Deck 7: Activity-Based Costing and Management

Question 1

Discretionary activities are necessary to comply with legal mandates.

Answer 1

False

Question 2

Product diversity means that products consume manufacturing overhead activities in systematically similar proportions.

Answer 2

False

Question 3

Activity analysis is the effort expended to identify those factors that are the root causes of activity costs.

Answer 3

False

Question 4

Costs that are caused by the inefficient performance of value-added activities are non-value-added costs.

Question 5

The value-added standard is the waste-free component of the value-added activity.

Question 6

One of the questions answered by activity analysis should be "What activities are done?"

Question 7

Activities necessary to remain in business are called value-added activities.

Question 8

Unit-level activities are performed each time a batch is produced.

Question 9

Activity drivers should be classified as either internal or external.

Question 10

An activity dictionary lists the activities in an organization along with some critical activity attributes.

Question 11

The consumption ratio is the amount of each activity consumed by all products.

Question 12

To calculate an activity rate, the practical capacity of each activity must be determined.

Question 13

An activity-based costing system first traces costs to activities and then to products.

Question 14

Factors that measure the consumption of activities by products and other cost objects are value-added costs.

Question 15

Efficiency is the reciprocal of cycle time.

Question 16

Activity input measure is the result or product of an activity.

Question 17

A work distribution matrix is derived from an interview or a written survey.

Question 18

Resource drivers are factors that measure the consumption of resources by activities.

Question 19

Activity attributes are financial and nonfinancial information items that describe individual activities.

Question 20

A volume-based costing system tends to be allocation-intensive.

Question 21

Quality improvement can increase profitability by decreasing costs.

Question 22

The activity driver for the shipping activity is the number of orders shipped. Product X uses 40 orders, and Product Y uses 120 orders. What is the consumption ratio for product X?

A) 0.215
B) 0.250
C) 0.300
D) 0.625

Question 23

What type of cost typically represents a much higher percentage of product costs than direct labour?

A) activity costs
B) value-added costs
C) consumption costs
D) manufacturing overhead costs

Question 24

Which ratio measures the proportion of an activity consumed by a product?

A) quality ratio
B) efficiency ratio
C) production ratio
D) consumption ratio

Question 25

One way to improve efficiency is to produce higher activity output with higher cost.

Question 26

What are the two classifications of activity drivers?

A) right and wrong
B) exact and inexact
C) inputs and outputs
D) unit-level and non-unit-level

Question 27

Which term reflects products having different consumption ratios for different manufacturing overhead activities?

A) volume costing
B) product diversity
C) activity-based costing
D) manufacturing overhead diversity

Question 28

Control activities are performed by an organization or its customers in response to poor quality.

Question 29

A defective product is one that conforms to specifications.

Question 30

Environmental costs are costs that are incurred because poor environmental quality exists.

Question 31

Which of the following are setups, material handling, and inspection all possible examples of?

A) product diversity
B) sustainable diversity
C) unit-level manufacturing overhead activities
D) non-unit-level manufacturing overhead activities

Question 32

Zero defects means that most products conform to specifications.

Question 33

Quality is concerned with doing the activity right the first time it is performed.

Question 34

One of the three major dimensions of measuring activity performance is quality.

Question 35

The robust quality view of conformance is that variations in the product are acceptable.

Question 36

Producing 20,000 cell phone units requires $600,000 of prime costs, uses 4,000 machine hours, and takes 2,400 setup hours. The activity rates are $80 per machine hour and $200 per setup hour. What is the unit cost of a cell phone?

A) $30
B) $40
C) $60
D) $70

Question 37

The moving activity has an expected cost of $80,000. Expected direct labour hours are 20,000, and the expected number of moves is 40,000. What is the most logical activity rate for moving?

A) $2 per hour
B) $2 per move
C) $4 per hour
D) $4 per move

Question 38

Unrealized external failure costs are also known as societal costs.

Question 39

What can be caused by using only unit-based activity drivers to assign non-unit-related manufacturing overhead costs?

A) efficiency
B) activity sharing
C) product diversity
D) distorted product costs

Question 40

Appraisal costs are incurred to prevent poor quality in the products or services being produced.

Question 41

Which term reflects a list of activities accompanied by information that describes each activity?

A) an activity note
B) an activity journal
C) an activity manifesto
D) an activity dictionary

Question 42

Moustache Manufacturing
Moustache Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors purchase the same product. The customer activities and costs for the previous quarter are found below: $\begin{array}{lrr}&\text { JIT } & \text { Non-JIT }\\\text { Sales Orders } & 300 & 20 \\\text { Sales Calls } & 25 & 25 \\\text { Service Calls } & 150 & 75 \\\text { Average Order Size } & 100 & 1,000 \\\text { Manufacturing Cost/Unit } & \$ 50 & \$ 50\end{array}$ $$\begin{array}{l}\text { Customer Costs: }\\\begin{array} { l l } \text { Processing Sales Orders } & \$ 200,000 \\\text { Selling Goods } & \$ 120,000 \\\text { Servicing Goods } & \$ 150,000 \\\text { Total } & \$ 470,000\end{array}\end{array}$$

-Refer to Moustache Manufacturing. What is the activity rate for processing sales orders?

A) $1.47 per order
B) $182.00 per order
C) $625.00 per order
D) $667.00 per order

Question 43

Andiamo
Andiamo Manufacturing produces two types of tablets: basic and deluxe. The tablets are produced using one continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used to assign costs to each activity. The manufacturing overhead activities, their costs, and the other related data are as follows: $$\begin{array} { l l l l l } \text { Product } & \text { Machine Hours } & \text { Setups } & \text { Receiving Orders } & \text { Packing Orders } \\\text { basic } & 20,000 & 200 & 100 & 800 \\\text { deluxe } & 20,000 & 500 & 400 & 4,000 \\\text { Costs } & \$ 80,000 & \$ 60,000 & \$ 10,000 & \$ 30,000\end{array}$$

-Refer to Andiamo Manufacturing. Suppose the company uses an activity rate for receiving that is based on receiving orders. What would be the receiving costs allocated to the basic?

A) $1,200
B) $1,600
C) $1,800
D) $2,000

Question 44

Moustache Manufacturing
Moustache Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors purchase the same product. The customer activities and costs for the previous quarter are found below: $\begin{array}{lrr}&\text { JIT } & \text { Non-JIT }\\\text { Sales Orders } & 300 & 20 \\\text { Sales Calls } & 25 & 25 \\\text { Service Calls } & 150 & 75 \\\text { Average Order Size } & 100 & 1,000 \\\text { Manufacturing Cost/Unit } & \$ 50 & \$ 50\end{array}$ $$\begin{array}{l}\text { Customer Costs: }\\\begin{array} { l l } \text { Processing Sales Orders } & \$ 200,000 \\\text { Selling Goods } & \$ 120,000 \\\text { Servicing Goods } & \$ 150,000 \\\text { Total } & \$ 470,000\end{array}\end{array}$$

-Refer to Moustache Manufacturing. What is the activity rate for servicing goods?

A) $650 per service call
B) $667 per service call
C) $675 per service call
D) $2,000 per service call

Question 45

Which matrix is derived from the interview process (or written survey)?

A) value analysis matrix
B) work distribution matrix
C) driver consumption matrix
D) activity explanation matrix

Question 46

In activity-based costing, what are interviews and surveys used to identify?

A) value
B) quality
C) velocity
D) activities

Question 47

Which costing system first assigns costs to activities and then to products?

A) unit-level costing
B) production costing
C) activity-based costing
D) volume-based costing

Question 48

What costing method can help a company to become more competitive by providing more accurate cost data?

A) production costing
B) unit-based costing
C) volume-based costing
D) activity-based costing

Question 49

Moustache Manufacturing
Moustache Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors purchase the same product. The customer activities and costs for the previous quarter are found below: $\begin{array}{lrr}&\text { JIT } & \text { Non-JIT }\\\text { Sales Orders } & 300 & 20 \\\text { Sales Calls } & 25 & 25 \\\text { Service Calls } & 150 & 75 \\\text { Average Order Size } & 100 & 1,000 \\\text { Manufacturing Cost/Unit } & \$ 50 & \$ 50\end{array}$ $$\begin{array}{l}\text { Customer Costs: }\\\begin{array} { l l } \text { Processing Sales Orders } & \$ 200,000 \\\text { Selling Goods } & \$ 120,000 \\\text { Servicing Goods } & \$ 150,000 \\\text { Total } & \$ 470,000\end{array}\end{array}$$

-Refer to Moustache Manufacturing. What is the activity rate for selling goods?

A) $375 per sales call
B) $1,200 per sales call
C) $2,400 per sales call
D) $4,800 per sales call

Question 50

Andiamo
Andiamo Manufacturing produces two types of tablets: basic and deluxe. The tablets are produced using one continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used to assign costs to each activity. The manufacturing overhead activities, their costs, and the other related data are as follows: $$\begin{array} { l l l l l } \text { Product } & \text { Machine Hours } & \text { Setups } & \text { Receiving Orders } & \text { Packing Orders } \\\text { basic } & 20,000 & 200 & 100 & 800 \\\text { deluxe } & 20,000 & 500 & 400 & 4,000 \\\text { Costs } & \$ 80,000 & \$ 60,000 & \$ 10,000 & \$ 30,000\end{array}$$

-Refer to Andiamo Manufacturing. Suppose the company uses only machine hours to calculate a plantwide manufacturing overhead rate. What would be the total manufacturing overhead assigned to the basic tablets?

A) $60,000
B) $80,000
C) $90,000
D) $180,000

Question 51

Moustache Manufacturing
Moustache Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors purchase the same product. The customer activities and costs for the previous quarter are found below: $\begin{array}{lrr}&\text { JIT } & \text { Non-JIT }\\\text { Sales Orders } & 300 & 20 \\\text { Sales Calls } & 25 & 25 \\\text { Service Calls } & 150 & 75 \\\text { Average Order Size } & 100 & 1,000 \\\text { Manufacturing Cost/Unit } & \$ 50 & \$ 50\end{array}$ $$\begin{array}{l}\text { Customer Costs: }\\\begin{array} { l l } \text { Processing Sales Orders } & \$ 200,000 \\\text { Selling Goods } & \$ 120,000 \\\text { Servicing Goods } & \$ 150,000 \\\text { Total } & \$ 470,000\end{array}\end{array}$$

-Refer to Moustache Manufacturing. What is the total customer cost for the JIT distributor?

A) $60,000
B) $100,050
C) $187,500
D) $347,550

Question 52

Which of the following must be determined to calculate an activity rate?

A) value of each activity
B) processing ratio of each activity
C) expenditure level of each activity
D) practical capacity of each activity

Question 53

What is an example of types of resources consumed in an activity dictionary?

A) qualities
B) allocations
C) activity sharing
D) activity attributes

Question 54

Andiamo
Andiamo Manufacturing produces two types of tablets: basic and deluxe. The tablets are produced using one continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used to assign costs to each activity. The manufacturing overhead activities, their costs, and the other related data are as follows: $$\begin{array} { l l l l l } \text { Product } & \text { Machine Hours } & \text { Setups } & \text { Receiving Orders } & \text { Packing Orders } \\\text { basic } & 20,000 & 200 & 100 & 800 \\\text { deluxe } & 20,000 & 500 & 400 & 4,000 \\\text { Costs } & \$ 80,000 & \$ 60,000 & \$ 10,000 & \$ 30,000\end{array}$$

-Refer to Andiamo Manufacturing. What is the consumption ratio for setups on the deluxe?

A) 0.500
B) 0.688
C) 0.700
D) 0.714

Question 55

CompInc.CompInc. produces two products: a high-end laptop computer and an inexpensive laptop. The two products use two manufacturing overhead activities, which have the following costs:
Setting up equipment $8,000
Machining 48,000
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production. $\begin{array}{lrr}&\text { High-end}&\text { Inexpensive }\\\text { Direct Labour } & \$ 24,000 & \$ 8,000 \\\text { Direct Materials } & 15,000 & 4,000 \\\text { Units } & 2,000 & 2,000 \\\text { Machine Hours } & 1,000 & 3,000 \\\text { Sebup Hours } & 150 & 50\end{array}$

-Refer to CompInc. What is the inexpensive laptop's consumption ratio for setup hours?

A) 0.25
B) 0.45
C) 0.50
D) 0.75

Question 56

Andiamo
Andiamo Manufacturing produces two types of tablets: basic and deluxe. The tablets are produced using one continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have been used to assign costs to each activity. The manufacturing overhead activities, their costs, and the other related data are as follows: $$\begin{array} { l l l l l } \text { Product } & \text { Machine Hours } & \text { Setups } & \text { Receiving Orders } & \text { Packing Orders } \\\text { basic } & 20,000 & 200 & 100 & 800 \\\text { deluxe } & 20,000 & 500 & 400 & 4,000 \\\text { Costs } & \$ 80,000 & \$ 60,000 & \$ 10,000 & \$ 30,000\end{array}$$

-Refer to Andiamo Manufacturing. What is the activity rate for packing that is based on packing orders?

A) $1.20 per packing order
B) $6.25 per packing order
C) $9.00 per packing order
D) $10.00 per packing order

Question 57

CompInc.CompInc. produces two products: a high-end laptop computer and an inexpensive laptop. The two products use two manufacturing overhead activities, which have the following costs:
Setting up equipment $8,000
Machining 48,000
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production. $\begin{array}{lrr}&\text { High-end}&\text { Inexpensive }\\\text { Direct Labour } & \$ 24,000 & \$ 8,000 \\\text { Direct Materials } & 15,000 & 4,000 \\\text { Units } & 2,000 & 2,000 \\\text { Machine Hours } & 1,000 & 3,000 \\\text { Sebup Hours } & 150 & 50\end{array}$

-Refer to CompInc. What is the manufacturing overhead cost per unit for high-end laptops when using a plantwide rate that is based on direct labour costs?

A) $7.00 per laptop
B) $10.00 per laptop
C) $14.00 per laptop
D) $21.00 per laptop

Question 58

CompInc.CompInc. produces two products: a high-end laptop computer and an inexpensive laptop. The two products use two manufacturing overhead activities, which have the following costs:
Setting up equipment $8,000
Machining 48,000
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the expected production. $\begin{array}{lrr}&\text { High-end}&\text { Inexpensive }\\\text { Direct Labour } & \$ 24,000 & \$ 8,000 \\\text { Direct Materials } & 15,000 & 4,000 \\\text { Units } & 2,000 & 2,000 \\\text { Machine Hours } & 1,000 & 3,000 \\\text { Sebup Hours } & 150 & 50\end{array}$

-Refer to CompInc. What is the manufacturing overhead cost per unit for each inexpensive laptop, when using manufacturing overhead rates that are based on machine hours and setup hours?

A) $10.00 per unit
B) $19.00 per unit
C) $20.00 per unit
D) $21.00 per unit

Question 59

What is assigned using direct tracing and resource drivers?

A) costs
B) profits
C) materials
D) resources

Question 60

Receiving provides 4,000 receiving hours and costs $80,000 per year. What is the activity rate for receiving?

A) $0.05 per receiving hour
B) $10.00 per receiving hour
C) $20.00 per receiving hour
D) $40.00 per receiving hour

Question 61

Sallisaw Savings & Loan
Sallisaw Savings & Loan has requested an analysis of checking account profitability by customer type. Customers are categorized according to size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: $\begin{array}{ll}\text { Opening and closing accounts } & \$ 100,000 \\\text { Issuing monthly statements } & \$ 150,000 \\\text { Frocessing transactions } & \$ 1,025,000 \\\text { Customer inquiries } & \$ 200,000 \\\text { Froviding ATM services } & \$ 560,000\\\text {Total Costs}&\$2,035,000\end{array}$ Additional data concerning the usage of the activities by the various customers are also provided: $$\begin{array} { l r r r } & \underline { \text { Low } } & \underline { \text { Medium } } & \underline { \text { High } } \\\text { Number of accounts } & 7,500 & 1,500 & 1,000 \\\text { opened/olosed } & & \\ \text { Number of }& 225,000 & 50,000 & 25,000 \\\text { Sutements issued } \\\text { Processing } \\\text { transactions }& 9,000,000 & 1,000,000 & 250,000\\\text { Number of } \\\text { telephone minutes } & 500,000 & 300,000 & 200,000 \\\text { Number of ATM } \\\text { transactions }& 675,000 & 100,000 & 25,000 \\ \text { Number of checking } \\\text { accolnts }& 19,000 & 4,000 & 2,000\end{array}$$ The company uses an activity-based costing system. The activity rate for opening and closing statements is based on the number of accounts opened and closed. The activity rate for issuing monthly statements is based on the number os statements issued. The activity rate for processing transactins is based on the number of transactions processed. The activity rate for customer inquiries is based on the number of telephone minutes. The rate for ATM services is based on the number of ATM transactions.

-Refer to Sallisaw Savings & Loan. Using activity-based costing, what is the activity rate for opening and closing accounts?

A) $4.00 per account
B) $10.00 per account
C) $81.40 per account
D) $203.50 per account

Question 62

Moustache Manufacturing
Moustache Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors purchase the same product. The customer activities and costs for the previous quarter are found below: $\begin{array}{lrr}&\text { JIT } & \text { Non-JIT }\\\text { Sales Orders } & 300 & 20 \\\text { Sales Calls } & 25 & 25 \\\text { Service Calls } & 150 & 75 \\\text { Average Order Size } & 100 & 1,000 \\\text { Manufacturing Cost/Unit } & \$ 50 & \$ 50\end{array}$ $$\begin{array}{l}\text { Customer Costs: }\\\begin{array} { l l } \text { Processing Sales Orders } & \$ 200,000 \\\text { Selling Goods } & \$ 120,000 \\\text { Servicing Goods } & \$ 150,000 \\\text { Total } & \$ 470,000\end{array}\end{array}$$

-Refer to Moustache Manufacturing. What is the total customer cost for the non-JIT distributor?

A) $12,500
B) $50,025
C) $78,791
D) $122,525

Question 63

Activity Cost $$\begin{array} { l l } \text { Inspecting comp onents (sampling only) } & \$ 190,000 \\\text { Reworking products (due to failed component) } & \$ 2,254,000 \\\text { Warranty work (due to failed component) } & \$ 1,723,000\end{array}$$ II. Supplier Data $\begin{array}{lrr}&\text { Supplier } 1 &\text { Supplier } 2\\\text { Units Purchase Price } & \$ 10.00 & \$ 8.95 \\\text { Units Purchased } & 22,500 & 52,500 \\\text { Sampling Hours } & 50 & 2,450 \\\text { Rework Hours } & 135 & 3,625 \\\text { Warranty Hours } & 475 & 6,000\end{array}$

-Refer to Tigra Company. What is the total activity cost per component associated with using Supplier 1?

A) $10.00
B) $15.75
C) $19.38
D) $20.00

Question 64

What is NOT a possible source of customer diversity?

A) pricing
B) sales support
C) order frequency
D) geographic distance

Question 65

Sallisaw Savings & Loan
Sallisaw Savings & Loan has requested an analysis of checking account profitability by customer type. Customers are categorized according to size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: $\begin{array}{ll}\text { Opening and closing accounts } & \$ 100,000 \\\text { Issuing monthly statements } & \$ 150,000 \\\text { Frocessing transactions } & \$ 1,025,000 \\\text { Customer inquiries } & \$ 200,000 \\\text { Froviding ATM services } & \$ 560,000\\\text {Total Costs}&\$2,035,000\end{array}$ Additional data concerning the usage of the activities by the various customers are also provided: $$\begin{array} { l r r r } & \underline { \text { Low } } & \underline { \text { Medium } } & \underline { \text { High } } \\\text { Number of accounts } & 7,500 & 1,500 & 1,000 \\\text { opened/olosed } & & \\ \text { Number of }& 225,000 & 50,000 & 25,000 \\\text { Sutements issued } \\\text { Processing } \\\text { transactions }& 9,000,000 & 1,000,000 & 250,000\\\text { Number of } \\\text { telephone minutes } & 500,000 & 300,000 & 200,000 \\\text { Number of ATM } \\\text { transactions }& 675,000 & 100,000 & 25,000 \\ \text { Number of checking } \\\text { accolnts }& 19,000 & 4,000 & 2,000\end{array}$$ The company uses an activity-based costing system. The activity rate for opening and closing statements is based on the number of accounts opened and closed. The activity rate for issuing monthly statements is based on the number os statements issued. The activity rate for processing transactins is based on the number of transactions processed. The activity rate for customer inquiries is based on the number of telephone minutes. The rate for ATM services is based on the number of ATM transactions.

-Refer to Sallisaw Savings & Loan. What is the monthly overall cost per checking account?

A) $6.78
B) $7.37
C) $8.93
D) $28.26

Question 66

Activity Cost $$\begin{array} { l l } \text { Inspecting comp onents (sampling only) } & \$ 190,000 \\\text { Reworking products (due to failed component) } & \$ 2,254,000 \\\text { Warranty work (due to failed component) } & \$ 1,723,000\end{array}$$ II. Supplier Data $\begin{array}{lrr}&\text { Supplier } 1 &\text { Supplier } 2\\\text { Units Purchase Price } & \$ 10.00 & \$ 8.95 \\\text { Units Purchased } & 22,500 & 52,500 \\\text { Sampling Hours } & 50 & 2,450 \\\text { Rework Hours } & 135 & 3,625 \\\text { Warranty Hours } & 475 & 6,000\end{array}$

-Refer to Tigra Company. What is the activity rate for inspecting components on the basis of sampling hours?

A) $72.00 per hour
B) $76.00 per hour
C) $77.25 per hour
D) $78.00 per hour

Question 67

Last year, Tevia Inc. shipped 6,000,000 kg of goods to customers at a cost of $4,800,000. Suppose an individual customer orders 40,000 kg and produces $400,000 of revenue. (The total revenue is $40 million.) What amount of shipping cost would be assigned to the customer when using activity-based costing?

A) $4,000
B) $8,000
C) $32,000
D) $40,000

Question 68

Sallisaw Savings & Loan
Sallisaw Savings & Loan has requested an analysis of checking account profitability by customer type. Customers are categorized according to size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: $\begin{array}{ll}\text { Opening and closing accounts } & \$ 100,000 \\\text { Issuing monthly statements } & \$ 150,000 \\\text { Frocessing transactions } & \$ 1,025,000 \\\text { Customer inquiries } & \$ 200,000 \\\text { Froviding ATM services } & \$ 560,000\\\text {Total Costs}&\$2,035,000\end{array}$ Additional data concerning the usage of the activities by the various customers are also provided: $$\begin{array} { l r r r } & \underline { \text { Low } } & \underline { \text { Medium } } & \underline { \text { High } } \\\text { Number of accounts } & 7,500 & 1,500 & 1,000 \\\text { opened/olosed } & & \\ \text { Number of }& 225,000 & 50,000 & 25,000 \\\text { Sutements issued } \\\text { Processing } \\\text { transactions }& 9,000,000 & 1,000,000 & 250,000\\\text { Number of } \\\text { telephone minutes } & 500,000 & 300,000 & 200,000 \\\text { Number of ATM } \\\text { transactions }& 675,000 & 100,000 & 25,000 \\ \text { Number of checking } \\\text { accolnts }& 19,000 & 4,000 & 2,000\end{array}$$ The company uses an activity-based costing system. The activity rate for opening and closing statements is based on the number of accounts opened and closed. The activity rate for issuing monthly statements is based on the number os statements issued. The activity rate for processing transactins is based on the number of transactions processed. The activity rate for customer inquiries is based on the number of telephone minutes. The rate for ATM services is based on the number of ATM transactions.

-Refer to Sallisaw Savings & Loan. Using activity-based costing, what is the activity rate for issuing monthly statements?

A) $0.50 per statement
B) $0.67 per statement
C) $6.78 per statement
D) $15.00 per statement

Question 69

A company has two inspectors, each earning a salary of $150,000. One inspector works exclusively on inspecting parts received from outside suppliers, while the other spends 40% of her time inspecting parts and 60% of her time inspecting final products. How much labour cost should be assigned to the activity of inspecting parts?

A) $60,000
B) $90,000
C) $210,000
D) $300,000

Question 70

Activity Cost $$\begin{array} { l l } \text { Inspecting comp onents (sampling only) } & \$ 190,000 \\\text { Reworking products (due to failed component) } & \$ 2,254,000 \\\text { Warranty work (due to failed component) } & \$ 1,723,000\end{array}$$ II. Supplier Data $\begin{array}{lrr}&\text { Supplier } 1 &\text { Supplier } 2\\\text { Units Purchase Price } & \$ 10.00 & \$ 8.95 \\\text { Units Purchased } & 22,500 & 52,500 \\\text { Sampling Hours } & 50 & 2,450 \\\text { Rework Hours } & 135 & 3,625 \\\text { Warranty Hours } & 475 & 6,000\end{array}$

-Refer to Tigra Company. What is the activity rate for reworking products on the basis of rework hours?

A) $595 per hour
B) $599 per hour
C) $602 per hour
D) $605 per hour

Question 71

Powen
The receiving department of Powen has three activities: unloading, counting goods, and inspecting. Unloading requires a forklift that is leased for $15,000 per year. The forklift is used only for unloading. The fuel for the forklift is $2,000 per year. Inspection requires special testing equipment that has a depreciation of $500 per year and an operating cost of $1,000 per year. Receiving has four employees who each have an average salary of $35,000 per year. The work distribution matrix for the receiving personnel is as follows: $$\begin{array}{l}\begin{array} { l c } &\text { Percentage of } \mathrm { T } \text { ime }\\\text { Activity } & \text { on Each Activity } \\\text { Unloading } & 25 \% \\\text { Counting } & 40 \% \\\text { Inspecting } & 35 \%\end{array}\end{array}$$

-Refer to Powen. What is the cost of counting?

A) $50,500
B) $52,000
C) $54,000
D) $56,000

Question 72

Sallisaw Savings & Loan
Sallisaw Savings & Loan has requested an analysis of checking account profitability by customer type. Customers are categorized according to size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: $\begin{array}{ll}\text { Opening and closing accounts } & \$ 100,000 \\\text { Issuing monthly statements } & \$ 150,000 \\\text { Frocessing transactions } & \$ 1,025,000 \\\text { Customer inquiries } & \$ 200,000 \\\text { Froviding ATM services } & \$ 560,000\\\text {Total Costs}&\$2,035,000\end{array}$ Additional data concerning the usage of the activities by the various customers are also provided: $$\begin{array} { l r r r } & \underline { \text { Low } } & \underline { \text { Medium } } & \underline { \text { High } } \\\text { Number of accounts } & 7,500 & 1,500 & 1,000 \\\text { opened/olosed } & & \\ \text { Number of }& 225,000 & 50,000 & 25,000 \\\text { Sutements issued } \\\text { Processing } \\\text { transactions }& 9,000,000 & 1,000,000 & 250,000\\\text { Number of } \\\text { telephone minutes } & 500,000 & 300,000 & 200,000 \\\text { Number of ATM } \\\text { transactions }& 675,000 & 100,000 & 25,000 \\ \text { Number of checking } \\\text { accolnts }& 19,000 & 4,000 & 2,000\end{array}$$ The company uses an activity-based costing system. The activity rate for opening and closing statements is based on the number of accounts opened and closed. The activity rate for issuing monthly statements is based on the number os statements issued. The activity rate for processing transactins is based on the number of transactions processed. The activity rate for customer inquiries is based on the number of telephone minutes. The rate for ATM services is based on the number of ATM transactions.

-Refer to Sallisaw Savings & Loan. What is the yearly overall cost per checking account?

A) $81.40
B) $88.48
C) $107.11
D) $339.17

Question 73

Activity Cost $$\begin{array} { l l } \text { Inspecting comp onents (sampling only) } & \$ 190,000 \\\text { Reworking products (due to failed component) } & \$ 2,254,000 \\\text { Warranty work (due to failed component) } & \$ 1,723,000\end{array}$$ II. Supplier Data $\begin{array}{lrr}&\text { Supplier } 1 &\text { Supplier } 2\\\text { Units Purchase Price } & \$ 10.00 & \$ 8.95 \\\text { Units Purchased } & 22,500 & 52,500 \\\text { Sampling Hours } & 50 & 2,450 \\\text { Rework Hours } & 135 & 3,625 \\\text { Warranty Hours } & 475 & 6,000\end{array}$

-Refer to Tigra Company. What is the total cost per component associated with using Supplier 2?

A) $8.95
B) $12.00
C) $15.74
D) $84.26

Question 74

Activity Cost $$\begin{array} { l l } \text { Inspecting comp onents (sampling only) } & \$ 190,000 \\\text { Reworking products (due to failed component) } & \$ 2,254,000 \\\text { Warranty work (due to failed component) } & \$ 1,723,000\end{array}$$ II. Supplier Data $\begin{array}{lrr}&\text { Supplier } 1 &\text { Supplier } 2\\\text { Units Purchase Price } & \$ 10.00 & \$ 8.95 \\\text { Units Purchased } & 22,500 & 52,500 \\\text { Sampling Hours } & 50 & 2,450 \\\text { Rework Hours } & 135 & 3,625 \\\text { Warranty Hours } & 475 & 6,000\end{array}$

-Refer to Tigra Company. What is the activity rate for warranty work on the basis of warranty hours?

A) $262 per hour
B) $264 per hour
C) $266 per hour
D) $268 per hour

Question 75

Powen
The receiving department of Powen has three activities: unloading, counting goods, and inspecting. Unloading requires a forklift that is leased for $15,000 per year. The forklift is used only for unloading. The fuel for the forklift is $2,000 per year. Inspection requires special testing equipment that has a depreciation of $500 per year and an operating cost of $1,000 per year. Receiving has four employees who each have an average salary of $35,000 per year. The work distribution matrix for the receiving personnel is as follows: $$\begin{array}{l}\begin{array} { l c } &\text { Percentage of } \mathrm { T } \text { ime }\\\text { Activity } & \text { on Each Activity } \\\text { Unloading } & 25 \% \\\text { Counting } & 40 \% \\\text { Inspecting } & 35 \%\end{array}\end{array}$$

-Refer to Powen. What is the cost for inspection?

A) $50,500
B) $52,000
C) $54,000
D) $56,000

Question 76

Activity Cost $$\begin{array} { l l } \text { Inspecting comp onents (sampling only) } & \$ 190,000 \\\text { Reworking products (due to failed component) } & \$ 2,254,000 \\\text { Warranty work (due to failed component) } & \$ 1,723,000\end{array}$$ II. Supplier Data $\begin{array}{lrr}&\text { Supplier } 1 &\text { Supplier } 2\\\text { Units Purchase Price } & \$ 10.00 & \$ 8.95 \\\text { Units Purchased } & 22,500 & 52,500 \\\text { Sampling Hours } & 50 & 2,450 \\\text { Rework Hours } & 135 & 3,625 \\\text { Warranty Hours } & 475 & 6,000\end{array}$

-Refer to Tigra Company. Suppose that the company loses $2,500,000 in sales per year because of its reputation for defective units attributable to failed components. Using warranty hours, assign the proportional cost of lost sales to Supplier 1. What would be the additional cost per unit as a result of the lost sales?

A) $4.00 per unit
B) $8.15 per unit
C) $8.95 per unit
D) $25.00 per unit

Question 77

Solo Company has developed cost formulas for the drivers of the following production activities: $\begin{array}{llcc}\text { Driver } & \text { Activity } & \text { Fixed} & \text { Variable }\\\text { Labour hours } & \text { Materials } & -0- & 40 \\\text { Labour hours } & \text { Labour } & -0- & 20 \\\text { Machine hours } & \text { Maintenance } & 20,000 & 16 \\\text { Machine hours } & \text { Machining } & 100,000 & 4 \\\text { Number of setups } & \text { Inspections } & 60,000 & 400 \\\text { Number of setups } & \text { Setups } & -0- & 600 \\\text { Number of purchase orders } & \text { Purchasing } & 150,000 & 6\end{array}$ What is the budgeted inspection cost for 20 setups?

A) $60,000
B) $68,000
C) $160,000
D) $330,000

Question 78

Sallisaw Savings & Loan
Sallisaw Savings & Loan has requested an analysis of checking account profitability by customer type. Customers are categorized according to size of their account: low balances, medium balances, and high balances. The activities associated with the three different customer categories and their associated annual costs are as follows: $\begin{array}{ll}\text { Opening and closing accounts } & \$ 100,000 \\\text { Issuing monthly statements } & \$ 150,000 \\\text { Frocessing transactions } & \$ 1,025,000 \\\text { Customer inquiries } & \$ 200,000 \\\text { Froviding ATM services } & \$ 560,000\\\text {Total Costs}&\$2,035,000\end{array}$ Additional data concerning the usage of the activities by the various customers are also provided: $$\begin{array} { l r r r } & \underline { \text { Low } } & \underline { \text { Medium } } & \underline { \text { High } } \\\text { Number of accounts } & 7,500 & 1,500 & 1,000 \\\text { opened/olosed } & & \\ \text { Number of }& 225,000 & 50,000 & 25,000 \\\text { Sutements issued } \\\text { Processing } \\\text { transactions }& 9,000,000 & 1,000,000 & 250,000\\\text { Number of } \\\text { telephone minutes } & 500,000 & 300,000 & 200,000 \\\text { Number of ATM } \\\text { transactions }& 675,000 & 100,000 & 25,000 \\ \text { Number of checking } \\\text { accolnts }& 19,000 & 4,000 & 2,000\end{array}$$ The company uses an activity-based costing system. The activity rate for opening and closing statements is based on the number of accounts opened and closed. The activity rate for issuing monthly statements is based on the number os statements issued. The activity rate for processing transactins is based on the number of transactions processed. The activity rate for customer inquiries is based on the number of telephone minutes. The rate for ATM services is based on the number of ATM transactions.

-Refer to Sallisaw Savings & Loan. Using activity-based costing, what is the activity rate for processing transactions?

A) $0.10 per transaction
B) $0.20 per transaction
C) $3.42 per transaction
D) $102.50 per transaction

Question 79

Activity Cost $$\begin{array} { l l } \text { Inspecting comp onents (sampling only) } & \$ 190,000 \\\text { Reworking products (due to failed component) } & \$ 2,254,000 \\\text { Warranty work (due to failed component) } & \$ 1,723,000\end{array}$$ II. Supplier Data $\begin{array}{lrr}&\text { Supplier } 1 &\text { Supplier } 2\\\text { Units Purchase Price } & \$ 10.00 & \$ 8.95 \\\text { Units Purchased } & 22,500 & 52,500 \\\text { Sampling Hours } & 50 & 2,450 \\\text { Rework Hours } & 135 & 3,625 \\\text { Warranty Hours } & 475 & 6,000\end{array}$

-Refer to Tigra Company. Suppose that the company loses $2,500,000 in sales per year because of its reputation for defective units attributable to failed components. Using warranty hours, assign the proportional cost of lost sales to Supplier 2. What would be the additional cost per unit as a result of the lost sales?

A) $11.34 per unit
B) $20.00 per unit
C) $44.11 per unit
D) $55.00 per unit

Question 80

Powen
The receiving department of Powen has three activities: unloading, counting goods, and inspecting. Unloading requires a forklift that is leased for $15,000 per year. The forklift is used only for unloading. The fuel for the forklift is $2,000 per year. Inspection requires special testing equipment that has a depreciation of $500 per year and an operating cost of $1,000 per year. Receiving has four employees who each have an average salary of $35,000 per year. The work distribution matrix for the receiving personnel is as follows: $$\begin{array}{l}\begin{array} { l c } &\text { Percentage of } \mathrm { T } \text { ime }\\\text { Activity } & \text { on Each Activity } \\\text { Unloading } & 25 \% \\\text { Counting } & 40 \% \\\text { Inspecting } & 35 \%\end{array}\end{array}$$

-Refer to Powen. What is the cost of unloading?

A) $50,500
B) $52,000
C) $54,000
D) $56,000