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Activity Based Costing
Activity Based Costing MCQs
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Which of the following costs should not be included in product costs for internal management reports that are used for decision-making?
Costs of unit-level activities.
Costs of batch-level activities.
Costs of product-level activities.
Costs of organization-sustaining activities.
?
Which of the following would probably be the most accurate measure of activity to use for allocating the costs associated with a factory’s purchasin...
Machine-hours
Direct labor-hours
Number of orders processed
Cost of materials purchased
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Guerra Electronics manufactures a variety of electronic gadgets for use in the home. Which of the following would probably be the most accurate measur...
Machine-hours
Direct labor-hours
Inspection time
Number of inspections
?
The labor time required to assemble a product is an example of a:
Unit-level activity.
Batch-level activity.
Product-level activity.
Organization-sustaining activity.
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Production order processing is an example of a:
Unit-level activity.
Batch-level activity.
Product-level activity.
Organization-sustaining activity.
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Assembling a product is an example of a:
Unit-level activity.
Batch-level activity.
Product-level activity.
Organization-sustaining.
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Setting up a machine to change from producing one product to another is an example of a:
Unit-level activity
Batch-level activity.
Product-level activity.
Organization-sustaining activity.
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Designing a new product is an example of a:
Unit-level activity.
Batch-level activity.
Product-level activity.
Organization-sustaining activity
?
The plant manager’s salary is an example of a:
Unit-level activity.
Batch-level activity.
Product-level activity.
Organization-sustaining activity.
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Machining a part for a product is an example of a:
Unit-level activity.
Batch-level activity.
Product-level activity.
Organization-sustaining activity.
?
If substantial batch-level or product-level costs exist, then overhead allocation based on a measure of volume such as direct labor-hours alone:
is a key aspect of the activity-based costing model.
will systematically overcost high-volume products and undercost low-volume products.
will systematically overcost low-volume products and undercost high-volume products.
must be used for external financial reporting since activity-based costing cannot be used for external reporting purposes.
?
If a cost object such as a product or customer has a negative yellow margin, then:
its red margin will be positive.
its red margin may be either positive or negative.
its red margin will be negative.
its red margin will be zero
?
If a cost object such as a product or customer has a negative red margin, then:
its green margin will be positive.
its green margin may be positive, negative, or zero.
its green margin will be negative.
its green margin will be zero.
?
If a cost object such as a product or customer has a positive yellow margin, then: A) B) C) D)
its green margin will be positive.
its green margin may be positive, negative, or zero.
its green margin will be negative.
its green margin will be zero.
?
An activity-based costing system uses which of the following procedures?
Overhead costs are traced to activities, then costs are traced to products.
Overhead costs are traced directly to products.
Overhead costs are traced to departments, then costs are traced to products.
All overhead costs are expensed as incurred.
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An activity that is consumed by a final cost object, such as a product or customer, is called a(n):
secondary activity.
primary activity.
overhead activity.
activity inventory.
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All of the following are non-unit-based activity drivers EXCEPT
number of material moves.
number of setups.
number of inspections.
number of direct labor hours.
?
If activity-based costing is used, modifications made by engineering to the product design of several products would be classified as a
batch-level activity.
facility-level activity.
unit-level activity.
product-level activity.
?
Which of the following statements about activity-based costing is not true?
Activity-based costing is useful for allocating marketing and distribution costs.
Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.
In activity-based costing, cost drivers are what cause costs to be incurred.
Activity-based costing differs from traditional costing systems in that products are not cross subsidized.
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A key concept of the JIT inventory system is:
the raw materials, work in process, and finished goods inventories of manufacturing companies act as buffers so that operations can proceed smoothly even if suppliers are late with deliveries or a department is unable to operate for a brief period due to breakdowns or other reasons.
the use of many suppliers in order to ensure rapid delivery of materials for production.
the maintenance of a stock of raw materials so that defective materials can be replaced quickly in order to maintain a high rate of productivity.
inventories are costly to carry and can be kept to minimum levels or eliminated entirely with careful planning.
?
The flow of goods through a JIT system is based on:
a workstation efficiently completing its processing of a batch of units so that the units can proceed forward to the next workstation regardless of whether the next workstation is ready to receive them.
processing goods in large batch sizes rather than less economical small batches.
maintaining a stockpile of raw materials in anticipation of errors in production.
producing to meet customer demand with no buildup of inventory at any point in the production process.
?
A successful JIT system is based upon which of the following concepts?
The company must rely upon a large number of suppliers to ensure frequent deliveries of small lots.
The company should always choose those suppliers offering the lowest prices.
The company should avoid long-term contracts with suppliers in order to exert pressure on suppliers to make prompt and frequent deliveries.
A small number of supplier make frequent deliveries of specific quantities thus avoiding the buildup of large inventories of materials on hand.
?
The term throughput means:
the length of time required to turn materials into products.
the total volume of production through a facility during a period.
the time involved in changing equipment, moving material about, and putting forms and jigs in place to accommodate the production of a different item.
production of goods without the accumulation of raw materials or work in process inventories.
?
A clustering of two or more machines at a single workstation is referred to as:
a cell.
an activity center.
a functional layout.
a flow line.
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A key feature of a flexible manufacturing system is:
the power provided by such a system to manufacture an entire family of products on a single flow line.
the use of mathematical models to control raw materials purchases.
the determination of the most economical production-run size.
the maintaining of appropriate levels of raw materials, work in process, and finished goods inventories to meet production and consumer needs.
?
Which of the following adds value to a product or service?
Queue time.
Move time.
Process time.
Inspection time.
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A major emphasis of process value analysis is:
the identification of ways to either reduce or eliminate non-value-added activities.
the calculation of unit costs for products manufactured.
the tracing of costs to activity centers.
the selection of cost drivers.
?
Overhead allocation based on volume alone:
is a key aspect of the activity-based costing model.
will systematically over cost high-volume products and under cost low-volume products.
will systematically over cost low-volume products and under cost high-volume products.
must be used for external financial reporting since an activity-based costing system cannot be designed to generate full product costs for external reporting purposes.
?
A cost driver:
is a term that applies only to activity-based costing systems.
relates only to direct labour-hours or machine-hours.
is identified only for the first stage in cost assignment.
is identified for both the first stage and the second stage in cost assignment.
