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The process of using activity-based costing information to manage a business's activities, and its costs, is called activity-based management.How do managers use the information provided by an activity-based costing system?

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By far, the greatest use of activity-bas...

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Customer-level activities and the resources consumed to perform them do not affect product costs.

A) True
B) False

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In an activity-based costing system, a critical question to ask during activity identification is, "How important is this activity to the overall strategy of the organization?"

A) True
B) False

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An activity that is performed for each individual unit of product is classified as a


A) variable cost-level activity.
B) unit-level activity.
C) batch-level activity.
D) operations-level activity.

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

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When using an activity-based costing system, which of the following is the formula for allocating costs to products or services?


A) Activity cost pool resources divided by activity driver
B) Activity cost pool resources times activity driver
C) Activity rate divided by activity driver consumption
D) Activity rate times activity driver consumption

E) A) and C)
F) All of the above

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When using an activity-based costing system, which of the following is the formula for allocating costs to products or services?


A) Activity rate × activity driver consumption
B) Activity rate × amount in activity pool
C) Predetermined manufacturing overhead rate × actual activity
D) Predetermined manufacturing overhead rate × planned activity

E) All of the above
F) C) and D)

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The key to reducing costs through activity management is


A) eliminating high-cost executive positions.
B) eliminating activities such as inspections.
C) eliminating the resources associated with the reduced activities.
D) eliminating high-cost executive positions, activities such as inspections, and the resources associated with the reduced activities.

E) B) and C)
F) B) and D)

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Which of the following is a likely activity driver for warehousing/packaging?


A) Direct labor hours
B) Number of machine set-ups
C) Number of product lines
D) Number of batches

E) A) and D)
F) A) and C)

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In an activity-based costing system, after the manufacturing overhead costs have been assigned to activity cost pools, the next step is to calculate the unit product cost.

A) True
B) False

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Process improvement is the examination of business processes to identify incremental changes that may reduce operating costs.

A) True
B) False

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Place an "X" in the column that corresponds to the type of activity level referred to in the following hospital setting. Place an X in the column that corresponds to the type of activity level referred to in the following hospital setting.

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Place an "x" in the column that corresponds to the type of activity level referred to in a hospital setting. Place an x in the column that corresponds to the type of activity level referred to in a hospital setting.

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Dawson Company manufactures two products, Regular and Deluxe.Overhead costs consist of machining, $2,500,000; and assembly, $1,250,000.Recent data are provided below: Dawson Company manufactures two products, Regular and Deluxe.Overhead costs consist of machining, $2,500,000; and assembly, $1,250,000.Recent data are provided below: Overhead allocated to Deluxe using a single overhead rate (based on number of parts) and using activity-based costing, respectively, are A) $2,400,000 and $2,625,000. B) $937,500 and $2,812,500. C) $1,350,000 and $1,125,000. D) $1,075,000 and $2,675,000. Overhead allocated to Deluxe using a single overhead rate (based on number of parts) and using activity-based costing, respectively, are


A) $2,400,000 and $2,625,000.
B) $937,500 and $2,812,500.
C) $1,350,000 and $1,125,000.
D) $1,075,000 and $2,675,000.

E) All of the above
F) C) and D)

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Mantle Co.manufactures baseball bats.The company's total overhead consists of assembly costs and inspection costs.The following data is available: Mantle Co.manufactures baseball bats.The company's total overhead consists of assembly costs and inspection costs.The following data is available: Total overhead assigned to aluminum bats assuming a single overhead rate and using activity-based costing, respectively, are A) $63,000 and $75,000. B) $57,000 and $45,000. C) $63,000 and $57,000. D) $57,000 and $75,000. Total overhead assigned to aluminum bats assuming a single overhead rate and using activity-based costing, respectively, are


A) $63,000 and $75,000.
B) $57,000 and $45,000.
C) $63,000 and $57,000.
D) $57,000 and $75,000.

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

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A simple ABC model can have fewer than 20 activities; a complex model may include up to 100 activities, but no more.

A) True
B) False

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Which of the following is a product- or service-related activity?


A) Making sales calls
B) Performing machine maintenance
C) Running a production machine
D) Moving materials

E) B) and C)
F) A) and D)

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Which of the following is the most time-consuming part of implementing an activity-based costing system?


A) Identifying activities
B) Developing activity cost pools
C) Calculating activity cost pool rates
D) Calculate the unit product cost

E) All of the above
F) None of the above

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A difference in GAAP-based product costing and activity-based costing is that under activity-based costing


A) all costs are classified as product and period costs, whereas under GAAP they are classified by behavior.
B) sales less cost of goods sold is classified as gross profit, whereas under GAAP this subtotal is titled contribution margin.
C) selling and administrative costs are allocated to products if they are incurred to provide resources that are consumed by unit-level, batch-level, or product-level activities.
D) all costs are traceable, whereas in GAAP-based costing some costs are allocated.

E) All of the above
F) B) and C)

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Morrow Co.produces 3 products: Beta, Delta, and Gamma.Beta requires 400 purchase orders, Delta requires 600 purchase orders, and Gamma requires 1,000 purchase orders.Morrow has identified an ordering and receiving activity cost pool with allocated overhead of $180,000 for which the cost driver is purchase orders.Direct labor hours used on each product are 50,000 for Beta, 40,000 for Delta, and 110,000 for Gamma.How much ordering and receiving overhead is assigned to each product? Morrow Co.produces 3 products: Beta, Delta, and Gamma.Beta requires 400 purchase orders, Delta requires 600 purchase orders, and Gamma requires 1,000 purchase orders.Morrow has identified an ordering and receiving activity cost pool with allocated overhead of $180,000 for which the cost driver is purchase orders.Direct labor hours used on each product are 50,000 for Beta, 40,000 for Delta, and 110,000 for Gamma.How much ordering and receiving overhead is assigned to each product?

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Which of the following is a way a company can use information about activities to manage its operations?


A) Activity-based costing and activity-based budgeting
B) Activity-based management and activity-based budgeting
C) Activity-based budgeting and activity-based engineering
D) Activity-based costing, activity-based management, and activity-based budgeting

E) B) and D)
F) C) and D)

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