ACCT434 Advanced Cost Management: Week 1 Activity Based Costing (Version 4)

Reminder: There are several versions of this week’s questions, please make sure you have reviewed and compared our questions with your questions.

ACCT434 Advanced Cost Management
Week 1 Activity Based Costing (Version 4)

1. (TCO 1) In refining a cost system, (Points : 3)
total direct costs are unchanged because they can be traced to the product in an economically feasible way and traced costs are more accurate.
the costs are grouped in homogeneous pools of the same or similar amounts.
the criterion of cause and effect is used to relate indirect costs to a factor that systematically links to a cost object.
the organization looks for cost-allocation bases that will provide a uniform spreading of indirect costs to each product.

2. (TCO 1) Building or plant security is an example of (Points : 3)
unit-level costs.
batch-level costs.
product-sustaining costs.
facility-sustaining costs.

3. (TCO 1) Evaluating customer reaction of the trade-off of giving up some features of a product for a lower price would best fit which category of management decisions under activity-based management? (Points : 3)
Pricing and product-mix decisions
Cost reduction decisions
Design decisions
Discretionary decisions

4. (TCO 1) Overcosting of a product is MOST likely to result from (Points : 3)
misallocating direct labor costs.
overpricing the product.
undercosting another product.
understating total product costs.

5. (TCO 1) The MOST likely example of a batch-level cost is (Points : 3)
utility costs.
machine repairs.
product-designing costs.
setup costs.

6. (TCO 1) Unit-level cost drivers are most appropriate as an overhead assignment base when (Points : 3)
several complex products are manufactured.
only one product is manufactured.
direct labor costs are low.
factories produce a mix of products.

7. (TCO 1) A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis (Points : 3)
can be used to eliminate non-value-added activities.
is easy to analyze and interpret.
takes the choices and judgment challenges away from the managers.
emphasizes how managers can achieve higher sales.

8. (TCO 1) The UNIQUE feature of an ABC system is the emphasis on (Points : 3)
costing individual jobs.
department indirect-cost rates.
multiple-cost pools.
individual activities.

9. (TCO 1) For service organizations that bill customers at a predetermined average rate, activity-based cost systems can help to (Points : 3)
clarify appropriate cost assignments for various service activities.
identify the profitability of various service activities.
Both A and B
None of the above

10. (TCO 1) Danielle Company produces a special spray nozzle. The budgeted indirect total cost of inserting the spray nozzle is $180,000. The budgeted number of nozzles to be inserted is 60,000. What is the budgeted indirect cost allocation rate for this activity? (Points : 3)
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