Week 3 Quiz
â€¢Which of the following cost drivers would best be associated with the activity of physician time in a medical clinic?
â€¢Number of new patient visits.
â€¢Number of continuing patient visits.
â€¢Physician minutes with a patient.
â€¢Number of line items on the clinicâ€™s bill.
â€¢The number of accreditations held by the clinic.
â€¢ Magnolia Industries combines all manufacturing overhead into a single cost pool and allocates this overhead to products by using machine hours. Activity-based costing would likely show that with Magnoliaâ€™s current procedures that:
â€¢all of the company’s products are undercosted.
â€¢the company’s high-volume products are undercosted.
â€¢all of the company’s products are overcosted.
â€¢the company’s high-volume products are overcosted.
â€¢the company’s low-volume products are overcosted.
â€¢When determining customer profitability, activity-based costing can be used to analyze:
â€¢special packaging and handling.
â€¢billing and collections.
â€¢All of the answers are correct.
â€¢Baxter customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 10,000 calls and incurred costs of $312,000. Of these calls, 3,800 were for the company’s wholesale operation; the remainder was for the retail division. Costs allocated to the retail division are:
â€¢Which of the following is not a broad, cost classification category typically used in activity-based costing?
â€¢ The following tasks are associated with an activity-based costing system:
1â€” Assignment of cost to products
2â€” Calculation of pool rates
3â€” Identification of cost drivers
4â€” Identification of cost pools
Which of the following choices correctly expresses the proper order of the preceding tasks?
â€¢1, 2, 3, 4.
â€¢2, 4, 1, 3.
â€¢3, 4, 2, 1.
â€¢4, 2, 1, 3.
â€¢4, 3, 2, 1.
â€¢ Flavorful Manufacturing sells a number of goods whose selling price is heavily influenced by cost. A recent study of product no. 519 revealed a traditionally-derived total cost of $1,019, a selling price of $1,850 based on that figure, and a newly computed activity-based total cost of $1,215. Which of the following statements is true?
â€¢All other things being equal, the company should consider a drop in its sales price.
â€¢The company may have been extremely competitive in the marketplace from a price perspective.
â€¢Product no. 519 could be labeled as being overcosted by the firm’s traditional costing procedures.
â€¢If product no. 519 is undercosted by traditional accounting procedures, then all of the company’s other products must be undercosted as well.
â€¢Generally speaking, the activity-based cost figure is “less accurate” than the traditionally-derived cost figure.
â€¢A hospital administrator is in the process of implementing an activity-based-costing system. Which of the following tasks would not be part of this process?
â€¢Identification of cost pools.
â€¢Calculation of pool rates.
â€¢Assignment of cost to services provided.
â€¢Identification of cost drivers.
â€¢None of the answers is correct.
â€¢Successful adoptions of activity-based costing typically occur when companies rely heavily on:
â€¢multidisciplinary project teams.
â€¢ Generally speaking, companies prefer doing business with customers who:
â€¢order small quantities rather than large quantities.
â€¢often change their orders.
â€¢require special packaging or handling.
â€¢request normal delivery times.
â€¢need specialized engineering design changes.
â€¢Activity-based costing systems:
â€¢use a single, volume-based cost driver.
â€¢assign overhead to products based on the products’ relative usage of direct labor.
â€¢often reveal products that were under- or over-costed by traditional costing systems.
typically use fewer cost drivers than more traditional costing systems.
â€¢have a tendency to distort product costs.
â€¢ Which of the following statements is (are) true about non-value-added activities?
I. Non-value-added activities are often unnecessary and dispensable.
II. Non-value-added activities may be necessary but are being performed in an inefficient and improvable manner.
III. Non-value-added activities can be eliminated without deterioration of product quality, performance, or perceived value.
â€¢I and II.
â€¢I, II, and III.
â€¢Which of the following is least likely to be classified as a facility-level activity in an activity-based costing system?
â€¢Machine processing cost.
â€¢Plant management salaries.
â€¢Flagler Corporation takes eight hours to complete the setup process for a certain electrical component, with the setup cost averaging $150 per hour. If the company’s competitor can accomplish the same process in six hours, Flaglerâ€™s non-value-added cost would be:
â€¢ Overton Enterprises is converting to an activity-based costing system. It wishes to depict the various activities in its manufacturing process along with the activities’ relationships. Which of the following is a tool that the company can use to accomplish this task?
â€¢Activity relationship charts (ARCs).
â€¢Which of the following can have a negative impact on a particular sale’s profitability?
Number of required sales contacts (phone calls, visits, etc.).
Special shipping instructions.
Accounts receivable collection time.
All of the answers are correct.
â€¢The adoption of a 24/7 customer service help line is an example of a:
â€¢Pound Industriesâ€™ customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 10,000 calls and incurred costs of $312,000. Of these calls, 3,800 were for the company’s wholesale operation; the remainder was for the retail division. Costs allocated to the wholesale operation are:
â€¢Rosen, Inc., an appliance manufacturer, is developing a new line of ovens that uses controlled-laser technology. The research and testing costs associated with the new ovens is said to arise from a:
â€¢In comparison with a system that uses a single, volume-based cost driver, an activity-based costing system is preferred when a company has:
â€¢a large proportion of non-unit-level activities.
â€¢minimal product-line diversity and a small proportion of non-unit-level activities.
â€¢existing variances from budgeted amounts.
â€¢product-line diversity and a large proportion of non-unit-level activities.