Question 1
Material amounts of underapplied or overapplied overhead should be
a. allocated to direct materials, work in process, and finished goods.
b. treated as an adjustment to cost of goods sold.
c. allocated to work in process, finished goods, and cost of goods sold.
d. treated as an adjustment to work in process.

Question 2
Services differ from tangible products in which of the following dimensions?
a. intangibility
b. inseparability
c. perishability
d. all of the above

Question 3
The set of interrelated parts that performs one or more processes to accomplish specific objectives is called a(n):
a. activity
b. system
c. cost objective
d. cost driver

Question 4
Which of the following activities is NOT significant to the advancement of information technology?
a. theory of constraints
b. decision support systems
c. enterprise resource planning software
d. emergence of electronic commerce

Question 5
Which of the following items would be associated with both a functional-based cost accounting information system and an activity based cost information system?
a. Overhead is assigned on a plant-wide rate based on direct labor hours.
b. Customer service costs are assigned to products using number of complaints as the activity driver.
c. Direct labor cost is assigned to products using direct tracing.
d. None of these.

Question 6
Figure 3-2A company usually processes 20,000 orders at a total cost of $300,000. During the year, only 16,000 orders were processed.
Refer to Figure 3-2. What is the cost of resource usage?
a. $240,000
b. $60,000
c. $30
d. $300,000
Solution: ($300,000/20,000) × 4,000 = $60,000

Question 7
Which of the following is a cost management subsystem designed to assign costs to individual products and services and other objects, as specified by management?
a. financial accounting information system
b. operational control information system
c. cost accounting information system
d. all of the above

Question 8
All of the following are unit-based activity drivers EXCEPT
a. machine hours.
b. direct labor hours.
c. number of setups.
d. number of units.

Question 9
If overhead is a significant proportion of the unit manufacturing costs, the distortion caused by using multi-level drivers can be serious.
True
False

Question 10
Activity attributes are nonfinancial and financial information items that describe individual activities.
True
False

Question 11
What does a correlation coefficient near 0 mean?
a. Two variables are moving in the same direction.
b. Two variables are unrelated.
c. One variable is a good predictor of the other.
d. Two variables are moving in the opposite direction.

Question 12
The two major subsystems of the accounting information system are the financial accounting information system and the cost management accounting information system.
True
False

Question 13
A secondary activity is
a. an activity driver.
b. one that is consumed by the final cost object.
c. one that is consumed by intermediate cost objects.
d. the second activity on the activity list.

Question 14
Costs can display variable, fixed, or mixed behavior, and it important that they are classified accurately.
True
False

Question 15
Which of the following costs incurred by a bus manufacturer would NOT be directly attributable to the finished product?
a. the wages paid to assembly-line production workers
b. the windshields for buses
c. the depreciation on factory building
d. the tires for buses

Question 16
Resources are categorized as flexible, which are supplied as needed, and committed, which are supplied in advance of usage.
True
False

Question 17
In an activity-based management system, one is NOT likely to find
a. broad flexible product costing.
b. systemwide performance maximization.
c. tracing of costs to activities.
d. only unit-based drivers.

Question 18
Which of the following is NOT part of the financial accounting information system?
a. filing reports with the SEC
b. preparing GAAP financial statements
c. reporting a large contingent liability to current and potential shareholders
d. determining the future cash flows of a proposed flexible manufacturing system

Question 19
Which of the following activities is NOT associated with the cost management information system?
a. preparing a cost of quality report
b. using future expected earnings to estimate the price of a share of common stock
c. determining the cost of a customer
d. preparing a performance report that compares actual costs to budgeted costs

Question 20
The simple list of activities identified in an ABC system is called:
a. Activity inventory
b. Activity attributes
c. Activity driver
d. Activity dictionary

Question 21
The Roan plant of the Texas Company has two production departments: Extrusion and
Assembly. The plant produces two products: P and Q. Cost information for the production departments is given below:
Extrusion $360,000
Assembly 750,000

The following table presents activity information about the departments and products:

Required:
a. Compute the predetermined overhead rate for each department if Extrusion uses machine hours and Assembly uses labor hours. (Be sure to show all work to receive full credit)

Question 22
The following information pertains to TwinStone Industries for 2014:
Estimated total overhead costs for 2014 $37,500
Estimated direct labor costs for 2014 25,000
Actual direct labor costs 22,500
Actual overhead costs 36,000
Activity base Direct labor costs
What is the predetermined overhead rate for Stone Industries for 2014? (be sure to show all work to receive full credit)

Question 23
Explain the relationship between the Cost Management System and the Financial Accounting System. Be sure to include the users of both systems.