Acc206 Principles of Accounting: Week 4 Quiz (Version 8 – October 2012)

Acc206 Principles of Accounting
Week 4 Quiz (Version 8 – October 2012)

1. A traditional costing system employs multiple allocation rates, but an activity-based costing system uses only one single allocation rate. (Points : 1)
True or False

2. 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)
a- 500
b- 300
d- 350

3. 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)
a- $28.80
d- $29.50
e-None of these is correct

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

5. Activity-based management refers to using activity-based cost information to make decisions that increase profits while satisfying customers' needs. (Points : 1)
True or False

6. Companies that use activity-based costing do NOT need to trace direct materials and direct labor to products as is done in traditional costing systems. (Points : 1)
True or False

7. Which of the following statements is CORRECT with respect to variable cost per unit, within the relevant range? (Points : 1)
a- It will increase as production decreases.
b-It will decrease as production decreases.
c- It will remain the same as production levels change.
d- It will decrease as production increases.

8. Dalian Company provides the following information:
Price per unit: $20
Variable cost per unit: $8
Fixed costs per month: $15,000

What is the breakeven point in terms of units sold? (Points : 1)
a- 1,150
b- 1,200
c- 1,875
d- 1,250

9. 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 or False

10. 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)
a- $ 630
b- $ 645
c- $1,095
d- $1,185
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