Abc Qustions
Abc Qustions
Name___________________________________
14) 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.
15) 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
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
16) How much of the account inquiry cost will be assigned to Department A?
A) $40,000 B) $200,000
C) $80,000 D) None of these answers are correct.
17) How much of the account billing cost will be assigned to Department B?
A) $14,000 B) $140,000
C) $7,000 D) None of these answers are correct.
22) 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
Fey Corporation manufactures two models of office chairs, a standard and a deluxe model. The following activity and
cost information has been compiled:
25) Assume a traditional costing system applies the $120,000 of overhead costs based on direct labor hours. What
is the total amount of overhead costs assigned to the standard model?
A) $49,600 B) $70,400 C) $75,000 D) $45,000
26) Assume a traditional costing system applies the $120,000 of overhead costs based on direct labor hours. What
is the total amount of overhead costs assigned to the deluxe model?
A) $49,600 B) $70,400 C) $75,000 D) $45,000
27) Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming
an activity-based costing system is used, what is the total amount of overhead costs assigned to the standard
model?
A) $49,600 B) $70,400 C) $75,000 D) $45,000
28) Number of setups and number of components are identified as activity-cost drivers for overhead. Assuming
an activity-based costing system is used, what is the total amount of overhead costs assigned to the deluxe
model?
A) $49,600 B) $70,400 C) $75,000 D) $45,000
Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is analyzed as follows:
T-SHIRTS SWEATSHIRTS
Production and sales volume 60,000 units 35,000 units
Selling price $16.00 $29.00
Direct material $ 2.00 $ 5.00
Direct labor $ 4.50 $ 7.20
Manufacturing overhead $ 2.00 $ 3.00
Gross profit $ 7.50 $13.80
Selling and administrative $ 4.00 $ 7.00
Operating profit $ 3.50 $ 6.80
What is projected operating income if direct materials costs of T-Shirts increase to $4.00 per unit and direct labor costs of
Sweatshirts increase to $8.20 per unit.
29) Under the revised ABC system, the activity-cost driver rate for the supervision activity is:
A) $2.58 B) $2.40 C) $2.24 D) $1.16
30) Under the revised ABC system, supervision costs allocated to Sweatshirts will be:
A) $48,720 B) $100,800
C) $100,920 D) None of these answers are correct.
31) Under the revised ABC system, total overhead costs allocated to Sweatshirts will be:
A) $ 48,720 B) $ 76,720
C) $224,920 D) None of these answers are correct.
32) Under the revised ABC system, overhead costs per unit for the Sweatshirts will be:
A) $1.39 per unit B) $1.60 per unit C) $2.19 per unit D) $2.47 per unit
33) Using an ABC system, next year's estimates show manufacturing overhead costs will total $228,300 for 52,000
T-shirts. If all other T-shirt costs and sales prices remain the same, the profitability that can be expected is:
A) $5.41 per t-shirt B) $4.39 per t-shirt C) $1.11 per t-shirt D) ($0.81) per t-shirt
Gregory Enterprises has identified three cost pools to allocate overhead costs. The following estimates are provided for
the coming year:
The accounting records show the Mossman Job consumed the following resources:
34) If Gregory Enterprises uses the three activity cost pools to allocate overhead costs, what are the activity-cost
driver rates for supervision of direct labor, machine maintenance, and facility rent, respectively?
A) $0.60 per dlh, $0.025 per mh, $0.80 per sq ft B) $1.25 per dlh, $0.25 per mh, $0.50 per sq ft
C) $0.40 per dlh, $0.05 per mh, $0.20 per sq ft D) $0.40 per dlh, $0.125 per mh, $2 per sq ft
35) Using the three cost pools to allocate overhead costs, what is the total amount of overhead costs to be
allocated to the Mossman Job?
A) $200 B) $380 C) $675 D) $170
36) Which method of allocation probably best estimates actual overhead costs used? Why?
A) Single direct labor-hours cost driver because it is best to allocate total costs uniformly to individual
jobs.
B) Single direct labor-hours cost driver because it is easiest to analyze and interpret.
C) Three activity-cost drivers because they best reflect the relative consumption of resources.
D) Three activity-cost drivers because product costs can be significantly cross-subsidized.
Velshi Printers has contracts to complete weekly supplements required by forty-six customers. For the year 2010,
manufacturing overhead cost estimates total $840,000 for an annual production capacity of 12 million pages.
For 2010 Velshi Printers has decided to evaluate the use of additional cost pools. After analyzing manufacturing overhead
costs, it was determined that number of design changes, setups, and inspections are the primary manufacturing overhead
cost drivers. The following information was gathered during the analysis:
During 2010, two customers, Money Managers and Hospital Systems, are expected to use the following printing services:
38) When costs are assigned using the single cost driver, number of pages printed, then:
A) Velshi Printers will want to retain this highly profitable customer
B) Money Managers will likely seek to do business with competitors
C) Money Managers is unfairly over billed for its use of printing resources
D) Money Managers is grossly under billed for the job, while other jobs will be unfairly over billed
39) Products make diverse demands on resources because of differences in all of the following EXCEPT:
A) volume B) selling price C) batch size D) complexity