361 Chapter 4 MC Solutions

Chapter 4—Activity-Based Management and Activity-Based Costing MULTIPLE CHOICE 1.

An objective of activity-based management is to a. eliminate the majority of centralized activities in an organization. b. reduce or eliminate non-value-added activities incurred to make a product or provide a service. c. institute responsibility accounting systems in decentralized organizations. d. all of the above

ANS: NAT: LOC: 2.

OBJ:

4-1

B PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-1

Easy

OBJ:

4-1

Lead time minus production time is equal to a. idle time. b. storage time. c. non-value-added time. d. value-added time.

ANS: NAT: LOC: 4.

Easy

Global competition has forced American industry to a. seek increased governmental regulation. b. improve product quality and customer service. c. narrow product lines. d. decrease its social responsibility.

ANS: NAT: LOC: 3.

B PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Which of the following statements about business-value-added activities (BVAs) is true? a. BVAs reflect the same processes in all organizations. b. A process map will not reflect BVAs because such activities are not essential to process performance. c. BVAs are actually value-added activities of an organization that relate to administrative processes. d. It is impossible to eliminate all BVAs in an organization.

ANS: D PTS: 1 DIF: Easy OBJ: 4-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling 5.In the pharmaceutical or food industries, quality control inspections would most likely be viewed as a. non-value-added activities. b. business-value-added activities. c. value-added-activities. d. process-efficiency activities.

ANS: NAT: LOC: 6.

Difficult

OBJ:

4-1

OBJ:

4-1

The sum of the non-value-added time and the value-added time equals a. inspection time. b. production time. c. the product life cycle. d. cycle time.

ANS: NAT: LOC: 7.

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

The amount of time between the development and the production of a product is a. the product life cycle. b. lead time. c. production time.

1

Chapter 4 d.

value-added time.

ANS: NAT: LOC: 8.

2

B PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

a. b. c. d.

ANS: NAT: LOC:

Yes No Yes No

ANS: NAT: LOC:

Yes No Yes No

Easy

4-1

Value-Added Costs No Yes Yes No

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-1

For a company that manufactures candy, how would the costs of product inspection be classified? Direct Costs a. b. c. d.

ANS: NAT: LOC:

Yes No Yes No

Value-Added Costs No Yes Yes No

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-1

For a company that manufactures candy, how would the cost of sugar be classified? Direct Costs a. b. c. d.

ANS: NAT: LOC: 12.

OBJ:

No Yes Yes No

For a CPA firm, how would the costs of continuing education for audit managers be classified?

a. b. c. d.

11.

4-1

Value-Added Costs

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Direct Costs

10.

OBJ:

For a CPA firm, how would the wages of staff auditors be classified? Direct Costs

9.

Easy

Yes No Yes No

Value-Added Costs No Yes Yes No

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-1

When a firm redesigns a product to reduce the number of component parts, the firm is a. increasing consumer value. b. increasing the value added to the product. c. decreasing product variety. d. decreasing non-value-added costs.

ANS: NAT: LOC:

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Moderate

OBJ:

4-1

Chapter 4 13.

3

Which of the following add customer value? a. setup time b. storage time c. idle time d. processing time

ANS: D PTS: 1 DIF: Easy OBJ: 4-1 NAT: AACSB: Reflective Thinking LOC: AICPA Functional Competencies: Decision Modeling 14. Non-value-added activities that are necessary to businesses, but not costs that customers are willing to pay for are known as a. business-value-added activities. b. long-term variable activities. c. short-term variable activities. d. superior business activities.

ANS: NAT: LOC: 15.

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

a. b. c. d.

yes no yes no

ANS: NAT: LOC:

Easy

OBJ:

4-1

Inspection time yes nono no yes

Easy

OBJ:

4-1

Transfer time

no yes yes

B PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

B PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-1

A value chart indicates a. all steps in a process and the time it takes for them to be completed. b. the value-added steps in a process and the time it takes for them to be completed. c. the time and cost of all value-added steps in a process. d. the time and costs of all value-added and non-value-added steps in a process.

ANS: NAT: LOC: 19.

4-1

A process map a. should indicate only value-added activities. b. is also known as a detailed flowchart. c. should indicate only those steps/processes that are obvious in the production of goods/services. d. is also known as a value chart.

ANS: NAT: LOC: 18.

OBJ:

Which of the following is considered a value-added activity? Idle time

17.

Moderate

Which of the following would not be considered a value-added activity in the preparation of a tax return? a. printing a copy of the return for the client b. printing a copy of the return for the IRS c. installing tax software d. checking for accuracy

ANS: NAT: LOC: 16.

A PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

A PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Moderate

A value chart should include which of the following? Service time a. b.

yes no

Inspection time no no

yes yes

Transfer time

OBJ:

4-1

Chapter 4 c. d.

yes yes

ANS: NAT: LOC: 20.

no

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-1

B PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-1

Easy

OBJ:

4-2

Manufacturing cycle efficiency is a measure of a. bottlenecks. b. effectiveness. c. efficiency. d. quality.

ANS: NAT: LOC: 22.

yes yesyes

The actual time it takes to perform a specific task is called a. inspection time. b. service time. c. transfer time. d. quality time.

ANS: NAT: LOC: 21.

4

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Manufacturing cycle efficiency should be increased by employing which of the following techniques? JIT Inventory a. b. c. d.

yes yes no yes

ANS: NAT: LOC:

Flexible Manufacturing Systems yesyes yes nono no

Batch Manufacturing

no yes

B PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Moderate

OBJ:

4-2

23. For one product that a firm produces, the manufacturing cycle efficiency is 20 percent. If the total production time is 12 hours, what is the total manufacturing time? a. 15.0 hours b. 60.0 hours c. 12.0 hours d. 2.4 hours

ANS: NAT: LOC: 24.

Easy

OBJ:

4-2

For one product that a firm produces, the manufacturing cycle efficiency is 25 percent. If the total production time is 10 hours, what is the total manufacturing time? a. 2.5 hours b. 8.0 hours c. 10.0 hours d. 40.0 hours

ANS: NAT: LOC: 25.

B PTS: 1 DIF: AACSB: Analytical Skills AICPA Functional Competencies: Decision Modeling

D PTS: 1 DIF: AACSB: Analytical Skills AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-2

Which of the following is typically regarded as a cost driver in traditional accounting practices? a. number of purchase orders processed b. number of customers served c. number of transactions processed d. number of direct labor hours worked

Chapter 4

ANS: NAT: LOC: 26.

D PTS: 1 DIF: Easy AACSB: Reflective Thinking AICPA Functional Competencies: Measurement, Reporting

C PTS: 1 DIF: Easy AACSB: Reflective Thinking AICPA Functional Competencies: Measurement, Reporting

a. b. c. d.

yes yes no no

ANS: NAT: LOC:

OBJ:

4-3

To measure resources consumed yes no yes no

A PTS: 1 DIF: Easy AACSB: Reflective Thinking AICPA Functional Competencies: Measurement, Reporting

D PTS: 1 DIF: Moderate AACSB: Reflective Thinking AICPA Functional Competencies: Measurement, Reporting

OBJ:

4-3

A PTS: 1 DIF: Easy AACSB: Reflective Thinking AICPA Functional Competencies: Measurement, Reporting

OBJ:

4-3

Costs that are common to many different activities within an organization are known as ____ costs. a. product- or process-level b. organizational-level c. batch-level d. unit-level

ANS: NAT: LOC: 31.

4-3

Cost allocation bases in activity-based costing should be a. cost drivers. b. value-added activities. c. activity centers. d. processes.

ANS: NAT: LOC: 30.

OBJ:

The term cost driver refers to a. any 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.

ANS: NAT: LOC: 29.

4-3

An activity driver is used for which of the following reasons? To measure demands

28.

OBJ:

When a company is labor-intensive, the cost driver that is probably least significant would be a. direct labor hours. b. direct labor dollars. c. machine hours. d. cost of materials used.

ANS: NAT: LOC: 27.

5

B PTS: 1 DIF: Easy AACSB: Reflective Thinking AICPA Functional Competencies: Measurement, Reporting

OBJ:

4-3

OBJ:

4-3

In activity-based costing, cost reduction efforts are directed at specific a. cost categories. b. cost pools. c. processes. d. cost drivers.

ANS: NAT: LOC:

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

Chapter 4 32.

6

Setup time is A batch cost a. b. c. d.

no yes yes no

ANS: NAT: LOC:

A value-added cost no yes no yes

no no yes yes

ANS: NAT: LOC:

OBJ:

4-3

nono yes no yesyes

OBJ:

4-4

OBJ:

4-4

OBJ:

4-5

OBJ:

4-5

Process complexity

yes yes

Moderate

In allocating variable costs to products, a. a volume-based cost driver should be used. b. direct labor hours should always be used as the allocation base. c. a company should use the same allocation base that it uses for fixed costs. d. a company should never use more than one cost driver.

A PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

Which of the following is not a drawback of mass customization? a. The choices are too numerous. b. The potential for errors is great. c. Only a small percentage of available choices is normally selected. d. All of the above are drawbacks.

ANS: NAT: LOC: 36.

Product complexity

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

ANS: NAT: LOC: 35.

Easy

Which of the following have an impact on long-term variable costs?

Product variety

34.

yes no yes yes

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

33.

a. b. c. d.

A production cost

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Moderate

Simultaneous engineering helps companies accomplish which of the following?

a. b. c. d.

Reduces process

complexity

complexity

no yes yes no

ANS: NAT: LOC: 37. a. b. c. d.

Reduces product

no yes no yes

B PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

For traditional costing purposes, R&D costs are capitalized and allocated over the product life cycle. expensed as incurred. capitalized and amortized over three years. charged to the future accounting periods that receive the benefit of the R&D expenditures.

Chapter 4 ANS: NAT: LOC: 38.

4-6

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-5

A PTS: 1 DIF: Easy AACSB: Reflective Thinking AICPA Functional Competencies: Measurement, Reporting

OBJ:

4-6

Product costing systems in use over the last 40 years a. concentrated on using multiple cost pools and cost drivers. b. were often technologically incapable of handling activity-based costing information. c. have generally been responsive to changes in the manufacturing environment. d. have been appropriate for managerial decision purposes as long as they met the requirements of generally accepted accounting principles.

ANS: NAT: LOC: 41.

OBJ:

Today, traditional accounting methods are a. still appropriate for financial reporting. b. still appropriate for providing useful cost information to internal managers. c. still appropriate for both internal and external financial reporting. d. outdated for all purposes.

ANS: NAT: LOC: 40.

B PTS: 1 DIF: Easy AACSB: Reflective Thinking AICPA Functional Competencies: Measurement, Reporting

Traditionally, managers have focused cost reduction efforts on a. activities. b. processes. c. departments. d. costs.

ANS: NAT: LOC: 39.

7

B PTS: 1 DIF: Moderate AACSB: Reflective Thinking AICPA Functional Competencies: Measurement, Reporting

OBJ:

4-5

Traditional overhead allocations result in which of the following situations? a. Overhead costs are assigned as period costs to manufacturing operations. b. High-volume products are assigned too much overhead, and low-volume products are assigned too little overhead. c. Low-volume products are assigned too much, and high-volume products are assigned too little overhead. d. The resulting allocations cannot be used for financial reports.

ANS: NAT: LOC:

B PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-5

42. Traditionally, overhead has been assigned based on direct labor hours or machine hours. What effect does this have on the cost of a high-volume item? a. over-costs the product b. under-costs the product c. has no effect the product cost d. cost per unit is unaffected by product volume

ANS: NAT: LOC: 43.

Easy

OBJ:

4-5

Relative to traditional product costing, activity-based costing differs in the way costs are a. processed. b. allocated. c. benchmarked. d. incurred.

ANS: NAT: LOC: 44.

A PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

B PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

In activity-based costing, final cost allocations assign costs to

Easy

OBJ:

4-5

Chapter 4 a. b. c. d.

departments. processes. products. activities.

ANS: NAT: LOC: 45.

47. a. b. c. d.

4-4

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-4

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Moderate

OBJ:

4-4

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Moderate

OBJ:

4-4

Of the following, which is the best reason for using activity-based costing? a. to keep better track of overhead costs b. to more accurately assign overhead costs to cost pools so that these costs are better controlled c. to better assign overhead costs to products d. to assign indirect service overhead costs to direct overhead cost pools

ANS: NAT: LOC:

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-5

Easy

OBJ:

4-5

ABC should be used in which of the following situations? a. single-product firms with multiple steps b. multiple-product firms with only a single process c. multiple-product firms with multiple processing steps d. in all manufacturing firms

ANS: NAT: LOC: 50.

OBJ:

Under activity-based costing, benchmarks for product cost should contain an allowance for idle time. idle time and scrap materials. spoilage. None of the responses are correct.

ANS: NAT: LOC:

49.

Easy

In allocating fixed costs to products in activity-based costing, a. direct labor hours should always be used as the allocation base. b. a company should use the same allocation base that it uses for variable costs. c. a cost driver that is not volume-related should be used. d. machine hours should always be used.

ANS: NAT: LOC:

48.

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

In activity-based costing, preliminary cost allocations assign costs to a. departments. b. processes. c. products. d. activities.

ANS: NAT: LOC: 46.

8

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Activity-based costing and activity-based management are effective in helping managers do all of the following except a. trace technology costs to products. b. promote excellence standards. c. identify only value-added activities. d. analyze performance problems.

ANS: NAT:

C PTS: 1 AACSB: Reflective Thinking

DIF:

Moderate

OBJ:

4-5

Chapter 4 LOC: 51.

9

AICPA Functional Competencies: Decision Modeling

Which of the following falls under the Activity-Based Management umbrella? Continuous improvement a. b. c. d.

no yes yes no

ANS: NAT: LOC: 52.

no no yesyes yes

yes no no yes

ANS: NAT: LOC:

Easy

OBJ:

4-5

Easy

OBJ:

4-5

Easy

OBJ:

4-6

Cost driver analysis yes yes no no

A PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Traditional standard costs are inappropriate measures for performance evaluation in the "new era" of manufacturing because they a. build in allowances for non-value-adding activities. b. are based on historical information. c. don't reflect current costs. d. are ideal goals.

ANS: NAT: LOC:

A PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Moderate

OBJ:

4-6

OBJ:

4-3

Activity analysis allows managers to a. classify activities so that processes can be eliminated. b. devise ways to minimize or eliminate non-value-added activities. c. evaluate process performance to gain competitive advantages. d. all of the above.

ANS: NAT: LOC: 56.

no

The costs of non-quality work do not include a. the cost of handling complaints. b. the cost of scrap. c. warranty costs. d. original design costs.

ANS: NAT: LOC:

55.

yes no

Which of the following is/are part of activity-based management?

a. b. c. d.

54.

Activity-based costing

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Activity analysis

53.

Business process reengineering

B PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

A key concept underlying cost driver analysis is that a. all cost drivers identified should be used for cost accumulation. b. the cost of measuring a driver does not exceed the benefits of using it. c. only costs occurring at the unit-level should be assigned to products or services. d. organizational/facility costs are non-value-added and should never be assigned to products or services.

ANS: NAT:

B PTS: 1 AACSB: Reflective Thinking

DIF:

Moderate

OBJ:

4-3

Chapter 4 LOC: 57.

AICPA Functional Competencies: Decision Modeling

When cost driver analysis is used, organizational profit or loss can be determined by subtracting a. organizational costs from total margin provided by products. b. organizational costs from total product revenue. c. total product costs from total product revenue. d. total unit, batch, product/process, and organizational level costs incurred for a period from total product revenue.

ANS: NAT: LOC: 58.

10

A PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

a. b. c. d.

yes yes no yes

ANS: NAT: LOC:

4-3

Product complexity

no no yesyes no yes no no yes

Process errors

OBJ:

4-5

Pareto principle

yes no yes

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Difficult

The following items are used in tracing costs in an ABC system. In which order are they used? (1) (2) (3) (4) a. b. c. d.

cost object cost driver activity driver cost pool 1, 2, 3, 4 2, 3, 4, 1 2, 4, 3, 1 4, 3, 1, 2

ANS: NAT: LOC: 60.

OBJ:

Mass customization is closely associated with Product variety

59.

Moderate

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Difficult

OBJ:

4-4

Easy

OBJ:

4-4

The "Rule of One" underlies the premise that all costs are a. variable. b. fixed. c. unit-based. d. short-term.

ANS: NAT: LOC:

A PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

61. Moreno Company makes ten different styles of inexpensive feather masks. Which of the following is this company most likely to have? a. Product complexity b. Process complexity c. Product variety d. Process customization

ANS: NAT: LOC: 62.

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Mass customization can be achieved through the use of a. activity-based costing. b. just-in-time inventory. c. flexible manufacturing systems. d. all of the above.

Easy

OBJ:

4-5

Chapter 4 ANS: NAT: LOC: 63.

66. a. b. c. d.

Moderate

OBJ:

4-5

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-4

D PTS: 1 DIF: Easy AACSB: Reflective Thinking AICPA Functional Competencies: Measurement, Reporting

OBJ:

4-4

A PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-5

If only one or two overhead cost pools are used, a. it will be easy to determine which products or services are creating the most costs. b. overhead created by a specific product will be assigned to all products. c. the reduction in cost accumulation and allocation time will raise company profits. d. allocations should be made using only unit-based cost drivers.

ANS: NAT: LOC:

B PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-4

A cost accumulation system should most likely be reevaluated when a company has a. automated one or more production processes. b. introduced new products to its customers. c. had its industry deregulated. d. all of the above.

ANS: NAT: LOC: 69.

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Simultaneous engineering can be used to reduce both product and process complexity. integrate activity-based costing with value chain analysis. reduce the time-to-market of new products through elimination of batch-level activities. reduce manufacturing cycle efficiency by reducing process waste.

ANS: NAT: LOC:

68.

4-5

Which of the following cost drivers is often disregarded in a traditional costing system? a. Pounds of direct material c. Direct labor dollars b. Machine hours d. Variety of products manufactured

ANS: NAT: LOC:

67.

OBJ:

An activity center is an organizational unit a. that makes a single product or performs a single service. b. in which only value-added activities are performed. c. that incurs only unit, batch, or product/process level costs. d. for which management wants separate activity information.

ANS: NAT: LOC: 65.

Easy

The Pareto principle is important to consider when an organization is a. assessing whether to employ activity-based costing versus attribute-based costing. b. evaluating the number of activities that are value-added versus those that are non-value-added. c. deciding whether to offer a product in one color versus in ten colors. d. determining whether simultaneous engineering activities will be impacted by the "Rule of One."

ANS: NAT: LOC: 64.

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

11

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-5

Engaging in which of the following will result in radical changes being made to an organization's processes? a. Continuous improvement b. Benchmarking c. Reengineering d. Mass customization

Chapter 4

ANS: NAT: LOC: 70.

12

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Moderate

OBJ:

4-5

Use of activity-based costing and activity-based management requires a. the creation of an environment for change in an organization. b. elimination of all non-value-added activities in an organization. c. that company processes be automated and the use of direct labor be minimal. d. each process be fully mapped and all activities be identified as value-added or non-value-added.

ANS: NAT: LOC:

A PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-5

71. If activity-based costing is implemented in an organization without any other changes being implemented, total overhead manufacturing costs will a. be reduced because of the elimination of non-value-added activities. b. be reduced because organizational costs will not be assigned to products or services. c. be increased because of the need for additional people to gather information on cost drivers and cost pools. d. remain constant and simply be spread over products using different cost drivers.

ANS: NAT: LOC: 72.

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

a. b. c. d.

yes yes yes no

ANS: NAT: LOC:

4-5

Transfer time

yesyesyes no no yes no yes yes

Value-added time

Cycle time

yes yes no

C PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Difficult

OBJ:

4-6

Which of the following is most likely to make the implementation of ABC/ABM slow and difficult? a. The development of new cost drivers that measure costs more effectively. b. A lack of involvement by or support from upper management. c. The need for dual costing systems. d. An inability to eliminate all business-value-added activities.

ANS: NAT: LOC: 74.

OBJ:

A just-in-time manufacturing process should have substantially less of which of the following than a traditional manufacturing process? Idle time

73.

Difficult

B PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Moderate

OBJ:

4-6

Activity-based costing and generally accepted accounting principles differ in that ABC a. does not define product costs in the same manner as GAAP. b. cannot be used to compute an income statement, but GAAP can. c. is concerned only with costs generated from automated processes, but GAAP is concerned with costs generated from both manual and automated processes. d. information is useful only to managers, while GAAP information is useful to all organizational stakeholders.

ANS: NAT: LOC: 75. a. b. c. d.

A PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Moderate

In the "new era" of manufacturing, good performance indicators are production-based. sales-based. cost-based. consumer-based.

OBJ:

4-6

Chapter 4 ANS: NAT: LOC:

13

D PTS: 1 DIF: AACSB: Reflective Thinking AICPA Functional Competencies: Decision Modeling

Easy

OBJ:

4-6

Levine Company Levine Company produces two products: A and B. The company has three overhead functions that are required for both products. Below is production information for Products A and B: Product

Prime Costs (Direct Materials + Direct Labor) $35 $22

A B

Direct Labor Hours

Overhead Function #1

Overhead Function #2

Overhead Function #3

4 hrs 1.5 hrs

2 hrs 1 hr

1 hr 8 hrs

6 hrs 1 hr

The company produces 800 units of Product A and 8,000 units of Product B each period. The overhead functions have the following hourly costs: Function

Hourly Rate $10 7 18

1 2 3

76.

Refer to Levine Company If total overhead is assigned to A and B on the basis of units produced, Product A will have an overhead cost per unit of a. $ 88.64. b. $123.64. c. $135.00. d. None of the responses are correct. ANS: A Total Overhead Product A

Function

Product B

Hourly Rate $

10

2

$

2

$

7

1

$

7

3

$

18

6

$

108

Totals

9

$

135

Hourly Rate 1

$

2 3

Units Produced

Hours

Total 1

$

10

$

7

8

$

56

$

18

1

$

18

Totals

10

$

84

Total

135

800

$

108,000

$

84

8,000

$

672,000

$

780,000

$ 780,000

20

10

$

Total OH

Total

1

Function

OH/Unit

Hours

Proportion

Allocated OH

0.090909091

$

Units Produced 70,909.09

OH per Unit 800

$ 88.64

(800/8,800)

PTS:

1

DIF:

Moderate

OBJ:

4-3

NAT:

AACSB: Analytical Skills

Chapter 4 LOC: 77.

14

AICPA Functional Competencies: Measurement, Reporting

Refer to Levine Company If total overhead is assigned to A and B on the basis of units produced, Product B will have an overhead cost per unit of a. $84.00. b. $88.64. c. $110.64. d. None of the responses are correct.

ANS: B See #70 for Total Overhead Computations Total OH

Proportion

$ 780,000

Allocated OH

0.909090909

$

Units Produced 709,090.91

OH per Unit 8,000

$ 88.64

(8,000/8,800)

PTS: LOC:

1 DIF: Moderate OBJ: 4-3 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

78. Refer to Levine Company If total overhead is assigned to A and B on the basis of direct labor hours, Product A will have an overhead cost per unit of a. $51.32 b. $205.26 c. $461.88 d. None of the responses are correct.

ANS:

B

Product

DL Hrs/Unit

Units Produced

Total DL Hours

A

4

800

3,200

B

1.5

8,000

12,000 15,200

Total OH $

Proportion

780,000

Allocated OH

0.210526316

$

Units Produced 164,210.53

OH per Unit 800

$

205.26

(3,200/15,200)

PTS: LOC: 79.

1 DIF: Moderate OBJ: 4-3 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

Refer to Levine Company If total overhead is assigned to A and B on the basis of direct labor hours, Product B will have an overhead cost per unit of a. $76.97 b. $87.75 c. $88.64 d. None of the responses are correct.

ANS:

A

Product

DL Hrs/Unit

Units Produced

Total DL Hours

A

4

800

3,200

B

1.5

8,000

12,000 15,200

Chapter 4

15

Total OH $

Proportion

780,000

Allocated OH

0.7894736

Units Produced

$

615,789.40

OH per Unit $

8000

76.97

(12,000/15,200)

80.Refer to Levine Company If total overhead is assigned to A and B on the basis of direct labor hours, Product B will have an overhead cost per unit of a. $76.97 b. $87.75 c. $88.64 d. None of the responses are correct.

Product

DL Hrs/Unit

Units Produced

Total DL Hours

A

4

800

3,200

B

1.5

8,000

12,000 15,200

Total OH $

Proportion 780,000

Allocated OH 0.7894736

Units Produced $

OH per Unit

615,789.40

$

8000

76.97

(12,000/15,200) ANS: A 81. Refer to Levine Company If total overhead is assigned to A and B on the basis of overhead activity hours used, the total product cost per unit assigned to Product A will be a. $86.32. b. $95.00. c. $115.50. d. None of the responses are correct.

ANS: C Total OH $

Proportion

780,000

0.082568807

Allocated OH $

Units Produced

64,403.67

OH per Unit

800

$

80.50

DM and DL/Unit $

35.00

Total $ 115.50

(7,200/87,200)

PTS: LOC: 82.

1 DIF: Moderate OBJ: 4-3 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

Refer to Levine Company If total overhead is assigned to A and B on the basis of direct labor hours, Product B will have an overhead cost per unit of a. $51.32 b. $76.97 c. $510.32 d. None of the responses are correct.

ANS: B See #72 for Direct Labor Computations Total OH $

780,000

Proportion 0.789473684

Allocated OH $

Units Produced 615,789.47

OH per Unit 8,000

$

76.97

(12,000/15,200)

PTS: LOC:

1 DIF: Moderate OBJ: 4-3 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

Chapter 4

16

83. Refer to Levine Company If total overhead is assigned to A and B on the basis of overhead activity hours used, the total product cost per unit assigned to Product B will be a. $115.50 b. $73.32 c. $34.60 d. None of the responses are correct.

ANS: D Total OH $

Proportion

780,000

0.917431193

Allocated OH $

Units Produced

715,596.33

OH per Unit

8,000

$

89.45

DM and DL/Unit $

22.00

Total $

111.45

(80,000/87,200)

PTS: LOC:

1 DIF: Moderate OBJ: 4-3 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

Video Corporation Video Corporation has two product lines: LCD televisions and projection televisions. The company has budgeted the following production and overhead costs for the upcoming year: LCD TV’s Units Produced Direct labor hours per Unit Material Moves per Product Line Budgeted Materials Handling Cost Total Machine Hours Machine Maintenance Costs

84.

Projection TV’s

1,500 20 15

2,250 30 25

10,000

16,000

$75,000 $180,000

Refer to Video Corporation. If the company uses total direct labor hours to allocate factory overhead, the materials handing cost allocated to LCD TVs would be: a. $23,077 b. $28,125 c. $30,000 d. $45,000

ANS: A Total direct labor hours (1,500 * 20) + (2,250 * 30) Total direct hours for LCD TVs (1,500 * 20) Total materials handling cost Materials handling costs for LCD TVs ($75,000 * (30,000/97,500))

PTS: LOC: 85.

1 DIF: Moderate OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

97,500 30,000 $75,000 $23,077

NAT:

Refer to Video Corporation. If the company uses total direct labor hours to allocate factory overhead, the machine maintenance cost allocated to LCD TV’s would be: a. $51,923 b. $55,385 c. $69,231 d. $72,000 ANS: B Total direct labor hours (1,500 * 20) + (2,250 * 30) 97,500 Total direct labor hours for LCD TVs (1,500 * 20) 30,000 Total machine maintenance costs

$180,000

Machine maintenance costs for LCD TV’s ($180,000 * (30,000/97,500))

PTS: LOC: 86.

AACSB: Analytical Skills

1 DIF: Moderate OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

$55,385

NAT:

AACSB: Analytical Skills

Refer to Video Corporation. If the company uses total direct labor hours to allocate factory overhead, the materials handing cost allocated to projection TVs would be: a. $35,000 b. $45,000

Chapter 4 c. d.

17

$46,875 $51,923

ANS: D Total direct labor hours (1,500 * 20) + (2,250 * 30) Total direct labor hours for projection TVs (2,250 * 30) Total materials handling cost Materials handling costs allocated to projection TVs ($75,000 * (67,500/97,500))

PTS: LOC: 87.

1 DIF: Moderate OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

97,500 67,500 $75,000 $51,923

NAT:

Refer to Video Corporation. If the company uses total direct labor hours to allocate factory overhead, the machine maintenance cost allocated to projection TVs would be: a. $ 72,000 b. $108,000 c. $110,769 d. $124,615

ANS: D Total direct labor hours (1,500 * 20) + (2,250 * 30) Total direct labor hours for projection TVs (2,250 * 30) Total machine maintenance costs Machine maintenance costs allocated to projection TV’s ($180,000 * (67,500/97,500))

PTS: LOC: 88.

1 DIF: Moderate OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

97,500 67,500 $180,000 $124,615

NAT:

AACSB: Analytical Skills

Refer to Video Corporation. If the company uses number of units produced to allocate factory overhead, the materials handing cost allocated to LCD TVs would be: a. $23,077 b. $28,125 c. $30,000 d. $45,000 ANS: C Total units produced (1,500 + 2,250)

3,750

Total LCD TVs produced Total materials handling cost Materials handling costs allocated to LCD TVs ($75,000 * (1,500/3,750))

PTS: LOC: 89.

AACSB: Analytical Skills

1 DIF: Moderate OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

1,500 $75,000 $30,000

NAT:

AACSB: Analytical Skills

Refer to Video Corporation. If the company uses number of units produced to allocate factory overhead, the machine maintenance cost allocated to LCD TVs would be: a. $51,923 b. $55,385 c. $69,231 d. $72,000

ANS: D Total units produced (1,500 + 2,250)

3,750

Total LCD TVs produced Total machine maintenance cost Machine maintenance costs allocated to LCD TVs $180,000 * (1,500/3,750)

PTS: LOC:

1 DIF: Moderate OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

1,500 $180,000 $72,000

NAT:

AACSB: Analytical Skills

Chapter 4 90.

18

Refer to Video Corporation. If the company uses number of units produced to allocate factory overhead, the materials handing cost allocated to projection TVs would be: a. $35,000 b. $45,000 c. $46,875 d. $51,923

ANS: B Total units produced (1,500 + 2,250)

3,750

Total projection TVs produced Total materials handling cost Materials handling cost allocated to projection TV’s ($75,000 * (2,250/3,750))

91.

2,250 $75,000 $45,000

Refer to Video Corporation. If the company uses number of units produced to allocate factory overhead, the machine maintenance cost allocated to projection TVs would be: a. $ 72,000 b. $108,000 c. $110,769 d. $124,615 ANS: B Total units produced (1,500 + 2,250) 3,750 Total projection TVs produced Total machine maintenance cost Machine maintenance cost allocated to projection TV’s ($180,000 * (2,250/3,750))

PTS: LOC: 92.

1 DIF: Moderate OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

2,250 $180,000 $108,000

NAT:

Refer to Video Corporation. If the company uses an activity-based costing (ABC) system to allocate factory overhead, the materials handing cost allocated to LCD TVs would be: a. $23,077 b. $28,125 c. $30,000 d. $45,000

ANS:

B

Total material moves (15+25)

40

Materials moves for LCD TVs Total materials handling cost Materials handling cost allocated to LCD TVs ($75,000 * (15/40))

PTS: LOC: 93.

AACSB: Analytical Skills

1 DIF: Moderate OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

15 $75,000 $28,125

NAT:

AACSB: Analytical Skills

Refer to Video Corporation. If the company uses an activity-based costing (ABC) system to allocate factory overhead, the machine maintenance cost allocated to LCD TVs would be: a. $51,923 b. $55,385 c. $69,231 d. $72,000

ANS:

C

Total machine hours (10,000 + 16,000)

26,000

Machine hours for LCD TVs Total machine maintenance cost Machine maintenance cost allocated to LCD TVs ($180,000 * (10/26))

PTS: LOC:

1 DIF: Moderate OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

10,000 $180,000 $69,231

NAT:

AACSB: Analytical Skills

Chapter 4 94.

19

Refer to Video Corporation. If the company uses an activity-based costing (ABC) system to allocate factory overhead, the materials handing cost allocated to projection TVs would be: a. $35,000 b. $45,000 c. $46,875 d. $51,923 ANS: C Total material moves (15 + 25)

40

Materials moves for projection TVs Total materials handling cost Materials handling cost allocated to projection TVs ($75,000 * (25/40))

PTS: LOC: 95.

1 DIF: Moderate OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

25 $75,000 $46,875

NAT:

AACSB: Analytical Skills

Refer to Video Corporation. If the company uses an activity-based costing (ABC) system to allocate factory overhead, the machine maintenance cost allocated to projection TVs would be: a. $ 72,000 b. $108,000 c. $110,769 d. $124,615

ANS:

C

Total machine hours (10,000 + 16,000)

26,000

Machine hours for projection TVs Total machine maintenance cost Machine maintenance cost allocated to projection TV’s $180,000 * (16/26)

PTS: LOC:

1 DIF: Moderate OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

16,000 $180,000 $110,769

NAT:

AACSB: Analytical Skills

Stone Company Stone Company produces 50,000 units of Product Q and 6,000 units of Product Z during a period. In that period, four set-ups were required for color changes. All units of Product Q are black, which is the color in the process at the beginning of the period. A set-up was made for 1,000 blue units of Product Z; a set-up was made for 4,500 red units of Product Z; a set-up was made for 500 green units of Product Z. A set-up was then made to return the process to its standard black coloration and the units of Product Q were run. Each set-up costs $500.

96.

Refer to Stone Company. If set-up cost is assigned on a volume basis for the department, what is the approximate per-unit setup cost for Product Z? a. $.010. b. $.036. c. $.040. d. None of the responses are correct.

ANS:

B

$2,000/56,000 = $0.0357

PTS: LOC: 97.

1 DIF: Moderate OBJ: 4-3 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

Refer to Stone Company. If set-up cost is assigned on a volume basis for the department, what is the approximate per-unit setup cost for the red units of Product Z? a. $.036. b. $.111. c. $.250. d. None of the responses are correct.

Chapter 4 ANS:

20

A

$2,000/56,000 = $0.0357

PTS: LOC: 98.

1 DIF: Moderate OBJ: 4-3 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

Refer to Stone Company. Assume that Stone Company has decided to allocate overhead costs using levels of cost drivers. What would be the approximate per-unit set-up cost for the blue units of Product Z? a. $.04. b. $.25. c. $.50. d. None of the responses are correct.

ANS: C Setup cost for blue units = $500.00 Number of blue units produced = 1,000 $500/1,000 = $.50

PTS: LOC: 99.

1 DIF: Moderate OBJ: 4-3 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

Refer to Stone Company. Assume that Stone Company has decided to allocate overhead costs using levels of cost drivers. What would be the approximate per-unit set-up cost for the green units of Product Z? a. $1.00. b. $0.25. c. $0.04. d. None of the responses are correct.

ANS: A Setup cost = $500.00 Units produced = 500 $500.00/500 = $1.00/unit

PTS: 1 Ada National Bank

DIF:

Moderate

OBJ:

4-3

NAT:

AACSB: Analytical Skills

Ada National Bank had the following activities, traceable costs, and physical flow of driver units:

Activities Open new accounts Process deposits Process withdrawals Process loan applications

Traceable Costs $50,000 36,000 15,000 27,000

Physical flow of Driver Units 1,000 accounts 400,000 deposits 200,000 withdrawals 900 applications

The above activities are used by the Broken Arrow branch and the Choctaw branch: Broken Arrow New accounts Deposits Withdrawals Loan applications

100.

Choctaw

200 40,000 15,000 100

Refer to Ada National Bank. What is the cost per driver unit for new account activity? a. $0.09 b. $0.075 c. $30.00 d. $50.00

400 20,000 18,000 160

Chapter 4

21

ANS: D $50,000 / 1,000 = $50.00 per account

PTS: LOC: 101.

1 DIF: Easy OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

Refer to Ada National Bank. What is the cost per driver unit for the deposit activity? a. $0.09 b. $0.075 c. $30.00 d. $50.00

ANS: A $36,000/400,000 = $0.09

PTS: LOC: 102.

NAT:

AACSB: Analytical Skills

Refer to Ada National Bank. What is the cost per driver unit for the withdrawal activity? a. $0.09 b. $0.075 c. $30.00 d. $50.00 ANS: B $15,000/200,000 = $0.075

PTS: LOC: 103.

1 DIF: Easy OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

1 DIF: Easy OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

Refer to Ada National Bank. What is the cost per driver unit for the loan application activity? a. $0.09 b. $0.075 c. $30.00 d. $50.00

ANS: C $27,000/900 = $30.00

PTS: LOC: 104.

105.

1 DIF: Easy OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

Refer to Ada National Bank. How much of the loan application cost will be assigned to the Broken Arrow branch? a. $3,000 b. $4,800 c. $ 7,800 d. $27,000

ANS:

A

PTS: LOC:

1 DIF: Easy OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

Refer to Ada National Bank. How much of the deposit cost will be assigned to the Choctaw branch? a. $1,800 b. $3,600 c. $ 5,400 d. $36,000

ANS: A $0.09 * 20,000 = $1,800

Chapter 4 PTS: LOC: 106.

22

1 DIF: Easy OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

Refer to Ada National Bank. How much of the new account cost will be assigned to the Choctaw branch? a. $10,000 b. $20,000 c. $30,000 d. $50,000

ANS: B 400 * $50 = $20,000

PTS: LOC:

1 DIF: Easy OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

NAT:

AACSB: Analytical Skills

Parrish Company Parrish Company uses activity-based costing. The company produces two products: IPods and MP3 players. The annual production and sales volume of IPods is 8,000 units and of MP3 players is 6,000 units. There are three activity cost pools with the following expected activities and estimated total costs: Activity Cost Pool

Estimated Cost

Expected Activity IPods

Expected Activity MP3 players Total

Activity 1 Activity 2 Activity 3

107.

100 800 800

400 200 3,000

500 1,000 3,800

Refer to Parrish Company. Using ABC, the cost per unit of IPods is approximately: a. $ 2.40 b. $ 3.90 c. $ 6.60 d. $10.59

ANS: C Activity 1 2 3

PTS: LOC: 108.

$20,000 $37,000 $91,200

Cost Allocation $20,000 * 100/500 = $ 4,000 / 8,000 $37,000 * 800/1,000 = $29,600 / 8,000 $91,200 * 800/3,800 = $19,200 / 8,000 Total Cost per Unit

1 DIF: Difficult OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

Cost per Unit $0.50 3.70 2.40 6.60

NAT:

AACSB: Analytical Skills

Refer to Parrish Company. Using ABC, the cost per unit of MP3 players is approximately: a. $ 2.40 b. $ 3.90 c. $12.00 d. $15.90

ANS: D Activity 1 2 3

PTS: LOC:

Cost Allocation $20,000 * 400/500 = $ 16,000 / 6,000 $37,000 * 200/1,000 = $ 7,400/ 6,000 $91,200 * 3,000/3,800 = $72,000 / 6,000 Total Cost per Unit

1 DIF: Difficult OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

Cost per Unit $2.67 1.23 12.00 15.90

NAT:

AACSB: Analytical Skills

Greenspan Company Greenspan Company manufactures two products: digital cameras and video cameras. The company uses an activity-based costing system. The annual production and sales volume of digital cameras is 10,000 units and of video cameras is 8,000 units. Direct costs for the digital cameras are $122; for the video cameras, direct costs are $153.

Chapter 4

23

For overhead costs, there are three activity cost pools with the following expected activities and estimated total costs: Activity Cost Pool

Estimated Cost

Expected Activity Digital Cameras

Expected Activity Video Cameras Total

Activity 1 Activity 2 Activity 3

109.

$30,000 $45,000 $96,600

100 600 400

500 300 2,000

600 900 2,400

Refer to Greenspan Company. Using ABC, the total cost per digital camera is approximately: a. $126.82 b. $127.11 c. $130.55 d. $131.50

ANS:

B

Direct Costs Overhead Costs Activity 1 2 3

PTS: LOC: 110. a. b. c. d.

$122.00 Cost Allocation $(30,000 x (100/600))/10,000 $(45,000 x (600/900)/10,000 $(96,600 x (400/2,400))/10,000 Total Cost

Cost per Unit $0.50 $3.00 $1.61 $127.11

1 DIF: Difficult OBJ: 4-4 NAT: AACSB: Analytical Skills AICPA Functional Competencies: Measurement, Reporting Refer to Greenspan Company. Using ABC, the total cost per video camera is approximately:

$162.50 $163.69 $168.35 $169.07

ANS: D Direct Costs Overhead Costs Activity 1 2 3

PTS: LOC:

$153.00 Cost Allocation $(30,000 x (500/600))/8,000 $(45,000 x (300/900)/8,000 $(96,600 x (2,000/2,400))/8,000 Total Cost

1 DIF: Difficult OBJ: 4-4 AICPA Functional Competencies: Measurement, Reporting

Cost per Unit $ 3.13 $1.88 $10.06 $169.07

NAT:

AACSB: Analytical Skills