accy 309 ch. 4

In allocating variable costs to products, A. a volume-based cost driver should be used. B. direct labor hours should always be used as the allocation base. C. a company should use the same allocation base that it uses for fixed costs. D. a company should never use more than one cost driver.

A- a volume-based cost driver should be used

A value chart indicates A. all steps in a process and the time it takes for them to be completed. B. the value-added steps in a process and the time it takes for them to be completed. C. the time and cost of all value-added steps in a process. D. the time and costs of all value-added and non-value-added steps in a process.

A- all steps in a process and the time it takes for them to be completed

Traditional standard costs are inappropriate measures for performance evaluation in the "new era" of manufacturing because they A. build in allowances for non-value-adding activities. B. are based on historical information. C. don't reflect current costs. D. are ideal goals.

A- build in allowances for non-value-adding activities

Non-value-added activities that are necessary to businesses, but not costs that customers are willing to pay for are known as A. business-value-added activities. B. long-term variable activities. C. short-term variable activities. D. superior business activities.

A- business-value-added activities

Cost allocation bases in activity-based costing should be A. cost drivers. B. value-added activities. C. activity centers. D. processes.

A- cost drivers

Activity-based costing and generally accepted accounting principles differ in that ABC A. does not define product costs in the same manner as GAAP. B. cannot be used to compute an income statement, but GAAP can. C. is concerned only with costs generated from automated processes, but GAAP is concerned with costs generated from both manual and automated processes. D. information is useful only to managers, while GAAP information is useful to all organizational stakeholders.

A- does not define product costs in the same manner as GAAP

When cost driver analysis is used, organizational profit or loss can be determined by subtracting A. organizational costs from total margin provided by products. B. organizational costs from total product revenue. C. total product costs from total product revenue. D. total unit, batch, product/process, and organizational level costs incurred for a period from total product revenue.

A- organizational costs from total margin provided by products

Traditionally, overhead has been assigned based on direct labor hours or machine hours. What effect does this have on the cost of a high-volume item? A. over-costs the product B. under-costs the product C. has no effect the product cost D. cost per unit is unaffected by product volume

A- over-costs the product

Simultaneous engineering can be used to A. reduce both product and process complexity. B. integrate activity-based costing with value chain analysis. C. reduce the time-to-market of new products through elimination of batch-level activities. D. reduce manufacturing cycle efficiency by reducing process waste.

A- reduce both product and process complexity

Today, traditional accounting methods are A. still appropriate for financial reporting. B. still appropriate for providing useful cost information to internal managers. C. still appropriate for both internal and external financial reporting. D. outdated for all purposes.

A- still appropriate for financial reporting

Use of activity-based costing and activity-based management requires A. the creation of an environment for change in an organization. B. elimination of all non-value-added activities in an organization. C. that company processes be automated and the use of direct labor be minimal. D. each process be fully mapped and all activities be identified as value-added or non-value-added.

A- the creation of an environment for change in an organization

The "Rule of One" underlies the premise that all costs are A. variable. B. fixed. C. unit-based. D. short-term.

A- variable

An activity driver is used for which of the following reasons? To measure demands To measure resources consumed A. yes yes B. yes no C. no yes D. no no

A- yes yes

Which of the following is/are part of activity-based management? Activity analysis Cost driver analysis A. yes yes B. no yes C. no no D. yes no

A- yes yes

For one product that a firm produces, the manufacturing cycle efficiency is 20 percent. If the total production time is 12 hours, what is the total manufacturing time? A. 15.0 hours B. 60.0 hours C. 12.0 hours D. 2.4 hours

B- 60 hours

Which of the following is most likely to make the implementation of ABC/ABM slow and difficult? A. The development of new cost drivers that measure costs more effectively. B. A lack of involvement by or support from upper management. C. The need for dual costing systems. D. An inability to eliminate all business-value-added activities.

B- a lack of involvement by or support from upper management

Relative to traditional product costing, activity-based costing differs in the way costs are A. processed. B. allocated. C. benchmarked. D. incurred.

B- allocated

Activity analysis allows managers to A. classify activities so that processes can be eliminated. B. devise ways to minimize or eliminate non-value-added activities. C. evaluate process performance to gain competitive advantages. D. all of the above.

B- devise ways to minimize or eliminate non-value-added activities

For traditional costing purposes, R&D costs are A. capitalized and allocated over the product life cycle. B. expensed as incurred. C. capitalized and amortized over three years. D. charged to the future accounting periods that receive the benefit of the R&D expenditures.

B- expensed as incurred

Traditional overhead allocations result in which of the following situations? A. Overhead costs are assigned as period costs to manufacturing operations. B. High-volume products are assigned too much overhead, and low-volume products are assigned too little overhead. C. Low-volume products are assigned too much, and high-volume products are assigned too little overhead. D. The resulting allocations cannot be used for financial reports.

B- high-volume products are assigned too much overhead, and low-volume products are assigned too little overhead

Global competition has forced American industry to A. seek increased governmental regulation. B. improve product quality and customer service. C. narrow product lines. D. decrease its social responsibility.

B- improve product quality and customer service

A process map A. should indicate only value-added activities. B. is also known as a detailed flowchart. C. should indicate only those steps/processes that are obvious in the production of goods/services. D. is also known as a value chart.

B- is also known as a detailed flowchart

The amount of time between the development and the production of a product is A. the product life cycle. B. lead time. C. production time. D. value-added time.

B- lead time

Which of the following is considered a value-added activity? Idle time Inspection time Transfer time A. yes yes no B. no no no C. yes no yes D. no yes yes

B- no no no

Costs that are common to many different activities within an organization are known as ____ costs. A. product- or process-level B. organizational-level C. batch-level D. unit-level

B- organizational-level

If only one or two overhead cost pools are used, A. it will be easy to determine which products or services are creating the most costs. B. overhead created by a specific product will be assigned to all products. C. the reduction in cost accumulation and allocation time will raise company profits. D. allocations should be made using only unit-based cost drivers.

B- overhead created by a specific product will be assigned to all products

An objective of activity-based management is to A. eliminate the majority of centralized activities in an organization. B. reduce or eliminate non-value-added activities incurred to make a product or provide a service. C. institute responsibility accounting systems in decentralized organizations. D. all of the above

B- reduce or eliminate non-value-added activities incurred to make a product or provide a service

The actual time it takes to perform a specific task is called A. inspection time. B. service time. C. transfer time. D. quality time.

B- service time

A key concept underlying cost driver analysis is that A. all cost drivers identified should be used for cost accumulation. B. the cost of measuring a driver does not exceed the benefits of using it. C. only costs occurring at the unit-level should be assigned to products or services. D. organizational/facility costs are non-value-added and should never be assigned to products or services.

B- the cost of measuring a driver does not exceed the benefits of using it

Product costing systems in use over the last 40 years A. concentrated on using multiple cost pools and cost drivers. B. were often technologically incapable of handling activity-based costing information. C. have generally been responsive to changes in the manufacturing environment. D. have been appropriate for managerial decision purposes as long as they met the requirements of generally accepted accounting principles.

B- were often technologically incapable of handling activity-based costing information

Simultaneous engineering helps companies accomplish which of the following? Reduces product complexity Reduces process complexity A. no no B. yes yes C. yes no D. no yes

B- yes yes

Manufacturing cycle efficiency should be increased by employing which of the following techniques? JIT Flexible Batch Inventory Manufacturing Systems Manufacturing A. yes yes yes B. yes yes no C. no no no D. yes no yes

B- yes yes no

The following items are used in tracing costs in an ABC system. In which order are they used? (1) cost object (2) cost driver (3) activity driver (4) cost pool A. 1, 2, 3, 4 B. 2, 3, 4, 1 C. 2, 4, 3, 1 D. 4, 3, 1, 2

C- 2, 3, 4, 1

In allocating fixed costs to products in activity-based costing, A. direct labor hours should always be used as the allocation base. B. a company should use the same allocation base that it uses for variable costs. C. a cost driver that is not volume-related should be used. D. machine hours should always be used.

C- a cost driver that is not volume related should be used

The Pareto principle is important to consider when an organization is A. assessing whether to employ activity-based costing versus attribute-based costing. B. evaluating the number of activities that are value-added versus those that are non-value-added. C. deciding whether to offer a product in one color versus in ten colors. D. determining whether simultaneous engineering activities will be impacted by the "Rule of One."

C- deciding whether to offer a product in one color versus ten color

Manufacturing cycle efficiency is a measure of A. bottlenecks. B. effectiveness. C. efficiency. D. quality.

C- efficiency

Mass customization can be achieved through the use of A. activity-based costing. B. just-in-time inventory. C. flexible manufacturing systems. D. all of the above.

C- flexible manufacturing systems

Activity-based costing and activity-based management are effective in helping managers do all of the following except A. trace technology costs to products. B. promote excellence standards. C. identify only value-added activities. D. analyze performance problems.

C- identify only value-added activities

Which of the following would not be considered a value-added activity in the preparation of a tax return? A. printing a copy of the return for the client B. printing a copy of the return for the IRS C. installing tax software D. checking for accuracy

C- installing tax software

When a company is labor-intensive, the cost driver that is probably least significant would be A. direct labor hours. B. direct labor dollars. C. machine hours. D. cost of materials used.

C- machine hours

ABC should be used in which of the following situations? A. single-product firms with multiple steps B. multiple-product firms with only a single process C. multiple-product firms with multiple processing steps D. in all manufacturing firms

C- multiple-product firms with multiple processing steps

Lead time minus production time is equal to A. idle time. B. storage time. C. non-value-added time. D. value-added time.

C- non-value-added time

Moreno Company makes ten different styles of inexpensive feather masks. Which of the following is this company most likely to have? A. Product complexity B. Process complexity C. Product variety D. Process customization

C- product variety

In activity-based costing, final cost allocations assign costs to A. departments. B. processes. C. products. D. activities.

C- products

Engaging in which of the following will result in radical changes being made to an organization's processes? A. Continuous improvement B. Benchmarking C. Reengineering D. Mass customization

C- reengineering

Of the following, which is the best reason for using activity-based costing? A. to keep better track of overhead costs B. to more accurately assign overhead costs to cost pools so that these costs are better controlled C. to better assign overhead costs to products D. to assign indirect service overhead costs to direct overhead cost pools

C- to better assign overhead costs to products

In the pharmaceutical or food industries, quality control inspections would most likely be viewed as A. non-value-added activities. B. business-value-added activities. C. value-added-activities. D. process-efficiency activities.

C- value-added-activities

Setup time is A batch cost A value-added cost A production cost A. no no yes B. yes yes no C. yes no yes D. no yes yes

C- yes no yes

A just-in-time manufacturing process should have substantially less of which of the following than a traditional manufacturing process? Idle time Transfer time Value-added time Cycle time A. yes yes yes yes B. yes no no yes C. yes yes no yes D. no yes yes no

C- yes yes no yes

Which of the following falls under the Activity-Based Management umbrella? Continuous improvement Business process reengineering Activity-based costing A. no no yes B. yes no no C. yes yes yes D. no yes no

C- yes yes yes

For a CPA firm, how would the wages of staff auditors be classified? Direct Costs Value-Added Costs A. Yes No B. No Yes C. Yes Yes D. No No

C- yes, yes

For a company that manufactures candy, how would the cost of sugar be classified? Direct Costs Value-Added Costs A. Yes No B. No Yes C. Yes Yes D. No No

C- yes, yes

For one product that a firm produces, the manufacturing cycle efficiency is 25 percent. If the total production time is 10 hours, what is the total manufacturing time? A. 2.5 hours B. 8.0 hours C. 10.0 hours D. 40.0 hours

D- 40 hours

In activity-based costing, preliminary cost allocations assign costs to A. departments. B. processes. C. products. D. activities.

D- activities

A cost accumulation system should most likely be reevaluated when a company has A. automated one or more production processes. B. introduced new products to its customers. C. had its industry deregulated. D. all of the above.

D- all of the above

Which of the following is not a drawback of mass customization? A. The choices are too numerous. B. The potential for errors is great. C. Only a small percentage of available choices is normally selected. D. All of the above are drawbacks.

D- all of the above are drawbacks

The term cost driver refers to A. any activity that can be used to predict cost changes. B. the attempt to control expenditures at a reasonable level. C. the person who gathers and transfers cost data to the management accountant. D. any activity that causes costs to be incurred.

D- any activity that causes costs to be incurred

In the "new era" of manufacturing, good performance indicators are A. production-based. B. sales-based. C. cost-based. D. consumer-based.

D- consumer-based

In activity-based costing, cost reduction efforts are directed at specific A. cost categories. B. cost pools. C. processes. D. cost drivers.

D- cost drivers

Traditionally, managers have focused cost reduction efforts on A. activities. B. processes. C. departments. D. costs.

D- costs

The sum of the non-value-added time and the value-added time equals A. inspection time. B. production time. C. the product life cycle. D. cycle time.

D- cycle time

When a firm redesigns a product to reduce the number of component parts, the firm is A. increasing consumer value. B. increasing the value added to the product. C. decreasing product variety. D. decreasing non-value-added costs.

D- decreasing non-value added costs

An activity center is an organizational unit A. that makes a single product or performs a single service. B. in which only value-added activities are performed. C. that incurs only unit, batch, or product/process level costs. D. for which management wants separate activity information.

D- for which management wants to separate activity information

Which of the following statements about business-value-added activities (BVAs) is true? A. BVAs reflect the same processes in all organizations. B. A process map will not reflect BVAs because such activities are not essential to process performance. C. BVAs are actually value-added activities of an organization that relate to administrative processes. D. It is impossible to eliminate all BVAs in an organization.

D- it is impossible to eliminate all BVAs in an organization

For a CPA firm, how would the costs of continuing education for audit managers be classified? Direct Costs Value-Added Costs A. Yes No B. No Yes C. Yes Yes D. No No

D- no, no

For a company that manufactures candy, how would the costs of product inspection be classified? Direct Costs Value-Added Costs A. Yes No B. No Yes C. Yes Yes D. No No

D- no, no

Under activity-based costing, benchmarks for product cost should contain an allowance for A. idle time. B. idle time and scrap materials. C. spoilage. D. None of the responses are correct.

D- none of the responses are correct

Which of the following is typically regarded as a cost driver in traditional accounting practices? A. number of purchase orders processed B. number of customers served C. number of transactions processed D. number of direct labor hours worked

D- number of direct labor hours worked

The costs of non-quality work do not include A. the cost of handling complaints. B. the cost of scrap. C. warranty costs. D. original design costs.

D- original design costs

Which of the following add customer value? A. setup time B. storage time C. idle time D. processing time

D- processing time

If activity-based costing is implemented in an organization without any other changes being implemented, total overhead manufacturing costs will A. be reduced because of the elimination of non-value-added activities. B. be reduced because organizational costs will not be assigned to products or services. C. be increased because of the need for additional people to gather information on cost drivers and cost pools. D. remain constant and simply be spread over products using different cost drivers.

D- remain constant and simply be spread over products using different cost drivers

Which of the following cost drivers is often disregarded in a traditional costing system? A. Pounds of direct material B. Machine hours C. Direct labor dollars D. Variety of products manufactured

D- variety of products manufactured

Mass customization is closely associated with Product Variety Product Complexity Process errors Pareto principle A. yes no no yes B. yes yes yes no C. no yes no no D. yes no yes yes

D- yes no yes yes

A value chart should include which of the following? Service time Inspection time Transfer time A. yes no yes B. no no yes C. yes yes no D. yes yes yes

D- yes yes yes

Which of the following have an impact on long-term variable costs? Product variety Product complexity Process complexity A. no no no B. no yes yes C. yes no yes D. yes yes yes

D- yes yes yes