1. unit-based product costing uses which procedure?

1.  Unit-based product costing uses which procedure? 

       All overhead costs are expensed as incurred.

       Overhead costs are traced to departments, then costs are traced to products.

       Overhead costs are traced directly to products.

       Overhead costs are traced to activities, then costs are traced to products.


2.  For a labor-intensive manufacturing operation, which would be the most appropriate activity driver? 

       Machine hours

       Direct labor hours

       Number of employees

       Units of output


3.  Which is NOT a characteristic of a unit-based costing system? 

       It uses traditional product costing definitions.

       It uses unit-based activity drivers to assign overhead to products.

       It offers greater product costing accuracy than an activity-based costing system.

       It is cheaper than an activity-based costing system.


4. Star Inc. uses a job-order costing system to account for product costs.

The following information was provided for the current year.

Materials placed in production                           $120,000 

Indirect labor                                                     $25,000 

Direct labor (10,000 hours)                                 $145,000 

Depreciation of factory building                         $55,000 

Other factory overhead                                      $85,000 

Increase in work-in-process inventory                 $25,000 

Factory overhead rate per direct labor hour         $15


Which is the amount of under- or overapplied overhead for Star Inc.? 

       $25,000 overapplied

       $15,000 overapplied

       $25,000 underapplied

       $15,000 underapplied   


5.  Acme Company manufactures two products (anvils and barrels).  Overhead costs ($84,000) have been divided into three cost pools, which use the following activity drivers.


Product# of SetupsMachine HoursPacking Orders



Cost per Pool $10,000 $60,000 $18,750


What is the allocation rate for barrels per setup using activity-based costing? 






6.  Which is NOT a limitation of a plantwide overhead rate? 

       Product diversity may consume overhead activities under differing consumption ratios.

       Overhead usage is not strictly linked to the units produced because some products are more complex and diverse than others.

       Predetermined rates using budgeted overhead are usually the best estimate of the amount of overhead.

       Overhead costs tend to be underallocated to highly complex products. 


7.  The resources consumed by the activity in producing its output are called 

       value-added activities.

       activity outputs.

       driver analyses.

       activity inputs.


8.  Which is NOT part of the cost dimension of the activity-based management model? 


       Driver analysis


       Cost objects


9.  Non-value-added activities 

       are unnecessary inputs.

       are valued outputs to internal users.

       are valued outputs to external users.

       help meet the organization’s needs, not the product needs.


10. The process that focuses on non-value-added activities is called 

       activity sharing.

       activity reduction.

       activity selection.

       activity elimination.


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