1. Unit-level activities are performed each time a unit is produced.
True False
2. Organization-sustaining activities are activities of the general organization that support specific
products.
True False
3. Costs classified as batch-level costs should depend on the number of batches processed rather
than on the number of units produced, the number of units sold, or other measures of volume.
True False
4. Customer-level activities relate to specific customers and are not tied to any specific products.
True False
5. Managing and sustaining product diversity requires many more overhead resources such as
production schedulers and product design engineers than managing and sustaining a single
product. The costs of these resources can be accurately allocated to products on the basis of direct
labor-hours.
True False
15. Personnel administration is an example of (an):
A. Unit-level activity.
B. Batch-level activity.
C. Product-level activity.
D. Organization-sustaining activity.
16. Which of the following activities would be classified as a batch-level activity?
A. Setting up equipment.
B. Designing a new product.
C. Training employees.
D. Milling a part required for the final product.
17. Would the following activities at a manufacturer of canned soup be best classified as unit-
level, batch-level, product-level, or organization-sustaining activities?
A. Option A
B. Option B
C. Option C
D. Option D
18. A duration driver is:
A. A simple count of the number of times an activity occurs.
B. An activity measure that is used for the life of the company.
C. A measure of the amount of time required to perform an activity.
D. An activity measure that is used for the life of an activity-based costing system.
19. A transaction driver is:
A. An event that causes a transaction to begin.
B. A measure of the amount of time required to perform an activity.
C. An event that causes a transaction to end.
D. A simple count of the number of times an activity occurs.
20. Which of the following is not a limitation of activity-based costing?
A. Maintaining an activity-based costing system is more costly than maintaining a traditional
direct labor-based costing system.
B. Changing from a traditional direct labor-based costing system to an activity-based costing
system changes product margins and other key performance indicators used by managers. Such
changes are often resisted by managers.
C. In practice, most managers insist on fully allocating all costs to products, customers, and other
costing objects in an activity-based costing system. This results in overstated costs.
D. More accurate product costs may result in increasing the selling prices of some products.
21. An activity-based costing system that is designed for internal decision-making will not
conform to generally accepted accounting principles because:
A. some manufacturing costs (i.e., the costs of idle capacity and organization-sustaining costs)
will not be assigned to products.
B. some non-manufacturing costs are assigned to products.
C. first-stage allocations may be based on subjective interview data.
D. all of the above are reasons why an activity-based costing system that is designed for internal
decision-making will not conform to generally accepted accounting principles.
22. Designing a new product is an example of (an):
A. Unit-level activity.
B. Batch-level activity.
C. Product-level activity.
D. Organization-sustaining activity.
23. Property taxes are an example of a cost that would be considered to be:
A. Unit-level.
B. Batch-level.
C. Product-level.
D. Organization-sustaining.
24. McCaskey Corporation uses an activity-based costing system with the following three activity
cost pools:
The Other activity cost pool is used to accumulate costs of idle capacity and organization-
sustaining costs.
The company has provided the following data concerning its costs:
The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Fabrication activity cost pool is closest to:
A. $1.65 per machine-hour
B. $4.00 per machine-hour
C. $0.80 per machine-hour
D. $2.40 per machine-hour
25. Christiansen Corporation uses an activity-based costing system with the following three
activity cost pools:
The Other activity cost pool is used to accumulate costs of idle capacity and organization-
sustaining costs.
The company has provided the following data concerning its costs:
The distribution of resource consumption across activity cost pools is given below:
The activity rate for the Order Processing activity cost pool is closest to:
A. $676 per order
B. $780 per order
C. $560 per order
D. $312 per order
