MAS – 08: ABC & BALANCED SCORECARD (64 MCQs)

1. An objective of activity-based management (ABM) is to

a. Eliminate the majority of centralized activities in an organization
b. Institute responsibility accounting systems in decentralized organizations
c. Reduce or eliminate non-value added activities done to make a product or provide a service
d. All of the above
2. A tool that focuses on manufacturing processes and seeks to optimize the activities performed within the process is
a. Process value analysis c. Benchmarking
b. Re-engineering d. None of the above
3. What is a non-value-adding costs?
a. Usually direct to a product c. Unavoidable
b. The same as a discretionary cost d. Not essential to manufacturing a product
4. What would be a value-added employee in a construction firm?
a. An accountant c. A painter
b. A secretary d. All of the above
5. “Machine hours” is an example of a (n) ___________ activity.
a. Batch-level c. Product-level
b. Facility-level d. Unit-level
6. Machine setup is an example of a (n) ___________ activity.
a. Batch-level c. Product-level
b. Facility-level d. Unit-level
7. TV Advertisement is an example of a (n) __________ activity.
a. Batch-level c. Product-level
b. Facility-level d. Unit-level
8. Landscaping is an example of a (n) ___________ activity.
a. Batch-level c. Product-level
b. Facility-level d. Unit-level
9. Which level of costs should NOT be included in product costs (mainly because indirect to product line segment) for internal management
reports that are used for decision making?
a. Unit-level activities c. Product-level activities
b. Batch-level activities d. Facility-level activities
10. These activities arise because a company does or maintains a particular type of business or product.
a. Batch-level activities c. Sustaining activities
b. Facility-sustaining activities d. Unit-level activities
11. Property taxes and insurance is an example of a cost that would be considered to be
a. Unit-level c. Product-level
b. Batch-level d. Organization-sustaining
12. Which of the following is typically regarded as cost driver in traditional costing practices?
a. Number of purchase order processed c. Number of transactions processed
b. Number of customers served d. Number of direct labor hours worked
13. Activity-based costing(ABC)
a. Requires the identification of cost drivers
b. Is used only in just-in-time (JIT) operations
c. Applied only to discretionary fixed costs
d. Does not help to identify activities as value-adding or non-value-adding
14. A company using activity-based costing
a. Tries to identify cost drivers
b. Is probably using the JIT philosophy
c. Allocates all costs to individual products
d. Look for the activity with which total costs are most closely associated
15. What is driver cost?
a. An activity that can be used to predict cost changes
b. The attempt to control expenditures at a reasonable level
c. The person who gathers and transfers cost data to the management accountant
d. Any activity that causes costs to be incurred
16. What is a cost pool?
a. All costs of a production department
b. Over applied or under-applied overhead costs
c. The material and labor cost used on a particular job
d. A group of overhead costs driven by the same activity
17. In ABC, in preliminary costs allocations assign cost to
a. Departments c. Products
b. Processes d. Activities
18. In ABC in final cost allocations assign costs to
a. Departments c Products
b. Processes d. Activities
19. Lebanon manufacturer’s two versions of a product. Production and cost information show the following:
Model A Model B
Unit produced 100 200
Material moves 10 40
Direct labor hours per unit 1 2
Under ABC, what is the materials handling costs of P100,000 allocated to unit of Model A?
a. P10 c. P333
b. P200 d. P400
20. Iran Manufacturing produces three products. Production and cost information show the following:
Model F Model A Model Q
Units produced 1,000 3,000 6,000
Direct labor hours 2,000 1,000 2,000
Number of inspections 20 30 50
Using ABC, what would be the inspection costs of P50,000 allocated to each unit of Model F?
 a. P5.00 c. P20.00
b. P10.00 d. Some other number
21. A company using activity-based overhead rates
a. Will usually have higher budget variances than one using a single rate
b. Will usually have higher volume variances than one using a single rate
c. Cannot compute fixed and variable components of overhead cost
d. Should have better information for planning and control than one using a single rate
22. The resource utilized by a given product divided by the total amount of the resource available is called
a. Activity driver c. Cost object
b. Consumption ratio d. Sustaining activity
23. Syria Inc. produces three products. Production and cost information is as follows:
Model Y Model O Model U
Units produced 2,000 6,000 12,000
Direct labor hours 4,000 2,000 4,000
Number of setups 100 150 250
What would be the consumption ratio for the number of setups?
Y O U Y O U
a. 40% - 20% - 40% c. 10% - 30% - 60%
b. 20% - 30% - 50% d. Some other numbers
24. Iraq Company uses activity-based costing to determine unit product costs for external reports. The company has two products: A and B. The
annual production and sales of Product A is 10,000 units and Product B is 4,000 units. There are three overhead activity centers, with
estimated overhead costs and expected activity as follows:
Activity Center Estimated Overhead Costs Product A activity Product B activity
Activity 1 P25,000 150 100
Activity 2 P65,000 800 200
Activity 3 P90,000 1,000 2,000
What is the overhead cost per unit of Product A under activity-based costing (ABC)?
a. P6.00 c. P1.50
b. P9.70 d. P3.00
Items 25 and 26 are based on the following information
Zaire Company is preparing its annual profit plan. As part of its analysis of the profitability of individual products, the controller estimates the
amount of overhead that should be allocated to the individual product lines from the information given as follows:
Wall Mirrors Specialty Windows
Units produced 25 25
Materials moves per product line 5 15
Direct labor hours per unit 200 200
Budgeted materials handling costs P50,000
25. Under a costing system that allocates overhead on the basis of direct labor hours, what would be the materials handling costs allocated to
one unit of wall mirrors?
a. P500 c. P2,000
b. P1,000 d. P5,000
26. Under ABC, what would be the materials handling costs allocated to one unit of wall mirrors?
a. P500 c. P1,500
b. P1,000 d. P2,500
27. Somalia Co. has used a traditional cost accounting system to apply quality costs uniformly to all products at a rate of 15% of direct labor cost.
Monthly direct labor cost for its main product is P30,000. In an attempt to distribute quality control cost more equitably, Somalia is
considering ABC. The monthly data shown below have been gathered for the main product. The three activities are (1) income materials
inspection (2) in-process inspection and (3) product certification. Cost are allocated to each activity on the basis of cost drivers.
Activity Cost Driver Cost Rate Quantity for Main Product
(1) Number of types of materials P12 per type 12 types
(2) Number of units P0.14 per unit 17,500 units
(3) Number of orders P77 per unit 30 orders
What is the monthly quality control cost assigned to the main product using ABC?
a. P150 per order c. P404 lower than using the traditional system
b. P4,500 d. P404 higher than using the traditional system
28. Assigning overhead to jobs using a predetermined overhead rate is called
a. Application c. Product costing
b. Budgeting d. Job-order costing
29. A company allocates overhead to jobs in process using direct labor cost, raw material costs, and machine hours.
The overhead application rates for the current year are
100% of direct labor
20% of raw materials
P117 per machine hours
A particular production run incurred the following costs:
Direct labor, P8,000
Raw materials, P2,000
A total of 140 machine hours were required for the production run
What is the total cost that would be charged to the production run?
a. P18,000 c. P24,780
b. P18,400 d. P34,780
30. Afghanistan Company uses ABC to compute product costs for external reports. The company has three activity centers and applied overhead
using predetermined overhead rates for each activity center. Estimated costs and activities for the current year are presented below for the
three activity centers:
Estimated overhead cost Expected activity
Activity 1 P61,387 2,300
Activity 2 P34,076 2,800
Activity 3 P69,075 2,500
Actual costs and activities for the current year were as follows:
Actual overhead cost Actual activity
Activity 1 P61,392 2,290
Activity 2 P33,941 2,795
 Activity 3 P69,080 1,340
What was the amount of overhead over or under-applied for activity 1 during the year?
a. P271.90 over-applied c. P5.00 over-applied
b. P271.90 under-applied d. P5.00 under-applied
31. The use of activity-based costing normally results in
a. Greater unit costs for low-volume products than is reported than is reported by traditional product costing
b. Lower unit costs for low-volume products than is reported by traditional product costing
c. Decreased setup costs being charged to volume products
d. Equalizing setup costs for all product lines
32. Predetermined overhead rates are based on activity measured by
a. Actual overhead cost and actual activity c. Budgeted overhead cost and actual activity
b. Actual overhead cost and budgeted activity d. Budgeted overhead cost and budgeted activity
33. What is the numerator in computing a predetermined overhead rate?
a. Budgeted manufacturing overhead cost c. Budgeted activity
b. Actual manufacturing overhead cost d. Fixed manufacturing overhead cost
34. What is the denominator in computing a predetermined overhead rate?
a. Budgeted manufacturing overhead cost c. Budgeted activity
b. Actual manufacturing overhead cost d. Fixed manufacturing overhead cost
35. A predetermined overhead rate cannot be used
a. If a company does not budget its overhead costs
b. By a company that uses job-order costing
c. In a multi-product company
d. By a highly automated company where labor is a minor part of product cost
36. Angola applies overhead based on direct labor cost. It had budgeted factory overhead of P500,000 and budgeted direct labor of P250,00.
Actual overhead was P525,000 while actual labor cost was P270,000. Overhead was:
a. Over-applied by P15,000 c. Over-applied by P25,000
b. Over-applied by P20,000 d. Under-applied by P20,000
37. Sudan Company applies overhead at P4 per machine hour. During March, it worked 10,000 hours and over-applied overhead by P3,000.
Actual overhead was:
a. P43,000 c. P37,000
b. P40,000 d. P35,000
38. Rwandan Company applies overhead at P8 per direct labor hour, of which P3 is variable overhead. Budgeted direct labor hours were 90,000.
Budgeted fixed overhead was:
a. P270,000 c. P720,000
b. P450,000 d. P810,000
39. Sahara Company applied overhead at P6 per direct labor hour. In March, Sahara incurred overhead of P144,000. Under-applied overhead
was P6,000. How many direct labor hours did Sahara work?
a. 25,000 c. 23,000
b. 24,000 d. 22,000
40. Machine hours used to set the predetermined overhead rate were 50,000, actual hours were 48,000, and overhead applied was P120,000.
Budgeted overhead for the year was:
a. P115,200 c. P120,000
b. P118,000 d. P125,000
41. The appropriate method for the disposition of under-applied or over-applied factory overhead
a. Is to cost of goods sold only
b. Is to finished goods inventory only
c. Is apportioned to cost of goods sold and finished goods inventory
d. Depends on the significance of the amount
42. A report that measures financial and non-financial performance measures for various units in a single report is a (n):
a. Balanced scorecard c. Imbalanced scorecard
b. Financial report scorecard d. Unbalanced scorecard
43. Customer-satisfaction measures are example of
a. Goal-congruence approach c. Financial report scorecard approach
b. Balanced scorecard approach d. Investment success approach
44. In balanced scorecard, a survey of employee satisfaction is a potential measure in which of the four perspectives?
a. Financial c. Internal business processes
b. Customer d. Learning and growth
45. Which is considered to be a performance measurement that is a non-financial rather than a financial measure?
a. Return on investment c. Customer satisfaction
b. Economic value added d. Profit margin
46. Which of the following is an example of an efficiency measure?
a. The rate of absenteeism
b. The goal of becoming a leader manufacturer
c. The number of insurance of insurance claims processed per day
d. The rate of customer complaints
47. Which performance measure would be part of those used for internal business processes perspective?
a. Cycle time c. Hours of training per employee
b. Employee satisfaction d. Customer retention
48. Which of the following represents value-added time in the manufacturing cycle?
a. Inspection time c. Move time
b. Queue time d. Process time
Items 49 to 51 are based on the following information
China Manufacturing Corporation has the following information:
Moving time 8 days
Inspection time 2 days
Processing time 10 days
Storage time 30 days
49. What is the total amount of value-added time?
a. 10 days c. 40 days
b. 30 days d. 50 days
50. What is the product’s cycle time?
 a. 10 days c. 40 days
b. 30 days d. 50 days
51. What is the manufacturing cycle efficiency (MCE)?
a. 25.0% c. 20.0%
b. 80.0% d. 60.0%
52. These are quality costs incurred to determine whether particular units of product meet quality standards.
a. Appraisal costs c. Internal failure costs
b. Prevention costs d. External failure costs
53. These are quality costs incurred when company determines units that do not meet quality standards.
a. Appraisal costs c. Internal failure costs
b. Prevention costs d. External failure costs
54. These are quality costs incurred when a unit of product fails to perform to customer expectations.
a. Appraisal costs c. Internal failure costs
b. Prevention costs d. External failure costs
55. The cost of disposing of defective units would be classified as a (n):
a. Preventive cost c. Internal failure costs
b. Appraisal costs d. External failure costs
56. The cost of statistical quality control in a product quality cost system is categorized as a(n)
a. Internal failure cost c. External failure cost
b. Training cost d. Appraisal cost
57. The cost of scrap, rework, and tooling changes in a product quality cost system is categorized as a (n)
a. Training cost c. Internal failure cost
b. External failure cost d. Prevention cost
58. The cost of processing customer complaints
a. Appraisal costs c. Internal failure costs
b. Prevention costs d. External failure costs
59. As prevention costs increase, other costs of quality generally
a. Are not affected c. Decrease
b. Increase but a slower pace d. Change, but the direction cannot be predicted
60. An increase in appraisal costs in a quality improvement would usually have the following initial effects on (I) internal failure costs and (II)
external failure costs:
a. (I) Increase (II) Increase c. (I) Decrease (II) Increase
b. (I) Increase (II) Decrease d. (I) Decrease (II) Decrease
61. All of the following would generally be included in a cost-of-quality report, EXCEPT
a. Warranty claims c. Supplier evaluations
b. Design engineering d. Lost contribution margin
62. Management of a company is attempting to build a reputation as a world-class manufacturer of quality products. Which of the following
measures would NOT be used by the firm to measure quality?
a. The percentage of shipments returned by customers because of poor quality
b. The number of parts shipped per day
c. The number of defective parts per million
d. The percentage of products passing quality tests the first time
63. The primary reason for adopting TQM was to achieve
a. Greater customer satisfaction c. Reduced delivery charges
b. Reduced delivery time d. Greater employee participation
64. What is the ultimate test of a quality product or service?
a. Whether the product is able to reduce the conformance costs
b. Whether the product is able to reduce the non-conformance costs
c. Whether the product is able to reduce the conformance and non-conformance costs
d. Whether the product meets or exceeds the customer’s expectation
65. Quality is achieved more economically if the company focuses on
a. Appraisal costs c. Internal failure costs
b. Prevention costs d. External failure costs
66. Quality cost index is often to measure and analyse cost of maintaining a given level of quality. One example of a quality cost index, which
uses a direct labor base, is computed as:
Quality cost index = (Total quality costs/ Direct labor costs) X 100
The following quality cost data were collected for May and June:
May June
Prevention costs P4,000 5,000
Appraisal costs 6,000 5,000
Internal failure costs 12,000 15,000
External failure costs 14,000 11,000
Direct labor costs 90,000 100,000
Based upon these cost data, the quality cost index
a. Decrease 4 points from May to June c. Increase 10 points from May to June
b. Was unchanged from May to June d. Decreased 10 points from May to June