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Multiple Choice


1.) Boxes-2-Go has two divisions, large and small, that share the common costs of the company's communications network. The annual common costs are $4,500,000. You have been provided with the following information for the upcoming year:
What is the allocation rate for the upcoming year assuming Boxes-2-Go uses the single-rate method and allocates common costs based on the time on the network?
$10.00
$7.14
$8.00
$10.98

2.) In an activity-based cost management (ABM) system, facility-level costs are those that are incurred to:
sustain the company's marketing program.
maintain the plant's production capacity.
cope with a change in the engineering plans for a product.
support the research and development process.

3.) Zela 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 provided below. (CMA based)
Budgeted material handling costs: $50,000
Under a traditional costing system that allocates overhead on the basis of direct labor hours, the materials handling costs allocated to one unit of specialty windows would be
$500
$5,000
$1,500
$2,000

4.) Activity analysis is one of the first stages in implementing an activity-based costing system. Which of the following steps in "activity analysis" is usually performed first?
Identify the process objectives that are defined by what the customer wants from the process.
Classify all activities as value added or nonvalue added.
Improve the efficiency of all activities and develop plans to eliminate any nonvalue-added activities.
Record, from start to finish, the activities used to complete the product or service.

5.) When managers are held responsible for costs and the input-output relationship is well specified, a(n) ________________________ is established.
standard cost center
discretionary cost center
asset center
revenue center

6.) Net realizable value at the split-off point is used to allocate
b
a
c
d

7.) Because this allocation method recognizes that service departments often provide each other with inter-departmental service, it is theoretically considered to be the most accurate method for allocating service department costs to production departments. This method is: (CMA adapted)
direct method.
linear method.
step-down method.
reciprocal method.
variable method.

8.) Assets invested in a responsibility center are included in a performance report of
d
b
c
a

9.) Rogers Company is preparing its annual profit plan. As part of its analysis of the cost of its purchasing activity, management estimates that the $48,000 for purchasing support should be assigned to the individual vendors from the information given as follows:
What is the amount of the purchasing costs that should be allocated to Vendor A assuming Rogers uses purchases orders to compute activity-based costs?
$38,400
$9,600
$32,000
$16,000

10.) Which of the following items would be classified as a volume-level cost in an activity-based cost management (ABM) system?
Indirect materials
Depreciation on factory building
Research and development
Production supervisor's salary

11.) Smelly Perfume Company manufactures and distributes several different products. They currently use a plantwide allocation method for allocating overhead at a rate of $7 per direct labor hour. Cindy is the department manager of Department C which produces Products J and P. Department C has $16,200 in traceable overhead. Diane is the department manager of Department D which manufactures Product X. Department D has $11,100 in traceable overhead. The product costs (per case of 24 bottles) and other information are as follows:
If Smelly changes its allocation basis to machine hours, what is the total product cost per case for Product X? (Do not round your intermediate calculations. Round your final answer to two decimal places.)
$75.17
$80.48
$79.50
$74.00

12.) Joint products and byproducts are produced simultaneously by a single process or series of processes and
byproducts are salable at the split-off point, but joint products are not.
joint products are salable at the split-off point, but byproducts are not.
the revenue from byproducts may be recognized at the time of production.
all byproducts must be allocated some portion of joint costs

13.) Folly Beach Industries decides to price delivery service according to the results of a recent activity-based costing (ABC) study. The study indicates Folly Beach should charge $16 per order, 1% of the order's value for general delivery costs, $2.50 per item, and $45 per delivery.
A year later, Folly Beach collected the following information for three of its customers:
What are the total delivery costs charged to Customer B during the year?
$13,490
$10,800
$11,378
$10,578

14.) The RAH Manufacturing Company has two service departments: Maintenance and Accounting. The Maintenance Department's costs of $300,000 are allocated on the basis of machine hours. The Accounting Department's costs of $120,000 are allocated on the basis of the number of employees within a specific department. The direct departmental costs for A and B are $300,000 and $500,000, respectively.
What is the Accounting Department's cost allocated to Department B using the direct method? (Do not round intermediate calculations. Round final answers to the nearest dollar amount.)
$80,000
$10,000
$40,000
$20,000

15.) Which of the following departments is not a service department in a typical manufacturing company?
Human resources
Accounting
Assembly
Information processing

16.) The Moody Company produced three joint products at a joint cost of $100,000. Two of these products were processed further. Production and sales were:
Assume Q is a by-product and Moody uses the cost reduction method of accounting for by-product cost. If estimated net realizable value is used, how much of the joint costs would be allocated to product R? (Do not round intermediate calculations.)
$38,889
$43,750
$50,000
$62,500

17.) The number of services provided by an accounting firm would be classified as a(n)
volume-related activity.
facility-related activity.
product-related activity.
batch-related activity

18.) Which of the following measures is used by activity-based costing (ABC) systems as an allocation base for allocating overhead costs to the units produced?
Volume-related activities
Batch-related activities
Product-related activities
Facility-related activities
All of these are used by ABC systems

19.) RS Company manufactures and distributes two products, R and S. Overhead costs are currently allocated using the number of units produced as the allocation base. The controller has recommended changing to an activity-based costing (ABC) system. She has collected the following information:
What is the total overhead allocated to Product S using the current system?
$100,000
$160,000
$113,600
$146,400

20.) The amount of resources used in an activity-based costing (ABC) system for a specific activity is computed by multiplying the:
cost driver rate and the actual cost driver volume.
cost driver rate and the planned cost driver volume.
overhead rate and the planned cost driver volume.
overhead rate and the actual cost driver volume

21.) An operating unit of an organization is called a profit center if it is responsible
only for costs.
for investments in assets.
for costs and revenues.
only for revenues.

22.) Fenway Telcom has three divisions, commercial, retail and consumer, that share the common costs of the company's computer server network. The annual common costs are $2,400,000. You have been provided with the following information for the upcoming year:
Fenway Telcom uses the single rate method and allocates common costs based on the number of connections. What is the total computer server network cost allocated to the Commercial Division?
$514,286
$1,200,000
$600,000
$480,000

23.) Beta Company is preparing its annual profit plan. As part of its analysis of the profitability of its customers, management estimates that the $12,000 for sales support should be assigned to the individual customers from the information given as follows:
What is the amount of the sales support costs that should be allocated to Customer B assuming Beta uses purchases orders to compute activity-based costs?
$2,400
$8,000
$4,000
$9,600

24.) Decentralization refers to the delegation of decision-making authority to
board of directors.
subordinates.
superiors.
top management.