question

Which of the following activities would not be considered a value-added activity?

answer

Accounting

question

Which of the following is a nonvalue-added activity?

answer

Rework of defective items

question

Which of the following is not one of the basic standards of the Institute of Management Accountants (IMA) Code of Ethics?

answer

Honesty

question

Which of the following is not a key financial manager in an organization?

answer

External auditor

question

Which of the following activities would not be included in the value chain of a manufacturing company?

answer

Accounting

question

Which of the following statements concerning the value chain is false?

answer

Successful firms are ones that operate within the entire value chain, thereby overseeing every aspect of the value chain for the customer.

question

Financial accounting provides a historical perspective, while cost accounting emphasizes

answer

the future.

question

The Sarbanes Oxley Act of 2002 requires an effective internal control system for publicly owned firms. Therefore, with regards to strategic investment decisions, it is important that management consider including

answer

All of these.

question

Which of the following statements is (are) false? (1). In general, the term expense is used for managerial purposes, while the term cost refers to external financial reports. (2). An opportunity cost is the benefit forgone by selecting one alternative over another.

answer

Only (1) is false.

question

Which of the following costs is both a prime cost and a conversion cost?

answer

direct labor

question

The beginning Work-in-Process inventory plus the total of the manufacturing costs equals

answer

total work-in-process during the period.

question

Direct labor would be part of the cost of the ending inventory for which of these accounts?

answer

Work-in-Process and Finished Goods.

question

(CMA adapted) The process of creating a formal plan and translating goals into a quantitative format is referred to as

answer

budgeting.

question

The costing method that first assigns costs to activities and then assigns them to products based on the products' consumption of activities is called

answer

activity-based costing.

question

A management method by which the organization seeks to excel on all dimensions of quality is called

answer

total quality management.

question

A firm's replies to customers' questions via email would be an example of which element of the value chain?

answer

Customer Service

question

Which of the following cost accounting methods does not help firms keep the supply chain "lean" and add value throughout the chain?

answer

Throughput-costing

question

The approaches and activities of managers in short-run and long-run planning and control decisions that increase value for customers and lower costs of products and services are known as

answer

value chain management.

question

R&D, production, and customer service are business functions that are all included as part of

answer

the value chain.

question

Cost accounting is an integral part of the ________ function in an organization.

answer

controller's

question

The process of assigning indirect costs to products, services, people, business units, etc., is

answer

cost allocation.

question

A ___________________ is any end to which a cost is assigned.

answer

cost object

question

A cost allocation rule is the method or process used to assign the costs in the _________ to the ______________.

answer

cost pool; cost object

question

The costs of direct materials are classified as:

answer

Choice D

question

Which terms below correctly describe the cost of the black paint used to paint the dots on a pair of dice?

answer

Choice B

question

If both the variable cost per unit and the selling price per unit decrease, the new contribution margin ratio in relation to the old contribution margin ratio will be:

answer

Cannot determine with the information given.

question

Operating leverage refers to the extent to which an organization's cost structure is made up of:

answer

fixed costs.

question

A decrease in the margin of safety would be caused by a(n):

answer

increase in the total fixed costs.

question

On January 1, 2013, Lake Co. increased its direct labor wage rates. All other budgeted costs and revenues were unchanged. How did this increase affect Lake's budgeted break-even point and budgeted margin of safety? (CPA adapted)

answer

Option B: inc; dec

question

Which of the following would not cause the break-even point to change?

answer

Sales volume decreases.

question

If the fixed costs for a product increase and the variable costs (as a percentage of sales dollars) increase, what will be the effect on the contribution margin ratio and the break-even point, respectively?

answer

Option A: dec; inc

question

A company's break-even point will not be changed by:

answer

a change in the income tax rate.

question

If both the variable cost per unit and the selling price per unit increase, the new contribution margin ratio in relation to the old contribution margin ratio will be:

answer

Cannot determine with the information given.

question

Which of the following is an assumption that is NOT made in most cost-volume-profit calculations?

answer

Selling price, variable expense per unit, and fixed expense per unit do not change throughout the relevant range.

question

On a cost-volume-profit graph, the break-even point is located:

answer

where the total revenue line intersects the total expenses line.

question

Which of the following is true regarding the contribution margin ratio of a single product company?

answer

If sales increase, the dollar increase in net operating income can be computed by multiplying the contribution margin ratio by the dollar increase in sales.

question

Assuming that the unit sales are unchanged, the total contribution margin will decrease if:

answer

variable expense per unit increases.

question

Witczak Company has a single product and currently has a degree of operating leverage of 5. Which of the following will increase Witczak's degree of operating leverage?

answer

Option A: yes; yes

question

Marston Enterprises sells three chemicals: petrol, septine, and tridol. Petrol's unit contribution margin is higher than septine's which is higher than tridol's. Which one of the following events is most likely to decrease the company's overall break-even point?

answer

A change in the relative market demand for the products, with the increase favoring petrol relative to septine and tridol.

question

On January 1, 2006, Lake Co. increased its direct labor wage rates. All other budgeted costs and revenues were unchanged. How did this increase affect Lake's budgeted break-even point and budgeted margin of safety? (CPA adapted)

answer

b: inc; dec

question

A decrease in the margin of safety would be caused by a(n):

answer

increase in the total fixed costs.

question

If the fixed costs for a product decrease and the variable costs (as a percentage of sales dollars) decrease, what will be the effect on the contribution margin ratio and the break-even point, respectively?

answer

option b: inc; dec

question

Cost A is a fixed cost, while B is a variable cost. During the current year, the volume of output has decreased. In terms of cost per unit of output, we would expect that:

answer

cost B has remained unchanged.

question

If both the variable cost per unit and the selling price per unit decrease, the new contribution margin ratio in relation to the old contribution margin ratio will be:

answer

Cannot determine with the information given.

question

A company's break-even point will not be increased by:

answer

an increase in the number of units produced and sold.

question

Operating leverage refers to the extent to which an organization's cost structure is made up of:

answer

fixed costs.

question

A decrease in the margin of safety would be caused by a(n):

answer

increase in the total fixed costs.

question

On January 1, 2013, Lake Co. increased its direct labor wage rates. All other budgeted costs and revenues were unchanged. How did this increase affect Lake's budgeted break-even point and budgeted margin of safety? (CPA adapted)

answer

Option B: inc; dec

question

Which of the following would not cause the break-even point to change?

answer

Sales volume increases.

question

Which of the following would not cause the break-even point to change?

answer

Sales volume decreases.

question

If the fixed costs for a product increase and the variable costs (as a percentage of sales dollars) increase, what will be the effect on the contribution margin ratio and the break-even point, respectively?

answer

Option A: dec; inc

question

A company's break-even point will not be changed by:

answer

a change in the number of units produced and sold.

question

If both the variable cost per unit and the selling price per unit increase, the new contribution margin ratio in relation to the old contribution margin ratio will be:

answer

Cannot determine with the information given.

question

Which of the following is an assumption that is NOT made in most cost-volume-profit calculations?

answer

Selling price, variable expense per unit, and fixed expense per unit do not change throughout the relevant range.

question

On a cost-volume-profit graph, the break-even point is located:

answer

where the total revenue line intersects the total expenses line.

question

Which of the following is true regarding the contribution margin ratio of a single product company?

answer

If sales increase, the dollar increase in net operating income can be computed by multiplying the contribution margin ratio by the dollar increase in sales.

question

Assuming that the unit sales are unchanged, the total contribution margin will decrease if:

answer

variable expense per unit increases.

question

To obtain the break-even point in terms of dollar sales, total fixed expenses are divided by which of the following?

answer

(Selling price per unit - Variable expense per unit)/Selling price per unit.

question

Witczak Company has a single product and currently has a degree of operating leverage of 5. Which of the following will increase Witczak's degree of operating leverage?

answer

Option A: yes; yes

question

If company A has a higher degree of operating leverage than company B, then:

answer

company A's profits are more sensitive to percentage changes in sales.

question

Which of the following would a manufacturing company expect to experience as it automates and shifts from variable expenses to fixed expenses?

answer

(D) Both A and B above.

question

On January 1, 2006, Lake Co. increased its direct labor wage rates. All other budgeted costs and revenues were unchanged. How did this increase affect Lake's budgeted break-even point and budgeted margin of safety? (CPA adapted)

answer

b: inc; dec

question

A decrease in the margin of safety would be caused by a(n):

answer

increase in the total fixed costs.

question

Which cost estimation method does not use the company's cost information as its primary source of information about the relationship between total costs and activity levels?

answer

Engineering estimates.

question

A manager is trying to estimate the manufacturing costs of a new product. The company makes several other products that utilize some of the same manufacturing procedures as the new product. Which cost estimation method would be the best method to determine the total cost of manufacturing the new product?

answer

Engineering estimates.

question

Which of the following costs would most likely be classified as variable, assuming the account analysis method is used to determine cost behaviors?

answer

Indirect materials.

question

In the cost equation TC = F + VX, X is best described as the:

answer

activity level used to estimate the total cost.

question

In the cost equation TC = F + VX, V is best described as the:

answer

slope of the cost equation.

question

A disadvantage of the high-low method of cost analysis is that it:

answer

uses only two data points, which may not be representative of normal conditions.

question

In the standard regression equation of y = a + bx, the letter b is best described as the:

answer

slope of the equation.

question

In the standard regression equation of y = a + bx, the letter a is best described as the:

answer

intercept of the equation.

question

In the standard regression equation of y = a + bx, the letter y is best described as the:

answer

dependent variable.

question

The coefficient of correlation is:

answer

the measure of variability of the actual observations from the predicting (forecasting) equation line.

question

Which of the following statements regarding regression analysis is (are) true? (A) One way to control the effects of a nonlinear relationship between total costs and activity is reduce the relevant range. (B) The linear cost estimate tends to understate the slope of the cost line in ranges close to capacity.

answer

Both A and B are true.

question

Which of the following may be used to estimate how inventory warehouse costs are affected by both the number of shipments and the weight of the material handled? (CPA adapted)

answer

Multiple regression analysis.

question

In the learning curve equation Y = aXb, the Y term represents:

answer

the labor time required to produce the last single unit.

question

In the learning curve equation Y = aXb, the X term represents:

answer

the cumulative number of units.

question

In the learning curve equation Y = aXb, the "a" term represents:

answer

the labor time required to produce the first unit.

question

Which of the following statements regarding the learning phenomenon is true?

answer

As production doubles, the time to produce the latest unit decreases.

question

Which of the following is not a data problem an analyst must watch for when estimating cost behavior?

answer

Depreciable assets.

question

Which cost estimation method does not use the company's cost information as its primary source of information about the relationship between total costs and activity levels?

answer

Engineering estimates.

question

A manager is trying to estimate the manufacturing costs of a new product. The company makes several other products that utilize some of the same manufacturing procedures as the new product. Which cost estimation method would be the best method to determine the total cost of manufacturing the new product?

answer

Engineering estimates.

question

Engineering cost estimates are usually based on operating conditions that are considered:

answer

optimal.

question

In the cost equation TC = F + VX, X is best described as the:

answer

activity level used to estimate the total cost.

question

In the cost equation TC = F + VX, V is best described as the:

answer

slope of the cost equation.

question

Which of the following cost estimation methods finds the fixed portion of a mixed cost before calculating the variable portion?

answer

Account analysis.

question

The term "relevant range" as used in cost accounting means the range over which:

answer

cost relationships are valid.

question

Which of the following cost estimation methods finds the variable portion of a mixed cost before calculating the fixed portion?

answer

High-low method.

question

The coefficient of correlation is:

answer

the measure of variability of the actual observations from the predicting (forecasting) equation line.

question

Given actual amounts of a semivariable cost for various levels of output, the method that will always give the most reliable measure of the fixed and variable components is the:

answer

linear regression method.

question

Which of the following statements regarding regression analysis is (are) true? (A) One way to control the effects of a nonlinear relationship between total costs and activity is reduce the relevant range. (B) The linear cost estimate tends to understate the slope of the cost line in ranges close to capacity.

answer

Both A and B are true.

question

In determining cost behavior in business, the cost function is often expressed as Y = a + bX. Which one of the following cost estimation methods should not be used in estimating fixed and variable costs for the equation? (CMA adapted)

answer

Management analysis of data.

question

In the learning curve equation Y = aXb, the Y term represents:

answer

the labor time required to produce the last single unit.

question

In the learning curve equation Y = aXb, the X term represents:

answer

the cumulative number of units.

question

In the learning curve equation Y = aXb, the "a" term represents:

answer

the labor time required to produce the first unit.

question

In the learning curve equation Y = aXb, the "b" term represents:

answer

the index of learning.

question

Which of the following is a common assumption of cost estimation?

answer

Cost behavior patterns are linear within the relevant range.

question

Which of the following is not a data problem an analyst must watch for when estimating cost behavior?

answer

Depreciable assets.

question

Which of the following is not a characteristic of job costing?

answer

Identical units are produced on an ongoing basis.

question

Which of the following companies would most likely use job costing?

answer

Advertising agency.

question

The journal entry to record the completion of a job in a job order cost system is:

answer

D: dr. finished goods inve cr. wip inve

question

The journal entry to record requisitions of material for new jobs started during the period is:

answer

a: dr wip cr. materials inven

question

Which of the following documents is used as the basis for posting to the direct labor section of the job cost sheet?

answer

Time card.

question

The journal entry to record the actual manufacturing overhead costs for indirect material is:

answer

a: dr. man overhead control cr. materials inventory

question

What are the transfers-out from the Finished Goods Inventory called?

answer

Cost of Goods Sold.

question

The journal entry to record the completion of a job in a job costing system is:

answer

d: dr. finished goods inve cr. wip inven

question

It is possible that the total cost of a job started in April and completed in May will not include:

answer

direct material purchased in May.

question

If a company multiplies its predetermined overhead rate by the actual activity level of its allocation base, it is using:

answer

normal costing

question

If a company multiplies its actual overhead rate by the actual activity level of its allocation base, it is using:

answer

actual costing.

question

Which of the following is not a difference between job costing for service firms and job costing for manufacturing companies?

answer

Service firms' costs are immediately expensed since all work is completed during a period.

question

Complex jobs that take multiple time periods and require the work of many different departments, divisions, or subcontractors are called:

answer

projects

question

Which of the following actions do not cause an impropriety in job costing?

answer

Choosing to use normal costing rather than actual costing.

question

Which of the following approaches allocates overhead by multiplying an actual overhead rate × actual activity?

answer

Actual costing.

question

In computing its predetermined overhead rate, Marple Company inadvertently left its indirect labor costs out of the computation. This oversight will cause:

answer

the Cost of Goods Manufactured to be understated.

question

Which of the following accounts is debited when direct labor is recorded?

answer

wip`

question

The balance in the Work-in-Process account equals:

answer

the balances on the job cost sheets of uncompleted jobs.

question

Martinez Aerospace Company uses a job-order costing system. The direct materials for Job #045391 were purchased in July and put into production in August. The job was not completed by the end of August. At the end of August, in what account would the direct material cost assigned to Job #045391 be located?

answer

Work-in-Process inventory.

question

Which of the following is correct with respect to closing out overapplied manufacturing overhead to Cost of Goods Sold versus closing it out to Cost of Goods Sold and Finished Goods and Work-in-Process inventories?

answer

Operating income will be higher if all of the overapplied overhead is closed out to Cost of Goods Sold.

question

The relevance of a particular cost to a decision is determined by the: (CMA adapted)

answer

potential effect on the decision.

question

Which of the following statements regarding special orders is (are) true? (A) The primary decision for special orders is determining whether the differential revenue is greater than the differential costs associated with the order. (B) The differential analysis approach to pricing for special orders could lead to under pricing in the long-run because fixed costs are not included in the analysis.

answer

Both A and B are true.

question

Which of the following statements about the theory of constraints is (are) true? (A) The theory of constraints focuses on determining the optimal product mix when one or more resources restrict the attainment of a goal or objective. (B) The theory of constraints focuses on maximizing the rate of throughput contribution while minimizing investment and other operating costs.

answer

Both A and B are true.

question

Differential costs are: (CMA adapted)

answer

the difference in total costs that result from selecting one choice instead of another.

question

The period of time over which capacity will be unchanged is:

answer

...

question

The price based on customers' perceived value for the product and the price that competitors charge:

answer

target price.

question

The practice of setting prices highest when the quantity demanded for the product approaches capacity:

answer

peak-load pricing.

question

Exporting a product to another country at a price below domestic cost:

answer

dumping.

question

Which of the following costs would continue to be incurred even if a segment is eliminated?

answer

Common fixed costs

question

If there is excess capacity, the minimum acceptable price for a special order must cover:

answer

...

question

Costs which are always relevant in decision making are those costs which are:

answer

avoidable.

question

The opportunity cost of making a component part in a factory with no excess capacity is the:

answer

net benefit foregone from the best alternative use of the capacity required.

question

Freestone Company is considering renting Machine Y to replace Machine X. It is expected that Y will waste less direct materials than does X. If Y is rented, X will be sold on the open market. For this decision, which of the following factors is(are) relevant? I. Cost of direct materials used II. Resale value of Machine X

answer

Both I and II

question

Which of the following are valid reasons for eliminating a product line? I. The product line's contribution margin is negative. II. The product line's traceable fixed costs plus its allocated common corporate costs are less than its contribution margin.

answer

Only I

question

When there is a production constraint, a company should emphasize the products with:

answer

the highest contribution margin per unit of the constrained resource.

question

Select the correct statement regarding relevant costs and revenues.

answer

Relevant costs are also known as avoidable costs. Relevant costs are future-oriented. Relevant revenues must differ between the alternatives. correct All of the above.

question

Select the correct statement regarding relevant costs and revenues.

answer

correct Sunk costs are not relevant for decision-making purposes. Relevant costs are frequently called unavoidable costs. Direct labor is an example of a batch-level cost. Only variable costs are relevant for decision making.

question

Which of the following is a way to relax a constraint or bottleneck?

answer

Have employees work overtime. Install faster machinery. Train workers to improve productivity. correct All of the above.

question

Halley Company has just received a special order for 1,000 deck chairs. Halley has sufficient idle capacity to accept the order. Accepting the order will increase Halley's variable manufacturing costs. Which type of cost is considered a sunk cost to Halley's decision of whether to accept or reject the special order?

answer

Depreciation on equipment that would be used to make the chairs

question

Halley Company has just received a special order for 1,000 deck chairs. Halley has sufficient idle capacity to accept the order. Accepting the order will increase Halley's variable manufacturing costs. During idle time, Halley normally performs maintenance on the production equipment to ensure its operation. If Halley accepts the order and decides not to do the scheduled maintenance what type of cost is the maintenance costs?

answer

...

question

When evaluating alternatives, what type of costs should be considered?

answer

Relevant costs

question

Which of the following statements is (are) true regarding product costing? (A) Individual product costs are relevant for managerial decision-making but irrelevant for preparing the financial statements. (B) A common decision facing managers is determining the price at which to sell their products or provide their services.

answer

Only B is true.

question

Which of the following statements is (are) false regarding cost allocations and product costing? (A) It is easier to determine the individual product cost for a manufacturer than it is for a wholesaler. (B) In general, indirect costs are assigned, while direct costs are allocated.

answer

Both A and B are false.

question

The Cost Flow Diagram for product costing includes all of the following costs except:

answer

selling expenses.

question

Which of the following statements does not reflect one of the fundamental themes underlying the design of cost systems for managerial purposes?

answer

The primary purpose of cost systems is to gather information to value inventory.

question

The basic cost flow model is:

answer

EB = BB + TI - TO.

question

The basic cost flow model is:

answer

EB - BB = TI - TO.

question

The basic cost flow model is:

answer

BB + TI - TO = EB.

question

When a manufacturing company has a highly automated manufacturing plant producing many different products, what is probably the most appropriate basis of applying overhead costs to work-in-process?

answer

...

question

In a labor intensive company in which more overhead is used by the more highly skilled and paid employees, which activity base would be most appropriate for applying overhead to production?

answer

Direct labor cost.

question

Which of the following statements regarding the two-stage cost allocation process is (are) false? (A) If a company has three cost pools, then it should also have three different cost allocation bases. (B) The selection of an appropriate cost allocation base is more important for single-stage cost allocation systems than for two-stage cost allocation systems.

answer

Only B is false.

question

Cost pools are:

answer

...

question

A system that provides information about the costs of processes, products, and services used and produced by an organization is a:

answer

cost management system.

question

The process of first allocating costs to intermediate cost pools and then to the individual cost objects using different allocation bases is a(n):

answer

two-stage allocation system.

question

A system that mass-produces a single, homogenous output in a continuous process is a(n):

answer

continuous flow process.

question

A hybrid costing system that is often used when manufacturing goods that have some common characteristics plus some individual characteristics is called:

answer

operations cost.

question

Which of the following statements is true?

answer

Process costing does not separately record the costs for each unit.

question

Which of the following would be the least appropriate allocation base for allocating overhead in a highly automated (i.e., capital-intensive) manufacturing company?

answer

Direct labor hours.

question

For which of the following businesses would the job order cost system be appropriate?

answer

Law office.

question

The loan department of a financial corporation makes loans to businesses. The costs of processing these loans are often several thousand dollars. All loans are initially evaluated using the same financial analysis software, but some require outside services such as appraisals and legal services. Which is the most appropriate costing system for the loan department?

answer

Operation costing.

question

The cost per unit of the allocation base used to charge overhead to products is the:

answer

predetermined overhead rate.

question

Which of the following would probably be the least appropriate allocation base for allocating overhead in a highly automated manufacturer of specialty valves?

answer

Direct labor-hours.

question

Which of the following statements is (are) true regarding product costing? (A) Twenty cans of paint that are 25% full are equivalent to four cans of paint that are completely full. (B) The equivalent unit concept refers to the actual amount of work during the period stated in terms of whole units.

answer

Only B is true.

question

Which of the following organizations would most likely use a process costing system?

answer

Gasoline refinery.

question

Of the following process costing steps, which must be done last?

answer

Compute the costs per equivalent unit of production.

question

If the units in the beginning Work-in-Process Inventory are greater than the units in the ending Work-in-Process Inventory, then the units transferred out are:

answer

...

question

In order to compute equivalent units of production using the FIFO method of process costing, work for the period must be broken down to units:

answer

completed from beginning inventory, started and completed during the month, and units in ending inventory.

question

Blue Company has beginning and ending Work-in-Process Inventories that are 45% and 10% complete, respectively. Materials are added at the beginning of the process. If first-in, first-out (FIFO) process costing is used, the total equivalent units for materials will equal the number of units:

answer

started into the process during the period.

question

Red Company had Work-in-Process Inventories that were 45% complete at the start of the month. Work-in-Process at the end of the month was 10% complete. Materials were added at the beginning of the process. If weighted-average process costing is used, the total equivalent units for materials will equal the number of units:

answer

transferred out during the process plus the units in the ending inventory.

question

A form prepared periodically for each processing department summarizing (1) the units for which the department is accountable and the disposition of these units and (2) the costs charged to the department and the allocation of these costs is called a:

answer

production cost report.

question

Which of the following statements regarding first-in, first-out (FIFO) process costing is (are) true? (A) First-in, first-out (FIFO) process costing transfers out the costs in beginning inventory before transferring out the costs associated with units started and completed. (B) First-in, first-out process costing requires one additional step in assigning costs to the units transferred out and the ending Work-in-Process Inventory.

answer

Only A is true.

question

In a production cost report using process costing, transferred-in costs are most similar to:

answer

material added at the beginning of the process.

question

Additional materials are added in the second department of a four-department production process. However, this addition does not increase the number of units being produced in the second department, but will:

answer

increase the total cost per unit.

question

Under which of the following conditions will the FIFO method produce the same cost of goods manufactured as the weighted-average method?

answer

There is no beginning inventory.

question

Which of the following statements is (are) true? I. For cost control, the FIFO method of process costing is better than the weighted-average method. II. The weighted-average method of process costing assigns more cost to units completed (transferred out) than the FIFO method.

answer

Only I is true.

question

Which of the following statements is (are) false? (A) Operations costing accounts for material costs like job costing and conversion costs like process costing. (B) An automobile manufacturer is more likely to use an operations costing system than a process costing system.

answer

Neither A nor B is false.

question

Predetermined manufacturing overhead rates can be used in all of the following costing systems except:

answer

actual costing.

question

In a process costing system, manufacturing overhead applied is usually recorded as a debit to:

answer

Work-in-process.

question

A process costing system:

answer

...

question

A company should use process costing, rather than job order costing, if:

answer

the product is composed of mass-produced homogeneous units.

question

Which of the following characteristics applies to process costing, but does not apply to job order costing?

answer

the use of equivalent units of production.

question

Equivalent units for a process costing system, using the weighted-average method, would be equal to:

answer

units completed during the period plus equivalent units in the ending work-in-process inventory.

question

Which of the following statements is (are) true regarding the potential effects of using reported product costs for decision making? (A) Traditional product costing systems (e.g., job and process costing) are designed primarily to accumulate cost information for financial reporting. (B) If a single cost driver is used as the allocation base, applied manufacturing overhead for product costing purposes may lead to inappropriate managerial decisions.

answer

Both A and B are true.

question

Which of the following statements is true?

answer

A problem with activity-based costing (ABC) is that it requires more record keeping than other methods.

question

The number of services provided by an accounting firm would be classified as a(n):

answer

product-related activity.

question

Which of the following costs is not related to a batch-related activity?

answer

Compliance costs.

question

Which of the following would NOT be a batch-related activity?

answer

Performing 100% inspection.

question

Which of the following would be a reasonable basis for assigning the materials handling costs to the units produced in an activity-based costing (ABC) system?

answer

Number of components per completed unit.

question

Companies using activity-based costing (ABC) have learned that costs are a function of:

answer

volume and activities.

question

Overhead allocation based solely on a measure of volume such as direct labor-hours:

answer

will systematically overcost high-volume products and undercost low-volume products.

question

Testing a prototype of a new product is an example of a(n):

answer

Product-level activity.

question

Setting up equipment is an example of a(n):

answer

Batch-level activity.

question

A duration driver is:

answer

A measure of the amount of time required to perform an activity.

question

A transaction driver is:

answer

A simple count of the number of times an activity occurs.

question

Which of the following is not a limitation of activity-based costing?

answer

...

question

Designing a new product is an example of a:

answer

Product-level activity.

question

Which of the following statements is (are) false regarding first-stage and second-stage cost allocation methods? (A) The basic difference between a first-stage cost allocation and a second-stage cost allocation is that cost pools are not used in first-stage cost allocations. (B) Predetermined overhead rates are used in first-stage cost allocations but not in second-stage cost allocations.

answer

Both A and B are false.

question

Activity analysis is one of the first stages in implementing an activity-based costing system. Which of the following steps in "activity analysis" is usually performed first?

answer

...

question

Which of the following costs is not a batch-related activity?

answer

Compliance costs

question

Which of the following statements is (are) true? (1) Activity-based costs per unit are always greater than volume-based costs per unit. (2) Volume-based costing has typically resulted in lower gross margins for high volume products and higher gross margins for low volume products.

answer

Only (2) is true.

question

Multiple (departmental) manufacturing overhead rates are considered preferable to a single (plant wide) overhead rate when (CMA adapted)

answer

various products are manufactured that do not pass through the same departments or use the same manufacturing techniques.

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