Which of the following is not an advantage of Activity Based Costing

Which of the following is not an advantage of Activity Based Costing

Which of the following is not an advantage of Activity BasedCosting (ABC) over traditional volume based costing systems?(Points : 6) ABC may lead toimprovement in cost control as managers are charged for usingactivities ABC is less likely than atraditional system to undercost complex products. ABC is more costly toimplement than traditional systems All of the above areadvantages of ABC 2. (6) Which of the following is not generally true whena company compares ABC and traditional costing? (Points :6) ABC uses more cost drivers ABC allocates cost basedsolely on production volume ABC is more expensive ABC is less likely toundercost complex, low volume products 3. The process of assigning indirect costs is called (Points: 6) directional association. variable costing. cost allocation. joint costing 4. Which of the following costs does not change when thelevel of business activity changes? (Points : 6) total fixed costs total variable costs total direct materialscosts fixed costs per unit 5. Which of the following is likely to be a noncontrollablecost of a department supervisor? (Points : 6) labor in the department materials used in the department insurance on the plant overtime premium pay earned by those working in the department 6. (9) The required rate of return used to compute netpresent value is related to the firms (Points : 6) contribution margin. depreciation methods. fixed costs. cost of capital. 7. Costs may be allocated to (Points : 6) products. services. departments. all of the above. 8. The contribution margin per unit is the difference between(Points : 6) total revenue and totalfixed costs. anticipated level of sales andthe break-even point in dollars. total fixed costs and totalvariable costs. selling price and variablecost per unit. 9. Which of the following statements about cost pools is nottrue? (Points : 6) The costs in each of thecost pools should be homogeneous or similar. Managers must make acost-benefit decision when determining how many costpools are appropriate. Only four different kinds ofcosts may be included in a single cost pool. More cost pools usuallyprovide more accurate information, but are moreexpensive. 10. At Wolfes Wearables, the break-even point is 2,000units. If fixed costs total $300,000 and variable costs are$30 per unit, what is the selling price per unit? (Points :6) $5 $210 $150 $180 11. (10) The cash budget alerts management to all of thefollowing except? (Points : 6) Stockouts will cause customerdissatisfaction The cash balance will bevery low Excess cash will be availablefor investment Significant capitalacquisitions are planned 12. (10) The difference between standard costs andbudgeted costs is that standard costs (Points : 6) refer to a single unit whilebudgeted costs refer to the cost, at standard, for the totalnumber of budgeted units. are calculated underideal conditions, while budgeted costs are calculated for attainable conditions. are calculated for materialwhile budgeted costs are calculated for labor. are part of the managementaccounting system, while budgets are part of the financialaccounting system. 13. Labor and overhead are often grouped together and referred to as (Points : 6) prime costs. conversion costs. total manufacturing costs. equivalent unit costs 14. (6) Which of the following steps is not involved inthe ABC approach? (Points : 6) Identify activities whichcause costs to be incurred. Allocate costs to productsbased on activity usage. Group costs of activities intocost pools. Improve processes based on benchmarking 15. Which of the following assumptions made when using C-V-Panalysis might affect the validity of the analysis? (Points :6) Costs can be accuratelyseparated into fixed and variable components. Fixed costs remain fixed andvariable costs per unit do not change over the activitylevels of interest. Both A and B. Neither A nor B. 16. (7) Common costs (Points : 6) are fixed costs that arenot directly traceable to an individual product line. normally not avoidable. Both A and B are true. Neither A nor B is true. 17. Which of the following steps is not involved in the ABCapproach? (Points : 6) Identify activitieswhich cause costs to be incurred. Allocate costs to productsbased on activity usage. Group costs of activities intocost pools. Improve processes basedon benchmarking. 18. Which of the following costs is least likely to be avariable cost? (Points : 6) sales commissions direct labor indirect materials supervisory salaries 19. (4) The number of units that must be sold to exactlycover its fixed and variable costs is the (Points : 6) contribution margin break-even point relevant range margin of safety 20. (6) Which of the following steps is not involved inthe ABC approach? (Points : 6) Identify activities which cause costs to be incurred. Allocate costs to productsbased on activity usage. Group costs of activities intocost pools. Improve processes basedon benchmarking 21. (9) Projects with a negative present value willalways have a(n) (Points : 6) payback period longerthan three years. internal rate of returnless than the required rate of return. negative accounting rateof return. series of cash outflows thattotal more than the initial cost of the project. 22. (9) The internal rate of return (Points :6) takes into account the timevalue of money. is the rate of returnthat equates the present value of future cash flows to the initial investment. both A and B neither A nor B 23. (10) The standard cost is (Points : 6) same as actual cost the cost that should have beenincurred to produce an item or service useful only to manufacturingfirms calculated afterproduction is completed 24. (10) The difference between the stand and actual costis a(n) (Points : 6) actual cost overrun. variance by exception. slack amount. standard costvariance. 25. (10) The difference between standard costs andbudgeted costs is that standard costs (Points : 6) refer to a single unit whilebudgeted costs refer to the cost, at standard, for the totalnumber of budgeted units. are calculated underideal conditions, while budgeted costs are calculated forattainable conditions. are calculated for materialwhile budgeted costs are calculated for labor. are part of the managementaccounting system, while budgets are part of the financialaccounting system. 26.Show all steps of your calculation and formula as well as thefinal answer ( to receive credit)Idol Company has developed standards for the materials required toproduce a single unit of Model IWIN, 25 pounds of Supreme at$130.00 per pound. Last month, Idol purchased 490,000 poundsof Supreme at a total cost of $61,250,000. Idol used 482,000pounds of Supreme to make 19,000 units of IWIN. Calculate the material price variance and material quantityvariance, and indicate whether each variance is favorable orunfavorable. (Points : 25) 27. Show all steps of your calculation and formula as well asthe final answer ( to receive credit) (7) Computer Boutiquesells computer equipment and home office furniture.Currently, the furniture product line takes up approximately50% of the companys retail floor space. The president ofComputer Boutique is trying to decide whether the companyshould continue offering furniture or just concentrate oncomputer equipment. If furniture is dropped, salaries andother direct fixed costs can be avoided. In addition, salesof computer equipment can increase by 13%. Allocated fixedcosts are assigned based on relative sales. ComputerHome Office EquipmentFurniture Total Sales $1,200,000$800,000$2,000,000 Less cost of goods sold 700,000 500,0001,200,000 Contribution margin 500,000 300,000 800,000 Less direct fixed costs: Salaries175,000175,000 350,000 Other60,00060,000120,000 Less allocated fixed costs: Rent14,118 9,88224,000 Insurance3,5292,4716,000 Cleaning4,1172,8837,000 Presidents salary76,47053,350130,000 Other 7,058 4,942 12,000 Total costs 340,292 380,708 649,000 Net Income$159,708($ 8,708) $151,000 Prepare an incremental analysis to determine the incrementaleffect on profit of discontinuing the furniture line. (Points : 25) 28.Show all steps of your calculation and formula as well as thefinal answer ( to receive credit)(9) A project will require an initial investment of$750,000 and will return $200,000 each year for five years. If taxes are ignored and the required rate of return is9%,what is the projects net present value? Based on thisanalysis, should the company proceed with the project? (Points : 25) 29. Show all steps of your calculation and formula as well as thefinal answer ( to receive credit)(9) A project will require an initial investment of$60,000 and will return $25,000 each year for five years. Iftaxes are ignored and the required rate of return is 14%,what is the projects net present value? Based on thisanalysis, should the company proceed with the project?(Points : 25) 30. Show all steps of your calculation and formula as well asthe final answer ( to receive credit)(7) Each year, ACE Engines surveys 7,600 former andprospective customers regarding satisfaction and brandawareness. For the current year, the company is consideringoutsourcing the survey to RBG Associates, who have offered to conduct the survey and summarize results for $50,000. Robert Ace,the president of ACE Engines, believes that RBG will do ahigher-quality job than his company has been doing, but isunwilling to spend more than $12,000 above current costs. Thehead of bookkeeping for ACE has prepared the following summary ofcosts related to the survey in the prior year. Mailing$27,000 Printing (done by Lester Print Shop)9,000 Salary of Pat Fisher, part-time employee who stuffedenvelopes and summarized data when surveys were returned (130x $16)2,080 Share of depreciation of computer and software used to tracksurvey responses and summarize results1,200 Share of electricity/phone/etc. based on square feet of spaceoccupied by Pat Fisher vs. entire company 600 Total$39,880 Prepare an incremental analysis in good form to determine the impact on profit of going outside versus conducting the survey asin the past. Will ACE accept the RBG offer? Why or why not?(Points : 25)


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