Question 1

Number of parts per unit is most appropriate as a cost driver for which of the following types of activity costs?
A) Machining
B) Purchasing
C) Assembly
D) Payroll

Accepted Answer

The number of parts per unit is most directly related to the assembly process, as more parts typically require more assembly work, making it an appropriate cost driver for assembly costs.

Question 2

Number of invoices is most appropriate as a cost driver for which of the following types of activity costs?
A) Machining
B) Purchasing
C) Assembly
D) Payroll

Accepted Answer

The number of invoices is most appropriate as a cost driver for purchasing activities because it directly relates to the number of transactions or orders processed by the purchasing department.

Question 3

Number of machine hours is most appropriate as a cost driver for which of the following types of activity costs?
A) Machining
B) Purchasing
C) Assembly
D) Payroll

Accepted Answer

Machining costs are directly related to the number of machine hours because the wear and tear on the machines, electricity usage, and need for maintenance increase with more hours of operation.

Question 4

Kratz Manufacturing Company uses an activity-based costing system. It has the following manufacturing activity areas, related cost drivers and cost allocation rates:
  During the month, 100 units were produced, with no defects, requiring three setups. Each unit consisted of 17 parts, 3 direct labor hours and 2.5 machine hours. Direct materials cost $50 per finished unit.
-What is the total manufacturing cost for machine setups?
A) $150
B) $500
C) $250
D) $300

Accepted Answer

(3 x $50) = $150

Question 5

Kratz Manufacturing Company uses an activity-based costing system. It has the following manufacturing activity areas, related cost drivers and cost allocation rates:
  During the month, 100 units were produced, with no defects, requiring three setups. Each unit consisted of 17 parts, 3 direct labor hours and 2.5 machine hours. Direct materials cost $50 per finished unit.
-What is the total manufacturing cost for materials handling?
A) $375
B) $500
C) $850
D) $750

Accepted Answer

(17 x $0.50) x 100 = $850

Question 6

Kratz Manufacturing Company uses an activity-based costing system. It has the following manufacturing activity areas, related cost drivers and cost allocation rates:
  During the month, 100 units were produced, with no defects, requiring three setups. Each unit consisted of 17 parts, 3 direct labor hours and 2.5 machine hours. Direct materials cost $50 per finished unit.
-What is the total manufacturing cost for inspections?
A) $1,100
B) $1,400
C) $ 900
D) $ 700

Accepted Answer

100 x $14 = $1,400

Question 7

Kratz Manufacturing Company uses an activity-based costing system. It has the following manufacturing activity areas, related cost drivers and cost allocation rates:
  During the month, 100 units were produced, with no defects, requiring three setups. Each unit consisted of 17 parts, 3 direct labor hours and 2.5 machine hours. Direct materials cost $50 per finished unit.
-What is the total manufacturing cost for the period?
A) $80,675
B) $10,625
C) $32,100
D) $17,250

Accepted Answer

100 x [(17 x $0.50) + (3 x $22) + (2.5 x $13) + $50 + $14] + (3 x $50) materials handling
= $17,250

Question 8

Kratz Manufacturing Company uses an activity-based costing system. It has the following manufacturing activity areas, related cost drivers and cost allocation rates:
  During the month, 100 units were produced, with no defects, requiring three setups. Each unit consisted of 17 parts, 3 direct labor hours and 2.5 machine hours. Direct materials cost $50 per finished unit.
-What is the per unit manufacturing cost for the period?
A) $806.75
B) $106.25
C) $321.00
D) $172.50

Accepted Answer

$17,250 / 100 = $172.50

Question 9

Office Supply store costs are expressed as a function of the unit sales of its two products: office chairs and task desks. Assume fixed costs are $9,000 per month and the variable costs are $60 per office chair and $125 per task desk.
What are Office Supply's estimated costs for the month if 100 office chairs and 52 task desks are sold?
A) $21,500
B) $25,000
C) $22,000
D) $20,500

Accepted Answer

$9,000 + ($60 x 100) + ($125 x 52) = $21,500

Question 10

Given the equation, Y= 4,000 + 2.5X. The coefficient of determination (R-Squared) is calculated to be 0.70 (or 70%). This equation implies
A) 70% of the variation in Y is explained in X
B) 70% of the variation in X is explained in Y
C) There is no relationship between X and Y, since it not 90% or 95%
D) Since 30% (100% - 70%) is closer to zero there is strong direct relationship between X and Y

Accepted Answer

Coefficient of determination explains the relationship of the independent variable (X) by the dependent variable (Y). The closer the number is to 1 or 100%, the stronger the relationship. 70% change in Y can be explained by change in X.

Question 11

Axe Manufacturers produces a product with the following manufacturing cost hierarchy for its only current product.
 Next year Axe plans to manufacture 25,000 units of product, in batches of 250 units.
Axe's predicted manufacturing cost for next year is:
A) $735,500
B) $750,000
C) $330,000
D) $305,000

Accepted Answer

11ee47ca_086e_5b73_9bb5_ff26c3f5c26f_TBCB1008_00

Question 12

Howell sells specialized products produced by electronics companies to engineering firms. Howell sells these products at a price based on Howell's purchase price. Howell's customer cost hierarchy is as follows:
 Next year Howell plans to sell $4,000,000 of product to the 100 engineering firms they serve. They anticipate that each firm will place an average of 4 orders.
Howell's predicted customer costs for next year are:
A) $ 80,000
B) $ 300,000
C) $1,790,000
D) $3,500,000

Accepted Answer

11ee47ca_086e_8285_9bb5_73bf566e90f1_TBCB1008_00

Question 13

At a sales volume of 25 units the average cost is $205 per unit and the variable cost is $5 per unit. Assuming a linear cost behavior pattern, if sales double to 50 units the average cost will be:
A) $110
B) $105
C) $205
D) $210

Accepted Answer

Variable cost = $5 x 25 units = $125
Total cost = $205 x 25 units = $5,125
Fixed cost = $5,125 - $125 = $5,000
Variable cost for 50 units = $5 x 50 units = $250
Fixed cost = $5,000
Total cost = $5,000 + $250 = $5,250
Average per unit cost = $5,250 / 50 units = $105
Exercises

Question 14

Classify the total costs of each of the following as variable, fixed, mixed, or step. Sales volume is the cost driver.
---------a.Wages of machine operator who is paid based on number of units produced on the machine
---------b.Keyboards purchased from a subcontract supplier in a computer assembly plant
---------c.Property taxes
---------d.Salaries of quality inspectors when each inspector can evaluate a maximum of 500 units per day
---------e.Annual salary for the vice president of manufacturing
---------f.Electric power in a factory
---------g.Raw materials used in production
---------h.Water consumed by the plant, which is based on a flat fee plus actual consumption
---------i.Overhead costs in the factory for incidental components such as small screws and rivets.
---------j.Fire insurance on factory building

Accepted Answer

The answer of Classify the total costs of each of...

Question 15

Phenning Company had the following costs for the past three years in which it produced 40,000, 48,000, and 60,000 units, respectively. 
  Identify which of the costs were variable, fixed, and mixed.

Accepted Answer

The answer of Phenning Company had the following costs for...

Question 16

The total monthly operating costs of Kristy's Yogurt Ice Cream Shack are:
$3,500 + $0.90X, where X = 12 ounce serving
a. Calculate the average cost per serving at each of the following monthly volumes: 1,000, 2,000, 3,000 and 5,000, and
b. Determine the monthly volume at which the average cost per serving is $1.90

Accepted Answer

The answer of The total monthly operating costs of Kristy's...

Question 17

Indicate whether each of the following fixed costs are committed or discretionary.
a. Depreciation on the factory
b. Cancellable lease on the corporate jet
c. Super Bowl TV advertisement
d. Annual scheduled maintenance on the air conditioning system
e. Annual donation to the local Boys and Girls Clubs
f. Salary of the director of training who is on a three-year contract
g. Travel for employees to attend professional development seminars

Accepted Answer

The answer of Indicate whether each of the following fixed...

Question 18

Assume RCA Cable Company has the following information available about fleet miles and operating costs for its service department:
  Using the high-low method, develop a cost-estimating equation for total annual operating costs.

Accepted Answer

The answer of Assume RCA Cable Company has the following...

Question 19

Assume the Paul's Custom Print Shop has the following information on the number of sales orders received and order-processing costs.
  Plot the data on a scatter diagram. Using the information from representative high- and low- volume months, and develop a cost-estimating equation for monthly production costs.

Accepted Answer

The answer of Assume the Paul's Custom Print Shop has...

Question 20

Cooper and Kaplan developed the framework used to classify manufacturing activities. List the four categories of activities and provide an example of each activity level.

Accepted Answer

The answer of Cooper and Kaplan developed the framework used...

Quiz 2: Cost Behavior, Activity Analysis, and Cost Estimation

Number of parts per unit is most appropriate as a cost driver for which of the following types of activity costs?

Number of invoices is most appropriate as a cost driver for which of the following types of activity costs?

Number of machine hours is most appropriate as a cost driver for which of the following types of activity costs?

Given the equation, Y= 4,000 + 2.5X. The coefficient of determination (R-Squared) is calculated to be 0.70 (or 70%) . This equation implies

Axe Manufacturers produces a product with the following manufacturing cost hierarchy for its only current product. Next year Axe plans to manufacture 25,000 units of product, in batches of 250 units. Axe's predicted manufacturing cost for next year is:

At a sales volume of 25 units the average cost is $205 per unit and the variable cost is $5 per unit. Assuming a linear cost behavior pattern, if sales double to 50 units the average cost will be:

Phenning Company had the following costs for the past three years in which it produced 40,000, 48,000, and 60,000 units, respectively. Identify which of the costs were variable, fixed, and mixed.

Assume RCA Cable Company has the following information available about fleet miles and operating costs for its service department: Using the high-low method, develop a cost-estimating equation for total annual operating costs.

Cooper and Kaplan developed the framework used to classify manufacturing activities. List the four categories of activities and provide an example of each activity level.