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Exam 5: Activity-Based Costing and Activity-Based Management

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Question 71

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Activity-based costing (ABC) can eliminate cost distortions because ABC systems ________.

A) establish a cause-and-effect relationship with the activities performed
B) use single cost pool for all overhead costs,thereby enabling simplicity
C) use a broad average to allocate all overhead costs
D) never consider interactions between different departments in assigning support costs

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Question 72

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Xylon Corp.has contracts to complete weekly supplements required by forty-six customers.For the year 2018,manufacturing overhead cost estimates total $940,000 for an annual production capacity of 10 million pages. For 2018,Xylon decided to evaluate the use of additional cost pools.After analyzing manufacturing overhead costs,it was determined that number of design changes,setups,and inspections are the primary manufacturing overhead cost drivers.The following information was gathered during the analysis: During 2018,two customers,Money Managers and Hospital Systems,are expected to use the following printing services: Under ABC costing,what is the inspection cost allocated to Hospital Systems?

A) $704
B) $80
C) $286
D) $6,574

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Question 73

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Facility-sustaining costs are the costs of activities ________.

Columbus Company provides the following ABC costing information: The above activities used by their three departments are: How much of the total cost will be assigned to the Plowing Department?

For a business that offers customers a store where product can be purchased and picked up or a delivery service that can ship the product directly to the customer,which of the following would most likely be the best cost allocation base for distribution costs?

Stark Corporation has two departments,Car Rental and Truck Rental.Central costs may be allocated to the two departments in various ways. If the facility lease expense of $381,000 is allocated on the basis of vehicles in the fleet,the amount allocated to the Car Rental Department would be ________.(Do not round interim calculations.Round the final answer to the nearest whole dollar. )

Implementing activity-based costing system involves use of different cost rates for different activities to compute indirect costs of a product.

Tiger Pride produces two product lines: T-shirts and Sweatshirts.Product profitability is analyzed as follows: Tiger Pride's managers have decided to revise their current assignment of overhead costs to reflect the following ABC cost information: Under the revised ABC system,the activity-cost driver rate for the supervision activity is ________.

Which of the following is true of refinement of a costing system?

Uniformly assigning the costs of resources to cost objects when those resources are actually used in a nonuniform way is called activity based costing.

In activity based costing systems,limiting cost-allocation bases to only units of output strengthens the cause-and-effect relationship between the cost-allocation base and the costs in a cost pool.

Dalrymple Company produces a special spray nozzle.The budgeted indirect total cost of inserting the spray nozzle is $68,750.The budgeted number of nozzles to be inserted is 11,000.What is the budgeted indirect cost allocation rate for this activity?

Using activity-cost rates rather than department indirect-cost rates to allocate costs results in different product costs when ________.

Identification of a cost-allocation base is not a critical element when using a strategy that will refine a costing system.

Which of the following is true with activity based cost accounting?

Even though there are no inventories for service companies,ABC systems are of great use for service companies.Explain why and how.

ABC systems help managers to ________.

Quality-inspection costs is an example of batch-level costs.

Canton Corp.manufactures two sizes of ceramic paperweights,regular and jumbo.The following information applies to their expectations for the planning period: Expected direct costs amounts to $942,000 for the period.Support cost requirements of both products are substantially different from one another.Canton uses an ABC costing system. The setups activity-cost driver rate is ________.

The reduction in cost per unit of wooden chess pieces under ABC system is due to difference in allocation of ________.