Question 1

Worker recreational facilities is an example of a cost that would ordinarily be considered to be:
A)Unit-level.
B)Batch-level.
C)Product-level.
D)Organization-sustaining.

Accepted Answer

Worker recreational facilities are not directly related to the production of any specific product or batch of products. Instead, they are a cost that supports the overall organization and helps to sustain a healthy work environment. Therefore, this cost is considered to be organization-sustaining.

Question 2

In activity-based costing,a plantwide overhead rate is used to apply overhead to products.

Accepted Answer

In activity-based costing, plantwide overhead rates are not used. Instead, overhead costs are assigned to individual activities and then to products based on their usage of those activities.

Question 3

The first-stage allocation in activity-based costing is the process by which overhead costs are assigned to products before they are assigned to customers.

Accepted Answer

False

Question 4

Rank the following methods of assigning overhead costs from least accurate to most accurate.
A)departmental rates,plantwide rate,activity-based costing
B)plantwide rate,departmental rates,activity-based costing
C)plantwide rate,activity-based costing,departmental rates
D)activity-based costing,departmental rates,plantwide rate

Accepted Answer

Plantwide rate is the least accurate as it uses a single overhead rate for the entire plant. Departmental rates are more accurate as they use different rates for different departments. Activity-based costing is the most accurate as it assigns costs based on actual activities and resource usage.

Question 5

If a company switches from a traditional costing system to an activity-based costing system in which some activities are batch-level and product-level,costs ordinarily shift from high-volume to low-volume products.

Accepted Answer

Activity-based costing allows for a more accurate allocation of costs to products based on the activities required to produce them. This often results in high-volume products being allocated a lower cost per unit, while low-volume products may see their costs increase.

Question 6

Activity-based costing uses a number of activity cost pools,each of which is allocated to products on the basis of direct labor-hours.

Accepted Answer

Activity-based costing uses a number of activity cost pools, each of which is allocated to products on the basis of their use of the activities, not just direct labor-hours.

Question 7

Testing a prototype of a new product is an example of a(n):
A)Unit-level activity.
B)Batch-level activity.
C)Product-level activity.
D)Organization-sustaining activity.

Accepted Answer

Testing a prototype of a new product is a product-level activity because it is specific to the development and refinement of a particular product.

Question 8

When combining activities in an activity-based costing system,activities should be grouped together at the same level.For example,batch-level activities should not be combined with unit-level activities.

Accepted Answer

The answer of When combining activities in an activity-based costing...

Question 9

In activity-based costing,as in traditional costing systems,nonmanufacturing costs are not assigned to products.

Accepted Answer

In activity-based costing, nonmanufacturing costs can also be assigned to products through cost drivers and activity analysis.

Question 10

The clerical activity associated with processing purchase orders to produce an order for a standard product is an example of a(n):
A)Unit-level activity.
B)Batch-level activity.
C)Product-level activity.
D)Organization-sustaining activity.

Accepted Answer

Processing purchase orders for standard products involves grouping them together in batches before they can be processed. This makes it a batch-level activity.

Question 11

Setting up equipment is an example of a(n):
A)Unit-level activity.
B)Batch-level activity.
C)Product-level activity.
D)Organization-sustaining activity.

Accepted Answer

Setting up equipment is a task that is done for a specific batch of products. Therefore, it is an example of a batch-level activity.

Question 12

Overhead allocation based solely on a measure of volume such as direct labor-hours:
A)is a key aspect of the activity-based costing model.
B)will systematically overcost high-volume products and undercost low-volume products.
C)will systematically overcost low-volume products and undercost high-volume products.
D)must be used for external financial reporting.

Accepted Answer

Overhead allocation based solely on a measure of volume such as direct labor-hours will systematically overcost high-volume products and undercost low-volume products. This is because overhead costs are not directly proportional to direct labor-hours and high-volume products may consume less overhead resources per unit than low-volume products.

Question 13

An action analysis report reconciles activity-based costing product costs with traditional product costs based on direct labor.

Accepted Answer

The answer of An action analysis report reconciles activity-based costing...

Question 14

Changing a cost accounting system is likely to meet with little resistance in an organization since it is a technical matter of little interest to individuals outside of the accounting department.

Accepted Answer

This statement is false. Changing a cost accounting system can have significant impacts on other departments, such as production and sales, and may require changes in their processes or reporting. Therefore, it is important to communicate the change and its potential impacts to all relevant stakeholders and address any concerns they may have.

Question 15

Duration drivers ordinarily require more effort to record than transaction drivers.

Accepted Answer

Duration drivers are related to how long a process takes or how much time and effort is expended. As they involve tracking and measuring time, they require more effort to record than transaction drivers, which are based on the number of transactions or activities that occur.

Question 16

Arranging for a shipment of a number of different products to a customer is an example of an activity at which of the following levels?
A)Unit-level activity.
B)Batch-level activity.
C)Customer-level activity.
D)Organization-sustaining activity.

Accepted Answer

Arranging for a shipment of a number of different products to a customer involves activities that are performed in batches, such as packaging, labeling, and preparing the products for shipment. This is an example of a batch-level activity.

Question 17

In activity-based costing,organization-sustaining costs should not be included in product costs for internal management reports that are used for decision-making.However,companies frequently include organization-sustaining costs in product costs to satisfy external reporting requirements.

Accepted Answer

This is because internal management reports are focused on decision-making regarding the allocation of resources and pricing of products, and including organization-sustaining costs would not provide relevant information for these purposes. However, external reporting requirements such as financial statements may require the inclusion of all costs, including organization-sustaining costs, in calculating the total cost of products.

Question 18

Unit-level production activities are performed each time a unit is made.

Accepted Answer

Unit-level production activities involve production activities that are performed on each unit produced. Examples include assembling, packaging and inspecting each unit before it is shipped to the customer. Thus, the statement is true.

Question 19

An activity-based costing system is generally easier to set up and run than a traditional cost system.

Accepted Answer

An activity-based costing system requires more resources and labor to set up and run than a traditional cost system. It involves identifying and analyzing all activities and their associated costs, which can be time-consuming and complex. However, the benefits of a more accurate and detailed costing system can outweigh the initial costs and effort involved.

Question 20

Purchase order processing is an example of a(n):
A)Unit-level activity.
B)Batch-level activity.
C)Product-level activity.
D)Organization-sustaining activity.

Accepted Answer

Purchase order processing involves processing a batch of purchase orders rather than individual purchase orders, hence it is an example of a batch-level activity.

Quiz 7: Activity-Based Costing: a Tool to Aid Decision Making

Worker recreational facilities is an example of a cost that would ordinarily be considered to be:

In activity-based costing,a plantwide overhead rate is used to apply overhead to products.

The first-stage allocation in activity-based costing is the process by which overhead costs are assigned to products before they are assigned to customers.

Rank the following methods of assigning overhead costs from least accurate to most accurate.

If a company switches from a traditional costing system to an activity-based costing system in which some activities are batch-level and product-level,costs ordinarily shift from high-volume to low-volume products.

Activity-based costing uses a number of activity cost pools,each of which is allocated to products on the basis of direct labor-hours.

Testing a prototype of a new product is an example of a(n) :

When combining activities in an activity-based costing system,activities should be grouped together at the same level.For example,batch-level activities should not be combined with unit-level activities.

In activity-based costing,as in traditional costing systems,nonmanufacturing costs are not assigned to products.

The clerical activity associated with processing purchase orders to produce an order for a standard product is an example of a(n) :

Setting up equipment is an example of a(n) :

Overhead allocation based solely on a measure of volume such as direct labor-hours: