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