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Jefferson,Inc.produces two different products (Product 5 and Product Z) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.The cost of Machining is $500,000,while the cost of Inspection is $30,000.Usage of the activity drivers are as follows: What proportion of Machining activity is used by Product 5? Jefferson,Inc.produces two different products (Product 5 and Product Z) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.The cost of Machining is $500,000,while the cost of Inspection is $30,000.Usage of the activity drivers are as follows: What proportion of Machining activity is used by Product 5? A) 20% B) 33% C) 67% D) 75%


A) 20%
B) 33%
C) 67%
D) 75%

E) B) and C)
F) A) and D)

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How is the cost of a batch-level activity similar to the cost of a unit-level activity?


A) Both are incurred for each individual unit.
B) Both decrease as production volume increases.
C) Both increase as production volume increases.
D) Both are incurred for a group of units all at once.

E) B) and D)
F) A) and D)

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Largo,Inc. ,which uses a volume-based cost system,produces cat condos,and has a gross profit margin of 50%.Direct materials cost $15 per unit,and direct labor costs $10 per unit.Manufacturing overhead is applied at a rate of 200% of direct labor cost.Nonmanufacturing costs are $27 per unit.How much does each cat condo sell for?


A) $50
B) $72
C) $90
D) $144

E) A) and B)
F) A) and C)

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Hadley,Inc.manufactures a product that uses $15 in direct materials and $5 in direct labor per unit.Under the traditional costing system Hadley uses,manufacturing overhead applied to each unit is $12.However,Hadley is considering switching to an ABC system.Under the ABC system,the total activity cost would be $25.What is the total manufacturing cost per unit for Hadley under the ABC system?


A) $20
B) $25
C) $32
D) $45

E) C) and D)
F) B) and C)

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Culver,Inc.produces two different products (Product V3 and Product G8) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.Usage of the activity drivers are as follows: The activity rate for Inspection is $750 per batch.What is the total cost of Inspection? Culver,Inc.produces two different products (Product V3 and Product G8) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.Usage of the activity drivers are as follows: The activity rate for Inspection is $750 per batch.What is the total cost of Inspection? A) $11,250 B) $33,750 C) $45,000 D) $75,000


A) $11,250
B) $33,750
C) $45,000
D) $75,000

E) A) and B)
F) All of the above

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Which of the following would not be directly related to a volume-based allocation measure?


A) The number of activities.
B) The number of units produced.
C) The number of customers served.
D) Direct materials cost.

E) All of the above
F) A) and B)

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A

If the total activity cost were unknown,it could be calculated by


A) Dividing the total activity driver by the activity rate.
B) Multiplying the total activity driver by the activity rate.
C) Adding the total activity driver to the activity rate.
D) Subtracting the activity rate from the total activity driver.

E) A) and B)
F) B) and C)

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Activity based management is a method of assigning indirect costs to products or services based on the activities they require.This describes activity based costing,not activity based management.

A) True
B) False

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Sherman,Inc.manufactures chainsaws that sell for $58.Each chainsaw uses $10 in direct materials and $3 in direct labor per unit.Sherman has two activities: Machining,which is applied at the rate of $2 per machine hour,and Finishing,which is applied at the rate of $20 per batch.This month,Sherman made 200 chainsaws,using 1,000 machine hours in 40 batches.What is the total manufacturing cost for one chainsaw?


A) $13
B) $14
C) $27
D) $30

E) None of the above
F) A) and B)

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Washington,Inc.produces two different products (Product C and Product 2) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.The cost of Machining is $750,000,while the cost of Inspection is $90,000.Usage of the activity drivers are as follows: What is the activity rate for Inspection? Washington,Inc.produces two different products (Product C and Product 2) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.The cost of Machining is $750,000,while the cost of Inspection is $90,000.Usage of the activity drivers are as follows: What is the activity rate for Inspection? A) $45,000 per batch B) $1,500 per batch C) $6,000 per batch D) $2,000 per batch


A) $45,000 per batch
B) $1,500 per batch
C) $6,000 per batch
D) $2,000 per batch

E) C) and D)
F) A) and B)

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An activity that is performed for a group of units all at once is a(n)


A) batch-level activity.
B) product-level activity.
C) facility level activity.
D) unit-level activity.

E) A) and D)
F) All of the above

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Prevention costs are costs that


A) are incurred to prevent quality problems from occurring in the first place.
B) are incurred to identify defective products before products are shipped to the customer.
C) result from defects that are caught before the product is shipped to the customer.
D) occur when a defective product makes its way into the hands of the customer.

E) B) and C)
F) None of the above

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A

Jackson,Inc.produces two different products (Product 5 and Product Z) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.The cost of Machining is $500,000,while the cost of Inspection is $30,000.Product 5 uses 20% of total machine hours and 75% of total batches.What is the total Machining cost assigned to Product Z?


A) $7,500
B) $22,500
C) $375,000
D) $400,000

E) A) and C)
F) None of the above

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D

Which of the following is most likely to be true of the manufacturing overhead costs assigned to a product with relatively low volume and high complexity?


A) An ABC system will assign more manufacturing overhead costs to the product than a volume-based system.
B) A volume-based system will assign more manufacturing overhead costs to the product than an ABC system.
C) An ABC system will assign the same manufacturing overhead costs to the product as a volume-based system.
D) An ABC system will assign manufacturing overhead costs to the product,while a volume-based system will not.

E) B) and D)
F) C) and D)

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Washington,Inc.produces two different products (Product C and Product 2) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.The cost of Machining is $750,000,while the cost of Inspection is $90,000.Usage of the activity drivers are as follows: What is the activity rate for Machining? Washington,Inc.produces two different products (Product C and Product 2) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.The cost of Machining is $750,000,while the cost of Inspection is $90,000.Usage of the activity drivers are as follows: What is the activity rate for Machining? A) $187.50 per machine hour B) $166.67 per machine hour C) $250.00 per machine hour D) $5750.00 per machine hour


A) $187.50 per machine hour
B) $166.67 per machine hour
C) $250.00 per machine hour
D) $5750.00 per machine hour

E) B) and D)
F) B) and C)

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A volume-based allocation measure is directly related to the number of units produced or the number of customers served.Units produced and customers served are measures of volume.

A) True
B) False

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Which of the following is the best example of a facility-level activity?


A) Human resources
B) Research and development
C) Painting a final product
D) Product testing

E) C) and D)
F) B) and C)

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Lynwood,Inc.produces two different products (Product A and Product X) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.The activity rate for Machining is $125 per machine hour,and the activity rate for Inspection is $500 per batch.Usage of the activity drivers are as follows: What is the amount of Inspection cost assigned to Product X? Lynwood,Inc.produces two different products (Product A and Product X) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.The activity rate for Machining is $125 per machine hour,and the activity rate for Inspection is $500 per batch.Usage of the activity drivers are as follows: What is the amount of Inspection cost assigned to Product X? A) $7,500 B) $22,500 C) $30,000 D) $125,000


A) $7,500
B) $22,500
C) $30,000
D) $125,000

E) B) and D)
F) A) and D)

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Appraisal or inspection costs are costs that


A) are incurred to prevent quality problems from occurring in the first place.
B) are incurred to identify defective products before products are shipped to the customer.
C) result from defects that are caught before the product is shipped to the customer.
D) occur when a defective product makes its way into the hands of the customer.

E) A) and B)
F) None of the above

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Culver,Inc.produces two different products (Product V3 and Product G8) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.Usage of the activity drivers are as follows: The activity rate for Machining is $67.50 per machine hour.What is the total cost of Machining? Culver,Inc.produces two different products (Product V3 and Product G8) using two different activities: Machining,which uses machine hours as an activity driver,and Inspection,which uses number of batches as an activity driver.Usage of the activity drivers are as follows: The activity rate for Machining is $67.50 per machine hour.What is the total cost of Machining? A) $274,050 B) $67,500 C) $202,500 D) $270,000


A) $274,050
B) $67,500
C) $202,500
D) $270,000

E) A) and C)
F) A) and D)

Correct Answer

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