Costing Systems

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Chapter 5: Activity-Based Costing
MULTIPLE CHOICE QUESTIONS 1. Consider the following statements regarding traditional costing systems: I.Overhead costs are applied to products on the basis of volume-related measures. II.All manufacturing costs are easily traceable to the goods produced. III.Traditional costing systems tend to distort unit manufacturing costs when numerous goods are made that have widely varying production requirements. Which of the above statements is (are) true? A. I only. B. II only. C. III only. D. I and III. E. II and III. Answer: D LO: 1 Type: N 2. 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. Answer: C LO: 1 Type: N 3. The following tasks are associated with an activity-based costing system: 1—Calculation of cost application rates 2—Identification of cost drivers 3—Assignment of cost to products 4—Identification of cost pools Which of the following choices correctly expresses the proper order of the preceding tasks? A. 1, 2, 3, 4. B. 2, 4, 1, 3. C. 3, 4, 2, 1. D. 4, 2, 1, 3. E. 4, 2, 3, 1. Answer: D LO: 2, 4 Type: RC

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4. Which of the following is the proper sequence of events in an activity-based costing system? A. Identification of cost drivers, identification of cost pools, calculation of cost application rates, assignment of cost to products. B. Identification of cost pools, identification of cost drivers, calculation of cost application rates, assignment of cost to products. C. Assignment of cost to products, identification of cost pools, identification of cost drivers, calculation of cost application rates. D. Calculation of cost application rates, identification of cost drivers, identification of cost pools, assignment of cost to products. E. Some other sequence of the four activities listed above. Answer: B LO: 2, 4 Type: RC 5. Which of the following tasks is not normally associated with an activity-based costing system? A. Calculation of cost application rates. B. Identification of cost pools. C. Preparation of allocation matrices. D. Identification of cost drivers. E. Assignment of cost to products. Answer: C LO: 2, 4 Type: RC 6. Which of the following is not a broad, cost classification category typically used in activity-based costing? A. Unit-level. B. Batch-level. C. Product-sustaining level. D. Facility-level. E. Management-level. Answer: E LO: 3 Type: RC 7. In an activity-based costing system, direct materials used would typically be classified as a: A. unit-level cost. B. batch-level cost. C. product-sustaining cost. D. facility-level cost. E. matrix-level cost. Answer: A LO: 3 Type: N 8. Which of the following is least likely to be classified as a batch-level activity in an activity-based costing system? A. Shipping. B. Receiving and inspection. C. Production setup. D. Property taxes. E. Quality assurance. Answer: D LO: 3 Type: RC

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Hilton, Managerial Accounting, Seventh Edition

9. In an activity-based costing system, materials receiving would typically be classified as a: A. unit-level activity. B. batch-level activity. C. product-sustaining activity. D. facility-level activity. E. period-level activity. Answer: B LO: 3 Type: RC 10. Foster, Inc., an appliance manufacturer, is developing a new line of ovens that uses controlledlaser technology. The research and testing costs associated with the new ovens is said to arise from a: A. unit-level activity. B. batch-level activity. C. product-sustaining activity. D. facility-level activity. E. competitive-level activity....
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