruption, lost sales, and lost customers.
• Which of the
following does not minimize ordering costs when using JIT purchasing?
Reducing the number
of vendors.
Negotiating long-term
supply agreements.
Making less frequent
payments.
Maintaining a safety
stock.
Eliminating
inspections.
• Inventory holding
costs typically include:
clerical costs of
purchase-order preparation.
costs of
deterioration, theft, or spoilage.
costs associated with
lost sales to customers.
forgone interest on
money tied up in inventory.
costs of
deterioration, theft, or spoilage and forgone interest on money tied up in
inventory.
In an activity-based
costing system, direct materials used would typically be classified as a:
unit-level cost.
batch-level cost.
product-sustaining
cost.
facility-level cost.
matrix-level cost.
• The following tasks
are associated with an activity-based costing system:
1— Assignment of cost to products
2— Calculation of pool rates
3— Identification of cost drivers
4— Identification of cost pools
Which of the following choices correctly expresses the proper
order of the preceding tasks?
1, 2, 3, 4.
2, 4, 1, 3.
3, 4, 2, 1.
4, 2, 1, 3.
4, 3, 2, 1.
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