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Cost Accounting

Which of the following activities is most likely to he classified as value-added for a manufacturing company?
A. storing
B. ordering
C. inspecting
D. assembling

2. Which of the following activities is most likely to be classified as value-added for a merchandise company?
A. purchasing
B. waiting
C. receiving
D. setting up

3. Activity-based cost management (ABM) can best be defined as
A. a cost system using multiple departmental overhead rates.
B. the use of cost information gathered using activity-based costing (ABC).
C. a quality-control system focusing on eliminating errors and mistakes.
D. an incentive system for a company's key decision-makers.

4. Which of the following items would be classified as a hatch-level cost in an activity-based cost management (ABM) system?
A. indirect labor
B. production supervisor's salary
C. depreciation on factory building
D. machinery set-up costs

5. Which of the following items would be classified as a product-level cost in an activity-based cost management (ABM) system?
A. change order to meet new a new customer's specification
B. movement or materials for products in production
C. long-term lease payments for factory equipment
D. insurance and property taxes on faculty building

6. Which of the following items would not he used as the cost driver for a volume-level cost in an activity-based cost management (ABM) system?
A. direct labor hours
B. machine hours
C. units produced
D. square footage

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

8. Activity-based costing (ABC) information cannot be used by managerial decision-makers to evaluate the
A. profitability of a customer.
B. market potential of a product.
C. cost of using a particular supplier.

D. whether to continue providing a service.
9. Green Lumber Supply noticed a recent decline in the amount of purchases from a key customer. Worried that other customers might also reduce their purchases, Green's management decided to evaluate the cost of its delivery service. Which of the following cost drivers should be used for general administrative costs of the Delivery Department'?
A. number of orders entered
B. value ofeach order
C. number of items in each order
D. number of deliveries made

10. The unused resource capacity is the difference between the resources supplied and the resources
A. purchased.
B. wasted.
C. used.
D. on hand.

11. The amount of production possible under normal working conditions, including planned downtime and scheduled vacations, is called
A. actual capacity
B. normal capacity.
C. practical capacity.
D. theoretical capacity.

12. Which of the following statements regarding quality costs is(are) false'?
(A) In a cost of quality system, internal and external failure costs are called conformance costs.
(B) Prevention costs are costs incurred to detect individual units of product that do not conform to its specifications.
A. Only A is false.
B. Only B is false.
C. Both A and I3 are false.
D. Neither A nor B is false.

13. Which of the following is not an example of a prevention cost?
A. Training employees to improve quality
B. Designing products to reduce production problems
C. Correcting product defects before they are sold
D. Inspecting the production process as it occurs

14. Which of the following is an example of a prevention cost?
A. Machine inspection
B. Warranty repairs
C. Field testing
D. Marketing costs

15. Which of the following is an example of an internal failure cost?
A. Training employees to improve quality
B. Designing products to reduce production problems
C. Correcting product defects before they are sold
D. Inspecting the production process as it occurs.

16. Which of the following is not an example of an external failure cost'!
A. Accepting company liability resulting from product failure
B. experiencing decreasing sales as a result of poor-quality products
C. Repairing or replacing defective products after they've been sold
D. Testing products in use at the customer's site

17. Which of the following items is included in almost all quality control systems'?
A. Quality-related waiting time
B. Quality planning and analysis
C. Excess or obsolete inventory
D. Quality-related overtime

18. 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:

Customer A Customer B
Units purchased 100,000 200,000
Purchase orders(annual) 5 20

What is the amount of the sales support costs that should be allocated to customer A assuming Beta uses activity-based costing (ABC)?

A. $2,400
B. $4,000
C. 8,000
D. 9,600
E. Some other answer

19. Which of the following statements about activity-based costing (ABC) is not true? (CIA adapted)

A. In ABC, cost drivers are what cause costs to be linked to products.
B. ABC is useful for assigning marketing and distribution costs
C. ABC differs from traditional costing systems in that products are not cross-subsidized.
D. ABC is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.

20. In an activity-based costing (ABC) system, cost reduction is accomplished by identifying and eliminating (CPA adapted)

All Cost Drivers Nonvalue-added Activities
A. No no
B. Yes yes
C. No yes
D. Yes no



21. Black Company’s cost management and product costing procedures follow activity-based costing (ABC) principles. Activities have been identified and classified as being either value-added or nonvalue –added for each product. Which of the following activities, used in Black’s production process, is nonvalue-added? (CPA adapted

A. Drill press activity
B. Heat treatment activity
C. Design engineering activity
D. Raw materials storage activity


BC Enterprises’ quality control report for august 2008 contains the following item.

Gathering, analysis, and reporting quality data $1,000
Inspecting raw materials received from vendors $2,000
Testing and inspecting finished products $3,000
Visiting customer sites and addressing complaints $4,000
Designing product to reduce production problems $5,000
Repairing and/ or replacing products under warranty $6,000
Maintaining the equipment used to gather quality data $7,000
Cost (net) of materials wasted during production $8,000

22. What would be the total of the prevention costs on the August 2008 quality control report for BC Enterprises?

A. $5,000
B. $7,000
C. $11,000
D. $12,000
E. Some other answer

23. What would be the total of the appraisal costs on the August 2008 quality control report for BC Enterprises?

A. $8000
B. $11,000
C. $12000
D. $15000
E. Some other answer

24. What would be the total of the internal failure costs on the august 2008 quality control report for BC Enterprises?

A. $8,000
B. $13000
C. $14,000
D. $16,000
E. Some other answer




25. What would be the total of the external failure costs on the August 2008 quality control report for BC Enterprises?

A. $4,000
B. $6,000
C. 7,000
D. 14,000
E. Some other answer

26. What would be the total of the conformance costs on the August 2008 quality control report for BC Enterprises?

A. $22,000
B. $20,000
C. $15,000
D. $13,000
E. Some other answer

27. What would be the total of the nonconformance costs on the August 2008 quality control report for BC Enterprises?

A. $22,000
B. 21,000
C. 14,000
D. 13,000
E. Some other answer


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***CORRECT ANSWERS ARE INDICATED IN BLACK
Which of the following activities is most likely to he classified as value-added for a
manufacturing company?
A. storing
B. ordering
C. inspecting
D....