Practice exercises for chapter 7 PDF

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Management Accounting 1 (ACCT 222) Chapter 7 Review MCQ's Winter, 2020MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Costs incurred at which of the following activity levels should NOT be allocated to products for decision- making purposes? A) ...

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Management Accounting 1 (ACCT 222) Chapter 7 Review MCQ's Winter, 2020 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Costs incurred at which of the following activity levels should NOT be allocated to products for decisionmaking purposes? A) Organization-sustaining activities. C) Batch-level activities.

B) Unit-level activities. D) Product-level activities.

2) Which of the following activity levels is an example of the clerical activity associated with processing purchase orders to produce an order for a standard product? A) Organization-sustaining activity. B) Unit-level activity. C) Product-level activity. D) Batch-level activity.

3) What is a transaction driver? A) An event that causes a transaction to end. B) A simple count of the number of times an activity occurs. C) An event that causes a transaction to begin. D) A measure of the amount of time required to perform an activity.

4) Paul Company has two products: A and B. The company uses activity-based costing. The estimated total cost and expected activity for each of the company's three activity cost pools are as follows: Expected Activity Activity Cost Pool Activity 1 Activity 2 Activity 3

Estimated Cost $22,000 16,240 14,600

Product A 400 380 500

Product B 100 200 250

Total 500 580 750

The activity rate under the activity-based costing system for Activity 3 is closest to which of the following? A) $70.45.

B) $19.47.

C) $58.40.

D) $28.87.

5) Matt Company uses activity-based costing. The company has two products: A and B. The annual production and sales of Product A is 8,000 units and of Product B is 6,000 units. There are three activity cost pools, with estimated total cost and expected activity as follows:

Activity Cost Pool Estimated Cost Activity 1 $20,000 Activity 2 37,000 Activity 3 91,200

Expected Activity Product A Product B 100 400 800 200 800 3,000

Total 500 1,000 3,8000

The cost per unit of Product A under activity-based costing is closest to which of the following? A) $2.40.

B) $6.60.

C) $3.90.

D) $10.59.

Reference: 07-03 Diehl Company uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity-based costing system: Costs: Manufacturing overhead Selling and administrative expenses Total

$480,000 100,000 $580,000

Distribution of Resource Consumption:

Manufacturing overhead Selling and administrative expenses

Activity Cost Pools Customer Order Size Support

Other

Total

5%

85%

10%

100%

60%

20%

20%

100%

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. You have been asked to complete the first-stage allocation of costs to the activity cost pools. 6) How much cost, in total, would be allocated in the first-stage allocation to the Order Size activity cost pool? A) $348,000. B) $29,000.

C) $188,000. D) $84,000.

7) How much cost, in total, would be allocated in the first-stage allocation to the Customer Support activity cost pool? A) $493,000. B) $428,000. C) $116,000. D) $304,500.

8) How much cost, in total, should not be allocated to orders and customer support in the second stage of the allocation process if the activity-based costing system is used for internal decision making? A) $0. B) $116,000. C) $58,000.

D) $68,000.

Reference: 07-04 Dierich Company uses an activity-based costing system with three activity cost pools. The company has provided the following data concerning its costs and its activity-based costing system: Costs: Manufacturing overhead Selling and administrative expenses Total

$600,000 220,000 $820,000

Distribution of Resource Consumption:

Manufacturing overhead Selling and administrative expenses

Activity Cost Pools Customer Order Size Support

Other

Total

15%

75%

10%

100%

60%

20%

20%

100%

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. You have been asked to complete the first-stage allocation of costs to the activity cost pools.

9) How much cost, in total, would be allocated in the first-stage allocation to the Order Size activity cost pool? A) $307,500. B) $222,000. C) $123,000. D) $492,000.

10) How much cost, in total, would be allocated in the first-stage allocation to the Customer Support activity cost pool? A) $389,500. B) $615,000. C) $494,000. D) $164,000.

11) How much cost, in total, should not be allocated to orders and customer support in the second stage of the allocation process if the activity-based costing system is used for internal decision making? A) $82,000.

B) $164,000. C) $0. D) $104,000.

Reference: 07-08

Escalona Company is a wholesale distributor that uses activity-based costing for all of its overhead costs. The company has provided the following data concerning its annual overhead costs and its activity-based costing system: Overhead costs: Wages and salaries $580,000 Other expenses 200,000 Total $780,000 Distribution of Resource Consumption:

Wages and salaries Other expenses

Activity Cost Pools Customer Filling Support Orders

Other

Total

40% 35%

10% 20%

100% 100%

50% 45%

The "Other" activity cost pool consists of the costs of idle capacity and organization-sustaining costs. The amount of activity for the year is as follows: Activity Cost Pool Filling orders Customer support

Activity 1,000 orders 30 customers

12) What would be the total overhead cost per order according to the activity-based costing system, rounded to the nearest whole cent? In other words, what would be the overall activity rate for the Filling Orders activity cost pool? A) $273.00.

B) $312.00

C) $292.50.

D) $302.00.

13) What would be the total overhead cost per customer according to the activity-based costing system, rounded to the nearest whole dollar? In other words, what would be the overall activity rate for the Customer Support activity cost pool? A) $13,000.

B) $12,667.

C) $11,700.

D) $12,350.

14) To the nearest whole dollar, how much wages and salaries cost would be allocated to a customer who placed four orders in a year? Do not round intermediate calculations. A) $10,595.

B) $14,248.

C) $8,859.

D) $7,124.

15) If the activity base in the Customer Support activity was 50,000 calls, what would the new activity rate

become? A) $7.60.

B) $4.80.

C) $8.95.

D) $11.10.

16) If the activity base in the Customer Support activity was 50,000 calls how much wages and salaries cost would be allocated to a customer who placed eight orders and 67 calls in a year? A) $2,804.60 B) $2,365.20. C) $2,244.60 D) $2,925.20.

1) A 2) D 3) B 4) B 5) B 6) D 7) B 8) D 9) B 10) C 11) D 12) D 13) B 14) A 15) A 16) C...