19. The first-stage allocation in activity-based costing is the process by which
overhead costs are assigned to activity cost pools.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
20. Activity-based costing involves a two-stage allocation in which overhead costs are
first assigned to departments and then to jobs.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
21. Activity rates in activity-based costing are computed by dividing costs from the
second-stage allocations by the activity measure for each activity cost pool.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
22. Activity rates are computed in the second-stage allocation in activity-based
costing.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Multiple Choice Questions
,23. An activity-based costing system that is designed for internal decision-making will
not conform to generally accepted accounting principles because:
A. under activity-based costing the sum of all product costs does not equal the
total costs of the company.
B. under activity-based costing manufacturing costs are assigned to
products.
C. activity-based costing has not been approved by the United Nation's
International Accounting Board.
D. activity-based costing results in less accurate costs than more traditional
costing methods based on direct labor-hours or machine-hours.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing
system.
24. Assembling a product is an example of a:
A. Unit-level
activity.
B. Batch-level
activity.
C. Product-level
activity.
D. Organization-
sustaining.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing
system.
,25. If substantial batch-level or product-level costs exist, then overhead allocation
based on a measure of volume such as direct labor-hours alone:
A. is a key aspect of the activity-based costing
model.
B. will systematically overcost high-volume products and undercost low-
volume products.
C. will systematically overcost low-volume products and undercost high-
volume products.
D. must be used for external financial reporting since activity-based costing
cannot be used for external reporting purposes.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing
system.
26. Which terms would make the following sentence true? Manufacturing companies
that benefit the most from activity-based costing are those where overhead costs
are a _________ percentage of total product cost and where there is ___________
diversity among the various products that they produce.
A. low;
little
B. low;
considerable
C. high;
little
D. high;
considerable
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing
system.
, 27. Which of the following costs should not be included in product costs for internal
management reports that are used for decision-making?
A. Costs of unit-level
activities.
B. Costs of batch-level
activities.
C. Costs of product-level
activities.
D. Costs of organization-sustaining
activities.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing
system.
28. The plant manager's salary is an example of a:
A. Unit-level
activity.
B. Batch-level
activity.
C. Product-level
activity.
D. Organization-sustaining
activity.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing
system.
overhead costs are assigned to activity cost pools.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
20. Activity-based costing involves a two-stage allocation in which overhead costs are
first assigned to departments and then to jobs.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 07-02 Assign costs to cost pools using a first-stage allocation.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
21. Activity rates in activity-based costing are computed by dividing costs from the
second-stage allocations by the activity measure for each activity cost pool.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
22. Activity rates are computed in the second-stage allocation in activity-based
costing.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-03 Compute activity rates for cost pools.
Learning Objective: 07-04 Assign costs to a cost object using a second-stage allocation.
Multiple Choice Questions
,23. An activity-based costing system that is designed for internal decision-making will
not conform to generally accepted accounting principles because:
A. under activity-based costing the sum of all product costs does not equal the
total costs of the company.
B. under activity-based costing manufacturing costs are assigned to
products.
C. activity-based costing has not been approved by the United Nation's
International Accounting Board.
D. activity-based costing results in less accurate costs than more traditional
costing methods based on direct labor-hours or machine-hours.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing
system.
24. Assembling a product is an example of a:
A. Unit-level
activity.
B. Batch-level
activity.
C. Product-level
activity.
D. Organization-
sustaining.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing
system.
,25. If substantial batch-level or product-level costs exist, then overhead allocation
based on a measure of volume such as direct labor-hours alone:
A. is a key aspect of the activity-based costing
model.
B. will systematically overcost high-volume products and undercost low-
volume products.
C. will systematically overcost low-volume products and undercost high-
volume products.
D. must be used for external financial reporting since activity-based costing
cannot be used for external reporting purposes.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing
system.
26. Which terms would make the following sentence true? Manufacturing companies
that benefit the most from activity-based costing are those where overhead costs
are a _________ percentage of total product cost and where there is ___________
diversity among the various products that they produce.
A. low;
little
B. low;
considerable
C. high;
little
D. high;
considerable
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing
system.
, 27. Which of the following costs should not be included in product costs for internal
management reports that are used for decision-making?
A. Costs of unit-level
activities.
B. Costs of batch-level
activities.
C. Costs of product-level
activities.
D. Costs of organization-sustaining
activities.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing
system.
28. The plant manager's salary is an example of a:
A. Unit-level
activity.
B. Batch-level
activity.
C. Product-level
activity.
D. Organization-sustaining
activity.
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 07-01 Understand activity-based costing and how it differs from a traditional costing
system.
