Anderson chapter 5

Consider the following statements: I. Product diversity creates costing problems because diverse products tend to utilize manufacturing activities in different ways. II. Overhead costs that are not incurred at the unit level create costing problems because such costs do not vary with traditional application bases such as direct labor hours or machine hours. III. Product diversity typically exists when a single product (e.g., a ballpoint pen) is made in different colors. Which of the above statements is (are) true

I and II.

Consider the following statements regarding traditional costing systems: I. Overhead costs are applied to products on the basis of volume-related measures. II. All manufacturing costs are easily traceable to the goods produced. III. Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements. Which are true?

I and III.

Consider the following factors: I. The degree of correlation between consumption of an activity and consumption of a particular cost driver. II. The likelihood that a particular cost driver will induce a desired behavioral effect. III. The likelihood that a particular cost driver will cause an increase in the cost of measurement. Which of these factors should be considered in the selection of a cost driver?

I, II, and III.

Consider the following statements regarding product-sustaining activities: I. They must be done for each batch of product that is made. II. They must be done for each unit of product that is made. III. They are needed to support an entire product line. Which of the above statements is (are) true?

III only

Which of the following generally fails to signal the need for a new product-costing system?

Product-line profit margins are easy to explain

Williams Corporation is changing from a traditional costing system to an activity-based system. As a result of this action, which of the following costs would likely change from indirect to direct?

Production setup, finished-goods inspection, and product shipping.

Which of the following is least likely to be classified as a batch-level activity in an activity-based costing system

Property taxes

Dreyfus Manufacturing sells a number of goods whose selling price is heavily influenced by cost. A recent study of product no. 519 revealed a traditionally-derived total cost of $1,019, a selling price of $1,850 based on that figure, and a newly computed activity-based total cost of $1,215. Which of the following statements is true

The company may have been extremely competitive in the marketplace from a price perspective.

Moon Bay Manufacturing uses machine hours to apply manufacturing overhead to products. This method of costing would likely be acceptable if the company has

a large proportion of unit-level activities and fairly identical consumption ratios among product lines.

Widely varying consumption ratios

are reflective of product-line diversity

The salaries of a manufacturing plant's management are said to arise from

facility-level activities

The division of activities into unit-level, batch-level, product-sustaining level, and facility-level categories is commonly known as a cost:

hierarchy.

Successful adoptions of activity-based costing typically occur when companies rely heavily on:

multidisciplinary project teams.

Of the following organizations, activity-based costing cannot be used by

none of the above, as all are able to use this costing system

Activity-based costing systems

often reveal products that were under- or overcosted by traditional costing systems.

In comparison with a system that uses a single, volume-based cost driver, an activity-based costing system is preferred when a company has:

product-line diversity or a large proportion of nonunit-level activities

Foster, Inc., an appliance manufacturer, is developing a new line of ovens that uses controlled-laser technology. The research and testing costs associated with the new ovens is said to arise from a

product-sustaining activity

Vanguard combines all manufacturing overhead into a single cost pool and allocates this overhead to products by using machine hours. Activity-based costing would likely show that with Vanguard's current procedures,

the company's high-volume products are overcosted

Consumption ratios are useful in determining

the existence of product-line diversity

In an activity-based costing system, direct materials used would typically be classified as a:

unit-level cost

A hospital administrator is in the process of implementing an activity-based-costing system. Which of the following tasks would not be part of this process

None of the above, as all these tasks would be part of the process

The following tasks are associated with an activity-based costing system: 1—Calculation of cost application rates 2—Identification of cost drivers 3—Assignment of cost to products 4—Identification of cost pools

4, 2, 1, 3.

Which of the following statements about activity-based costing (ABC) is false

ABC cannot be used by service businesses

Under a traditional costing system, which of the following costs would likely be classified as indirect with respect to the various products manufactured

All of the above would be considered indirect costs.

Which of the following activity cost pools and activity measures likely has the lowest degree of correlation

Employee travel to job sites (sites are within 100-mile radius of company headquarters) / Number of employees

Which of the following is the proper sequence of events in an activity-based costing system?

Identification of cost pools, identification of cost drivers, calculation of cost application rates, assignment of cost to products.

Which of the following is least likely to be classified as a facility-level activity in an activity-based costing system?

Machine processing cost.

Which of the following is not a broad, cost classification category typically used in activity-based costing

Management-level

Which of the following tasks is not normally associated with an activity-based costing system

Preparation of allocation matrices.

Grossman Enterprises is converting to an activity-based costing system and needs to depict the various activities in its manufacturing process along with the activities' relationships. Which of the following is a possible tool that the company can use to accomplish this task?

Storyboards.

In an activity-based costing system, materials receiving would typically be classified as a:

batch-level activity

Many traditional costing systems

combine widely varying elements of overhead into a single cost pool