Cost Accounting, 13e (Horngren et al - Get as DOC - DOC

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Cost Accounting, 13e (Horngren et al - Get as DOC - DOC Powered By Docstoc
					                             Chapter 5 Lecture Questions



 1) A top-selling product might actually result in losses for the company. T or F




 5) If a company undercosts one of its products, then it will overcost at least one of its other products. T or F




14) Traditional systems are likely to undercost complex products with lower production volume. T or F




28) Information derived from an ABC analysis might be used to eliminate nonvalue-added activities. T or F




39) Overcosting of a product is MOST likely to result from:
     A) misallocating direct labor costs
      B) overpricing the product
     C) undercosting another product
     D) understating total product costs




41) Misleading cost numbers are MOST likely the result of misallocating:
     A) direct material costs
      B) direct manufacturing labor costs
     C) indirect costs
     D) All of these answers are correct.




51) A single indirect-cost rate may distort product costs because:
      A) there is an assumption that all support activities affect all products
      B) it recognizes specific activities that are required to produce a product
      C) costs are not consistently recorded
      D) it fails to measure the correct amount of total costs




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Answer the following questions 56-61 using the information below:

Merriman Company provides the following ABC costing information:

Activities                   Total Costs           Activity-cost drivers
Account inquiry hours         $400,000                 10,000 hours
Account billing lines         $280,000              4,000,000 lines
Account verification accounts $150,000                 40,000 accounts
Correspondence letters         $ 50,000                 4,000 letters
 Total costs                  $880,000

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

      56) How much of the account inquiry cost will be assigned to Department A?
           A) $80,000
            B) $400,000
           C) $160,000
           D) None of these answers are correct.




      57) How much of the account billing cost will be assigned to Department B?
           A) $28,000
            B) $280,000
           C) $14,000
           D) None of these answers are correct.




      58) How much of account verification costs will be assigned to Department A?
           A) $30,000
            B) $37,500
           C) $150,000
           D) $10,000




      59) How much of correspondence costs will be assigned to Department B?
           A) $1,600
            B) $12,500
           C) $50,000
           D) $20,000




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      60) How much of the total costs will be assigned to Department A?
           A) $158,000
            B) $80,000
           C) $224,000
           D) $880,000




      61) How much of the total costs will be assigned to Department B?
           A) $158,000
            B) $80,000
           C) $224,000
           D) $880,000




Answer the following questions 65-70 using the information below:

Happy Valley Land and Snow Company provides the following ABC costing information:

Activities                     Total Costs        Activity-cost drivers
Labor hours                     $160,000               8,000 hours
Gas                              $18,000               6,000 gallons
Invoices                         $20,000               2,500 invoices
  Total costs                   $198,000

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



      65) How much of the labor cost will be assigned to the Lawn Department?
           A) $50,000
            B) $12,800
           C) $20,000
           D) None of these answers are correct.




      66) How much of the gas cost will be assigned to the Plowing Department?
           A) $25,000
            B) $11,100
           C) $15,000
           D) None of these answers are correct.




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67) How much of invoice cost will be assigned to the Bush Department?
     A) $3,200
      B) $4,000
     C) $12,800
     D) $20,000




68) How much of the gas cost will be assigned to the Lawn Department?
     A) $2,400
      B) $10,000
     C) $4,500
     D) $11,100




69) How much of the total cost will be assigned to the Plowing Department?
     A) $198,000
      B) $101,100
     C) $67,300
     D) $86,000




70) How much of the total costs will be assigned to the Lawn Department?
     A) $50,000
      B) $29,600
     C) $100,000
     D) $67,300




72) The MOST likely example of a batch-level cost is:
      A) utility costs
      B) machine repairs
      C) product-designing costs
      D) setup costs




                                                        4
Answer the following questions 92-95 using the information below:

Speedy Racer Corporation manufactures two models of motorized go-carts, a standard and a deluxe model. The
following activity and cost information has been compiled:

                    Number of               Number of                Number of
Product                Setups              Components        Direct Labor Hours
Standard                   15                      10                       750
Deluxe                     35                      15                       500

Overhead costs          $30,000                  $50,000

      92) Assume a traditional costing system applies the $80,000 of overhead costs based on direct labor hours. What
          is the total amount of overhead cost assigned to the standard model?
             A) $32,000
              B) $48,000
             C) $50,000
             D) $30,000




      93) Assume a traditional costing system applies the $80,000 of overhead costs based on direct labor hours. What
          is the total amount of overhead cost assigned to the deluxe model?
             A) $32,000
              B) $48,000
             C) $50,000
             D) $30,000




      94) 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 cost assigned to the standard
          model?
            A) $51,000
            B) $30,000
            C) $29,000
            D) $48,000




      95) 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 cost assigned to the deluxe
          model?
            A) $51,000
            B) $50,000
            C) $48,000
            D) $25,000




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