The Laramie factory runs two departments: the Preparation Department and the Processing Department. The departmental overhead cost pool for the Preparation Department was $25,000 and was $20,000 for the Processing Department. The total amount of departmental allocation base was 400 DL hours in the Preparation Department and 600 DL hours in the Processing Department.
What is the estimated departmental overhead cost pool for each department?
ANSWER
INCORRECT
·
$2.50 for the Processing Department and $2.00 for the Preparation Department
·
THE CORRECT ANSWER
$62.50 for the Preparation Department and $33.33 for the Processing Department
·
YOU WERE SURE AND INCORRECT
$625.00 for the Processing Department and $333.33 for the Preparation Department
·
$6.25 for the Processing Department and $3.33 for the Preparation Department
·
I DON'T KNOW YET
Dobles Corporation has provided the following data from its activity-based costing system:
Activity Cost Pools | Estimated Overhead Cost | Expected Activity | |
Assembly | $228,060 | 18,000 | machine-hours |
Processing orders | $34,068 | 1,200 | orders |
Inspection | $125,560 | 1,720 | inspection-hours |
The company makes 420 units of product D28K a year, requiring a total of 460 machine-hours, 80 orders, and 10 inspection-hours per year. The product's direct materials cost is $48.96 per unit, and its direct labor cost is $25.36 per unit.
Use activity-based costing to compute the unit product cost of product D28K.
ANSWER
INCORRECT
·
$93.60 per unit
·
$89.93 per unit
·
YOU WERE SURE AND INCORRECT
$74.32 per unit
·
THE CORRECT ANSWER
$95.34 per unit
·
I DON'T KNOW YET
Setting up a machine to change from producing one product to another is an example of a ________.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
batch-level cost
·
product-level cost
·
YOU WERE SURE AND INCORRECT
unit-level cost
·
facility-level cost
·
I DON'T KNOW YET
Which of the following is NOT a characteristic of 5S Workplace Organizations?
ANSWER
INCORRECT
·
Managers eliminate infrequently used tools and supplies out of the workplace.
·
THE CORRECT ANSWER
Mangers store infrequently used tools and supplies to avoid purchasing tools later.
·
YOU WERE SURE AND INCORRECT
Managers use visual management tools, such as color-coding, to create logical orders of tools, supplies, and equipment.
·
Managers ensure all equipment and tools are thoroughly cleaned.
·
I DON'T KNOW YET
An important concern in forming a cost pool is to ________.
ANSWER
INCORRECT
·
limit the number of costs that make up the pool
·
THE CORRECT ANSWER
ensure the costs in the cost pool are homogenous with respect to the cost driver
·
YOU WERE SURE AND INCORRECT
add as much cost as possible to the cost pool
·
avoid placing similar costs in the same pool
·
I DON'T KNOW YET
Computer World, Inc. manufactures computer parts and keyboards. The annual production and sales of computer parts is 1,000 units, while 1,200 keyboards are produced and sold. The company has traditionally used direct-labor hours to allocate its overhead to products. Computer parts require 3 direct labor hours per unit, while keyboards require 2.5 direct labor hours per unit. The total estimated overhead for the period is $114,000. The company is looking at the possibility of changing to an activity-based costing system for its products.
What is the predetermined overhead allocation rate using the traditional costing system?
ANSWER
INCORRECT
·
$27.24
·
YOU WERE SURE AND INCORRECT
$30.92
·
THE CORRECT ANSWER
$19
·
$12.09
·
I DON'T KNOW YET
Which of the following is NOT one of the eight wastes that comprise much of the waste found in traditional organizations, including service and merchandising companies?
ANSWER
INCORRECT
·
Moving materials within the plant
·
Adding features customers never use
·
YOU WERE SURE AND INCORRECT
Storing inventory
·
THE CORRECT ANSWER
Overutilizing employees
·
I DON'T KNOW YET
Which of the following provides an example of a conformance cost?
ANSWER
INCORRECT
·
Warranty cost
·
THE CORRECT ANSWER
Inspection cost
·
Rework costs
·
YOU WERE SURE AND INCORRECT
Maintenance costs
·
I DON'T KNOW YET
Testing a prototype of a new product is an example of a ________.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
product-level cost
·
unit-level cost
·
YOU WERE SURE AND INCORRECT
facility-level cost
·
batch-level cost
·
I DON'T KNOW YET
Whiteley Inc. manufactures and sells two products: Product M5 and Product P4. Data concerning the expected production of each product and the expected total direct labor hours (DLH) required to produce that output appear below:
Expected Production | Direct Labor-Hours Per Unit | Total Direct Labor Hours | |
Product M5 | 200 | 9.0 | 1,800 |
Product P4 | 100 | 12.0 | 1,200 |
Total direct labor hours | 3,000 |
The direct labor rate is $27.50 per DLH. The direct materials cost per unit for each product is given below:
Direct Materials Cost per Unit | |
Product M5 | $185.20 |
Product P4 | $244.20 |
The company is considering adopting an activity-based costing system with the following activity cost pools, activity measures, and expected activity:
Estimated | Expected Activity | ||||
Activity Cost Pools | Activity Measures | Overhead Cost | Product M5 | Product P4 | Total |
Labor-related | DLH | $117,330 | 1,800 | 1,200 | 3,000 |
Product testing | tests | 9,499 | 400 | 300 | 700 |
General factory | machine hours (MH) | 641,606 | 5,000 | 4,800 | 9,800 |
$768,435 | |||||
The unit product cost of Product P4 under activity-based costing is closest to ___________.
ANSWER
INCORRECT
·
$3,716.76 per unit
·
$3,648.00 per unit
·
YOU WERE SURE AND INCORRECT
$3,135.65 per unit
·
THE CORRECT ANSWER
$4,226.79 per unit
·
I DON'T KNOW YET
Which of the following is NOT true regarding total quality management (TQM) programs?
ANSWER
INCORRECT
·
TQM programs measure the number of customer complaints.
·
YOU WERE SURE AND INCORRECT
TQM programs measure defect rates.
·
THE CORRECT ANSWER
TQM programs never emphasize nonfinancial measures.
·
TQM programs emphasize the number of warranty repairs.
·
I DON'T KNOW YET
If a manager determines an existing cost system is outdated, the manager should consider implementing ________.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
activity-based costing
·
no new accounting systems
·
YOU WERE SURE AND INCORRECT
fewer cost-cutting practices
·
less new technology
·
I DON'T KNOW YET
In the cost allocation process, an allocation base ________.
ANSWER
INCORRECT
·
using bar coding and other technological advances is discouraged since data collection is inconsistent
·
YOU WERE SURE AND INCORRECT
usage collection is discouraged since it is never related to the allocation base
·
THE CORRECT ANSWER
should be the cost driver of the costs in the particular activity pool
·
is never a concern since managers never track activity pools
·
I DON'T KNOW YET
Which is NOT an example of a product-level cost?
ANSWER
INCORRECT
·
Design time
·
THE CORRECT ANSWER
Setup time
·
YOU WERE SURE AND INCORRECT
Parts administration
·
Research & development
·
I DON'T KNOW YET
A relevant facility-level cost driver for heating costs is ________.
ANSWER
INCORRECT
·
the lease payments on sole-purpose use manufacturing equipment
·
YOU WERE SURE AND INCORRECT
the costs to set up the machine
·
the inspection units of production
·
THE CORRECT ANSWER
floor space
·
I DON'T KNOW YET
Selecting an allocation base for each activity and estimating the total annual cost ________.
ANSWER
INCORRECT
·
is the fourth step to compute and use activity cost allocation rates
·
THE CORRECT ANSWER
is the second step to compute and use activity cost allocation rates
·
YOU WERE SURE AND INCORRECT
is the first step to compute and use activity cost allocation rates
·
is the third step to compute and use activity cost allocation rates
·
I DON'T KNOW YET
An important concern in forming a cost pool is to ________.
ANSWER
INCORRECT
·
avoid placing similar costs in the same pool
·
add as much cost as possible to the cost pool
·
YOU WERE SURE AND INCORRECT
limit the number of costs that make up the pool
·
THE CORRECT ANSWER
ensure the costs in the cost pool are homogenous with respect to the cost driver
·
I DON'T KNOW YET
Excessive cost and time required to implement and maintain is characteristic of ________.
ANSWER
INCORRECT
·
job order costing
·
THE CORRECT ANSWER
activity-based costing (ABC)
·
YOU WERE SURE AND INCORRECT
process costing
·
operational cost systems
·
I DON'T KNOW YET
Which of the following is a benefit of employee empowerment?
ANSWER
INCORRECT
·
Lean companies focus on employees working in production cells; therefore, an employee may only complete one task.
·
THE CORRECT ANSWER
Lean companies typically focus on employee empowerment to combat waste.
·
YOU WERE SURE AND INCORRECT
Lean companies empower employees by using large teams to identify waste and abuse.
·
Lean companies focus on smaller employee roles than employees at other companies.
·
I DON'T KNOW YET
Which of the following is NOT a characteristic of 5S Workplace Organizations?
ANSWER
INCORRECT
·
Managers eliminate infrequently used tools and supplies out of the workplace.
·
THE CORRECT ANSWER
Mangers store infrequently used tools and supplies to avoid purchasing tools later.
·
YOU WERE SURE AND INCORRECT
Managers use visual management tools, such as color-coding, to create logical orders of tools, supplies, and equipment.
·
Managers ensure all equipment and tools are thoroughly cleaned.
·
I DON'T KNOW YET
The cost driver of the costs in the particular activity pool is ________.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
the cost allocation base
·
the costs using direct labor hours as the allocation base
·
YOU WERE SURE AND INCORRECT
the costs using direct material costs
·
the cost of supervisory expense
·
I DON'T KNOW YET
Which of the following choices represent conformance costs?
ANSWER
INCORRECT
·
THE CORRECT ANSWER
Appraisal and prevention costs
·
Prevention and external failure costs
·
YOU WERE SURE AND INCORRECT
Appraisal and internal failure costs
·
Internal and external failure costs
·
I DON'T KNOW YET
The first step in the development of an activity-based costing system is to ________.
ANSWER
incorrect
·
identify activity cost pools
·
allocates manufacturing overhead
·
YOU WERE SURE AND INCORRECT
select the allocation base and estimate total amounts
·
compute activity cost allocation rates
·
I DON'T KNOW YET
Which of the following situations indicate that a manager should consider using activity-based costing (ABC)?
ANSWER
incorrect
·
Older systems continue to operate at consistent levels of accuracy.
·
The cost system is outdated.
·
YOU WERE SURE AND INCORRECT
The costs of implementing activity-based costing (ABC) exceeds the expected benefits.
·
The existing cost systems do not distort costs.
·
I DON'T KNOW YET
The first step in the development of an activity-based costing system is to ________.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
identify activity cost pools
·
allocates manufacturing overhead
·
YOU WERE SURE AND INCORRECT
select the allocation base and estimate total amounts
·
compute activity cost allocation rates
·
I DON'T KNOW YET
Which of the following situations indicate that a manager should consider using activity-based costing (ABC)?
ANSWER
INCORRECT
·
Older systems continue to operate at consistent levels of accuracy.
·
THE CORRECT ANSWER
The cost system is outdated.
·
YOU WERE SURE AND INCORRECT
The costs of implementing activity-based costing (ABC) exceeds the expected benefits.
·
The existing cost systems do not distort costs.
·
I DON'T KNOW YET
Which of the following is a characteristic of 5S Workplace Organizations?
ANSWER
YOU CHOSE TWO
·
Managers NEVER use visual management tools, such as color-coding, to create logical orders of tools, supplies, and equipment.
·
YOU WERE UNSURE AND INCORRECT
Managers do not need to inspect employee workstations because managers have faith and trust in employees.
·
YOU WERE UNSURE AND CORRECT
Managers eliminate infrequently used tools and supplies out of the workplace.
·
Mangers store infrequently used tools and supplies to avoid purchasing tools later.
I DON'T KNOW YET
Which of the following eights wastes signifies unsafe work conditions that may decrease employee morale and increase the firm’s workers’ compensation claims?
ANSWER
YOU CHOSE TWO
·
Waiting
·
Inventory
·
YOU WERE UNSURE AND CORRECT
Movement
·
YOU WERE UNSURE AND INCORRECT
Transportation
·
I DON'T KNOW YET
Which of the following would be the best cost driver to assemble a cost pool?
ANSWER
INCORRECT
·
THE CORRECT ANSWER
Number of parts
·
Amount of square footage of the manufacturing floor
·
Number of orders
·
YOU WERE SURE AND INCORRECT
Number of product lines
·
I DON'T KNOW YET
Johnson Enterprises uses departmental overhead rates to allocate manufacturing overhead to jobs. The company has two divisions: Production and Assembling. The Production Division uses a departmental overhead rate of $40 per machine hour, while the Assembling Division uses a departmental overhead rate of $25 per direct labor hour. Job 757 used the following direct-labor hours and machine hours in each division.
Actual Results | Production Division | Assembling Division |
Direct labor (DL) hours | 10 | 7 |
Machine Hours | 12 | 9 |
The cost for direct labor is $35 per hour and the cost of the direct materials used by Job 757 is $1,500.
How much manufacturing overhead would be allocated to Job 757 using the departmental overhead rates?
ANSWER
YOU CHOSE TWO
·
$525
·
YOU WERE UNSURE AND INCORRECT
$205
·
YOU WERE UNSURE AND CORRECT
$655
·
$44
·
I DON'T KNOW YET
Quality at the source ________.
ANSWER
I DON'T KNOW YET
·
THE CORRECT ANSWER
is the term that refers to shifting the responsibility for quality adherence to the operators at each step in the value stream, rather than relying on supervisors or quality control experts to discover errors
·
refers to the exchange of information with suppliers and customers to reduce costs, improve quality, and speed delivery of goods and services from suppliers to company, focusing on customers
·
is the goal of producing near perfection, with less than 3.4 defects per million opportunities
·
is a system in which production costs are not assigned to units until they are finished or sold. As a result, managers save bookkeeping steps of moving products through various types of inventory accounts
Which of the following statements is TRUE regarding total quality management (TQM) programs?
ANSWER
INCORRECT
·
YOU WERE UNSURE AND INCORRECT
A manager would not include the number of customer complaints in a TQM program.
·
TQM programs fail to measure defect rates.
·
THE CORRECT ANSWER
TQM programs emphasize nonfinancial measures.
·
YOU WERE UNSURE AND INCORRECT
A manager would not include warranty repairs in a TQM programs.
·
I DON'T KNOW YET
________ is the term that refers to shifting the responsibility for quality adherence to the operators at each step in the value stream instead of relying on supervisors or quality control experts to discover errors.
ANSWER
INCORRECT
·
THE CORRECT ANSWER
Quality at the source
·
YOU WERE UNSURE AND INCORRECT
Supply-chain management
·
Backflush costing
·
YOU WERE UNSURE AND INCORRECT
Six Sigma
·
I DON'T KNOW YET
Laramie produces two products: Basic and Deluxe. The plant’s overhead for January was $45,000 and the plant used 600 durect labor (DL) hours. The factory has two departments: Preparation and Processing. The Preparation Department incurred $25,000 of overhead and used 400 DL hours. In the Processing Department, $20,000 of manufacturing overhead was incurred and 160 DL hours were used. During January, 300 DL hours were used by the Basic model and 300 DL hours were used by the Deluxe model to make 100 units of each.
What is the total overhead rate if Laramie uses departmental rates based on DL hours (DLH)?
ANSWER
YOU CHOSE TWO
·
$125/DLH for preparation and $62.50/DLH for processing
·
YOU WERE UNSURE AND INCORRECT
$80.35/DLH for preparation and $80.35/DLH for processing
·
$75/DLH for both departments
·
YOU WERE UNSURE AND CORRECT
$62.50/DLH for preparation and $125/DLH for processing
·
I DON'T KNOW YET
