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B. ACTIVITY-BASED COST SYSTEM 5. Primary concepts under activity-based management include all of th
A. activity analysis C. activity-based c
B. total quality management D. cost driver analy
THEORIES:
Outdated cost system 18. Which of the following falls under the Activity
3. Symptoms of an outdated cost system include all of the following EXCEP umbrella?
A. product costs change because of changes in financial reporting. Continuous Business process Activ
B. products that are difficult to produce show little profit. improvement reengineering costin
C. competitors' prices appear unrealistically low. A. NO NO YES
D. the company has a highly profitable niche all to itself. B. YES NO NO
C. YES YES YES
13. Which of the following is NOT a sign of poor cost data? D. NO YES NO
A. Competitors' prices for high-volume products appear much too high.
B. The company seems to have a highly profitable niche all to itself. 29. All of the following are ways that activities can be managed to
C. Customers don't balk at price increases for low-volume products. process, except
D. Competitors' prices for low-volume products appear much too high. A. activity induction C. activity eliminati
B. activity selection D. activity sharing
Activity-based management
1. Which system focuses on the management of activities with the objective of improving the Traditional Costing vs. ABC system
value received by the customer and the profit received by providing this value? 27. Which of the following is not a distinction between the traditional an
A. activity-based management C. contemporary cost control A. the number of overhead cost pools tends to be higher in ABC s
B. traditional cost management system D. standard cost system B. the number allocation bases tend to be higher in ABC system
C. costs within an ABC cost pool tend to be more homogeneo
28. Activity-based management (ABM) is traditional system’s cost pool
A. a costing system in which multiple overhead cost pools are allocated using bases that D. all ABC systems are one-stage costing systems, while tradition
include one or more nonvolume related factors two-stage
B. a base used to allocate the cost of a resource to the different activities using it
C. the use of information obtained from ABC to make improvements in the firm 32. In contrast to a company that uses a single overhead rate, one that
D. a base used to allocate the cost of an activity to products and customers A. will have higher product costs than one using a single overhea
B. cannot compute budget variances.
17. An objective of activity-based management is to C. will incur additional costs for recordkeeping.
A. eliminate the majority of centralized activities in an organization. D. must have a preponderance of fixed overhead costs.
B. reduce or eliminate non-value-added activities incurred to make a product or provide a
service. Activity-based costing
C. institute responsibility accounting systems in decentralized organizations. Reason
D. all of the above 21. Of the following, which is the best reason for using activity-based co
A. to keep better track of overhead costs
B. to more accurately assign overhead costs to cost pools so
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controlled 6. Which of the following is typical of activity-based costing systems?
C. to better assign overhead costs to products A. Use of a single predetermined overhead rate.
D. to assign indirect service overhead costs to direct overhead cost pools B. Use of direct labor hours or direct labor cost to assign overhe
C. Assumption of correlation between direct labor and incurrenc
Benefits D. Use of multiple cost drivers to allocate overhead.
2. The primary benefit of using ABC is that it provides
A. better management decisions. 14. All of the following statements are correct except that
B. enhanced control over overhead costs. A. activity-based costing has been widely adopted in service indu
C. more cost pools. B. the objective of installing ABC in service firms is different than
D. more accurate product costing. C. a larger proportion of overhead costs are company-wide costs
D. the general approach to identifying activities and activity co
10. Which of the following is not a benefit of activity-based costing? service company as in a manufacturing company.
A. More accurate product costing.
B. Enhanced control over overhead costs. Application
C. Less costly to use. 22. ABC should be used in which of the following situations?
D. Better management decisions. A. single-product firms with multiple steps
B. multiple-product firms with only a single process
Factors suggesting need to switch to ABC C. multiple-product firms with multiple processing steps
4. Which of the following factors would suggest a need to switch to activity-based costing? D. in all manufacturing firms
A. Product lines similar in volume and manufacturing complexity.
B. Overhead costs constitute a significant portion of total costs. Limitation
C. The manufacturing process has been stable. 9. Which of the following is a limitation of activity-based costing?
D. Production managers use data provided by the existing system. A. More cost pools C. Poorer manage
B. Less control over overhead costs D. Some arbitrary
7. A least likely reason to use activity-based overhead rates is that
A. some departments are labor-intensive, some are machine-intensive. 12. Each of the following is a limitation of activity-based costing system
B. significant amounts of overhead are driven by different factors. A. it can be expensive to use.
C. rates calculated for some departments are much higher than for other departments. B. it is more complex than the traditional costing.
D. all jobs require about the same amounts of cost-driving activities. C. more cost pools are used.
D. some arbitrary allocations still continue.
8. The presence of any of the following factors would suggest a switch to ABC except when
A. product line differ greatly in volume. Cost behavior of high-volume & low-volume product
B. overhead costs constitute a minor portion of total costs. 11. As compared to a high-volume product, a low-volume product
C. the manufacturing process has changed significantly. A. usually requires less special handling.
D. production managers are ignoring data provided by the existing system. B. is usually responsible for more overhead costs per unit.
C. requires relatively fewer machine setups.
Characteristics D. requires use of direct labor hours as the primary cost driver
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of overhead. D. all of the above
Cost assignment Cost driver, activity driver & resource driver
15. Which of the following lists the most to least accurate method of cost assignment? 23. Any activity that causes resources to be consumed is called a
A. direct tracing, driver tracing, allocation C. driver tracing, direct tracing, allocation A. just-in-time activity C. facility-level acti
B. allocation, direct tracing, driver tracing D. allocation, driver tracing, direct tracing B. cost driver D. nonvalue-added
30. An activity-based costing system uses which of the following procedures? 24. A base used to allocate the cost of a resource to the different activi
A. Overhead costs are traced to departments, then costs are traced to products. A. resource driver C. activity driver
B. Overhead costs are traced to activities, then costs are traced to products. B. final cost object D. driver
C. Overhead costs are traced directly to products.
D. All overhead costs are expensed as incurred. 42. A base used to allocate the cost of products, customers, or other fin
A. resource driver C. activity driver
Steps B. final cost object D. driver
16. A well-designed activity-based costing system starts with
A. identifying the activity-cost pools. 38. Activity drivers differ from resource drivers in that activity drivers
B. computing the activity-based overhead rate. A. are used to assign indirect costs while resource drivers are use
C. assigning manufacturing overhead costs for each activity cost pool to products. B. assign the cost of activities to cost objects while resource
D. analyzing the activities performed to manufacture a product. resources to activities
C. assign the cost of activities to resources and resource drivers a
25. The first step in activity-based costing is to to cost objects
A. assign manufacturing overhead costs for each activity cost pool to products. D. are used to assign direct costs while resource drivers are used
B. compute the activity-based overhead rate per cost driver.
C. identify and classify the major activities involved in the manufacture of specific products. 55. An appropriate cost driver base should
D. identify the cost driver that has a strong correlation to the activity cost pool. A. have a cause-and-effect relationship with the activity and the u
B. predict or explain activities' use of resources with reasonable a
26. The last step in activity-based costing is to C. be based on the practical capacity of the resource to support a
A. identify the major activities that pertain to the manufacture of specific products. D. all of the above
B. allocate manufacturing overhead costs to activity cost pools.
C. identify the cost drivers that accurately measure each activity’s contribution to the Cost pool
finished product. 31. A cost pool is
D. assign manufacturing overhead costs for each activity cost pool to products. A. all of the costs of a particular department.
B. all costs in a group such as variable costs or discretionary fixed
65. Successful activity-based costing (ABC) implementation depends upon the firm having: C. all costs related to a product or product line.
A. top management support D. all costs that have the same driver.
B. ABC linked to its competitive strategy
C. adequate resources Cost pool rate
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B. ACTIVITY-BASED COST SYSTEM 5. Primary concepts under activity-based management include all of th
A. activity analysis C. activity-based c
B. total quality management D. cost driver analy
THEORIES:
Outdated cost system 18. Which of the following falls under the Activity
3. Symptoms of an outdated cost system include all of the following EXCEP umbrella?
A. product costs change because of changes in financial reporting. Continuous Business process Activ
B. products that are difficult to produce show little profit. improvement reengineering costin
C. competitors' prices appear unrealistically low. A. NO NO YES
D. the company has a highly profitable niche all to itself. B. YES NO NO
C. YES YES YES
13. Which of the following is NOT a sign of poor cost data? D. NO YES NO
A. Competitors' prices for high-volume products appear much too high.
B. The company seems to have a highly profitable niche all to itself. 29. All of the following are ways that activities can be managed to
C. Customers don't balk at price increases for low-volume products. process, except
D. Competitors' prices for low-volume products appear much too high. A. activity induction C. activity eliminati
B. activity selection D. activity sharing
Activity-based management
1. Which system focuses on the management of activities with the objective of improving the Traditional Costing vs. ABC system
value received by the customer and the profit received by providing this value? 27. Which of the following is not a distinction between the traditional an
A. activity-based management C. contemporary cost control A. the number of overhead cost pools tends to be higher in ABC s
B. traditional cost management system D. standard cost system B. the number allocation bases tend to be higher in ABC system
C. costs within an ABC cost pool tend to be more homogeneo
28. Activity-based management (ABM) is traditional system’s cost pool
A. a costing system in which multiple overhead cost pools are allocated using bases that D. all ABC systems are one-stage costing systems, while tradition
include one or more nonvolume related factors two-stage
B. a base used to allocate the cost of a resource to the different activities using it
C. the use of information obtained from ABC to make improvements in the firm 32. In contrast to a company that uses a single overhead rate, one that
D. a base used to allocate the cost of an activity to products and customers A. will have higher product costs than one using a single overhea
B. cannot compute budget variances.
17. An objective of activity-based management is to C. will incur additional costs for recordkeeping.
A. eliminate the majority of centralized activities in an organization. D. must have a preponderance of fixed overhead costs.
B. reduce or eliminate non-value-added activities incurred to make a product or provide a
service. Activity-based costing
C. institute responsibility accounting systems in decentralized organizations. Reason
D. all of the above 21. Of the following, which is the best reason for using activity-based co
A. to keep better track of overhead costs
B. to more accurately assign overhead costs to cost pools so
769
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(B. Activit
controlled 6. Which of the following is typical of activity-based costing systems?
C. to better assign overhead costs to products A. Use of a single predetermined overhead rate.
D. to assign indirect service overhead costs to direct overhead cost pools B. Use of direct labor hours or direct labor cost to assign overhe
C. Assumption of correlation between direct labor and incurrenc
Benefits D. Use of multiple cost drivers to allocate overhead.
2. The primary benefit of using ABC is that it provides
A. better management decisions. 14. All of the following statements are correct except that
B. enhanced control over overhead costs. A. activity-based costing has been widely adopted in service indu
C. more cost pools. B. the objective of installing ABC in service firms is different than
D. more accurate product costing. C. a larger proportion of overhead costs are company-wide costs
D. the general approach to identifying activities and activity co
10. Which of the following is not a benefit of activity-based costing? service company as in a manufacturing company.
A. More accurate product costing.
B. Enhanced control over overhead costs. Application
C. Less costly to use. 22. ABC should be used in which of the following situations?
D. Better management decisions. A. single-product firms with multiple steps
B. multiple-product firms with only a single process
Factors suggesting need to switch to ABC C. multiple-product firms with multiple processing steps
4. Which of the following factors would suggest a need to switch to activity-based costing? D. in all manufacturing firms
A. Product lines similar in volume and manufacturing complexity.
B. Overhead costs constitute a significant portion of total costs. Limitation
C. The manufacturing process has been stable. 9. Which of the following is a limitation of activity-based costing?
D. Production managers use data provided by the existing system. A. More cost pools C. Poorer manage
B. Less control over overhead costs D. Some arbitrary
7. A least likely reason to use activity-based overhead rates is that
A. some departments are labor-intensive, some are machine-intensive. 12. Each of the following is a limitation of activity-based costing system
B. significant amounts of overhead are driven by different factors. A. it can be expensive to use.
C. rates calculated for some departments are much higher than for other departments. B. it is more complex than the traditional costing.
D. all jobs require about the same amounts of cost-driving activities. C. more cost pools are used.
D. some arbitrary allocations still continue.
8. The presence of any of the following factors would suggest a switch to ABC except when
A. product line differ greatly in volume. Cost behavior of high-volume & low-volume product
B. overhead costs constitute a minor portion of total costs. 11. As compared to a high-volume product, a low-volume product
C. the manufacturing process has changed significantly. A. usually requires less special handling.
D. production managers are ignoring data provided by the existing system. B. is usually responsible for more overhead costs per unit.
C. requires relatively fewer machine setups.
Characteristics D. requires use of direct labor hours as the primary cost driver
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(B. Activit
of overhead. D. all of the above
Cost assignment Cost driver, activity driver & resource driver
15. Which of the following lists the most to least accurate method of cost assignment? 23. Any activity that causes resources to be consumed is called a
A. direct tracing, driver tracing, allocation C. driver tracing, direct tracing, allocation A. just-in-time activity C. facility-level acti
B. allocation, direct tracing, driver tracing D. allocation, driver tracing, direct tracing B. cost driver D. nonvalue-added
30. An activity-based costing system uses which of the following procedures? 24. A base used to allocate the cost of a resource to the different activi
A. Overhead costs are traced to departments, then costs are traced to products. A. resource driver C. activity driver
B. Overhead costs are traced to activities, then costs are traced to products. B. final cost object D. driver
C. Overhead costs are traced directly to products.
D. All overhead costs are expensed as incurred. 42. A base used to allocate the cost of products, customers, or other fin
A. resource driver C. activity driver
Steps B. final cost object D. driver
16. A well-designed activity-based costing system starts with
A. identifying the activity-cost pools. 38. Activity drivers differ from resource drivers in that activity drivers
B. computing the activity-based overhead rate. A. are used to assign indirect costs while resource drivers are use
C. assigning manufacturing overhead costs for each activity cost pool to products. B. assign the cost of activities to cost objects while resource
D. analyzing the activities performed to manufacture a product. resources to activities
C. assign the cost of activities to resources and resource drivers a
25. The first step in activity-based costing is to to cost objects
A. assign manufacturing overhead costs for each activity cost pool to products. D. are used to assign direct costs while resource drivers are used
B. compute the activity-based overhead rate per cost driver.
C. identify and classify the major activities involved in the manufacture of specific products. 55. An appropriate cost driver base should
D. identify the cost driver that has a strong correlation to the activity cost pool. A. have a cause-and-effect relationship with the activity and the u
B. predict or explain activities' use of resources with reasonable a
26. The last step in activity-based costing is to C. be based on the practical capacity of the resource to support a
A. identify the major activities that pertain to the manufacture of specific products. D. all of the above
B. allocate manufacturing overhead costs to activity cost pools.
C. identify the cost drivers that accurately measure each activity’s contribution to the Cost pool
finished product. 31. A cost pool is
D. assign manufacturing overhead costs for each activity cost pool to products. A. all of the costs of a particular department.
B. all costs in a group such as variable costs or discretionary fixed
65. Successful activity-based costing (ABC) implementation depends upon the firm having: C. all costs related to a product or product line.
A. top management support D. all costs that have the same driver.
B. ABC linked to its competitive strategy
C. adequate resources Cost pool rate
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