1		Which of the following statements is true?
			A)	When accountants first developed cost systems, indirect manufacturing costs were relatively large compared to the direct cost of producing a product.
			B)	Traditionally, the most common sole allocation base has been number of units produced.
			C)	Direct labor hours is no longer an effective allocation base in many companies because machines have replaced most human workers.
			D)	Today most indirect manufacturing costs are highly correlated with the use of direct labor.
2		Assume a company used direct labor hours as the sole allocation base to allocate indirect costs. If the company continues to use direct labor hours as its allocation base after automating the production of one area of its production,
			A)	the company’s total overhead will most likely decrease.
			B)	too much overhead will be allocated to the non-automated areas of production.
			C)	the cost of the units produced in the newly automated area will be overstated.
			D)	the cost of the units produced in the non-automated areas will not change.

Use the following information to answer questions 3 and 4.

The Boulder Company allocates overhead on the basis of direct labor hours. It allocates overhead costs of $12,600 to two different jobs as follows:

	Direct Labor Hours	Overhead Costs Allocated
Job 1	15	$6,300
Job 2	15	$6,300

Boulder automates the production process for Job 2. After the automation, Job 2 requires only 5 hours of direct labor and 5 hours of mechanical processing. As a result of the change, total overhead increases to $15,800.

3		How much overhead cost will be allocated to Job 1 after automation of Job 2?
			A)	$6,300
			B)	$7,900
			C)	$9,480
			D)	$11,850
4		Which of the following statements is true?
			A)	Since the production process of Job 1 did not change, the amount of overhead allocated to Job 1 does not change.
			B)	Using a companywide allocation rate allocates the increased overhead costs associated with the automation only to Job 2.
			C)	Using a companywide allocation rate causes the cost of Job 2 to be overstated.
			D)	The use of machine hours to allocate the costs associated with automation would be a better method for allocating overhead costs.
5		Which of the following statements is false?
			A)	An activity-based cost driver distributes the relevant costs to the appropriate products.
			B)	Activity-based costing improves the accuracy of cost allocations.
			C)	Activity-based costing improves the effectiveness of decisions.
			D)	A volume-based cost driver allocates costs in the most appropriate manner.
6		Which of the following is not an activity-based cost driver?
			A)	Number of machine setups
			B)	Direct labor hours
			C)	Pounds of material delivered
			D)	Number of batches run
7		In an activity-based costing system, companies group related activities into hubs in order to reduce record-keeping costs. These hubs are called
			A)	activity pools.
			B)	activity centers.
			C)	activity groups.
			D)	activity bases.
8		Which of the following statements regarding activity-based costing is true?
			A)	An activity-based costing system allocates activity center cost pools using volume-based cost drivers.
			B)	An activity-based costing system allocates departmental cost pools using activity-based cost drivers.
			C)	An activity-based costing system allocates departmental cost pools using both volume-based and activity-based cost drivers.
			D)	An activity-based costing system allocates activity center cost pools using both volume-based and activity-based cost drivers.
9		Which of the following is an example of a unit-level cost?
			A)	Cost of packaging completed units
			B)	Setup cost for each batch of units produced
			C)	Equipment depreciation
			D)	Product engineering costs
10		Which of the following is an example of a batch-level cost?
			A)	Per unit inspection cost
			B)	Manufacturing facility rent
			C)	Machine set-up cost
			D)	Product engineering cost
11		Which of the following is an example of a product-level cost?
			A)	Machine maintenance cost
			B)	Manufacturing facility rent
			C)	Material handling cost
			D)	Product engineering cost
12		Which of the following is an example of a facility-level cost?
			A)	Machine maintenance cost
			B)	Manufacturing facility rent
			C)	Material handling cost
			D)	Product engineering cost
13		Which of the following statements is true?
			A)	Activity-based costing uses only activity-based cost drivers.
			B)	Traditional costing systems use both volume-based and activity-based cost drivers.
			C)	Volume-based cost drivers are appropriate for allocating indirect costs that vary relative to the volume of activity.
			D)	Using units or direct labor hours as a cost driver is appropriate for allocating batch-level costs.
14		Parker Furniture Company makes two types of dining room tables by hand. One of the tables has Queen Anne style legs, and the other table has two pedestal legs. Parker uses a companywide overhead rate based on direct labor hours to allocate overhead costs to the two types of tables. Parker automates the production of the Queen Anne tables and continues to make the double pedestal tables by hand. If Parker continues to use direct labor hours as a companywide cost driver, then
			A)	the Queen Anne tables will be over-costed.
			B)	the double pedestal tables will be over-costed.
			C)	the double pedestal tables will be under-costed.
			D)	the unit cost of each table will not be affected.
15		Which of the following costs cannot be avoided by eliminating a product line?
			A)	Unit-level costs.
			B)	Batch-level costs.
			C)	Product-level costs.
			D)	Facility-level costs.

Use the following information to answer questions 16 and 17.

Shadow Company produces a variety of lighting fixtures. The plant is highly automated and uses an activity-based costing system to allocate overhead costs to its various products. The company expects to produce 50,000 units during the upcoming period. The costs and cost drivers associated with four activity cost pools are as follows:

ACTIVITIES	UNIT LEVEL	BATCH LEVEL	PRODUCT LEVEL	FACILITY LEVEL
Cost	$60,000	$15,000	$30,000	$240,000
Cost Driver	15,000 labor hrs	200 setups	% of use	50,000 units

Production of 5,000 units of a particular chandelier required 2,000 labor hours, 15 setups, and 20% of the product sustaining activities.

16		How much total overhead cost will be allocated to the chandeliers if the company allocates overhead on the basis of a single overhead allocation rate based on direct labor hours?
			A)	$6,000
			B)	$34,500
			C)	$46,000
			D)	$60,000
17		How much total overhead cost will be allocated to the chandeliers if the company allocates overhead using an activity-based costing system?
			A)	$34,500
			B)	$39,125
			C)	$46,000
			D)	$48,475
18		Which of the following statements is false?
			A)	Upstream costs are incurred before goods are manufactured.
			B)	Downstream costs are incurred after goods are manufactured.
			C)	Upstream costs may be ignored when making decisions regarding unit selling price.
			D)	Downstream costs must be considered when making decisions regarding unit selling price.
19		Which of the following is an upstream cost?
			A)	research and development costs
			B)	packaging costs
			C)	shipping costs
			D)	sales commissions
20		Which of the following is a downstream cost?
			A)	research and development costs
			B)	sales commissions
			C)	raw material shipping costs
			D)	product design costs.
21		Costs incurred to identify nonconforming products produced are
			A)	prevention costs.
			B)	appraisal costs.
			C)	failure costs.
			D)	nonconformity costs.
22		Voluntary costs include
			A)	prevention and appraisal costs.
			B)	prevention and failure costs.
			C)	appraisal and failure costs.
			D)	internal failure and external failure costs.
23		Total quality control cost is the sum of
			A)	prevention and appraisal costs.
			B)	prevention and failure costs.
			C)	voluntary and failure costs.
			D)	appraisal and internal failure costs.
24		Managing quality costs to achieve the highest level of customer satisfaction is known as
			A)	total quality costing.
			B)	total quality management.
			C)	activity-based management.
			D)	volume-based management.
25		Tara Company recorded the following costs of quality during the current period: Product design $ 39,000 Reliability testing 32,000 Repair and rework 81,000 Training costs 22,000 Customer relations 28,000 Inventory inspection 55,000 Restocking and packaging 25,000       Total costs of quality $282,000 How much of the costs were prevention, appraisal, and failure costs?                     Prevention      Appraisal     Failure
			A)	$ 94,000       $ 75,000      $113,000
			B)	$ 89,000       $ 87,000      $106,000
			C)	$ 61,000       $ 87,000      $134,000
			D)	$ 61,000       $136,000      $ 85,000