1.

Many traditional costing systems:

Group of answer choices
produce results far superior to those achieved with activity-based costing.
write off manufacturing overhead as an expense of the current period.
trace manufacturing overhead to individual activities and require the development of
numerous activity-costing rates.
use a host of different cost drivers (e.g., number of production setups, inspection hours,
orders processed) to improve the accuracy of product costing.
combine widely varying elements of overhead into a single cost pool.

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

          1—Calculation of cost application rates
            2—Identification of cost drivers
            3—Assignment of cost to products
            4—Identification of cost pools
 
            Which of the following choices correctly expresses the proper order of the
preceding tasks?
Group of answer choices
3, 4, 2, 1.
2, 4, 1, 3.
4, 2, 1, 3.
1, 2, 3, 4.
4, 2, 3, 1

3. Which of the following is the proper sequence of events in an activity-based

costing system?
Group of answer choices
Identification of cost drivers, identification of cost pools, calculation of cost application
rates, assignment of cost to products.
Assignment of cost to products, identification of cost pools, identification of cost drivers,
calculation of cost application rates.
Calculation of cost application rates, identification of cost drivers, identification of cost
pools, assignment of cost to products.
Some other sequence of the four activities listed above.
Identification of cost pools, identification of cost drivers, calculation of cost application
rates, assignment of cost to products.

4. Which of the following is least likely to be classified as a batch-level activity in an

activity-based costing system?
Group of answer choices
Receiving and inspection.
Shipping.
Property taxes.
Production setup.
Quality assurance.

5. Which of the following choices correctly depicts a cost that arises from a batch-
level activity and one that arises from a facility-level activity?
            Batch-Level Activity                Facility-Level   Activity
Group of answer choices
Quality assurance Shipping
Inspection Property taxes
Plant maintenance Insurance
Direct materials Plant depreciation
Management salaries Material handling

6. An objective of activity-based management is to

Group of answer choices
eliminate the majority of centralized activities in an organization.
all of the above
institute responsibility accounting systems in decentralized organizations.
reduce or eliminate non-value-added activities incurred to make a product or provide a
service.

7. Which of the following is not a drawback of mass customization?

Group of answer choices
The potential for errors is great.
All of the above.
The choices are too numerous.
Only a small percentage of available choices is normally selected.
None of the above.

8. Traditional overhead allocations result in which of the following situations?

Group of answer choices
Low-volume products are assigned too much, and high-volume products are assigned
too little overhead.
The resulting allocations cannot be used for financial reports.
High-volume products are assigned too much overhead, and low-volume products are
assigned too little overhead.
Overhead costs are assigned as period costs to manufacturing operations.

9. Traditionally, overhead has been assigned based on direct labor hours or machine
hours. What effect does this have on the cost of a high-volume item?
Group of answer choices
over-costs the product
cost per unit is unaffected by product volume
under-costs the product
has no effect the product cost

10. Which of the following statements about activity-based costing is NOT true?
Group of answer choices
Activity-based costing seeks to distinguish batch-level, product-sustaining, and facility-
sustaining costs, especially when they are not proportionate to one another.
Activity-based costing differs from traditional costing systems in that products are not
cross subsidized.
Activity-based costing is more likely to result in major differences from traditional
costing systems if the firm manufactures only one product rather than multiple products.
Activity-based costing is useful for allocating marketing and distribution costs.

11. Answer the following questions using the information below: (for numbers 11 -
16)
Mertens Company provides the following ABC costing information:
Activities                                  Total Costs       Activity-cost drivers
Account inquiry hours               $200,000          10,000 hours
Account billing lines                 $140,000         4,000,000 lines
Account verification accounts   $75,000           40,000 accounts
Correspondence letters              $ 25,000           4,000 letters
 Total costs                               $440,000
 
The above activities are used by Departments A and B as follows:
                                                 Department A             Department B
Account inquiry hours              2,000 hours                 4,000 hours
Account billing lines                 400,000 lines               200,000 lines
Account verification accounts   10,000 accounts           8,000 accounts
Correspondence letters              1,000 letters                 1,600 letters
How much of the account inquiry cost will be assigned to Department A?
Group of answer choices
$200,000
$40,000
$80,000
None of these answers are correct.

Computation: (200k/10k) x 2000

12. Answer the following questions using the information below: (for numbers 11 -
16)
Mertens Company provides the following ABC costing information:
Activities                                  Total Costs       Activity-cost drivers
Account inquiry hours               $200,000          10,000 hours
Account billing lines                 $140,000         4,000,000 lines
Account verification accounts   $75,000           40,000 accounts
Correspondence letters              $ 25,000           4,000 letters
 Total costs                               $440,000
 
The above activities are used by Departments A and B as follows:
                                                 Department A             Department B
Account inquiry hours              2,000 hours                 4,000 hours
Account billing lines                 400,000 lines               200,000 lines
Account verification accounts   10,000 accounts           8,000 accounts
Correspondence letters              1,000 letters                 1,600 letters
How much of the account account billing cost will be assigned to Department B?
Group of answer choices
$14,000
$140,000
None of these answers are correct.
$7,000

Computation: (140k / 4m) x 200k

13. Answer the following questions using the information below: (for numbers 11 -
16)
Mertens Company provides the following ABC costing information:
Activities                                  Total Costs       Activity-cost drivers
Account inquiry hours               $200,000          10,000 hours
Account billing lines                 $140,000         4,000,000 lines
Account verification accounts   $75,000           40,000 accounts
Correspondence letters              $ 25,000           4,000 letters
 Total costs                               $440,000
 
The above activities are used by Departments A and B as follows:
                                                 Department A             Department B
Account inquiry hours              2,000 hours                 4,000 hours
Account billing lines                 400,000 lines               200,000 lines
Account verification accounts   10,000 accounts           8,000 accounts
Correspondence letters              1,000 letters                 1,600 letters
How much of account verification costs will be assigned to Department A?
Group of answer choices
$75,000
$5,000
$15,000
$18,750

Computation: (75k / 40k) x 10k

14. Answer the following questions using the information below: (for numbers 11 -
16)
Mertens Company provides the following ABC costing information:
Activities                                  Total Costs       Activity-cost drivers
Account inquiry hours               $200,000          10,000 hours
Account billing lines                 $140,000         4,000,000 lines
Account verification accounts   $75,000           40,000 accounts
Correspondence letters              $ 25,000           4,000 letters
 Total costs                               $440,000
 
The above activities are used by Departments A and B as follows:
                                                 Department A             Department B
Account inquiry hours              2,000 hours                 4,000 hours
Account billing lines                 400,000 lines               200,000 lines
Account verification accounts   10,000 accounts           8,000 accounts
Correspondence letters              1,000 letters                 1,600 letters
How much of correspondence costs will be assigned to Department B?
Group of answer choices
$25,000
$800
$6,250
$10,000

Computation: (25k / 4k) x 1,600

15. Answer the following questions using the information below: (for numbers 11 -
16)
Mertens Company provides the following ABC costing information:
Activities                                  Total Costs       Activity-cost drivers
Account inquiry hours               $200,000          10,000 hours
Account billing lines                 $140,000         4,000,000 lines
Account verification accounts   $75,000           40,000 accounts
Correspondence letters              $ 25,000           4,000 letters
 Total costs                               $440,000
 
The above activities are used by Departments A and B as follows:
                                                 Department A             Department B
Account inquiry hours              2,000 hours                 4,000 hours
Account billing lines                 400,000 lines               200,000 lines
Account verification accounts   10,000 accounts           8,000 accounts
Correspondence letters              1,000 letters                 1,600 letters
How much of the total costs will be assigned to Department A?
Group of answer choices
$112,000
$40,000
$440,000
$79,000

Computation:
(200k/10k) x 2k
(140k/4m) x 400k
(75k/40k) x 10k
(25k/4k) x 1k

16. Answer the following questions using the information below: (for numbers 11 -
16)
Mertens Company provides the following ABC costing information:
Activities                                  Total Costs       Activity-cost drivers
Account inquiry hours               $200,000          10,000 hours
Account billing lines                 $140,000         4,000,000 lines
Account verification accounts   $75,000           40,000 accounts
Correspondence letters              $ 25,000           4,000 letters
 Total costs                               $440,000
 
The above activities are used by Departments A and B as follows:
                                                 Department A             Department B
Account inquiry hours              2,000 hours                 4,000 hours
Account billing lines                 400,000 lines               200,000 lines
Account verification accounts   10,000 accounts           8,000 accounts
Correspondence letters              1,000 letters                 1,600 letters
How much of the total costs will be assigned to Department B?
Group of answer choices
$112,000
$440,000
$40,000
$79,000

Computation:
(200k/10k) x 4k
(140k/4m) x 200k
(75k/40k) x 8k
(25k/4k) x 1600

17. Activity-based costing is most likely to yield benefits for companies with all of the
following characteristics EXCEPT:
Group of answer choices
numerous products that consume different amounts of resources
operations that remain fairly consistent
accessible accounting and information systems expertise to maintain the system
a highly competitive environment, where cost control is critical

18. Each of the following statements is true EXCEPT:

Group of answer choices
cost distortions occur when a mismatch (incorrect association) occurs between the way
indirect costs are incurred and the basis for their assignment to individual products
traditional product costing systems seek to assign all manufacturing costs to products
ABC product costing systems seek to assign all manufacturing costs to products
traditional product costing systems are more refined than an ABC system

19. Use the following to answer questions 19-27:

 
HiTech Products manufactures three types of remote-control devices: Economy,
Standard, and Deluxe.  The company, which uses activity-based costing, has identified
five activities (and related cost drivers).  Each activity, its budgeted cost, and related cost
driver is identified below.

Activity Cost Cost Driver

Material handling $   225,000 Number of parts

Material insertion 2,475,000 Number of parts

Automated machinery 840,000 Machine hours

Finishing 170,000 Direct labor hours

Packaging 170,000 Orders shipped

Total $3,880,000

The following information pertains to the three product lines for next year:

Economy Standard Deluxe

Units to be produced 10,000 5,000 2,000

Orders to be shipped 1,000 500 200

Number of parts per

10 15 25
unit

Machine hours per unit 1 3 5

Labor hours per unit     2 2 2

19. What is HiTech's cost application rate for the material-handling activity?

Group of answer choices

$2.25 per part.
$1.00 per part.
$13.23 per part.
$6.62 per labor hour.

Use the following to answer questions 19-27:

 
HiTech Products manufactures three types of remote-control devices: Economy,
Standard, and Deluxe.  The company, which uses activity-based costing, has identified
five activities (and related cost drivers).  Each activity, its budgeted cost, and related cost
driver is identified below.

Activity Cost Cost Driver

Material handling $   225,000 Number of parts
Material insertion 2,475,000 Number of parts
Automated
840,000 Machine hours
machinery
Finishing 170,000 Direct labor hours

Packaging 170,000 Orders shipped

Total $3,880,000

The following information pertains to the three product lines for next year:

Economy Standard Deluxe

Units to be produced 10,000 5,000 2,000
Orders to be shipped 1,000 500 200
Number of parts per
10 15 25
unit
Machine hours per unit 1 3 5
Labor hours per unit     2 2 2

20. What is HiTech's cost application rate for the automated machinery activity?

Group of answer choices

$24.50 per labor hour.
$24.00 per machine hour.
$50.00 per machine hour.
$49.42 per unit.

Use the following to answer questions 19-27:

 
HiTech Products manufactures three types of remote-control devices: Economy,
Standard, and Deluxe.  The company, which uses activity-based costing, has identified
five activities (and related cost drivers).  Each activity, its budgeted cost, and related cost
driver is identified below.

Activity Cost Cost Driver

Material handling $   225,000 Number of parts
Material insertion 2,475,000 Number of parts
Automated
840,000 Machine hours
machinery
Finishing 170,000 Direct labor hours
Packaging 170,000 Orders shipped

Total $3,880,000

The following information pertains to the three product lines for next year:

Economy Standard Deluxe

Units to be produced 10,000 5,000 2,000
Orders to be shipped 1,000 500 200
Number of parts per
10 15 25
unit
Machine hours per unit 1 3 5
Labor hours per unit     2 2 2

21. What is HiTech's cost application rate for the finishing activity?

Group of answer choices

$5.00 per machine hour.
$5.00 per unit.
$5.00 per labor hour.
$7.50 per unit

Use the following to answer questions 19-27:

 
HiTech Products manufactures three types of remote-control devices: Economy,
Standard, and Deluxe.  The company, which uses activity-based costing, has identified
five activities (and related cost drivers).  Each activity, its budgeted cost, and related cost
driver is identified below.

Activity Cost Cost Driver

Material handling $   225,000 Number of parts
Material insertion 2,475,000 Number of parts
Automated
840,000 Machine hours
machinery
Finishing 170,000 Direct labor hours

Packaging 170,000 Orders shipped

Total $3,880,000
The following information pertains to the three product lines for next year:

Economy Standard Deluxe

Units to be produced 10,000 5,000 2,000
Orders to be shipped 1,000 500 200
Number of parts per
10 15 25
unit
Machine hours per unit 1 3 5
Labor hours per unit     2 2 2

22. What is HiTech's cost application rate for the packaging activity?

Group of answer choices

$10.00 per unit.
$5.00 per labor hour.
$4.86 per machine hour.
$100.00 per order shipped.

Use the following to answer questions 19-27:

 
HiTech Products manufactures three types of remote-control devices: Economy,
Standard, and Deluxe.  The company, which uses activity-based costing, has identified
five activities (and related cost drivers).  Each activity, its budgeted cost, and related cost
driver is identified below.

Activity Cost Cost Driver

Material handling $   225,000 Number of parts
Material insertion 2,475,000 Number of parts
Automated
840,000 Machine hours
machinery
Finishing 170,000 Direct labor hours

Packaging 170,000 Orders shipped

Total $3,880,000

The following information pertains to the three product lines for next year:

Economy Standard Deluxe

Units to be produced 10,000 5,000 2,000
Orders to be shipped 1,000 500 200
Number of parts per
10 15 25
unit
Machine hours per unit 1 3 5
Labor hours per unit     2 2 2

23. Under an activity-based costing system, what is the per-unit cost of Economy?
Group of answer choices
$228.
$225.
$141.
$164.

Use the following to answer questions 19-27:

 
HiTech Products manufactures three types of remote-control devices: Economy,
Standard, and Deluxe.  The company, which uses activity-based costing, has identified
five activities (and related cost drivers).  Each activity, its budgeted cost, and related cost
driver is identified below.

Activity Cost Cost Driver

Material handling $   225,000 Number of parts
Material insertion 2,475,000 Number of parts
Automated
840,000 Machine hours
machinery
Finishing 170,000 Direct labor hours

Packaging 170,000 Orders shipped

Total $3,880,000

The following information pertains to the three product lines for next year:

Economy Standard Deluxe

Units to be produced 10,000 5,000 2,000
Orders to be shipped 1,000 500 200
Number of parts per
10 15 25
unit
Machine hours per unit 1 3 5
Labor hours per unit     2 2 2

24. Under an activity-based costing system, what is the per-unit cost of Standard?

Group of answer choices

$164.
$272.
$282.
$228.

Use the following to answer questions 19-27:

 
HiTech Products manufactures three types of remote-control devices: Economy,
Standard, and Deluxe.  The company, which uses activity-based costing, has identified
five activities (and related cost drivers).  Each activity, its budgeted cost, and related cost
driver is identified below.

Activity Cost Cost Driver

Material handling $   225,000 Number of parts
Material insertion 2,475,000 Number of parts
Automated
840,000 Machine hours
machinery
Finishing 170,000 Direct labor hours

Packaging 170,000 Orders shipped

Total $3,880,000

The following information pertains to the three product lines for next year:

Economy Standard Deluxe

Units to be produced 10,000 5,000 2,000
Orders to be shipped 1,000 500 200
Number of parts per
10 15 25
unit
Machine hours per unit 1 3 5
Labor hours per unit     2 2 2

25. Under an activity-based costing system, what is the per-unit cost of Deluxe?

Group of answer choices

$272.
$282.
$320.
$440.

Use the following to answer questions 19-27:

 
HiTech Products manufactures three types of remote-control devices: Economy,
Standard, and Deluxe.  The company, which uses activity-based costing, has identified
five activities (and related cost drivers).  Each activity, its budgeted cost, and related cost
driver is identified below.

Activity Cost Cost Driver

Material handling $   225,000 Number of parts
Material insertion 2,475,000 Number of parts
Automated
840,000 Machine hours
machinery
Finishing 170,000 Direct labor hours

Packaging 170,000 Orders shipped

Total $3,880,000

The following information pertains to the three product lines for next year:

Economy Standard Deluxe

Units to be produced 10,000 5,000 2,000
Orders to be shipped 1,000 500 200
Number of parts per
10 15 25
unit
Machine hours per unit 1 3 5
Labor hours per unit     2 2 2

26. Assume that HiTech is using a volume-based costing system, and the preceding
manufacturing costs are applied to all products based on direct labor hours. How
much of the preceding cost would be assigned to Deluxe?
Group of answer choices
$456,471.
$1,141,176.
$646,471.
$961,176.
Use the following to answer questions 19-27:
 
HiTech Products manufactures three types of remote-control devices: Economy,
Standard, and Deluxe.  The company, which uses activity-based costing, has identified
five activities (and related cost drivers).  Each activity, its budgeted cost, and related cost
driver is identified below.

Activity Cost Cost Driver

Material handling $   225,000 Number of parts
Material insertion 2,475,000 Number of parts
Automated
840,000 Machine hours
machinery
Finishing 170,000 Direct labor hours

Packaging 170,000 Orders shipped

Total $3,880,000

The following information pertains to the three product lines for next year:

Economy Standard Deluxe

Units to be produced 10,000 5,000 2,000
Orders to be shipped 1,000 500 200
Number of parts per
10 15 25
unit
Machine hours per unit 1 3 5
Labor hours per unit     2 2 2

27. Assume that HiTech is using a volume-based costing system, and the preceding
manufacturing costs are applied to all products based on direct labor hours.  How
much of the preceding cost would be assigned to Standard?
Group of answer choices
$961,176.
$1,141,176.
$646,471.
$456,471.

28. Traditional overhead allocations result in which of the following situations?

Group of answer choices
PlanOverhead costs are assigned as period costs to manufacturing operations.t
maintenance.
The resulting allocations cannot be used for financial reports.
High-volume products are assigned too much overhead, and low-volume products are
assigned too little overhead.
Low-volume products are assigned too much, and high-volume products are assigned
too little overhead.

29. Williams Corporation is changing from a traditional costing system to an activity-

based system.  As a result of this action, which of the following costs would likely
change from indirect to direct?
Group of answer choices
Production setup, finished-goods inspection, and product shipping.
Factory supplies.
Direct materials.
Production setup.
Production setup and finished-goods inspection.

30. Which of the following statements about activity-based costing (ABC) is false?
Group of answer choices
In comparison with traditional costing systems, ABC tends to use more cost pools and
more cost drivers.
ABC tends to reduce cost distortion among product lines.
ABC cannot be used by service businesses.
In comparison with traditional-costing systems, ABC results in less cost “averaging” of
various diversified activities
In comparison with traditional-costing systems, ABC results in more costs being
classified as direct costs.

31. 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?
Group of answer choices
Identification of cost pools.
Identification of cost drivers.
Assignment of cost to services provided.
Calculation of cost application rates.
None of the above, as all these tasks would be part of the process.

Answer the following questions using the information below: (for question 32 -40)
Happy Valley Land and Snow Company provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Labor hours $320,000 8,000 hours
Gas      $36,000 6,000 gallons
Invoices $40,000 2,500 invoices
Total costs $396,000

The above activities used by their three departments are:

Lawn Department Bush Department Plowing Department

Labor hours 2,500 hours 1,200 hours 4,300 hours

Gas      1,500 gallons    800 gallons 3,700 gallons

Invoices 1,600 invoices 400 invoices 500 invoices

32. How much of the labor cost will be assigned to the Lawn Department?
Group of answer choices
$100,000
$40,000
$25,600
$60,000

Computation: (320k / 8k) x 2,500

Answer the following questions using the information below: (for question 32 -40)
Happy Valley Land and Snow Company provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Labor
$320,000 8,000 hours
hours
Gas      $36,000 6,000 gallons
Invoices $40,000 2,500 invoices
Total costs $396,000

The above activities used by their three departments are:

Lawn Department Bush Department Plowing Department

Labor
2,500 hours 1,200 hours 4,300 hours
hours
Gas      1,500 gallons    800 gallons 3,700 gallons
 500 voice
Invoices 1,600 invoices 400 invoices
s

33. How much of the gas cost will be assigned to the Plowing Department?

Group of answer choices

None of these answers are correct.
$30,000
$25,600
$50,000

Computation: (36k/6k) x 3,700

Answer the following questions using the information below: (for question 32 -40)
Happy Valley Land and Snow Company provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Labor
$320,000 8,000 hours
hours
Gas      $36,000 6,000 gallons
Invoices $40,000 2,500 invoices
Total costs $396,000

The above activities used by their three departments are:

Lawn Department Bush Department Plowing Department

Labor
2,500 hours 1,200 hours 4,300 hours
hours
Gas      1,500 gallons    800 gallons 3,700 gallons
Invoices 1,600 invoices 400 invoices 500 invoices

34. How much of invoice cost will be assigned to the Bush Department?
Group of answer choices
$6,400
$40,000
$25,600
$8,000

Computation: (40k/2,500) x 400

Answer the following questions using the information below: (for question 32 -40)
Happy Valley Land and Snow Company provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Labor
$320,000 8,000 hours
hours
Gas      $36,000 6,000 gallons
Invoices $40,000 2,500 invoices
Total costs $396,000

The above activities used by their three departments are:

Lawn Department Bush Department Plowing Department

Labor
2,500 hours 1,200 hours 4,300 hours
hours
Gas      1,500 gallons    800 gallons 3,700 gallons
Invoices 1,600 invoices 400 invoices 500 invoices

35. How much of the gas cost will be assigned to the Lawn Department?
Group of answer choices
$20,000
$22,200
$4,800
$9,000

Computation: (36k/6k) x 1,500

Answer the following questions using the information below: (for question 32 -40)
Happy Valley Land and Snow Company provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Labor
$320,000 8,000 hours
hours
Gas      $36,000 6,000 gallons
Invoices $40,000 2,500 invoices
Total costs $396,000

The above activities used by their three departments are:

Lawn Department Bush Department Plowing Department

Labor
2,500 hours 1,200 hours 4,300 hours
hours
Gas      1,500 gallons    800 gallons 3,700 gallons
Invoices 1,600 invoices 400 invoices 500 invoices

36. How much of the total cost will be assigned to the Plowing Department?
Group of answer choices
$172,000
$202.200
$396,000
$134,600

Computation:
(320k/8k) x 4,300
(36k/6k) x 3,700
(40k/2,500) x 500

Answer the following questions using the information below: (for question 32 -40)
Happy Valley Land and Snow Company provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Labor
$320,000 8,000 hours
hours
Gas      $36,000 6,000 gallons
Invoices $40,000 2,500 invoices
Total costs $396,000

The above activities used by their three departments are:

Lawn Department Bush Department Plowing Department

Labor
2,500 hours 1,200 hours 4,300 hours
hours
Gas      1,500 gallons    800 gallons 3,700 gallons
Invoices 1,600 invoices 400 invoices 500 invoices

37. How much of the total costs will be assigned to the Lawn Department?
Group of answer choices
$49,200
$134,600
$200,000
$100,000

Computation:
(320k/8k) x 2,500
(36k/6k) x 1,500
(40k/2,500) x 1,600

Answer the following questions using the information below: (for question 32 -40)
Happy Valley Land and Snow Company provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Labor
$320,000 8,000 hours
hours
Gas      $36,000 6,000 gallons
Invoices $40,000 2,500 invoices
Total costs $396,000

The above activities used by their three departments are:

Lawn Department Bush Department Plowing Department

Labor
2,500 hours 1,200 hours 4,300 hours
hours
Gas      1,500 gallons    800 gallons 3,700 gallons
Invoices 1,600 invoices 400 invoices 500 invoices

38. A manufacturing firm produces multiple families of products requiring various

combinations of different types of parts. Of the following, the most appropriate
cost driver for assigning materials handling costs to the various products is:
Group of answer choices
number of suppliers involved
number of units produced
direct labor hours
number of parts used

Answer the following questions using the information below: (for question 32 -40)
Happy Valley Land and Snow Company provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Labor
$320,000 8,000 hours
hours
Gas      $36,000 6,000 gallons
Invoices $40,000 2,500 invoices
Total costs $396,000

The above activities used by their three departments are:

Lawn Department Bush Department Plowing Department

Labor
2,500 hours 1,200 hours 4,300 hours
hours
Gas      1,500 gallons    800 gallons 3,700 gallons
Invoices 1,600 invoices 400 invoices 500 invoices

39. Assume a traditional costing system applies the $120,000 of overhead costs
based on direct labor hours. What is the total amount of overhead costs assigned
to the deluxe model?
Group of answer choices
$75,000
$45,000
$70,400
$49,600

Answer the following questions using the information below: (for question 32 -40)
Happy Valley Land and Snow Company provides the following ABC costing information:

Activities Total Costs Activity-cost drivers

Labor
$320,000 8,000 hours
hours
Gas      $36,000 6,000 gallons
Invoices $40,000 2,500 invoices
Total costs $396,000

The above activities used by their three departments are:

Lawn Department Bush Department Plowing Department

Labor
2,500 hours 1,200 hours 4,300 hours
hours
Gas      1,500 gallons    800 gallons 3,700 gallons
Invoices 1,600 invoices 400 invoices 500 invoices

40. Number of setups and number of components are identified as activity-cost

drivers for overhead. Assuming an activity-based costing system is used, what is
the total amount of overhead costs assigned to the standard model?
Group of answer choices
$75,000
$70,400
$49,600
$45,000

Computation:

Answer the following questions using the information below: (question 41 -45)
Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is
analyzed as follows:

T-SHIRTS SWEATSHIRTS
Production and sales volume 60,000 units 35,000 units
Selling price $16.00  $29.00
Direct material $ 2.00 $ 5.00
Direct labor  $ 4.50 $ 7.20
Manufacturing overhead $ 2.00 $ 3.00
Gross profit      $ 7.50 $13.80
Selling and administrative $ 4.00 $ 7.00
 Operating profit           $ 3.50 $ 6.80

What is projected operating income if direct materials costs of T-Shirts increase to $4.00
per unit and direct labor costs of Sweatshirts increase to $8.20 per unit.
41. Under the revised ABC system, the activity-cost driver rate for the supervision
activity is:
Group of answer choices
$1.16
$2.58
$2.40
$2.24

Computation:
1.16 (100,920) / 45k + 42k

Answer the following questions using the information below: (question 41 -45)
Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is
analyzed as follows:
 T-SHIRTS SWEATSHIRTS
Production and sales volume 60,000 units 35,000 units
Selling price $16.00  $29.00
Direct material $ 2.00 $ 5.00
Direct labor  $ 4.50 $ 7.20
Manufacturing overhead $ 2.00 $ 3.00
Gross profit      $ 7.50 $13.80
Selling and administrative $ 4.00 $ 7.00
 Operating profit           $ 3.50 $ 6.80

What is projected operating income if direct materials costs of T-Shirts increase to $4.00
per unit and direct labor costs of Sweatshirts increase to $8.20 per unit.
42. Under the revised ABC system, supervision costs allocated to Sweatshirts will be:
Group of answer choices
$100,920
None of these answers are correct.
$48,720
$100,800

Answer the following questions using the information below: (question 41 -45)
Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is
analyzed as follows:

T-SHIRTS SWEATSHIRTS
Production and sales volume 60,000 units 35,000 units
Selling price $16.00  $29.00
Direct material $ 2.00 $ 5.00
Direct labor  $ 4.50 $ 7.20
Manufacturing overhead $ 2.00 $ 3.00
Gross profit      $ 7.50 $13.80
Selling and administrative $ 4.00 $ 7.00
 Operating profit           $ 3.50 $ 6.80

What is projected operating income if direct materials costs of T-Shirts increase to $4.00
per unit and direct labor costs of Sweatshirts increase to $8.20 per unit.
43. Under the revised ABC system, total overhead costs allocated to Sweatshirts will
be:
Group of answer choices
$ 96,720
$ 48,720
None of these answers are correct
$224,920

Answer the following questions using the information below: (question 41 -45)
Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is
analyzed as follows:

T-SHIRTS SWEATSHIRTS
Production and sales volume 60,000 units 35,000 units
Selling price $16.00  $29.00
Direct material $ 2.00 $ 5.00
Direct labor  $ 4.50 $ 7.20
Manufacturing overhead $ 2.00 $ 3.00
Gross profit      $ 7.50 $13.80
Selling and administrative $ 4.00 $ 7.00
 Operating profit           $ 3.50 $ 6.80

What is projected operating income if direct materials costs of T-Shirts increase to $4.00
per unit and direct labor costs of Sweatshirts increase to $8.20 per unit.
44. Under the revised ABC system, overhead costs per unit for the Sweatshirts will
be:
Group of answer choices
$1.39 per unit
$1.60 per unit
$2.47 per unit
$2.19 per unit

Answer the following questions using the information below: (question 41 -45)
Tiger Pride produces two product lines: T-shirts and Sweatshirts. Product profitability is
analyzed as follows:

T-SHIRTS SWEATSHIRTS
Production and sales volume 60,000 units 35,000 units
Selling price $16.00  $29.00
Direct material $ 2.00 $ 5.00
Direct labor  $ 4.50 $ 7.20
Manufacturing overhead $ 2.00 $ 3.00
Gross profit      $ 7.50 $13.80
Selling and administrative $ 4.00 $ 7.00
 Operating profit           $ 3.50 $ 6.80

What is projected operating income if direct materials costs of T-Shirts increase to $4.00
per unit and direct labor costs of Sweatshirts increase to $8.20 per unit.
45. Using an ABC system, next year's estimates show manufacturing overhead costs
will total $228,300 for 52,000 T-shirts. If all other T-shirt costs and sales prices
remain the same, the profitability that can be expected is:
Group of answer choices
$1.11 per t-shirt
$5.41 per t-shirt
($0.81) per t-shirt
$4.39 per t-shirt

46. Use of activity-based costing and activity-based management requires

Group of answer choices
the creation of an environment for change in an organization.
each process be fully mapped and all activities be identified as value-added or non-
value-added.
that company processes be automated and the use of direct labor be minimal.
elimination of all non-value-added activities in an organization.

47. Hazel Company uses activity-based costing.  The company produces two
products:  coats and hats.  The annual production and sales volume of coats is
8,000 units and of hats is 6,000 units.  There are three activity cost pools with the
following expected activities and estimated total costs:
 

Expected Expected  
Activity  Estimated 
Activity Activity  
Cost Pool Cost
Coats Hats Total

Activity 1 $20,000 100   400   500

Activity 2 $37,000 800   200 1,000

Activity 3 $91,200 800 3,000 3,800

Refer to Hazel Company. Using ABC, the cost per unit of coats is approximately:
Group of answer choices
$ 6.60
$2.40
$10.59
$3.90

48. Hazel Company uses activity-based costing.  The company produces two
products:  coats and hats.  The annual production and sales volume of coats is
8,000 units and of hats is 6,000 units.  There are three activity cost pools with the
following expected activities and estimated total costs:
 

Expected Expected  
Activity Estimated
Activity Activity  
Cost Pool Cost
Coats Hats Total

Activity 1 $20,000 100   400   500

Activity 2 $37,000 800   200 1,000

Activity 3 $91,200 800 3,000 3,800

Refer to Hazel Company. Using ABC, the cost per unit of hats is approximately:
Group of answer choices
$3.90
$2.40
$15.90
$12.00

49. Activity-based costing and generally accepted accounting principles differ in that
ABC
Group of answer choices
cannot be used to compute an income statement, but GAAP can.
is concerned only with costs generated from automated processes, but GAAP is
concerned with costs generated from both manual and automated processes.
does not define product costs in the same manner as GAAP.
information is useful only to managers, while GAAP information is useful to all
organizational stakeholders.

50. If activity-based costing is implemented in an organization without any other

changes being implemented, total overhead costs will
Group of answer choices
remain constant and simply be spread over products differently.
be increased because of the need for additional people to gather information on cost
drivers and cost pools.
be reduced because of the elimination of non-value-added activities.
be reduced because organizational costs will not be assigned to products or services.