Exam 1 Ch 5 true and false Flashcards
1
Q
- When overhead is properly assigned in ABC, it will usually decrease the unit cost of high-volume products.
A
f
2
Q
- Activity-based management focuses on reducing costs and improving processes.
A
t
3
Q
- Non-value-added activities increase the cost of a product but not its market value.
A
t
4
Q
- Machining is a non-value-added activity.
A
f
5
Q
- What sometimes makes implementation of activity-based costing difficult in service industries is that a smaller proportion of overhead costs are company-wide costs
A
f
6
Q
- Under a traditional costing approach based on direct labour hours, how much overhead would be assigned to the Downy product?
a. $224,000
b. $252,000
c. $280,000
d. $336,000
A
a
7
Q
- The first step in activity-based costing is to
a. assign manufacturing overhead costs for each activity cost pool to products.
b. calculate the activity-based overhead rate per cost driver.
c. identify and classify the major activities involved in the manufacture of specific products.
d. identify the cost driver that has a strong correlation to the activity cost pool.
A
c
8
Q
- A well-designed activity-based costing system starts with
a. identifying the activity-cost pools.
b. computing the activity-based overhead rate.
c. assigning manufacturing overhead costs for each activity cost pool to products.
d. analyzing the activities performed to manufacture a product.
A
d
9
Q
- When using a single cost driver to allocate overhead costs, the amount of overhead costs that are applied is
a. usually greater for low-volume products than for high-volume products.
b. usually greater for high-volume products than for low-volume products.
c. usually equal for both low and high-volume products.
d. sometimes greater for higher-volume products, and sometimes greater for low-volume products.
A
b
10
Q
- Hammock Company manufactures two models of its hammock, the Superior and the Deluxe. The Superior model requires 10,000 direct labour hours and the Deluxe requires 40,000 direct labour hours. The company produces 4,000 units of the Superior model and 1,000 units of the Deluxe model each year. The company produces the Superior model in batch sizes of 200, while it produces the Deluxe model in batch sizes of 100. The company expects to incur $120,000 of total setup costs this year. How much of the setup costs are allocated to the Superior model using ABC costing?
a. $80,000
b. $60,000
c. $24,000
d. $100,000
A
a
11
Q
- Jaime Inc. manufactures 2 products, sweaters and jackets. The company has estimated its overhead in the order-processing department to be $180,000. The company produces 50,000 sweaters and 80,000 jackets each year. Sweater production requires 25,000 machine hours, jacket production requires 50,000 machine hours. The company places raw materials orders 10 times per month, 2 times for raw materials for sweaters and the remainder for raw materials for jackets. How much of the order processing overhead should be allocated to jackets?
a. $90,000
b. $120,000
c. $110,770
d. $144,000
A
d
12
Q
- What might be an impediment in changing from a traditionally-based costing system to an activity-based costing system?
a. Management may not be in favour of a change.
b. Excessive costs must be incurred to assist in capturing costs.
c. Most current costs would have to be allocated arbitrarily after the changeover.
d. All of the above are impediments
A
d
13
Q
- Which of the following is a non-value-added activity?
a. Engineering design
b. Machining
c. Inspection
d. Packaging
A
c
14
Q
- Which of the following is a unit-level activity?
a. Cleaning the paint sprayer when switching from one colour of paint to another
b. Paint used in the manufacturing process
c. Test-marketing to see which colour of paint customers prefer
d. Painting the executive offices
A
b
15
Q
- Which of the following is a batch-level activity?
a. Sandpaper used to smooth the wood used in the manufacture of a chair
b. The design of a chair
c. The chairs in the staff cafeteria
d. Shipment of chairs to a customer
A
d
