Question 1: Which would be an appropriate cost driver for the ordering and receiving activity cost pool?
A. Inspections
B. Machine setups
C. Machine hours
D. Purchase orders
Question 2: Which of the following is NOT typical of traditional costing systems?
A. Use of multiple cost drivers to allocate overhead
B. Use of a single predetermined overhead rate
C. Assumption of correlation between direct labor and incurrence of overhead cost
D. Use of direct labor hours or direct labor cost to assign overhead
Question 3: A well-designed activity-based costing system starts with
A. analyzing the activities performed to manufacture a product
B. identifying the activity-cost pools
C. assigning manufacturing overhead costs for each activity cost pool to products
D. computing the activity-based overhead rate
Question 4: What sometimes makes implementation of activity-based costing difficult in service industries is
A. attempting to reduce or eliminate nonvalue-added activities
B. the labeling of activities as value-added
C. that a larger proportion of overhead costs are company-wide costs
D. identifying activities, activity cost plus, and cost drivers
Question 5: Which of the following factors would suggest a switch to activity-based costing?
A. Production managers use data provided by the existing system.
B. Product lines similar in volume and manufacturing complexity.
C. The manufacturing process has been stable.
D. Overhead costs constitute a significant portion of total costs.
Question 6: All of the following statements are correct EXCEPT that
A. the general approach to identifying activities and activity cost pools is the same in a service company as in a manufacturing company
B. activity-based costing has been widely adopted in service industries
C. a larger proportion of overhead costs are company-wide costs in service industries
D. the objective of installing ABC in service firms is different than it is in a manufacturing firm
Question 7: One of Astro Company's activity cost pools is machine setups, with estimated overhead of $150,000. Astro produces sparklers (400 setups) and lighters (600 setups). How much of the machine setup cost pool should be assigned to sparklers?
A. $90,000
B. $150,000
C. $75,000
D. $60,000
Question 8: The cost to produce Part A was $10 per unit in 2005. During 2006, it has increased to $11 per unit. In 2006, Supplier Company has offered to supply Part A for $9 per unit. For the make-or-buy decision,
A. differential costs are $2 per unit
B. net relevant costs are $1 per unit
C. incremental costs are $1 per unit
D. incremental revenues are $2 per unit
Question 9: Walton, Inc. is unsure of whether to sell its product assembled or unassembled. The unit cost of the unassembled product is $16, while the cost of assembling each unit is estimated at $17. Unassembled units can be sold for $55, while assembled units could be sold for $71 per unit. What decision should Walton make?
A. Process further; the company will save $16 per unit.
B. Process further; the company will save $1 per unit.
C. Sell before assembly; the company will save $15 per unit.
D. Sell before assembly; the company will save $1 per unit.
Question 10: Ace Company sells office chairs with a selling price of $25 and a contribution margin per unit of $15. It takes 3 machine hours to produce one chair. How much is the contribution margin per unit of limited resource?
A. $10
B. $45
C. $3.33
D. $5
Question 11: Hess, Inc. sells a single product with a contribution margin of $12 per unit and fixed costs of $74,400 and sales for the current year of $100,000. How much is Hess's break-even point?
A. 2,133 units
B. 6,200 units
C. $25,600
D. 4,600 units
Question 12: Hartley, Inc. has one product with a selling price per unit of $200, the unit variable cost is $75, and the total monthly fixed costs are $300,000. How much is Hartley's contribution margin ratio?
A. 266.6%
B. 150%.
C. 37.5%
D. 62.5%.
Question 13: Which statement describes a fixed cost?
A. It remains the same per unit regardless of activity level.
B. Its total varies proportionally to the level of activity.
C. The amount per unit varies depending on the activity level.
D. It varies in total at every level of activity.
Question 14: Which cost is charged to the product under variable costing?
A. Fixed administrative expenses
B. Variable administrative expenses
C. Fixed manufacturing overhead
D. Variable manufacturing overhead
Question 15: Variable costing
A. is also known as full costing
B. treats fixed manufacturing overhead as a period cost
C. is required under GAAP
D. is used for external reporting purposes
Question 16: Which cost is NOT charged to the product under variable costing?
A. Fixed manufacturing overhead
B. Variable manufacturing overhead
C. Direct labor
D. Direct materials