1			A company using the traditional volume-based overhead assignment (allocation) method will tend to:
			A)	overstate the cost of low volume products.
			B)	understate the cost of high volume products.
			C)	understate the cost of low volume products.
			D)	understate the cost of all products.
			E)	Both a and b are correct.

USE THE FOLLOWING INFORMATION TO ANSWER QUESTIONS 2, 3, 4 AND 5:

Harry Company has established the following overhead cost pools and cost drivers for the month of July:

Cost Pool	Overhead Costs	Cost Driver Levels
Electricity	$30,000	10,000-kilowatt hours
Purchase orders	90,000	50 orders
Machine setups	150,000	100 setups
Miscellaneous overhead costs	183,000	1,000 machine hours

Expected direct labor costs for July is 20,000 hours at $10 per hour.

Product X100 consumed 800 kilowatt hours, 5 orders, 10 setups, 90 machine hours, and 1,800 direct labor hours. Additionally it required $25,000 of materials.

2			What is the overhead rate assuming that the firm is using a volume-based procedure and that direct labor hours will be its cost driver?
			A)	$4.50 per DLH
			B)	$22.65 per DLH
			C)	$18.30 per DLH
			D)	$3.00 per DLH.
3			What is the overhead rate per purchase order using activity-based costing?
			A)	$1,830
			B)	$1,500
			C)	$1,800
			D)	$4.50
			E)	$22.65
4			What is the amount of total costs assigned to job X100 assuming that the firm is using a volume-based procedure?
			A)	$83,770
			B)	$40,770
			C)	$496,000
			D)	$85,870
5			What is the amount of total costs assigned to job X100 assuming that the firm is using activity-based costing?
			A)	$83,770
			B)	$42,870
			C)	$496,000
			D)	$85,870

USE THE FOLLOWING INFORMATION TO ANSWER QUESTIONS 6 AND 7:

Franklin Company has identified the following cost drivers for its expected overhead costs for the year:

Cost Pools	Budgeted Cost	Cost Driver	Cost Driver Level
Setup	$40,000	Number of setups	100
Ordering	20,000	Number of orders	500
Maintenance	50,000	Machine hours	2,500
Power	10,000	Kilowatt hours	5,000

Total direct labor hours budgeted = 1,000 hours.

The following data applies to one of the products completed during the year:

Product Y
Cost		Driver Consumption
Direct materials	$1,000	Number of setups	2
Direct labor	$1,200	Number of orders	5
Units completed	200	Machine hours	25
Direct labor hours	80	Kilowatt hours	50

6			If the activity-based cost drivers are used to allocate overhead cost, the total overhead cost of Product Y will be:
			A)	$1,500
			B)	$1,600
			C)	$2,200
			D)	$2,800
			E)	$3,800
7			If the activity-based cost drivers are used to allocate overhead cost, the total cost of Product X will be:
			A)	$3,700
			B)	$3,900
			C)	$2,200
			D)	$3,800
8			Elimination of low-value-added activities in a firm should:
			A)	be discouraged because of potential harmful effects.
			B)	not affect the form, fit, or function of the product or service.
			C)	not have priority because non-value-added activities do not affect a firm's performance.
			D)	have priority only when a firm is operating at a loss.
9			What ABC/M tool is used to answer the following critical question? What do we do?
			A)	Activity analysis
			B)	Activity-based costing
			C)	Performance Measurement
			D)	Total Quality Management
10			Which of the following is a true statement?
			A)	ABC/M applications are not commonly used by manufacturing firms.
			B)	ABC/M applications are only used by manufacturing firms.
			C)	ABC/M applications are not commonly used by governmental units.
			D)	ABC/M are commonly used in most industries.
11			__________ identifies customer service activities, cost drivers, and the profitability of individual customers or groups of customers.
			A)	Customer revenue analysis
			B)	Customer cost analysis
			C)	Customer value assessment
			D)	Customer profitability analysis
12			Which of the following is a customer batch-level cost category?
			A)	Order processing is $1 per item.
			B)	Monthly billing is $5 per statement.
			C)	Salaries and fringe benefits are $100,000 per month.
			D)	Restocking is $5 per item.
			E)	Order taking is $30 per order.
13			Customer costs can be classified into all of the following categories, except:
			A)	Customer batch-level costs.
			B)	Distribution-channel profits.
			C)	Sales-sustaining costs.
			D)	Customer-sustaining costs.
14			Customer lifetime value (CLV) is:
			A)	The net future value of all estimated future profits from the customer.
			B)	The estimated future profits from the customer.
			C)	The net present value of all estimated future profits from the customer.
			D)	The net present value of all estimated profits over the past 10 years.
15			Successful ABC/M implementation requires close cooperation among the management accountant and:
			A)	engineers.
			B)	manufacturing managers.
			C)	operating managers.
			D)	All of the above is correct.
			E)	None of the above is correct.