ACC 256 MC QUIZ NAME______
CIRCLE THE CORRECT RESPONSE. SECTION_____ TEAM______
CHAPTER 8
1. Which of the following processes best describes Activity Based Costing (ABC)?
a. A one-stage process in which a plantwide overhead rate encompassing all costs in a factory is allocated to products based on direct labor hours.
b. A two-stage process in which the first stage involves assigning overhead costs to production departments. In the second stage, costs are allocated to individual jobs based on direct labor hours or machine-hours.
c. A two-stage process in which the first stage involves assigning overhead costs to cost pools that represent particular activities. In the second stage, the costs in each cost pool are assigned to jobs according to the number of the particular activities the jobs require.
2. In general, ABC…
a. decreases the number of cost pools used to accumulate overhead costs.
b. changes many overhead costs from indirect costs to direct costs.
c. changes the basis of overhead costs assignment from number of setups to direct labor costs.
d. decreases the traceability of overhead costs to products.
e. DEFGHIJKLMNOPQRSTUVWXYZ.
3. When there are batch-level or product-level costs, in comparison to a traditional cost system, an activity-based costing system ordinarily will:
a. Shift costs from low-volume to high-volume products.
b. Shift costs from high-volume to low-volume products.
c. Shift costs from standardized to specialized products.
d. Shift costs from specialized to standardized products.
4. Setting up equipment is an example of a(an):
a. unit-level activity.
b. batch-level activity.
c. product-level activity.
d. organization-sustaining activity.
5. Which of the following levels of cost should not be allocated to products for decision-making purposes?
a. unit-level activity.
b. batch-level activity.
c. product-level activity.
d. organization-sustaining activity.
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6. In allocating costs to products, more accurate costing is generally obtained by:
a. allocating costs using labor hours as the allocation base.
b. having more than one cost pool.
c. always using allocation bases that are based on production volume.
d. none of the above.
7. Cost drivers in activity-based costing:
a. are always related to production volume.
b. are workers who influence cost control.
c. often assign more costs to low-volume products than traditional allocation methods.
d. none of the above.
8. A systematic approach to identifying the activities with the greatest room for improvement that is based on comparing the performance in an organization with the performance of other similar organizations known for their outstanding performance is known as:
a. activity-based costing.
b. benchmarking.
c. performance reporting.
d. process reengineering.
9. A cost driver (or activity measure):
a. is a term that applies only to activity-based systems.
b. relates only to direct labor hours or machine hours.
c. is identified only for the first stage in cost assignment.
d. is a quantifiable measure of what causes the costs to be incurred..
10. Old World uses activity-based costing to compute product costs for external reports. The company has three activity cost pools and applies overhead using predetermined overhead rates for each activity cost pool. Estimated costs totaled $60,000 and expected activity equals 3,000 for this activity cost pool Actual activity for the current year was 2,900. The amount of overhead applied for this activity during the year was closest to:
a. $59,900
b. $60,000
c. $58,000
d. $62,069