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| 1 | |
Tableco will manufacture two types of tables in the coming year - square tables and round tables. Tableco is considering introducing an activity-based costing system. Below is each activity, its cost and related activity driver: Activity | Cost | Activity driver | Machine setups | $500 000 | Number of setups | Materials handling | 96 000 | Number of parts | Cutting | 48 000 | Number of parts | Assembly | 2 100 000 | Direct labour hours | Finishing | 350 000 | Number of units |
The level of activity estimated for the year is:
| Square | Round | Units to be produced | 25 000 | 10 000 | Number of setups | 100 | 25 | Number of parts per unit | 32 | 16 | Direct labour hours per unit | 4 | 2 |
The level of activity estimated for the year is: |
| | A) | $100.80 per unit |
| | B) | $57.40 per unit |
| | C) | $94.80 per unit |
| | D) | $63.40 per unit |
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| 2 | |
Ingrid Svenson was engaged as a consultant by the ABC Manufacturing Company to investigate the feasibility of implementing an activity-based costing system. At the beginning of her assignment, she familiarised herself with the conventional costing system currently used by ABC Manufacturing Company. Then she interviewed management to find out what problems they were experiencing with the current conventional costing system. The activity-based approaches that Ingrid may implement at ABC Manufacturing Company are: - a simple activity-based product costing system, which allocates manufacturing overhead costs to products
- an activity-based product costing system for indirect costs, which allocates manufacturing overhead costs and non-manufacturing overhead costs to products
- a comprehensive activity-based system allocating all costs (except direct material) to products and for activity management
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| | A) | 1 only |
| | B) | 2 only |
| | C) | 3 only |
| | D) | 1, 2 and 3 |
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| 3 | |
Ingrid Svenson was engaged as a consultant by the ABC Manufacturing Company to investigate the feasibility of implementing an activity-based costing system. At the beginning of her assignment, she familiarised herself with the conventional costing system currently used by ABC Manufacturing Company. Then she interviewed management to find out what problems they were experiencing with the current conventional costing system. What are the impediments to introducing activity-based costing that Ingrid may face at ABC Manufacturing Company? |
| | A) | Remaining unaware of activity-based costing. |
| | B) | Being uncertain about the potential benefits accruing from activity-based costing. |
| | C) | Understanding the need for change but being concerned about the extensive resource requirements necessary for the implementation of activity-based costing. |
| | D) | All of the given answers. |
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| 4 | |
When there is underutilised capacity, and budgeted costs have been used, it is necessary to include: |
| | A) | a cost of overused capacity |
| | B) | a cost of unused capacity |
| | C) | a cost of budgeted capacity usage |
| | D) | a cost of actual capacity usage |
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| 5 | |
If facility level costs are assigned to products, the allocation base is: |
| | A) | based on causal relationships |
| | B) | arbitrary |
| | C) | based on cost versus benefit |
| | D) | based on complex mathematical techniques |
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| 6 | |
The designing of a product and its production processes is an example of a: |
| | A) | batch level activity |
| | B) | unit level activity |
| | C) | product level activity |
| | D) | facility level activity |
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| 7 | |
The polishing of each individual piece of furniture manufactured is an example of a: |
| | A) | batch level activity |
| | B) | unit level activity |
| | C) | product level activity |
| | D) | facility level activity |
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| 8 | |
Committed resources: |
| | A) | are resources that managers have made a commitment to provide in the future |
| | B) | are human resources |
| | C) | are resources such as plant, equipment and supervision supplied in advance of being used in production |
| | D) | is another name for assets |
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| 9 | |
Activity-based estimates of costs per unit of product are: |
| | A) | marginal costs |
| | B) | variable costs |
| | C) | average costs |
| | D) | fixed costs |
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| 10 | |
Indicators of an outdated costing system include all of the following except: |
| | A) | products that are difficult to make have low profit margins |
| | B) | competitors’ prices are unrealistically low |
| | C) | there are no competitors for products that the costing system claims are profitable |
| | D) | customers are not deterred by price increases |
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