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BCOST221: COST ACCOUNTING (BSA25) 2nd Sem SY 2021-2022

Enabling Assessment 3

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Question 1
Service and not-for-profit organizations often:

Response:

Do not have activity-based costing systems which are similar to those of manufacturing firms.

Question 2
Which of the following is not an indirect manufacturing cost of producing wooden tables?

Response:

Wood used in the manufacturing process.

Question 3
Activity-based costing for manufacturing operations is used to assign:

Response:

Manufacturing overhead costs to products.

Question 4
Engineering change orders, maintenance of equipment used in manufacturing, and product design costs are
examples of:

Response:

Product-level costs.

Question 5
Customer profitability analysis allows managers to do which of the following?

Response:

Manage each customer’s costs-to-serve.

Question 6
Techno Incorporated manufactures two models of cameras that can be used as cell phones, MPX, and digital
camcorders.
Model Annual Sales in Units
High F 10,900
Great P 16,900

Techno uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime
costs of each product were as follows:

High F Great P
Direct materials $ 38.90 $ 26.30
Direct labor $ 18.50 $ 14.10
Budget factory overhead:
Engineering and Design 2,580 engineering hours $ 412,800
Quality Control 13,010 inspection hours 323,250
Machinery 33,890 machine hours 507,150
Miscellaneous Overhead 26,570 direct labor hours 158,940
Total $ 1,402,140

Techno's controller had been researching activity-based costing and decided to switch to it. A special study
determined Techno's two products have the following budgeted activities:

High F Great P
Engineering and design hours 1,050 1,530
Quality control inspection hours 5,730 7,280
Machine hours 20,370 13,520
Labor hours 12,090 14,480

Using activity-based costing, applied machinery overhead for the High F model per unit is: (Rounded to the
nearest cent.)

Response: $27.97.

Question 7
Which of the following is a batch-level cost driver?

Response:

Number of orders.

Question 8
Procurement costs such as costs of placing orders for materials and paying suppliers are usually classified as:

Response:

Batch-level costs.

Question 9
Invoicing cost is an example of a:

Response:

Customer batch-level cost.

Question 10
Which one of the following is not a recommendation for a successful implementation of Activity-Based
Costing/M?

Response:

All of these answer choices are features of successful Activity-Based Costing/M implementations.

Question 11
If the usage of project activities is not proportional to the number of units produced, then some managers will be
overcharged and others undercharged under:

Response:

Volume-based costing.

Question 12
The major limitation of volume-based costing systems is the use of volume-based:

Response:

Rates.

Question 13
In the context of activity-based costing, cross-subsidization refers to:

Response:

Costing inaccuracies which affect the relative profitability of products.

Question 14
The cost to process monthly statements is an example of a:

Response:

Customer-sustaining cost.

Question 15
Underwood Company is preparing its annual profit plan. As part of its analysis of the profitability of individual
products, the controller estimates the amount of manufacturing overhead that should be assigned to each of the two
product lines from the information given below.

Wall Mirrors Specialty Windows

Total units produced 20 20
Total number of material moves 7 18
Direct labor hours per unit 100 100

Budgeted material-handling costs are $35,000.

The material-handling cost per wall mirror under activity-based costing is:

Response: $490.

Question 16
Costs at the unit-level of activity should be allocated to products using cost drivers that are:

Response:

Volume-related.
Question 17
Tango Company produces and sells two products, Alpha and Zeta. The following information is available relating
to its setup activities:

Alpha Zeta
Units produced 800 66,000
Batch size (units) 40 600
Total direct labor hours 7,000 118,000
Cost per setup $ 7,000 $ 7,000

Use of activity-based costing would allocate the following amounts of setup cost to each unit: (Rounded to the
nearest cent.)

Alpha Zeta
A) $ 175.00 $ 11.67
B) $ 438.00 $ 963.14
C) $ 12.92 $ 13.00
D) $ 83.00 $ 20.00
E) $ 9.00 $ 0.11

Response: Option A

Question 18
In an activity-based costing system, overhead costs are divided into separate:

Response:

Activity cost pools.

Question 19
Which of the following describes a low-value-added activity?

Response:

Producing an unnecessary or unwanted output.

Question 20
The use of activity-based costing is most appropriate for:

Response:

Firms that manufacture multiple product lines.

Question 21
Print Company manufacturers laser printers. It has outlined the following overhead cost drivers:

Overhead Costs Pool Cost Driver Overhead Cost Budgeted Level for Cost Driver
Quality control Number of inspections $ 80,000 1,600
Machine operation Machine hours 180,000 1,500
Materials handling Number of batches 1,200 30
Miscellaneous overhead cost Direct labor hours 63,000 6,300
Print Company has an order for 1,000 laser printers that has the following production requirements:

Number of inspections 150

Machine hours 275
Number of batches 6
Direct labor hours 840

What is the total overhead cost per unit of the laser printers order using activity-based costing? (Rounded to the
nearest cent.)

Response: $49.14.

Question 22
A volume-based rate is an appropriate overhead application base when:

Response:

Only one product is manufactured.

Question 23
Which of the following is not true regarding activity-based costing (ABC) systems?

Response:

Activity-Based Costing identifies more costs as indirect costs than do traditional volume-based systems.

Question 24
Which of the following is a step in developing an Activity-Based Costing System?

Response:

Assign activity costs to cost objects.

Question 25
Which of the following is a description of categorizing related customer costs into cost pools on the basis of cost
drivers?

Response:

Customer cost analysis.

Question 26
Customer lifetime value is concerned with what?

Response:

Long-term value of customer.

Question 27
Techno Incorporated manufactures two models of cameras that can be used as cell phones, MPX, and digital
camcorders.

Model Annual Sales in Units

High F 10,300
Great P 16,300
Techno uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime
costs of each product were as follows:

High F Great P
Direct materials $ 38.30 $ 25.70
Direct labor $ 17.90 $ 13.50
Budget factory overhead:
Engineering and Design 2,460 engineering hours $ 418,200
Quality Control 12,890 inspection hours 308,880
Machinery 33,770 machine hours 506,250
Miscellaneous Overhead 26,450 direct labor hours 132,150
Total $ 1,365,480

Techno's controller had been researching activity-based costing and decided to switch to it. A special study
determined Techno's two products have the following budgeted activities:

High F Great P
Engineering and design hours 990 1,470
Quality control inspection hours 5,670 7,220
Machine hours 20,310 13,460
Labor hours 12,030 14,420

Using activity-based costing, applied engineering and design factory overhead for the Great P model per unit is:
(Rounded to the nearest cent.)

Response: $15.33.

Question 28
Smith Company sells its products at $620 per unit, net 30. The firm's gross margin ratio is 40 percent. The firm has
estimated the following operating costs:

Activity Cost Driver and Rate

Sales calls $ 460 per visit
Order processing $ 130 per order
Deliveries $ 80 per order + $0.50 per mile
Sales returns $ 90 per return and $3 restocking per unit returned

Smith Company has gathered the following data pertaining to activities it performed for two of its customers:

XBT NINTO
Number of orders 16 2
Number of parts per order 560 2,060
Sales returns:
Number of returns 4 10
Number of units returned (per return) 52 50
Number of sales calls 12 10
Miles per delivery 10 20
Shipping terms FOB, Factory FOB, Destination

What is Smith's total customer unit-level cost applicable to XBT as a customer?

Response: $624.

Question 29
A measure of frequency and intensity of demands placed on activities by cost objects is:

Response:

An activity consumption cost driver.

Question 30
Techno Incorporated manufactures two models of cameras that can be used as cell phones, MPX, and digital
camcorders.

Model Annual Sales in Units

High F 11,000
Great P 17,000

Techno uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime
costs of each product were as follows:

High F Great P
Direct materials $ 39.00 $ 26.40
Direct labor $ 18.60 $ 14.20
Budget factory overhead:
Engineering and Design 2,600 engineering hours $ 468,000
Quality Control 13,030 inspection hours 310,560
Machinery 33,910 machine hours 574,940
Miscellaneous Overhead 26,590 direct labor hours 185,500
Total $ 1,539,000

Techno's controller had been researching activity-based costing and decided to switch to it. A special study
determined Techno's two products have the following budgeted activities:

High F Great P
Engineering and design hours 1,060 1,540
Quality control inspection hours 5,740 7,290
Machine hours 20,380 13,530
Labor hours 12,100 14,490

Using activity-based costing, applied quality control factory overhead for the High F model per unit is: (Rounded
to the nearest cent.)

Response: $12.43.

Question 31
When gathering activity data, which of the following would not be a question that Activity-Based Costing project
team members typically ask employees or managers?

Response:

Where the activity takes place

Question 32
Sharp Company manufactures a variety of electric razors for men and women. The company's plant is partially
automated. Listed below is cost driver information used in the product-costing system:

Budgeted Overhead Budgeted Cost Driver

Overhead Cost Pool Cost Driver
Cost Level
Machinery
$ 198,940 28,700 Machine hours
depreciation/maintenance
Factory
142,100 28,700 Machine hours
depreciation/utilities/insurance
Product design 682,080 43,190 Hours in design
Pounds of raw
Material handling 1,307,320 175,000
materials

In addition, Sharp Company expects to spend $568,400 for 8,120 direct labor-hours. Two current product orders
had the following requirements:

Men’s Razors Women’s Razors

Units produced and sold 21,000 24,000
Direct labor hours 50 60
Pounds of raw materials 604 494
Hours in design 40 43
Machine hours 62 47

What is the total manufacturing overhead assigned to the current order for Women's Razors if the firm uses a
volume-based plant wide overhead rate based on direct labor hours?

Response: $17,220.00.

Question 33
Techno Incorporated manufactures two models of cameras that can be used as cell phones, MPX, and digital
camcorders.

Model Annual Sales in Units

High F 11,600
Great P 17,600

Techno uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime
costs of each product were as follows:

High F Great P
Direct materials $ 39.60 $ 27.00
Direct labor $ 19.20 $ 14.80
Budget factory overhead:
Engineering and Design 2,720 engineering hours $ 462,400
Quality Control 13,150 inspection hours 364,000
Machinery 34,030 machine hours 575,960
Miscellaneous Overhead 26,710 direct labor hours 159,360
Total $ 1,561,720

Techno's controller had been researching activity-based costing and decided to switch to it. A special study
determined Techno's two products have the following budgeted activities:

High F Great P
Engineering and design hours 1,120 1,600
 High F Great P
Quality control inspection hours 5,800 7,350
Machine hours 20,440 13,590
Labor hours 12,160 14,550

Using activity-based costing, applied miscellaneous overhead for the High F model per unit is: (Rounded to the
nearest cent.)

Response: $6.25.

Question 34
Implementing activity-based costing does not require which of the following groups?

Response:

Marketers.

Question 35
An adaptation of activity-based costing that simplifies costing by assigning resource costs directly to cost objects is
called:

Response:

Time-Driven activity-based costing.

Question 36
A firm has many products, some produced in an automated production process and some produced in a manual
production process. Using direct labor hours to assign manufacturing overhead to a product manufactured with a
highly automated process is likely to:

Response:

Understate overhead of the product.

Question 37
Techno Incorporated manufactures two models of cameras that can be used as cell phones, MPX, and digital
camcorders.

Model Annual Sales in Units

High F 11,700
Great P 17,700

Techno uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime
costs of each product were as follows:

High F Great P
Direct materials $ 39.70 $ 27.10
Direct labor $ 19.30 $ 14.90
Budget factory overhead:
Engineering and Design 2,740 engineering hours $ 411,000
Quality Control 13,170 inspection hours 338,260
Machinery 34,050 machine hours 610,020
Miscellaneous Overhead 26,730 direct labor hours 132,850
Total $ 1,492,130
Techno's controller had been researching activity-based costing and decided to switch to it. A special study
determined Techno's two products have the following budgeted activities:

High F Great P
Engineering and design hours 1,130 1,610
Quality control inspection hours 5,810 7,360
Machine hours 20,450 13,600
Labor hours 12,170 14,560

What is the overhead application rate using the firm's volume-based costing system? (Rounded to the nearest
percent or cents.)

Response: 305 percent of direct labor cost.

Question 38
Customer profitability analysis:

Response:

Helps identify actions that affect customer profitability.

Question 39
Sharp Company manufactures a variety of electric razors for men and women. The company's plant is partially
automated. Listed below is cost driver information used in the product-costing system:

Budgeted Overhead Budgeted Cost Driver

Overhead Cost Pool Cost Driver
Cost Level
Machinery
$ 384,640 28,378 Machine hours
depreciation/maintenance
Factory
326,080 28,378 Machine hours
depreciation/utilities/insurance
Product design 752,640 42,350 Hours in design
Pounds of raw
Material handling 1,174,000 146,750
materials

In addition, Sharp Company expects to spend $532,800 for 8,325 direct labor-hours. Two current product orders
had the following requirements:

Men’s Razors Women’s Razors

Units produced and sold 22,000 29,000
Direct labor hours 40 50
Pounds of raw materials 759 649
Hours in design 30 33
Machine hours 68 53

Using activity-based costing, how much batch-level overhead is assigned to the current order for Women's Razors
based on pounds of raw materials?

Response: $5,192.

Question 40
Which of the following would be the most appropriate cost driver to allocate factory electricity costs to products?

Response:

Machine hours.
Question 41
Which of the following has the weakest linkage between activity and cost driver?

Model Cost Driver

A) Machine setup Number of setups
B) Machine maintenance Machine hours
C) Lighting on shop floor Number of kilowatt-hours
D) Quality control Square feet of floor space
E) Materials Handling Weight of materials in process

Response:

Option D

Question 42
More accurate and informative product costs describes which ebenfit of activity-based costing?

Response:

Better profitability measures.

Question 43
If a costing system uses a single base to allocate overhead costs that are the result of several production activities:

Response:

Products that use relatively more of this base tend to be overcosted.

Question 44
Using a volume-based overhead rate based on machine hours to assign manufacturing overhead to a product line
that uses relatively few machine hours is likely to:

Response:

Underapply overhead to the product line.

Question 45
Purchase order, set-up, and inspection costs are examples of:

Response:

Batch-level costs.

Question 46
General corporate sales expenditures are:

Response:

Sales-sustaining costs.

Question 47
Which of the following is not a level that a firm classifies its activities at?

Response:

corporate-level
Question 48
Multistage activity-based costing is used when:

Response:

There are complex relationships among the activities.

Question 49
In an organization that makes furniture, which of the following is a high value-added activity?

Response:

Using direct materials in production.

Question 50
Techno Incorporated manufactures two models of cameras that can be used as cell phones, MPX, and digital
camcorders.

Model Annual Sales in Units

High F 10,200
Great P 16,200

Techno uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime
costs of each product were as follows:

High F Great P
Direct materials $ 38.20 $ 25.60
Direct labor $ 17.80 $ 13.40
Budget factory overhead:
Engineering and Design 2,440 engineering hours $ 402,600
Quality Control 12,870 inspection hours 295,780
Machinery 33,750 machine hours 607,320
Miscellaneous Overhead 26,430 direct labor hours 158,520
Total $ 1,464,220

Techno's controller had been researching activity-based costing and decided to switch to it. A special study
determined Techno's two products have the following budgeted activities:

High F Great P
Engineering and design hours 980 1,460
Quality control inspection hours 5,660 7,210
Machine hours 20,300 13,450
Labor hours 12,020 14,410

Using activity-based costing, applied engineering and design factory overhead for the High F model per unit is:
(Rounded to the nearest cent.)

Response: $15.85.

Question 51
The management of activities to improve the value received by the customer and the competitiveness of the
organization is:
Response:

Activity-based management.

Question 52
Techno Incorporated manufactures two models of cameras that can be used as cell phones, MPX, and digital
camcorders.

Model Annual Sales in Units

High F 11,700
Great P 17,700

Techno uses a volume-based costing system to apply factory overhead based on direct labor dollars. The unit prime
costs of each product were as follows:

High F Great P
Direct materials $ 39.70 $ 27.10
Direct labor $ 19.30 $ 14.90
Budget factory overhead:
Engineering and Design 2,740 engineering hours $ 411,000
Quality Control 13,170 inspection hours 338,260
Machinery 34,050 machine hours 610,020
Miscellaneous Overhead 26,730 direct labor hours 132,850
Total $ 1,492,130

Techno's controller had been researching activity-based costing and decided to switch to it. A special study
determined Techno's two products have the following budgeted activities:

High F Great P
Engineering and design hours 1,130 1,610
Quality control inspection hours 5,810 7,360
Machine hours 20,450 13,600
Labor hours 12,170 14,560

Using activity-based costing, applied machinery overhead for the Great P model per unit is: (Rounded to the
nearest cent.)

Response: $13.77.

Question 53
A company using a volume-based overhead assignment (allocation) method will tend to:

Response:

Understate the cost of low volume products.

Question 54
Metal Company budgeted $568,000 manufacturing direct wages, 3,000 direct labor hours, and had the following
manufacturing overhead:

Overhead Cost Budgeted Overhead Budgeted Level for Cost Overhead Cost
Pool Cost Driver Driver
Materials
$ 225,000 4,500 pounds Weight of materials
handling
Overhead Cost Budgeted Overhead Budgeted Level for Cost Overhead Cost
Pool Cost Driver Driver
Machine setup 15,600 520 setups Number of setups
Machine repair 1,650 33,000 machine hours Machine hours
Number of
Inspections 17,400 290 inspections
inspections

Requirements for Job #971 which manufactured 4 units of product:

Direct labor 25 hours

Direct materials 180 pounds
Machine setup 40 setups
Machine hours 16,300 machine hours
Inspections 15 inspections

The total overhead of Job #971 under the Activity-Based Costing costing is:

Response: $11,915.

Question 55
The Activity-Based costs assigned to cost objects are based on what?

Response:

Planned levels of spending and capacity usage.

Question 56
What is a customer unit-level cost?

Response:

resources consumed for each unit sold to a customer.

Question 57
Sharp Company manufactures a variety of electric razors for men and women. The company's plant is partially
automated. Listed below is cost driver information used in the product-costing system:

Budgeted Overhead Budgeted Cost Driver

Overhead Cost Pool Cost Driver
Cost Level
Machinery
$ 198,793 28,399 Machine hours
depreciation/maintenance
Factory
141,995 28,399 Machine hours
depreciation/utilities/insurance
Product design 542,700 43,120 Hours in design
Pounds of raw
Material handling 1,306,354 224,000
materials

In addition, Sharp Company expects to spend $567,980 for 8,114 direct labor-hours. Two current product orders
had the following requirements:

Men’s Razors Women’s Razors

Units produced and sold 20,000 23,000
Direct labor hours 50 60
Pounds of raw materials 622 512
Hours in design 40 43
Machine hours 70 55
Using activity-based costing, how much product-level overhead is assigned to the current order for Men's Razors?

Response: 503.43.

Question 58
Which of the following is most likely to be the cost driver for the packaging and shipping activity?

Response:

Number of orders.

Question 59
The cost of unused capacity can be determined using activity-based costing (ABC) for the purpose of:

Response:

Helping managers plan the short and longer-term use of the operating resources.

Question 60
Effective implementation of activity-based costing (ABC) requires:

Response:

Support of top management and key employees.