Cost Ch. 5

A(n)_______________ is a grouping of logically related information. a. data set b. activity driver c. cost objective d. both a and c

A. data set

If unit-based product costing is used, which of the following would be traced directly to the product? a. setup costs b. direct labor c. maintenance of machinery d. inspection costs

B. Direct labor

In a department that is drilling holes in materials, which activity base is likely to be most appropriate for assigning overhead costs? a. units produced b. direct labor hours c. machine hours d. number of batches

C. machine hours

If activity-based costing is used, modifications made by engineering to the product design of several products would be classified as a a. unit-level activity. b. batch-level activity. c. product-level activity. d. facility-level activity.

C. product-level activity

A(n) _______________ method first traces costs to a department and then to products. a. direct costing b. absorption costing c. unit-based costing d. indirect costing

C. unit-based costing

A(n) _______________ system first traces costs to activities and then to products. a. direct costing b. absorption costing c. functional-based costing d. activity-based costing

D. activity-based costing

Kryzski Company has a predetermined overhead rate of $6 per direct labor hour. Last year the company incurred $156,600 of actual manufacturing overhead cost and the account was $12,600 underapplied. How many direct labor hours were worked during the year? a. 24,000 direct labor hours b. 25,000 direct labor hours c. 26,000 direct labor hours d. 28,200 direct labor hours

A. 24,000 direct labor hours

_____________ is a simple list of activities identified in an ABC system. a. Activity inventory b. Activity dictionary c. Activity attributes d. Activity driver

A. Activity inventory

Unit-based product costing uses which of the following procedures? a. Overhead costs are traced to departments, then costs are traced to products. b. Overhead costs are traced to activities, then costs are traced to products. c. Overhead costs are traced directly to products. d. All overhead costs are expensed as incurred.

A. Overhead costs are traced to departments, then costs are traced to products.

Which of the following is NOT a limitation of a plantwide overhead rate? a. Predetermined rates using budgeted overhead are usually the best estimate of the amount of overhead. b. Overhead usage is not strictly linked to the units produced because some products are more complex and diverse than others. c. Product diversity may consume overhead activities under differing consumption ratios. d. Overhead costs tend to be underallocated to highly complex products.

A. Predetermined rates using budgeted overhead are usually the best estimate of the amount of overhead.

Which of the following is NOT an advantage of a time-driven ABC system? a. There are more activity pools used to allocate costs b. Managers can review the costs of unused capacity c. Managers can determine how to reduce the cost of supplying unused resources in subsequent periods d. Managers can monitor efforts to reduce costs with unused capacity

A. There are more activity pools used to allocate costs

Unit-level product costing assigns a. direct materials and direct labor directly to products and assigns overhead to departmental pools which are assigned to products using predetermined overhead rates based on unit-level drivers. b. direct materials, direct labor and overhead to departmental cost pools which as assigned to products using predetermined overhead rates based on unit-level drivers. c. direct materials and direct labor directly to products and assigns overhead to departmental pools which are assigned to products using predetermined overhead rates based on non-unit level drivers. d. direct materials, direct labor and overhead to departmental cost pools which are assigned to products using predetermined overhead rates based on non-unit level drivers.

A. direct materials and direct labor directly to products and assigns overhead to departmental pools which are assigned to products using predetermined overhead rates based on unit-level drivers.

Assume the following: Actual overhead costs equaled estimated overhead. Actual direct labor hours exceeded estimated direct labor hours used to calculate the predetermined overhead rate. If overhead is applied using the predetermined overhead rate, then overhead is a. overapplied. b. underapplied. c. $-0-. d. indeterminable from the information given.

A. overapplied

Maintenance of the production equipment would be classified as a a. unit-level activity. b. product-level activity. c. cell-level activity. d. facility-level activity.

A. unit-level activity

_____________ are nonfinancial and financial data that describe individual activities. a. Activity dictionaries b. Activity attributes c. Concatenated keys d. ABC inventories

B. Activity attributes

A predetermined overhead rate is calculated using which of the following formulas? a. Actual annual overhead / budgeted annual driver level b. Budgeted annual overhead / budgeted annual driver level c. Budgeted annual overhead / actual annual driver level d. Actual annual overhead / actual annual driver level

B. Budgeted annual overhead/budgeted annual driver level

All of the following are non-unit-based activity drivers EXCEPT a. number of setups. b. number of direct labor hours. c. number of inspections. d. number of material moves.

B. Number of direct labor hours

An activity-based costing system uses which of the following procedures? a. Overhead costs are traced to departments, then costs are traced to products. b. Overhead costs are traced to activities, then costs are traced to products. c. Overhead costs are traced directly to products. d. All overhead costs are expensed as incurred.

B. Overhead costs are traced to activities, then costs are traced to products.

If operations run on less than full capacity, what is the result on cost driver rates? a. They are not affected. b. They are too low. c. They can be either too high or too low. d. They are too high.

B. They are too low

If activity-based costing is used, materials handling would be classified as a a. unit-level activity. b. batch-level activity. c. product-level activity. d. facility-level activity.

B. batch-level activity

If activity-based costing is used, product inspections would be classified as a a. unit-level activity. b. batch-level activity. c. product-level activity. d. facility-level activity.

B. batch-level activity

If activity-based costing is used, setups would be classified as a a. unit-level activity. b. batch-level activity. c. product-level activity. d. facility-level activity.

B. batch-level activity

The proportion of an overhead activity consumed by a product is the a. overhead ratio. b. consumption ratio. c. quick ratio. d. fixed ratio.

B. consumption ratio

For a labor-intensive manufacturing operation, which of the following would be the most appropriate activity driver? a. machine hours b. direct labor hours c. number of employees d. units of output

B. direct labor hours

A costing system that uses actual costs for direct materials and labor and predetermined overhead rates to apply overhead is called a(n) a. actual costing system. b. normal costing system. c. standard costing system. d. activity-based costing system.

B. normal costing system.

All of the following are unit-based activity drivers EXCEPT a. machine hours. b. number of setups. c. number of units. d. direct labor hours.

B. number of setups

In an approximately relevant ABC system a. all activities still are separated into pools; they are allocated on estimated activity levels. b. only the most expensive activities are allocated using appropriate cause-and-effect drivers. c. cost pools are limited to only two cost pools. d. none of these.

B. only the most expensive activities are allocated using appropriate cause-and-effect drivers

The use of unit-based activity drivers to assign costs tends to a. overcost low-volume products. b. overcost high-volume products. c. undercost all products. d. overcost all products.

B. overcost high-volume products

The overhead rates of the traditional functional-based product costing use a. non-unit-based activity drivers. b. unit-based activity drivers. c. process costing. d. job order costing.

B. unit-based activity drivers.

Igor Inc. had a predetermined overhead rate of $2 per direct labor hour. The direct labor hours were estimated to be 25,000. The actual manufacturing overhead incurred was $47,000 and 24,000 actual direct labor hours were worked. How much was overhead over/under applied last year? a. $1,000 underapplied b. $2,000 underapplied c. $1,000 overapplied d. $3,000 overapplied

C. $1,000 overapplied

Carlson Company uses a predetermined rate to apply overhead. At the beginning of the year, Carlson estimated its overhead costs at $240,000, direct labor hours at 40,000, and machine hours at 10,000. Actual overhead costs incurred were $249,280, actual direct labor hours were 41,000, and actual machine hours were 11,000. What is the predetermined overhead rate per machine hour for Carlson? a. $6.08 b. $5.85 c. $24.00 d. $22.66

C. $24

_______________ is (are) the collected data sets that are organized and interrelated for use by an organization's ABC information system. a. Activity driver b. Cost objective c. Activity-based costing database d. Both a and c

C. Activity-based costing database

Product costs can be distorted if a unit-based activity driver is used and a. non-unit-based overhead costs are a significant proportion of total overhead. b. the consumption ratios differ between unit-based and non-unit-based input categories. c. both a and b. d. neither a nor b.

C. Both a and b

Activity-based costing assigns cost to cost objects by first tracing costs to a. products and then tracing costs to cost objects. b. departments and then tracing costs to products. c. activities and then tracing costs to cost objects. d. customers and then tracing costs to products.

C. activities and then tracing costs to cost objects

More accurate product costing information is produced by assigning costs using a. a volume-based, plantwide rate. b. volume-based, departmental rates. c. activity-based pool rates. d. all of these.

C. activity-based pool rates

If a firm has implemented activity-based procedures for home office expenses, it will a. allocate all home office expenses on the basis of sales revenues. b. allocate all home office expenses to homogeneous cost pools. c. allocate the costs in a pool using a predetermined rate per unit of activity. d. both a and b.

C. allocate the costs in a pool using a predetermined rate per unit of activity

Unit-level cost drivers create distortions when a. products use resources similarly. b. products are produced using resources homogeneously. c. different products consume resources differently. d. all of these.

C. different products consume resources differently

In the time-driven ABC systems, managers a. assign resources to departments, then activities. b. assign resource costs first to activities, then to products. c. directly estimate the resource demands imposed by each product. d. none of these.

C. directly estimate the resource demands imposed by each product

In a time-driven ABC system, once the managers determine the cost of per time unit of supplying resources to activities, the next step would be a. for managers to determine how long an employee takes to do an activity. b. assign costs of a department's resources to the customer who uses the services. c. for managers to determine the time it takes to carry out one unit of each kind of activity. d. attempt to estimate practical capacity.

C. for managers to determine the time it takes to carry out one unit of each kind of activity

_____________ aids management in achieving objectives such as product or customer costing, continuous improvement and environmental management. a. Activity driver b. Concatenated key c. Primary key d. Activity classification

D. Activity classification

Common measures of production activity include a. units produced. b. direct labor hours. c. machine hours. d. all of these.

D. All of these

Which of the following statements is TRUE? a. A vital attribute of an ABC database is the cost of individual departments. b. The ultimate objective of activity classification is to build homogeneous cost pools. c. When unbundling general ledger costs to an ABC database, we are more concerned about "How are the dollars spent?" than "What is spent?" d. Both b and c are true.

D. Both b and c are true

Which is NOT a characteristic of a unit-based costing system? a. It uses traditional product costing definitions. b. It uses unit-based activity drivers to assign overhead to products. c. It is cheaper than an activity-based costing system. d. It offers greater product costing accuracy than an activity-based costing system.

D. It offers greater product costing accuracy than an activity-based costing system.

Which of the following is NOT an approach to estimate practical capacity in a time-driven ABC system? a. Review past activity levels and identify the month with the most days. b. Assume practical capacity at some set percentage of theoretical capacity. c. Review past activity levels and identify the month with the most overtime. d. Review project activity levels based on time estimates from interviews of employees.

D. Review project activity levels based on time estimates from interviews of employees

A possible solution to overcome distortions caused by unit level rates is a. assign costs by multiplying activity rates times the amount of activity consumed. b. calculate individual rates for each activity with activity drivers. c. increase the number of rates used that reflect the diverse activity and nonunit overhead drivers. d. all of these.

D. all of these

Products might consume overhead in different proportions due to differences in a. product size. b. setup times. c. product complexity. d. all of these.

D. all of these

Which of the following quantities is an example of an activity driver in activity-based costing? a. number of direct labor hours b. number of labor transactions c. number of machine hours d. all of these

D. all of these

Which of the following quantities is an example of an activity driver in activity-based costing? a. number of setups b. number of orders placed c. number of machine hours d. all of these

D. all of these

Material amounts of underapplied or overapplied overhead should be a. treated as an adjustment to cost of goods sold. b. treated as an adjustment to work in process. c. allocated to direct materials, work in process, and finished goods. d. allocated to work in process, finished goods, and cost of goods sold.

D. allocated to work in process, finished goods, and cost of goods sold.

If activity-based costing is used, insurance on the plant would be classified as a a. unit-level activity. b. batch-level activity. c. product-level activity. d. facility-level activity.

D. facility-level activity

If activity-based costing is used, security is an example of a a. unit-level activity. b. batch-level activity. c. product-level activity. d. facility-level activity.

D. facility-level activity

A department that is capital-intensive most likely would use a predetermined departmental overhead rate based on which of the following activity bases? a. units of direct material used b. direct labor hours c. direct labor cost d. machine hours

D. machine hours

The Holland Company uses a predetermined overhead rate of $12 per direct labor hour to apply overhead. During the year, 30,000 direct labor hours were worked. Actual overhead costs for the year were $320,000. The overhead variance is a. $36,000 overapplied. b. $35,560 underapplied. c. $40,000 underapplied. d. none of the above.

D. none of the above

A secondary activity is a. the second activity on the activity list. b. an activity driver. c. one that is consumed by the final cost object. d. one that is consumed by intermediate cost objects.

D. one that is consumed by intermediate cost objects