Question 1

As non-value-added activities and their associated resources are eliminated, a company's
A)costs will decrease.
B)fixed costs will be eliminated.
C)variable costs will increase.
D)fixed costs will increase.

Accepted Answer

Non-value-added activities are those that do not add to the value of a product or service and are therefore considered wasteful. By eliminating these activities, a company can reduce its costs, which will ultimately result in an overall decrease in the company's costs.

Question 2

Mantle Co.manufactures baseball bats.The company's total overhead consists of assembly costs and inspection costs.The following data is available:  Total overhead assigned to aluminum bats assuming a single overhead rate and using activity-based costing, respectively, are
A)$63,000 and $75,000.
B)$57,000 and $45,000.
C)$63,000 and $57,000.
D)$57,000 and $75,000.

Accepted Answer

The answer of Mantle Co.manufactures baseball bats.The company's total overhead...

Question 3

Turnbull Company produces two products and their overhead consists of setups $20,000; machining $2,220,000; and packing $80,000.Data for the current year follow:  The overhead allocated to Beta assuming a single overhead rate based on machine hours and assuming ABC, respectively, are
A)$256,000 and $478,000.
B)$464,000 and $456,000.
C)$256,000 and $242,000.
D)$464,000 and $478,000.

Accepted Answer

The answer of Turnbull Company produces two products and their...

Question 4

Austin Company manufactures 2 products, Flacca and Gordo.Overhead costs are comprised of machine set-ups $1,600,000; machining $3,600,000; and inspecting $1,200,000.Recent data are shown below:  Overhead assigned to Gordo using a single overhead rate based on direct labor hours and using ABC, respectively, will be
A)$4,000,000 and $2,400,000.
B)$4,000,000 and $3,072,000.
C)$2,400,000 and $3,328,000.
D)$2,400,000 and $3,072,000.

Accepted Answer

The answer of Austin Company manufactures 2 products, Flacca and...

Question 5

Those activities that create the product the customer wants to buy are referred to as
A)profitability activities.
B)manufacturing burden.
C)value-added activities.
D)period costs.

Accepted Answer

Value-added activities are those activities that add value to a product or service and are essential for creating the product that the customer wants to buy. These activities contribute to the cost of the product or service and are important for the company's profitability. Examples of value-added activities include designing, engineering, assembling, packaging, and delivering the product to the customer. Profitability activities refer to the activities that contribute to the company's overall profitability, whereas manufacturing burden includes indirect costs associated with the production process. Period costs are expenses that are not directly related to the production process and are expensed in the period they are incurred.

Question 6

Which of the following activities is classified as non-value-added in the manufacture of dresses?
A)Cutting
B)Sewing
C)Hemming
D)Inspecting

Accepted Answer

Inspecting is not considered a value-added activity as it does not directly contribute to the creation or improvement of the product. Instead, it is a quality control activity that ensures the end product meets the desired specifications. Cutting, sewing, and hemming are all examples of value-added activities as they directly contribute to the creation of the dress.

Question 7

Which of the following activities is classified as non-value added in the manufacture of wooden bird houses?
A)Moving paint to production
B)Nailing the oak roof
C)Painting the sides
D)Sanding the corners

Accepted Answer

Moving paint to production is considered non-value added because it does not directly contribute to the transformation of materials into the final product. It is a necessary activity, but it does not add value to the product. The other activities listed (nailing the oak roof, painting the sides, sanding the corners) directly contribute to the creation of the wooden bird houses and are therefore considered value added.

Question 8

Which of the following activities is classified as non-value-added in the manufacture of sports jackets?
A)Machine setup
B)Cutting
C)Sewing
D)Lettering

Accepted Answer

Machine setup is the activity of preparing the equipment for production, which does not add value to the final product. Cutting, sewing, and lettering are all necessary steps in the manufacturing process and add value to the sports jackets.

Question 9

Auburn, Inc.'s overhead costs of $700,000 consist of machining $400,000; inspecting $200,000; and packaging $100,000.Machining works 4,000 hours a year, 500 inspections occur each year, and 1,000 packing order occur each year.Information on the company's two products are as follows:  How much overhead is allocated to Alpha using a single overhead rate (based on direct labor hours) and assuming ABC, respectively?
A)$340,000 and $360,000
B)$340,000 and $175,000
C)$360,000 and $175,000
D)$360,000 and $525,000

Accepted Answer

The answer of Auburn, Inc.'s overhead costs of $700,000 consist...

Question 10

Dawson Company manufactures two products, Regular and Deluxe.Overhead costs consist of machining, $2,500,000; and assembly, $1,250,000.Recent data are provided below:  Overhead allocated to Regular using a single overhead rate (based on number of parts) and using activity-based costing, respectively, are
A)$2,400,000 and $2,625,000.
B)$937,500 and $2,812,500.
C)$1,350,000 and $1,125,000.
D)$1,075,000 and $2,675,000.

Accepted Answer

The answer of Dawson Company manufactures two products, Regular and...

Question 11

The categories of activities that are required to produce and sell products, non-value-added and value-added, are defined from which of the following perspectives?
A)Industry
B)Management
C)Customer
D)Organization

Accepted Answer

The categories of activities that are required to produce and sell products, non-value-added and value-added, are defined from the customer's perspective. This is because value-added activities are those that customers perceive as adding value to the product or service, and are willing to pay for, whereas non-value-added activities do not add value from the customer's viewpoint and ideally should be minimized or eliminated.

Question 12

The key to reducing costs through activity management is
A)reducing the number of activities.
B)eliminating the resources associated with the reduced activities.
C)reducing the work force.
D)reducing the commissions of sales force.

Accepted Answer

Reducing the number of activities alone will not necessarily result in cost reduction, as each activity may still require resources. Eliminating the resources associated with the reduced activities will result in cost savings while still maintaining necessary activities. Reducing the work force may result in lower costs, but it is not necessarily the key to reducing costs through activity management. Reducing the commissions of the sales force is not related to activity management and may have negative consequences on sales performance.

Question 13

Which of the following activities is classified as non-value-added in the manufacture of decorative pillows?
A)Cutting
B)Sewing
C)Storing
D)Stuffing

Accepted Answer

Storing is a non-value-added activity because it does not directly contribute to the creation or enhancement of the decorative pillows. It is simply a necessary part of the production process to temporarily store the pillows until they are ready to be shipped or sold. Cutting, sewing, and stuffing are all value-added activities because they directly contribute to the creation of the finished product.

Question 14

In changing from a traditional costing system to an activity-based costing system, overhead costs tend to shift from high-volume standard products to low-volume premium products because
A)all overhead costs are indirect.
B)premium products usually consume more activities per unit than standard products.
C)standard products use more total activities than premium products.
D)all overhead costs are direct.

Accepted Answer

Activity-based costing system allocates overhead costs based on the activities used to produce each unit. Premium products usually require more activities per unit than standard products, which results in a higher allocation of overhead costs. Therefore, overhead costs tend to shift from high-volume standard products to low-volume premium products.

Question 15

Auburn, Inc.'s overhead costs of $700,000 consist of machining $400,000; inspecting $200,000; and packaging $100,000.Machining works 4,000 hours a year, 500 inspections occur each year, and 1,000 packing order occur each year.Information on the company's two products are as follows:  How much overhead is allocated to Omega using a single overhead rate (based on direct labor hours) and using ABC, respectively?
A)$340,000 and $360,000
B)$340,000 and $175,000
C)$360,000 and $175,000
D)$360,000 and $525,000

Accepted Answer

The answer of Auburn, Inc.'s overhead costs of $700,000 consist...

Question 16

Which of the following might be a reason that allocating overhead under an activity-based approach might have less manufacturing overhead allocated to the products?
A)The general overhead cost pool is not allocated to products under activity-based costing.
B)The product mix includes products that are not similar in material and labor.
C)The product mix has all products that are similar in makeup of materials and labor.
D)The general overhead cost pool is allocated to products under activity-based costing.

Accepted Answer

Activity-based costing allocates overhead based on activity levels, rather than using a general overhead cost pool. This means that some overhead costs that might have been allocated to products under a traditional costing approach might not be allocated to products under activity-based costing.

Question 17

Austin Company manufactures 2 products, Flacca and Gordo.Overhead costs are comprised of machine set-ups $1,600,000; machining $3,600,000; and inspecting $1,200,000.Recent data are shown below:  Overhead assigned to Flacca using a single overhead rate based on direct labor hours and using ABC, respectively, will be
A)$4,000,000 and $2,400,000.
B)$4,000,000 and $3,072,000.
C)$2,400,000 and $3,328,000.
D)$2,400,000 and $3,072,000.

Accepted Answer

The answer of Austin Company manufactures 2 products, Flacca and...

Question 18

Those activities that consume resources but do not contribute to the value of the product are referred as
A)contribution activities.
B)non-value-added activities.
C)negative activities.
D)period costs.

Accepted Answer

Non-value-added activities refer to those activities that consume resources but do not add any value to the product or service from the customer's perspective. They are also known as waste, unnecessary, or excess activities. Examples include overprocessing, waiting, defects, excess motion, inventory, and unnecessary movement of materials. Contribution activities contribute to the value of the product and are important for its success. Negative activities are not a commonly used term in this context. Period costs are costs that are not directly related to the production of goods or services, such as salaries, rent, and insurance.

Question 19

Turnbull Company produces two products and their overhead consists of setups $20,000; machining $2,220,000; and packing $80,000.Data for the current year follow:  The overhead allocated to Delta assuming a single overhead rate based on machine hours and assuming ABC, respectively, are
A)$1,856,000 and $1,878,000.
B)$1,864,000 and $2,056,000.
C)$1,856,000 and $1,842,000.
D)$1,864,000 and $1,878,000.

Accepted Answer

The answer of Turnbull Company produces two products and their...

Question 20

Dawson Company manufactures two products, Regular and Deluxe.Overhead costs consist of machining, $2,500,000; and assembly, $1,250,000.Recent data are provided below:  Overhead allocated to Deluxe using a single overhead rate (based on number of parts) and using activity-based costing, respectively, are
A)$2,400,000 and $2,625,000.
B)$937,500 and $2,812,500.
C)$1,350,000 and $1,125,000.
D)$1,075,000 and $2,675,000.

Accepted Answer

The answer of Dawson Company manufactures two products, Regular and...

Quiz 7: Activity-Based Costing and Activity-Based Management

As non-value-added activities and their associated resources are eliminated, a company's

Mantle Co.manufactures baseball bats.The company's total overhead consists of assembly costs and inspection costs.The following data is available: Total overhead assigned to aluminum bats assuming a single overhead rate and using activity-based costing, respectively, are

Turnbull Company produces two products and their overhead consists of setups $20,000; machining $2,220,000; and packing $80,000.Data for the current year follow: The overhead allocated to Beta assuming a single overhead rate based on machine hours and assuming ABC, respectively, are

Those activities that create the product the customer wants to buy are referred to as

Which of the following activities is classified as non-value-added in the manufacture of dresses?

Which of the following activities is classified as non-value added in the manufacture of wooden bird houses?

Which of the following activities is classified as non-value-added in the manufacture of sports jackets?

The categories of activities that are required to produce and sell products, non-value-added and value-added, are defined from which of the following perspectives?

The key to reducing costs through activity management is

Which of the following activities is classified as non-value-added in the manufacture of decorative pillows?

In changing from a traditional costing system to an activity-based costing system, overhead costs tend to shift from high-volume standard products to low-volume premium products because

Which of the following might be a reason that allocating overhead under an activity-based approach might have less manufacturing overhead allocated to the products?

Those activities that consume resources but do not contribute to the value of the product are referred as

Turnbull Company produces two products and their overhead consists of setups $20,000; machining $2,220,000; and packing $80,000.Data for the current year follow: The overhead allocated to Delta assuming a single overhead rate based on machine hours and assuming ABC, respectively, are