1.

Which of the following would activity-based costing most likely lead to

A) Cutting back on high-volume products that appear to be unprofitable.
B) Raising the sale price of low-volume products.
C) Raising the sale price of high-volume products.
D) Expanding low-volume products that appear to be profitable.
E) Distorting product costs.

2. Which of the following would likely not be a cost driver?

A) Product orders
B) Product inspections
C) Cost accountant’s labor hours
D) Material requisitions
E) Machine setups

3. Activity-based costing systems:

A) use a single, volume-based cost driver.
B) assign overhead to products based on the products' relative usage of direct labor.
C) often reveal products that were under- or over-costed by traditional costing systems.
D) typically use fewer cost drivers than more traditional costing systems.
E) have a tendency to distort product costs.

4. Overton Enterprises is converting to an activity-based costing system. It wishes to depict the various
activities in its manufacturing process along with the activities' relationships. Which of the following is a
tool that the company can use to accomplish this task
A) Storyboards.
B) Activity relationship charts (ARCs).
C) Decision trees.
D) Simulation games.
E) Process organizers.

5. Successful adoptions of activity-based costing typically occur when companies rely heavily on:
A) finance personnel.
B) accounting personnel.
C) manufacturing personnel.
D) office personnel.
E) multidisciplinary project teams
6. Which of the following statements is (are) true about non-value-added activities?
1.I. Non-value-added activities are often unnecessary and dispensable.
2.II. Non-value-added activities may be necessary but are being performed in an inefficient and
improvable manner.
3.III. Non-value-added activities can be eliminated without deterioration of product quality,
performance, or perceived value.
A) I only
B) II only
C) III only
D) I and II
E) I, II, and III

7. Generally inspecting time is considered ____________ and delivering the product is considered
_____________
A) value-added/non-value added.
B) non-value-added/value-added.
C) non-value-added/non-value-added.
D) value-added/value-added.
E) None of these answer choices are correct.

8. During a recent accounting period, Falcon Express’ shipping department processed 26 orders. Each
order typically takes four hours to complete. However, the average time increased to five hours because
of various departmental inefficiencies. If shipping labor is paid $14 per hour, the company's non-value-
added cost would be:
A) $0.
B) $56.
C) $364.
D) $1,456.
E) $1,820.

9. Flagler Corporation takes eight hours to complete the setup process for a certain electrical
component, with the setup cost averaging $150 per hour. If the company's competitor can accomplish
the same process in six hours, Flagler’s non-value-added cost would be:
A) $0.
B) $150.
C) $300.
D) $900.
E) $1,200.

10. Willow Springs produces various wooden bookcases, tables, storage units, and chairs. Which of the
following would be included in a listing of the company's non-value-added activities?
A) Assembly of tables.
B) Staining of storage units.
C) Transfer of chairs from the assembly line to the staining facility.
D) Storage of completed bookcases in inventory.
E) Transfer of chairs from the assembly line to the staining facility and storage of completed
bookcases in inventory.
11. Motor Mike builds recreational motor homes. All of the following activities add value to the finished
product except:
A) installation of carpet.
B) assembly of the frame to the chassis.
C) storage of the vehicle in the sales area.
D) addition of exterior lights.
E) final painting and polishing.

12. An example of a customer-value-added activity is:

A) final painting and polishing of the product.
B) installation of a computerized human resource management module.
C) shortening the customers' billing cycle.
D) addition of an employee hotline for workplace complaints.
E) maintenance of an adequate safety stock.

13. Which of the following is not an example of a business-value-added activity?

A) Adopting bar-code technology in the receiving department.
B) Installation of a computerized human resource management module.
C) Shortening the customers' billing cycle.
D) Addition of an employee hotline for workplace complaints.
E) Final painting and polishing of the product.

14. Sleek, Inc. is a manufacturer that assigns cost using activity-based costing principles. Activities have
been identified and classified as being either value-added or non-value-added as to each product. Which
of the following activities used in Sleek’s production process is non-value-added?
A) raw materials storage activity.
B) heat treatment activity.
C) drill press activity.
D) molding activity.
E) engineering design activity.

15. Customer profitability analysis is tied closely to:

A) just-in-time systems.
B) activity-based costing.
C) job costing.
D) process costing.
E) operation costing.

16. When determining customer profitability, activity-based costing can be used to analyze:
A) orders processed.
B) sales visits.
C) special packaging and handling.
D) billing and collections.
E) All of the answers are correct.

17. Generally speaking, companies prefer doing business with customers who
 A) order small quantities rather than large quantities.
B) often change their orders.
C) require special packaging or handling.
D) request normal delivery times.
E) need specialized engineering design changes.

18. Which of the following can have a negative impact on a particular sale's profitability?
A) Number of required sales contacts (phone calls, visits, etc.).
B) Special shipping instructions.
C) Accounts receivable collection time.
D) Purchase-order changes.
E) All of the answers are correct.

19. Of the following organizations, activity-based costing (ABC) cannot be used by:
A) manufacturers.
B) financial-services firms.
C) book publishers.
D) hotels.
E) None of these are correct, as all these organizations can use ABC.

20. A hospital administrator is in the process of implementing an activity-based-costing system. Which

of the following tasks would not be part of this process?
A) Identification of cost pools.
B) Calculation of pool rates.
C) Assignment of cost to services provided.
D) Identification of cost drivers.
E) None of the answers is correct.
21. Which of the following cost drivers would best be associated with the activity of physician time
in a medical clinic?
A) Number of new patient visits.
B) Number of continuing patient visits.
C) Physician minutes with a patient.
D) Number of line items on the clinic’s bill.
E) The number of accreditations held by the clinic.

22. Which of the following best explains the main advantages of time-driven-activity-based costing
for services over the use of conventional ABC?
A) The number of services can more easily be expanded than under conventional ABC, since
costs are assigned to unused capacity.
B) Theoretical capacity, used in this type of costing, allows service companies a better
method to assess quality control than does conventional ABC.
C) Time-based resource and activity data is easy to collect and practical capacity is used by
time-driven-activity-based costing.
D) The number of line items on a service’s bill is minimized and practical capacity is used by
time-driven-activity-based costing.
E) This type of costing allows service companies better information since their objectives
when using ABC are different than those of manufacturing firms.