ACC 650 Managerial Accounting

ACC 650 Managerial Accounting

Week 3 Quiz

•Which of the following cost drivers would best be associated with the activity of physician time in a medical clinic?

•Number of new patient visits.

•Number of continuing patient visits.

•Physician minutes with a patient.

•Number of line items on the clinic’s bill.

•The number of accreditations held by the clinic.

• 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 Magnolia’s current procedures that:

•all of the company’s products are undercosted.

•the company’s high-volume products are undercosted.

•all of the company’s products are overcosted.

•the company’s high-volume products are overcosted.

•the company’s low-volume products are overcosted.

•When determining customer profitability, activity-based costing can be used to analyze:

•orders processed.

•sales visits.

•special packaging and handling.

•billing and collections.

•All of the answers are correct.

•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:






•Which of the following is not a broad, cost classification category typically used in activity-based costing?



•Product-sustaining level.



• The following tasks are associated with an activity-based costing system:

1— Assignment of cost to products

2— Calculation of pool rates

3— Identification of cost drivers

4— Identification of cost pools

Which of the following choices correctly expresses the proper order of the preceding tasks?

•1, 2, 3, 4.

•2, 4, 1, 3.

•3, 4, 2, 1.

•4, 2, 1, 3.

•4, 3, 2, 1.

• 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?

•All other things being equal, the company should consider a drop in its sales price.

•The company may have been extremely competitive in the marketplace from a price perspective.

•Product no. 519 could be labeled as being overcosted by the firm’s traditional costing procedures.

•If product no. 519 is undercosted by traditional accounting procedures, then all of the company’s other products must be undercosted as well.

•Generally speaking, the activity-based cost figure is “less accurate” than the traditionally-derived cost figure.

•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?

•Identification of cost pools.

•Calculation of pool rates.

•Assignment of cost to services provided.

•Identification of cost drivers.

•None of the answers is correct.

•Successful adoptions of activity-based costing typically occur when companies rely heavily on:

•finance personnel.

•accounting personnel.

•manufacturing personnel.

•office personnel.

•multidisciplinary project teams.

• Generally speaking, companies prefer doing business with customers who:

•order small quantities rather than large quantities.

•often change their orders.

•require special packaging or handling.

•request normal delivery times.

•need specialized engineering design changes.

•Activity-based costing systems:

•use a single, volume-based cost driver.

•assign overhead to products based on the products’ relative usage of direct labor.

•often reveal products that were under- or over-costed by traditional costing systems.

typically use fewer cost drivers than more traditional costing systems.

•have a tendency to distort product costs.

• 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.

•I only

•II only.

•III only.

•I and II.

•I, II, and III.

•Which of the following is least likely to be classified as a facility-level activity in an activity-based costing system?

•Plant maintenance.

•Property taxes.

•Machine processing cost.

•Plant depreciation.

•Plant management salaries.

•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, Flagler’s non-value-added cost would be:






• 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?


•Activity relationship charts (ARCs).

•Decision trees.

•Simulation games.

•Process organizers.

•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.

Purchase-order changes.

All of the answers are correct.

•The adoption of a 24/7 customer service help line is an example of a:

business-value-added activity.

customer-value-added activity.

non-value-added activity.

batch-related activity.

product-sustaining activity.

•Pound Industries’ 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:






•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:

unit-level activity.

batch-level activity.

product-sustaining activity.

facility-level activity.

competitive-level activity.

•In comparison with a system that uses a single, volume-based cost driver, an activity-based costing system is preferred when a company has:

•a large proportion of non-unit-level activities.

•product-line diversity.

•minimal product-line diversity and a small proportion of non-unit-level activities.

•existing variances from budgeted amounts.

•product-line diversity and a large proportion of non-unit-level activities.