Accounting 202 - Chapter 4 Copy

35 Questions  I  By Jc173
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Accounting Quizzes & Trivia
Activity-Based Costing, Lean Production, and the Costs of Quality

  
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  • 1. 
    Cost distortion results in the:
    • A. 

      Overcosting of all products

    • B. 

      Undercosting of all products

    • C. 

      Overcosting of some products and undercosting of other products

    • D. 

      Accurate costing of all products


  • 2. 
    When calculating a departmental overhead rate, the numerator should be the:
    • A. 

      Total estimated departmental overhead cost pool.

    • B. 

      Total estimated amount of the departmental allocation base.

    • C. 

      Total estimated amount of manufacturing overhead for the factory.

    • D. 

      Actual quantity of the departmental allocation base used by the job.


  • 3. 
    Which of the following condition(s) favors using departmental overhead rates in place of a plantwide overhead rate?
    • A. 

      Different departments incur different amounts and types of manufacturing overhead.

    • B. 

      Different jobs or products use the departments to a different extent.

    • C. 

      Both of the above are true.

    • D. 

      Neither of the above are true.


  • 4. 
    The use of departmental overhead rates will generally result in the use of a:
    • A. 

      Single cost allocation base.

    • B. 

      Separate cost allocation base for each department in the factory.

    • C. 

      Single overhead cost pool for the factory.

    • D. 

      Separate cost allocation base for each activity in the factory.


  • 5. 
    What is the first step in developing an ABC system?
    • A. 

      Identify the primary activities and estimate a total cost pool for each.

    • B. 

      Allocate the costs to the cost object using the activity cost allocation rates.

    • C. 

      Select an allocation base for each activity.

    • D. 

      Calculate an activity cost allocation rate for each activity.


  • 6. 
    In using an ABC system, which of the following steps is NOT performed before the company’s year begins? 
    • A. 

      Identify the primary activities and estimate a total cost pool for each.

    • B. 

      Allocate the costs to the cost object using the activity cost allocation rates.

    • C. 

      Select an allocation base for each activity.

    • D. 

      Calculate an activity cost allocation rate for each activity.


  • 7. 
    The use of which of the following costing systems is most likely to reduce cost distortion to a minimum? 
    • A. 

      Plantwide overhead rate

    • B. 

      Departmental overhead allocation rates

    • C. 

      Activity-based costing

    • D. 

      Traditional costing system


  • 8. 
    Which of the following does ABC take into account? 
    • A. 

      The types of manufacturing activities used by the product

    • B. 

      The extent to which the manufacturing activities are used by the product

    • C. 

      Both A and B

    • D. 

      Neither A nor B


  • 9. 
    Which of the following describes how, in ABC, the activity allocation rate is computed?
    • A. 

      The total estimated activity cost pool is divided by the total estimated activity allocation base

    • B. 

      The total estimated activity allocation base is divided by the total estimated activity cost pool

    • C. 

      The total estimated activity allocation base is multiplied by the total estimated activity cost pool

    • D. 

      You take the total estimated activity allocation base and subtract the total estimated total activity cost pool


  • 10. 
    What is the last step in developing an ABC system?
    • A. 

      Identify the primary activities and estimate a total cost pool for each.

    • B. 

      Allocate the costs to the cost object using the activity cost allocation rates.

    • C. 

      Select an allocation base for each activity.

    • D. 

      Calculate an activity cost allocation rate for each activity.


  • 11. 
    Which of the following statements does NOT describe an ABC system?
    • A. 

      ABC systems can create more accurate product costs.

    • B. 

      ABC systems may only be used by service companies.

    • C. 

      ABC systems are more complex and costly than traditional costing systems.

    • D. 

      ABC systems are used in both manufacturing and nonmanufacturing companies.


  • 12. 
    Which of the following can be used in conjunction with activity-based costing?
    • A. 

      Job costing

    • B. 

      Process costing

    • C. 

      Neither A nor B

    • D. 

      Both A and B


  • 13. 
    The __________________system focuses on activities as the fundamental cost objects. It uses the costs of those activities as building blocks for compiling the indirect costs of products and other cost objects.
    • A. 

      Activities-based costing

    • B. 

      Job costing

    • C. 

      Process costing

    • D. 

      Product costing


  • 14. 
    ABC costing might lead to:
    • A. 

      Cutting back on high-volume products that appear unprofitable.

    • B. 

      Expanding low-volume products that appear profitable.

    • C. 

      Raising the sale price of high-volume products.

    • D. 

      Raising the sale price of low-volume products.


  • 15. 
    Which of the following is MOST likely to be the cost driver for the packaging and shipping activity?
    • A. 

      Number of orders shipped

    • B. 

      Number of setups

    • C. 

      Number of units produced

    • D. 

      Hours of testing


  • 16. 
    Non-value-added activities are:
    • A. 

      Also called waste activities.

    • B. 

      Activities that neither enhance the customer’s image of the product or service nor provide a competitive advantage.

    • C. 

      Activities that could be reduced or removed from the process with no ill effect on the end product or service.

    • D. 

      All of the above.


  • 17. 
    The benefits of using the ABC costing system are higher if the company:
    • A. 

      Has high indirect costs

    • B. 

      Produces many different products that use differing amounts of resources

    • C. 

      Produces only one product

    • D. 

      Has high indirect costs and produces many different products that use differing amounts of resources.


  • 18. 
    Why are the benefits of adopting ABC/ABM higher for companies in competitive markets?
    • A. 

      Because ABM can pinpoint opportunities for cost savings

    • B. 

      Because accounting /information system expertise is inexpensive to develop

    • C. 

      Because accurate product cost information is not as relevant for price setting

    • D. 

      Because companies in competitive markets have low indirect costs


  • 19. 
    Indications that a product cost system needs revision include:
    • A. 

      Managers lose bids they expected to win and win bids they expected to lose.

    • B. 

      Employees do not believe the cost numbers are accurate.

    • C. 

      The company uses a single-allocation-base system developed long ago.

    • D. 

      All of the above.


  • 20. 
    Signs that a product cost system is not working properly include that:
    • A. 

      Managers don’t understand costs and profits.

    • B. 

      The cost system was installed five years ago.

    • C. 

      The cost system has multiple allocation bases.

    • D. 

      The cost system is fully depreciated.


  • 21. 
    A system that focuses on activities as the fundamental cost object and uses the costs for these activities to compile indirect costs of goods and services is:
    • A. 

      Appraisal costs.

    • B. 

      Activity-based costing.

    • C. 

      Value engineering.

    • D. 

      Prevention costs.


  • 22. 
    Which of the following cost items should be classified as a prevention cost on a cost of quality report?
    • A. 

      Warranty expenses on defective products

    • B. 

      Technical support provided to suppliers

    • C. 

      Supervision of quality inspections

    • D. 

      Net cost of spoiled units


  • 23. 
    If a company were to increase its appraisal costs by inspecting more units as the units are completed, the company’s internal failure costs:
    • A. 

      Would usually increase

    • B. 

      Would usually decrease

    • C. 

      Would usually remain the same

    • D. 

      Could not be predicted


  • 24. 
    If a company were to increase its appraisal costs by inspecting more units as the units are completed, the company’s external failure costs:
    • A. 

      Would usually increase

    • B. 

      Would usually decrease

    • C. 

      Would usually remain the same

    • D. 

      Could not be predicted


  • 25. 
    The cost of testing incoming raw materials from a supplier would be classified as a(an) :
    • A. 

      Prevention cost

    • B. 

      Appraisal cost

    • C. 

      Internal failure cost

    • D. 

      External failure cost


  • 26. 
    The cost of training quality control supervisors would be classified as a(n):
    • A. 

      Prevention cost.

    • B. 

      Appraisal cost.

    • C. 

      Internal failure cost.

    • D. 

      External failure cost.


  • 27. 
    The costs incurred when poor quality goods or services are detected and corrected before delivery to customers are called:
    • A. 

      Appraisal costs.

    • B. 

      External failure costs.

    • C. 

      Internal failure costs.

    • D. 

      Prevention costs.


  • 28. 
    Which of the following pertains to a lean production system?
    • A. 

      It will have like machines grouped together.

    • B. 

      It will produce goods in smaller batches than a traditional production system.

    • C. 

      It will require higher inventory levels than a traditional production system.

    • D. 

      It will require longer set-up times than a traditional system.


  • 29. 
    Which of the following pertains to a lean costing or production system?
    • A. 

      . An individual does fewer tasks than under a traditional production system.

    • B. 

      Product costs attached to units are tracked as units move through production.

    • C. 

      Summary journal entries are made when units are completed.

    • D. 

      Units are produced in larger batches than under a traditional production system.


  • 30. 
    Which of the following is TRUE about a lean production system?
    • A. 

      Customer orders drive the production process.

    • B. 

      Inventory levels are maintained at high levels.

    • C. 

      Raw materials are purchased in large quantities.

    • D. 

      Finished goods are produced ahead of customers’ orders to protect against running out of finished goods inventory.


  • 31. 
    Which of the following is NOT a factor in the success of lean production systems?
    • A. 

      Short production cycle times

    • B. 

      Continuous flow of production without interruptions

    • C. 

      Inflexible production operations

    • D. 

      The focus on quality


  • 32. 
    The production system designed to eliminate waste is called a(n):
    • A. 

      Traditional system

    • B. 

      Lean production system

    • C. 

      Activity-based system

    • D. 

      Full costing system


  • 33. 
    A system in which companies purchase raw materials only when needed is called:
    • A. 

      ABC

    • B. 

      External failure costs

    • C. 

      Internal failure costs

    • D. 

      JIT production


  • 34. 
    Which term listed below describes a system where companies purchase raw materials when needed in production and complete finished goods when needed by customers?
    • A. 

      Internal failure costs

    • B. 

      Backflush costing

    • C. 

      Just-in-time

    • D. 

      External failure costs


  • 35. 
    The cost of warranty work is an example of a(n):
    • A. 

      Prevention cost

    • B. 

      Appraisal cost

    • C. 

      Internal failure cost

    • D. 

      External failure cost


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