Consider the following statements traditional costing systems can produce distorted product costs if

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Acctg 202
Chapter 5 Examination
Choose the best answer. 

1. A transaction-based costing system:
A) adds the assigned to beginning work-in-process inventory to the current-period production costs.
B) identifies multiple cost drivers and assigns costs of activities to products based on the basis of the number of transactions they general for the various cost drivers. 
C) averages production costs over a large number of product units.
D) assigns costs to partially completed products that are transferred into one production department from a prior department.
E) none of the above.

2. An example of a product-sustaining-level cost is:
A) a machine-related activity cost pool.
B) material handling.
C) packaging and shipping.
D) a computer-aided design (CAD) system used for engineering design.
E) none of the above.

3. A transaction-based costing system:
A) adds the assigned to beginning work-in-process inventory to the current-period production costs.
B) identifies multiple cost drivers and assigns costs of activities to products based on the basis of the number of transactions they general for the various cost drivers. 
C) averages production costs over a large number of product units.
D) assigns costs to partially completed products that are transferred into one production department from a prior department.
E) none of the above.

4. Many traditional-costing systems: 
A) trace manufacturing overhead to individual activities and require the development of numerous activity-costing rates. 
B) write off manufacturing overhead as an expense of the current period. 
C) combine widely varying elements of overhead into a single cost pool. 
D) use a host of different cost drivers (e.g., number of production setups, inspection hours, orders processed) to improve the accuracy of product costing. 
E) produce results far superior to those achieved with activity-based costing.

5. Consider the following statements regarding product-sustaining activities:
I) They must be done for each batch of product that is made.
II) They must be done for each unit of product that is made.
III) They are needed to support an entire product line.
Which of the above statements is (are) true? 
A) I only. 
B) II only. 
C) III only. 
D) I and II only. 
E) II and III only.

6. The salaries of a manufacturing plant's management are said to arise from: 
A) unit-level activities. 
B) batch-level activities. 
C) product-sustaining level activities. 
D) facility-level activities. 
E) direct-cost activities.

7. Activity-based costing systems: 
A) use a single, volume-based cost driver. 
B) assign overhead to products based on the products' relative usage of direct labor. 
C) often reveal under- and overcosted products. 
D) typically use fewer cost drivers than more traditional costing systems. 
E) have a tendency to distort product costs.

8. Under a traditional-costing system, which of the following costs would likely be classified as indirect with respect to the various products manufactured? 
A) Plant maintenance. 
B) Inspection of finished goods. 
C) Utilities. 
D) Machinery depreciation. 
E) All of the above would be considered indirect costs.

9. Vanguard combines all manufacturing overhead into a single cost pool and allocates this overhead to products by using machine hours. The company will likely find that: 
A) all of its products are undercosted. 
B) its high-volume products are undercosted. 
C) all of its products are overcosted. 
D) its high-volume products are overcosted. 
E) its low-volume products are overcosted.

10. Homogeneity is a key issue in the selection of cost pools. In order for a cost pool to be homogeneous: 
A) all costs must be from the same department. 
B) all costs must be incurred to make only a subset of the products. 
C) all costs must be approximately the same dollar amount. 
D) the activity associated with each cost must be consumed in approximately the same proportion by each product line. 
E) all costs must relate to the same type of resource.

Free

Multiple Choice

Free

Multiple Choice

Which of the following statements is/are true? i. Activity management requires analysis of overhead activities only. ii. Activity management requires analysis of all activities. iii. Activity management requires identification of detailed activities, rather than broad activities.

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Multiple Choice

Calculate the cost of processing one sales order if the total activity cost is $1 720 000 p.a., the activity driver is the number of orders received and the annual quantity of the activity driver is 43 000 orders.

Multiple Choice

Activity-based costing has most to offer where:

Multiple Choice

Which of the following can signal the need for a new product costing system?

Multiple Choice

Consider the following statements. Which of the statements is true?

Multiple Choice

Consider the following statements. Traditional costing systems can produce distorted product costs if: i. overheads are driven by non-volume factors. ii. overheads are a minor part of the product cost. iii. it fails to recognise non-manufacturing costs as product costs. Which of the statements is true?

Multiple Choice

In a simple activity-based product costing system:

Multiple Choice

Consider the following statements. Activity-based costing is more difficult in a service business because: i. service businesses have a low proportion of overhead in their total costs. ii. service businesses tend to have a higher level of facility costs than most manufacturers. iii. it is often difficult to identify service activities because they are non-repetitive. Which of the above statements is true?

Multiple Choice

Characteristics of activity-based costing include:

Multiple Choice

Multiple Choice

Consider the following statements. i. The optimal product costing system is the most accurate system. ii. The optimal product costing system is the one that minimises the cost of poor decisions from inferior information. iii. The optimal product costing system is the most expensive one. Which of the statements is true?

Multiple Choice

Calculate the activity cost per unit of activity driver if the activity cost is $3500, the activity driver is the number of batches and the total quantity of the activity driver is 1750 batches.

Multiple Choice

Which of the following statements is false?

Multiple Choice

Companies are likely to benefit from activity-based costing systems if:

Multiple Choice

Which of the following statements is false?

Multiple Choice

Which of the following statements regarding activity-based costing (ABC) is false?

Multiple Choice

Which of the following can signal the need for a new product costing system?

Multiple Choice

Calculate the cost per unit for setup for one run of 10 000 units if setup labour is $20 per hour and 10 hours are required to set up.

Multiple Choice

Why traditional volume based systems distort product costs?

Which of the following statement S is are true about activity

Which of the following are components of conversion costs?

What is activity