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Exam 7: Activity-Based Costing and Management

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Question 51

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For small manufacturing firms, ABC systems are best with: $\begin{array}{ll}\text { Number of } & \text { Number of } \\\text { Activities } & \text { Cost Drivers }\\\hline\text { a) Few } & \text { Few } \\\text { b) Many } & \text { Few } \\\text { c) Many } & \text { Many } \\\text { d) Few } & \text { Many }\end{array}$

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Question 52

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Cost drivers are:

A) Activities that cause costs to increase as the activity increases
B) Accounting techniques used to control costs
C) Accounting measurements used to evaluate whether or not performance is proceeding according to plan
D) A mechanical basis, such as machine hours, computer time, size of equipment, or square metres of factory, used to assign costs to activities

E) All of the above
F) A) and B)

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Question 53

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Product inspections are an example of:

In an ABC system, a "cost object" could be a unit of product, a product line, or a customer.

ABC systems measure resource flows in an organization.

The cost hierarchy for an ABC system includes: I. Unit-level activities II. Marketing activities III. Product-sustaining activities IV. Administrative activities

Costs associated with developing an ABC system most likely include:

Flowing Wells Corporation is preparing its annual budget. As part of its analysis of the contribution of individual products to overall profitability, the controller estimates the amount of overhead that should be assigned to the individual product lines. Budgeted inspection costs are $4,800. Additional information is as follows: $\begin{array}{lll}&\text { Small Pumps }& \text { Large Pumps }\\\hline \text { Units inspected } & 120 & 120 \\\text { Hours spent inspecting } & 2.5 & 17.5 \\\text { Direct labour hours per unit } & 2 & 2\end{array}$ Under activity-based costing (ABC) , the inspection cost assigned to one small pump would be:

Under GPK a cost centre is a department or larger cost object.

Which of the following activities involves managing a plant, area, or location within an organization?

When implementing an ABC system, the accounting information system may require modifications to

Activity-based management and activity-based costing are two ways of describing the same thing.

Uncertainties associated with ABC and ABM include: I. The appropriate choice of activities II. The appropriate choice of cost drivers III. Employee response to the system

Activity-Based Costing can be used for: I. Allocating manufacturing overhead II. Allocating non-manufacturing department costs III. Determining customer-related costs

What is the normal effect on the numbers of cost pools and allocation bases when an ABC system replaces a traditional cost system? $\begin{array} { l l } \text { Cost Pools } & \text { Allocation Bases } \\\hline \text { a) Decrease } & \text { Decrease } \\\text { b) Decrease } & \text { No effect } \\\text { c) No effect } & \text { Increase } \\\text { d) Increase } & \text { Increase }\end{array}$

Unlike activity-based costing, traditional costing systems never use multiple cost pools for overhead allocation.

The costs of designing and implementing an ABC system include employee time and training.

How can ABC information be used to manage constrained resources?

Le Château Joyal is an historic hotel in the heart of old Quebec City. It is owned by Riel Hotels, which operates additional properties in Halifax, Montreal, and Winnipeg. Le Château Joyal has 9 floors, with approximately 20 rooms per floor. Facilities also include a workout room, restaurant, and pool. The hotel is organized into 5 departments: front desk, engineering, housekeeping, food & beverage, and customer relations. As part of its operation, Le Château Joyal regularly incurs the following costs: General manager's salary Housekeeping supplies Utility costs Amortization on workout room equipment Advertising Food and beverage costs Amortization on restaurant equipment From the perspective of Riel Hotels, advertising specifically for Le Château Joyal is best described as a(n) :

Caring Change Medical Practice specializes in plastic surgery. Which of the following is least likely to be a committed cost in its operations?