09 Feb accomplish this

• Which of the following cost drivers would best be associated with the activity of physician time in a medical clinic? • The number of accreditations held by the clinic. • Physician minutes with a patient. • Number of new patient visits. • Number of line items on the clinic’s bill. • Number of continuing patient visits. • Magnolia Industries combines all manufacturing overhead into a single cost pool and allocates this overhead to products by using machine hours. Activity-based costing would likely show that with Magnolia’s current procedures that: • all of the company’s products are overcosted. • all of the company’s products are undercosted. • the company’s high-volume products are undercosted. • the company’s high-volume products are overcosted. • the company’s low-volume products are overcosted. • When determining customer profitability, activity-based costing can be used to analyze: • All of the answers are correct. • special packaging and handling. • sales visits. • orders processed. • billing and collections. • Baxter customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 10,000 calls and incurred costs of $312,000. Of these calls, 3,800 were for the company’s wholesale operation; the remainder was for the retail division. Costs allocated to the retail division are: • $203,000. • $31,200. • $193,440. • $118,560. • $0. • Which of the following is not a broad, cost classification category typically used in activity-based costing? • Product-sustaining level. • Batch-level. • Unit-level. • Management-level. • Facility-level. • The following tasks are associated with an activity-based costing system: 1— Assignment of cost to products 2— Calculation of pool rates 3— Identification of cost drivers 4— Identification of cost pools Which of the following choices correctly expresses the proper order of the preceding tasks? • 4, 2, 1, 3. • 4, 3, 2, 1. • 1, 2, 3, 4. • 2, 4, 1, 3. • 3, 4, 2, 1. • Flavorful Manufacturing sells a number of goods whose selling price is heavily influenced by cost. A recent study of product no. 519 revealed a traditionally-derived total cost of $1,019, a selling price of $1,850 based on that figure, and a newly computed activity-based total cost of $1,215. Which of the following statements is true? • All other things being equal, the company should consider a drop in its sales price. • The company may have been extremely competitive in the marketplace from a price perspective. • Product no. 519 could be labeled as being overcosted by the firm’s traditional costing procedures. • If product no. 519 is undercosted by traditional accounting procedures, then all of the company’s other products must be undercosted as well. • Generally speaking, the activity-based cost figure is “less accurate” than the traditionally-derived cost figure. • A hospital administrator is in the process of implementing an activity-based-costing system. Which of the following tasks would not be part of this process? • None of the answers is correct. • Assignment of cost to services provided. • Calculation of pool rates. • Identification of cost pools. • Identification of cost drivers. • Successful adoptions of activity-based costing typically occur when companies rely heavily on: • manufacturing personnel. • office personnel. • finance personnel. • accounting personnel. • multidisciplinary project teams. • Generally speaking, companies prefer doing business with customers who: • often change their orders. • request normal delivery times. • require special packaging or handling. • order small quantities rather than large quantities. • need specialized engineering design changes. • • Activity-based costing systems: • often reveal products that were under- or over-costed by traditional costing systems. • use a single, volume-based cost driver. • assign overhead to products based on the products’ relative usage of direct labor. • typically use fewer cost drivers than more traditional costing systems. • have a tendency to distort product costs. • Which of the following statements is (are) true about non-value-added activities? I. Non-value-added activities are often unnecessary and dispensable. II. Non-value-added activities may be necessary but are being performed in an inefficient and improvable manner. III. Non-value-added activities can be eliminated without deterioration of product quality, performance, or perceived value. • III only. • I, II, and III. • I and II. • II only. • I only • Which of the following is least likely to be classified as a facility-level activity in an activity-based costing system? • Plant management salaries. • Property taxes. • Machine processing cost. • Plant maintenance. • Plant depreciation. • Flagler Corporation takes eight hours to complete the setup process for a certain electrical component, with the setup cost averaging $150 per hour. If the company’s competitor can accomplish the same process in six hours, Flagler’s non-value-added cost would be: • $900. • $0. • $1,200. • $150. • $300. • Overton Enterprises is converting to an activity-based costing system. It wishes to depict the various activities in its manufacturing process along with the activities’ relationships. Which of the following is a tool that the company can use to accomplish this task? • Decision trees. • Activity relationship charts (ARCs). • Process organizers. • Storyboards. • Simulation games. • Which of the following can have a negative impact on a particular sale’s profitability? • Special shipping instructions. • Accounts receivable collection time. • Purchase-order changes. • Number of required sales contacts (phone calls, visits, etc.). • All of the answers are correct. • The adoption of a 24/7 customer service help line is an example of a: • product-sustaining activity. • customer-value-added activity. • batch-related activity. • business-value-added activity. • non-value-added activity. • Pound Industries’ customer service department follows up on customer complaints by telephone inquiry. During a recent period, the department initiated 10,000 calls and incurred costs of $312,000. Of these calls, 3,800 were for the company’s wholesale operation; the remainder was for the retail division. Costs allocated to the wholesale operation are: • $118,560. • $31,200. • $203,000. • $0. • $193,440. • Rosen, Inc., an appliance manufacturer, is developing a new line of ovens that uses controlled-laser technology. The research and testing costs associated with the new ovens is said to arise from a: • unit-level activity. • competitive-level activity. • batch-level activity. • product-sustaining activity. • facility-level activity. • In comparison with a system that uses a single, volume-based cost driver, an activity-based costing system is preferred when a company has: • existing variances from budgeted amounts. • product-line diversity and a large proportion of non-unit-level activities. • a large proportion of non-unit-level activities. • minimal product-line diversity and a small proportion of non-unit-level activities. • product-line diversity.

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