Which
of the following situations indicate that a manager should consider using
activity-based costing (ABC)?
ANSWER
INCORRECT
·
THE CORRECT ANSWER
The cost system is outdated.
·
Older systems continue to
operate at consistent levels of accuracy.
·
The existing cost systems do
not distort costs.
·
YOU WERE SURE AND INCORRECT
The costs of implementing
activity-based costing (ABC) exceeds the expected benefits.
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
A
manager should consider using activity-based costing (ABC) if the
cost system is outdated. If the costs of implementing activity-based
costing (ABC) exceed expected benefits, if older systems continue to function,
and if existing systems do not distort costs, then the existing cost system is
appropriate.
Setting
up a machine to change from producing one product to another is an example of a
________.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
batch-level cost
·
YOU WERE SURE AND INCORRECT
facility-level cost
·
product-level cost
·
unit-level cost
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
Setting up a machine to change from producing
one product to another is an example of a batch-level cost.
Inspecting and packaging are examples of
unit-level costs.
Lease payment for the sole use of
manufacturing is an example of a product-level cost.
Facility
upkeep is an example of a facility-level cost.
________
have separate cost allocation rates for each activity identified by the
company.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
Activity-based costing (ABC)
systems
·
YOU WERE SURE AND INCORRECT
Plantwide cost allocation
systems
·
Departmental cost allocation
systems
·
All cost allocation systems
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
Activity-based (ABC) systems have separate cost
allocation rates for each activity identified by the company. The main
difference between an ABC system and a plantwide or departmental cost
allocation system is that ABC systems have separate cost allocation rates for
each activity identified by the company. Thus, all cost allocation systems do
not have separate cost allocation rates for each activity the manager
identifies at the company.
In
the cost allocation process, an allocation base ________.
ANSWER
INCORRECT
·
usage collection is discouraged
since it is never related to the allocation base
·
THE CORRECT ANSWER
should be the cost driver of
the costs in the particular activity pool
·
YOU WERE SURE AND INCORRECT
is never a concern since
managers never track activity pools
·
using bar coding and other
technological advances is discouraged since data collection is inconsistent
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
In
the cost allocation process, an allocation base should
be the cost driver of the costs in the particular activity pool.
Managers always track how much of the allocation base a job or product uses.
Managers always collect usage information about each allocation base. Bar
coding and other technological advances encourage lower data collection costs
and enhance the data collection process.
Which
of the following choices represent conformance costs?
ANSWER
INCORRECT
·
Appraisal and internal failure
costs
·
Internal and external failure
costs
·
YOU WERE SURE AND INCORRECT
Prevention and external failure
costs
·
THE CORRECT ANSWER
Appraisal and prevention costs
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
Appraisal and prevention costs represent conformance
costs. Internal and external failure costs are non-conformance costs.
Which
of the following categories of a cost of quality report is an example of a cost
incurred to detect poor-quality goods or services?
ANSWER
INCORRECT
·
THE CORRECT ANSWER
Appraisal costs
·
Internal failure costs
·
YOU WERE SURE AND INCORRECT
Prevention costs
·
External failure costs
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
An appraisal cost is an example of a cost
incurred to detect poor-quality goods or services. Other categories that form
the framework for costs of quality report that exclude appraisal costs but
outline other quality report costs include prevention costs, internal failure
costs, and external failure costs.
Activity-based
costing (ABC) ________.
ANSWER
INCORRECT
·
allocates direct costs only to
the products based on the type of activity
·
THE CORRECT ANSWER
focuses on activities performed
to produce a product
·
YOU WERE SURE AND INCORRECT
results in the most amount of
cost distortion among products
·
focuses on departments instead
of activities to produce a product
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
Activity-based
costing (ABC) focuses on activities performed to produce a product. ABC
results in the least amount of cost distortion among products because indirect
costs are allocated to the products based on types of activities and the extent
to which the activities are used.
Activity-based
costing (ABC) ________.
ANSWER
INCORRECT
·
focuses on departments instead
of activities to produce a product
·
results in the most amount of
cost distortion among products
·
YOU WERE SURE AND INCORRECT
allocates direct costs only to
the products based on the type of activity
·
THE CORRECT ANSWER
focuses on activities performed
to produce a product
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
Activity-based
costing (ABC) focuses on activities performed to produce a product.
ABC results in the least amount of cost distortion among products because indirect
costs are allocated to the products based on types of activities and the extent
to which the activities are used.
In
the cost allocation process, an allocation base ________.
ANSWER
INCORRECT
·
is never a concern since
managers never track activity pools
·
using bar coding and other
technological advances is discouraged since data collection is inconsistent
·
YOU WERE SURE AND INCORRECT
usage collection is discouraged
since it is never related to the allocation base
·
THE CORRECT ANSWER
should be the cost driver of
the costs in the particular activity pool
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
In
the cost allocation process, an allocation base should
be the cost driver of the costs in the particular activity pool.
Managers always track how much of the allocation base a job or product uses.
Managers always collect usage information about each allocation base. Bar
coding and other technological advances encourage lower data collection costs
and enhance the data collection process.
Setting
up a machine to change from producing one product to another is an example of a
________.
ANSWER
INCORRECT
·
facility-level cost
·
YOU WERE SURE AND INCORRECT
product-level cost
·
THE CORRECT ANSWER
batch-level cost
·
unit-level cost
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
Setting up a machine to change from producing
one product to another is an example of a batch-level cost.
Inspecting and packaging are examples of
unit-level costs.
Lease payment for the sole use of
manufacturing is an example of a product-level cost.
Facility
upkeep is an example of a facility-level cost.
Which
of the following situations indicate that a manager should consider using
activity-based costing (ABC)?
ANSWER
INCORRECT
·
The existing cost systems do
not distort costs.
·
YOU WERE SURE AND INCORRECT
The costs of implementing
activity-based costing (ABC) exceeds the expected benefits.
·
Older systems continue to
operate at consistent levels of accuracy.
·
THE CORRECT ANSWER
The cost system is outdated.
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
A
manager should consider using activity-based costing (ABC) if the
cost system is outdated. If the costs of implementing activity-based
costing (ABC) exceed expected benefits, if older systems continue to function,
and if existing systems do not distort costs, then the existing cost system is
appropriate.
Which
of the following categories of a cost of quality report is an example of a cost
incurred to detect poor-quality goods or services?
ANSWER
INCORRECT
·
External failure costs
·
Internal failure costs
·
YOU WERE SURE AND INCORRECT
Prevention costs
·
THE CORRECT ANSWER
Appraisal costs
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
An appraisal cost is an example of a cost
incurred to detect poor-quality goods or services. Other categories that form
the framework for costs of quality report that exclude appraisal costs but
outline other quality report costs include prevention costs, internal failure
costs, and external failure costs.
Which
of the following statements best describes the relationship among
activity-based costing and cost distortion among products?
ANSWER
INCORRECT
·
THE CORRECT ANSWER
Activity-based costing
typically causes the least cost distortion between products because of the way
indirect costs are allocated to the product.
·
YOU WERE SURE AND INCORRECT
Activity-based costing distorts
product costs, which ALWAYS result from the allocation of all indirect costs.
·
Cost distortion is never a
result of the way a manager allocates indirect costs.
·
Activity based-costing causes
the most cost distortion among product costs because indirect costs are
allocated to products based on the extent to which the activities are used.
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
Activity-based costing typically causes the least cost distortion
between products because of the way indirect costs are allocated to the product.
Activity-based costing causes the least distortion because managers allocate
indirect costs to products based on the types and usage of product activities.
Cost distortion results solely from the way a manager allocates indirect costs
(manufacturing overhead).
The
Laramie factory runs two departments: the Preparation Department and the
Processing Department. The departmental overhead cost pool for the Preparation
Department was $25,000 and was $20,000 for the Processing Department. The total
amount of departmental allocation base was 400 DL hours in the Preparation
Department and 600 DL hours in the Processing Department.
What
is the estimated departmental overhead cost pool for each department?
ANSWER
INCORRECT
·
$2.50 for the Processing
Department and $2.00 for the Preparation Department
·
YOU WERE SURE AND INCORRECT
$6.25 for the Processing
Department and $3.33 for the Preparation Department
·
$625.00 for the Processing
Department and $333.33 for the Preparation Department
·
THE CORRECT ANSWER
$62.50 for the Preparation
Department and $33.33 for the Processing Department
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The estimated departmental overhead cost pool
for each department is $62.50 for the Preparation Department and
$33.33 for the Processing Department. The calculations include:
Step 1: Total Departmental Overhead Cost Pool:
Preparation Department
…………………..…….....…….$25,000
Processing Department …………………………..….......$20,000
Total Manufacturing Overhead (MOH)
…………..…$45,000
Step 2: Total Amount of Departmental
Allocation Base:
Preparation Department………………………………400 DL hours
Processing Department ………………………..……..600 DL
hours
Step 3: Departmental Overhead Rates:
Preparation Department overhead rate = $25,000
/ 400 = $62.50 per DL hour
Processing
Department overhead rate = $20,000 / 600 = $33.33 per DL hour
Which
of the following choices represent conformance costs?
ANSWER
INCORRECT
·
Appraisal and internal failure
costs
·
YOU WERE SURE AND INCORRECT
Prevention and external failure
costs
·
Internal and external failure
costs
·
THE CORRECT ANSWER
Appraisal and prevention costs
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
Appraisal and prevention costs represent conformance
costs. Internal and external failure costs are non-conformance costs.
Dobles Corporation has provided
the following data from its activity-based costing system:
|
Activity Cost Pools
|
Estimated Overhead Cost
|
Expected Activity
|
|
|
Assembly
|
$228,060
|
18,000
|
machine-hours
|
|
Processing
orders
|
$34,068
|
1,200
|
orders
|
|
Inspection
|
$125,560
|
1,720
|
inspection-hours
|
The
company makes 420 units of product D28K a year, requiring a total of 460
machine-hours, 80 orders, and 10 inspection-hours per year. The product's direct
materials cost is $48.96 per unit, and its direct labor cost is $25.36 per
unit.
Use
activity-based costing to compute the unit product cost of product D28K.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
$95.34 per unit
·
$93.60 per unit
·
YOU WERE SURE AND INCORRECT
$89.93 per unit
·
$74.32 per unit
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
$95.34 per unit. The activity rates for each
activity cost pool are computed as follows:
|
Activity Cost Pools
|
(a)
Estimated Overhead Cost |
(b)
Total Expected Activity |
(a) / (b) Activity Rate |
||
|
Assembly
|
$228,060
|
18,000
|
machine-hours
|
$12.67
|
per
machine-hour
|
|
Processing
orders
|
$34,068
|
1,200
|
orders
|
$28.39
|
per
order
|
|
Inspection
|
$125,560
|
1,720
|
inspection-hours
|
$73.00
|
per
inspection-hour
|
The overhead cost charged to Product D28K is:
|
Activity Cost Pools
|
Activity Rates |
Expected Activity |
Amount |
||
|
Assembly
|
$12.67
|
per
machine-hour
|
460
|
machine-hours
|
$5,828.20
|
|
Processing
orders
|
$28.39
|
per
order
|
80
|
Orders
|
2,271.20
|
|
Inspection
|
$73.00
|
per
inspection-hour
|
10
|
inspection-hours
|
730.00
|
|
Total
overhead costs assigned
|
|
|
|
|
$8,829.40
|
|
Direct
materials (420 units × $48.96 per unit)
|
$20,563.20
|
|
Direct
labor (420 units × $25.36 per unit)
|
10,651.20
|
|
Overhead
|
8,829.40
|
|
Total
cost
|
$40,043.80
|
Unit product cost = $40,043.80 / 420 units = $95.34 per unit.
The
first step in the development of an activity-based costing system is to
________.
ANSWER
INCORRECT
·
compute activity cost
allocation rates
·
allocates manufacturing
overhead
·
YOU WERE SURE AND INCORRECT
select the allocation base and
estimate total amounts
·
THE CORRECT ANSWER
identify activity cost pools
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The
first step in the development of an activity-based costing system is to identify
activity cost pools. Next, the manager selects the allocation base and estimates the
total amounts, computes activity cost allocation rates, and allocates
manufacturing overhead.
________ is a management
philosophy and strategy focused on creating value for the customer by eliminating
waste.
ANSWER
INCORRECT
·
Eight
wastes
·
THE CORRECT ANSWER
Lean
thinking
·
Just-in-time
(JIT)
·
YOU WERE SURE AND INCORRECT
Kaizen
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
Lean thinking management philosophy and strategy focuses on creating value
for the customer and eliminating waste.
Kaizen is a Japanese word
meaning “change for the better.”
Eight wastes identifies the
different waste found in traditional organizations, including service and
merchandising companies. The eight wastes include (a) defects (b)
overproduction (c) waiting (d) not utilizing people to their full potential (e)
transportation (f) inventory (g) movement, and (h) excess processing.
Just-in-time (JIT) inventory philosophy focuses on purchasing raw
materials just-in-time for
production and then completing the finished goods just in time for delivery to
customers.
Which
of the following categories of a cost of quality report is an example of a cost
incurred to detect poor-quality goods or services?
ANSWER
INCORRECT
·
YOU WERE SURE AND INCORRECT
Prevention costs
·
THE CORRECT ANSWER
Appraisal costs
·
Internal failure costs
·
External failure costs
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
An appraisal cost is an example of a cost
incurred to detect poor-quality goods or services. Other categories that form
the framework for costs of quality report that exclude appraisal costs but
outline other quality report costs include prevention costs, internal failure
costs, and external failure costs.
The
Laramie factory runs two departments: the Preparation Department and the
Processing Department. The departmental overhead cost pool for the Preparation
Department was $25,000 and was $20,000 for the Processing Department. The total
amount of departmental allocation base was 400 DL hours in the Preparation
Department and 600 DL hours in the Processing Department.
What
is the estimated departmental overhead cost pool for each department?
ANSWER
INCORRECT
·
THE CORRECT ANSWER
$62.50 for the Preparation
Department and $33.33 for the Processing Department
·
$6.25 for the Processing
Department and $3.33 for the Preparation Department
·
$2.50 for the Processing
Department and $2.00 for the Preparation Department
·
YOU WERE SURE AND INCORRECT
$625.00 for the Processing
Department and $333.33 for the Preparation Department
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
The estimated departmental overhead cost pool
for each department is $62.50 for the Preparation Department and
$33.33 for the Processing Department. The calculations include:
Step 1: Total Departmental Overhead Cost Pool:
Preparation Department
…………………..…….....…….$25,000
Processing Department …………………………..….......$20,000
Total Manufacturing Overhead (MOH)
…………..…$45,000
Step 2: Total Amount of Departmental
Allocation Base:
Preparation Department………………………………400 DL hours
Processing Department ………………………..……..600 DL
hours
Step 3: Departmental Overhead Rates:
Preparation Department overhead rate = $25,000
/ 400 = $62.50 per DL hour
Processing
Department overhead rate = $20,000 / 600 = $33.33 per DL hour
Which
of the following statements best describes the relationship among
activity-based costing and cost distortion among products?
ANSWER
INCORRECT
·
Activity based-costing causes
the most cost distortion among product costs because indirect costs are
allocated to products based on the extent to which the activities are used.
·
THE CORRECT ANSWER
Activity-based costing typically
causes the least cost distortion between products because of the way indirect
costs are allocated to the product.
·
YOU WERE SURE AND INCORRECT
Activity-based costing distorts
product costs, which ALWAYS result from the allocation of all indirect costs.
·
Cost distortion is never a
result of the way a manager allocates indirect costs.
·
I DON'T KNOW YET
WHAT
YOU NEED TO KNOW
Activity-based costing typically causes the least cost distortion
between products because of the way indirect costs are allocated to the product.
Activity-based costing causes the least distortion because managers allocate
indirect costs to products based on the types and usage of product activities.
Cost distortion results solely from the way a manager allocates indirect costs
(manufacturing overhead).
No comments:
Post a Comment