# Acc206 Principles of Accounting: Week 4 Quiz (Version 6 – October 2012)

Acc206 Principles of Accounting
Week 4 Quiz (Version 6 – October 2012):

1. Ace Plastics produces many different kinds of products all in one manufacturing facility. They have identified four activities for their costing system:
Materials management – allocated by number of purchase orders
Chemical processing – allocated on metric tons
Molding – allocated on direct labor hours
Packaging – allocated by number of units produced
The activity rates are as follows:
Materials management \$12.00 Per purchase order
Chemical processing \$ 7.50 Per metric ton
Molding \$24.00 Per direct labor hour
Packaging \$ 0.10 Per unit
Ace received an order for 3,000 plastic toys. The engineering design shows that the order will require \$540 of direct material cost in total, \$90 of direct labor cost, will require 4 purchase orders, will use 2 metric tons of chemical base, will need 8 direct labor hours, and will produce 3.000 units of product. What will the full production cost of the order be? (Points : 1)
\$ 630
\$ 645
\$1,095
\$1,185

2. Activity-based costing creates more precise matching of indirect costs with products (Points : 1)
True
False

3. Brannon Company manufactures ceiling fans and uses an activity-based costing system. Each ceiling fan consists of 20 separate parts totaling \$95 in direct materials, and requires 2.5 hours of machine time to produce. There are no direct labor costs. Additional information follows:
Activity Allocation Base Cost Allocation Rate
Materials handling Number of parts \$ .08
Machining Machine hours \$7.20
Assembling Number of parts \$.35
Packaging Number of finished units \$2.70
What is the total manufacturing cost per ceiling fan? (Points : 1)
\$125.75
\$121.13
\$115.32
\$124.30
None of these is correct

4. Formosa Steel Products makes steel building materials for export, and uses an activity-based costing system to account for the indirect manufacturing costs of its various products. Indirect costs for the whole factory are broken down into three activities—casting, materials handling, and milling. The cost driver for casting is machine hours; the cost driver for material handling is kilograms, and the cost driver for milling is direct labor hours. Activity costs and volumes for the year were estimated as follows:
Activity Cost Volume
Casting \$2,000,000 800,000.00 Machine hours
Material Handling \$400,000 500,000.00 Kilograms
Milling \$1,120,000 140,000.00 Direct labor hours
One product is steel reinforcement rods, sold by the metric ton. Engineering reports show that one metric ton of steel reinforcement rods requires \$100 of direct materials cost plus \$50 of direct labor cost. Producing one metric ton of steel rods also requires 24 machine hours for casting, weighs 1,000 kilograms, and requires 15 direct labor hours.
What is the activity rate for the milling activity? (Points : 1)
\$8.00 per direct labor hr
\$4.40 per direct labor hr
\$0.13 per direct labor hr
\$0.80 per direct labor hr

5. Jurassic Manufacturers produces flooring material. Fixed costs are \$5,000 per month. Sales price for one unit of product is \$50, and the variable cost per unit is \$30. If Jurassic wishes to earn an operating income of \$5,000, how many units need to be sold? (Points : 1)
500
300
450
350

6. Kenney Company uses activity-based costing to account for its manufacturing process. Kenney Company produces tires, and each tire has \$.50 of direct materials, includes 20 parts and requires 2 hours of machine time. There is no direct labor. Additional information follows:
Activity Allocation Base Cost Allocation Rate
Materials handling Number of parts \$ .16
Machining Machine hours \$14.40
Assembling Number of parts \$.70
Packaging Number of finished units \$5.40
What is the cost of machining per tire? (Points : 1)
\$28.80
\$26.40
\$25.80
\$29.50
None of these is correct

7. Peterson Company has both fixed and variable costs. If the volume doubles, the total variable costs will double. (Points : 1)
True
False

8. Activity-based costing systems and traditional costing systems will produce the same results for product cost and profitability, although they use different methods of calculation. (Points : 1)
True
False
9. JB Company has fixed costs of \$300,000. Total costs, both fixed and variable, are \$378,000 when 40,000 units are produced. How much is the variable cost per unit? (Please round to the nearest cent.) (Points : 1)
\$9.45
\$2.78
\$7.50
\$1.95
None of these is correct

10. The first step in the activity-based costing system is to identify each activity and its total indirect cost. (Points : 1)
True
False