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| 1 | In activity based costing, a cost driver is:
(Learning Objective 1 Ch 8) |
 | A) | an overhead cost |
| B) | a direct product cost |
| C) | a resource consuming activity that causes overheads |
| D) | a variable cost |
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| 2 | In activity-based costing, some manufacturing costs may be excluded from product costs.
(Learning Objective 1 Ch 8) |
| A) | True |
| B) | False |
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| 3 | Property taxes and insurance are which category of cost?
(Learning Objective 2 Ch 8) |
| A) | Unit-level. |
| B) | Batch-level. |
| C) | Product-level. |
| D) | Organisation-sustaining. |
|
| 4 | Which of the following activities would be classified as a batch-level activity?
(Learning Objective 2 Ch 8) |
| A) | Setting up equipment. |
| B) | Designing a new product. |
| C) | Training employees. |
| D) | Milling a part required for the final product. |
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| 5 | Anola Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows
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The activity rate under the activity-based costing system for Activity 3 is closest to
(Learning Objective 3 Ch 8) |
| A) | £30.00. |
| B) | £30.50. |
| C) | £90.00. |
| D) | £67.78. |
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| 6 | The activity rates computed in activity-based costing can provide valuable clues concerning where there is waste and scope for improvement in an organization.
(Learning Objective 4 Ch 8) |
| A) | True |
| B) | False |
|
| 7 | Vex Corporation manufactures a variety of products. In the past, Vex had been using a traditional overhead allocation system based on machine-hours. For the current year, Vex decided to switch to an activity-based costing system using machine-hours and the number of inspections as measures of activity. Information on these measures of activity and related overhead rates for the current year are as follows:
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Job #812 for the current year required 15 machine-hours and 2 inspections. Would this job have been overcosted or undercosted under the traditional system and by how much?
(Learning Objective 5&6 Ch 8) |
| A) | Undercosted by £36 |
| B) | Undercosted by £44 |
| C) | Overcosted by £80 |
| D) | Undercosted by £80 |
|
| 8 | If a cost object such as a product or customer has a negative green margin, then
(Learning Objective 7 Ch 8) |
| A) | its yellow margin will be positive. |
| B) | its yellow margin may be either positive or negative. |
| C) | its yellow margin will be negative. |
| D) | its yellow margin will be zero |
|
| 9 | ABC is not normally used for external reporting purposes because:
(More than one answer may be correct)
(Learning Objective 8 Ch 8) |
| A) | There is no need to give a breakdown of individual product costs for external reporting purposes |
| B) | Both manufacturing and non-manufacturing costs are included in ABC |
| C) | ABC gives less accurate product costs |
| D) | ABC does not conform to generally accepted accounting principles |
|
| 10 | The simplified approach to ABC is helpful when preparing an action analysis
(Learning Objective 9 Ch 8) |
| A) | True |
| B) | False |