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Exam 4: Activity-Based Costing

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Question 51

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ABC usually results in less appropriate management decisions.

A) True
B) False

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Question 52

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Each of the following is a limitation of activity-based costing except that

A) it can be expensive to use.
B) it decreases control over overhead costs
C) it is complex and can be difficult to understand
D) some arbitrary allocations continue.

E) A) and B)
F) None of the above

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Question 53

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Activity-based costing allocates overhead to multiple cost pools and assigns the cost pools to products using cost drivers.

The first step in activity-based costing is to assign overhead costs to products, using cost drivers.

Zimmerman Company manufactures two products, Board 12 and Case 165. Zimmerman's overhead costs consist of setting up machines, $2,400,000; machining, $5,400,000; and inspecting, $1,800,000. Information on the two products is: $\begin{array}{lrr}&\text { Board } 12&\text { Case } 165\\\text { Direct labor hours } & 15,000 & 25,000 \\\text { Machine setups } & 600 & 400 \\\text { Machine hours } & 24,000 & 26,000 \\\text { Inspections } & 800 & 700\end{array}$ Overhead applied to Board 12 using traditional costing using direct labor hours is

Low-volume products often require more special handling than high-volume products.

ABC is generally more costly to implement than traditional costing.

Boswell Company manufactures two products, Regular and Supreme. Boswell's overhead costs consist of machining, $3,000,000; and assembling, $1,500,000. Information on the two products is: $\begin{array} { l c c } & \text { Regular } & \text { Supreme } \\\text { Direct labor hours }& 10,000 & 15,000 \\\text { Machine hours } & 10,000 & 30,000 \\\text { Number of parts } & 90,000 & 160,000\end{array}$ Overhead applied to Regular using activity-based costing is

The presence of any of the following factors would suggest a switch to ABC except when

What sometimes makes implementation of activity-based costing difficult in service industries is that a smaller proportion of overhead costs are company-wide costs.

An activity that has a direct cause-effect relationship with the resources consumed is a(n)

An "Ordering and Receiving Materials" cost pool would most likely have as a cost driver:

Which of the following factors would suggest a switch to activity-based costing?

Which account is used in just-in-time processing?

Ben Gordon, Inc. manufactures 2 products, wheels and seats. The company has estimated its overhead in the assembling department to be $660,000. The company produces 300,000 wheels and 600,000 seats each year. Each wheel uses 2 parts, and each seat uses 3 parts. How much of the assembly overhead should be allocated to wheels?

A well-designed activity-based costing system starts with

Quality control is less important in just-in-time than in traditional manufacturing philosophies.

Which of the following statements is false?

Boswell Company manufactures two products, Regular and Supreme. Boswell's overhead costs consist of machining, $3,000,000; and assembling, $1,500,000. Information on the two products is: $\begin{array} { l c c } & \text { Regular } & \text { Supreme } \\\text { Direct labor hours }& 10,000 & 15,000 \\\text { Machine hours } & 10,000 & 30,000 \\\text { Number of parts } & 90,000 & 160,000\end{array}$ Overhead applied to Regular using traditional costing using direct labor hours is

The overall objective of installing ABC in service firms is no different than it is in a manufacturing company.