Question :
5) Traditional cost systems distort product costs because:
A) they : 1217207
5) Traditional cost systems distort product costs because:
A) they do not know how to identify the appropriate units
B) competitive pricing is ignored
C) they emphasize financial accounting requirements
D) they apply average support costs to each unit of product
6) Which of the following statements about activity-based costing is NOT true?
A) Activity-based costing is useful for allocating marketing and distribution costs.
B) Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products.
C) Activity-based costing seeks to distinguish batch-level, product-sustaining, and facility-sustaining costs, especially when they are not proportionate to one another.
D) Activity-based costing differs from traditional costing systems in that products are not cross-subsidized.
7) Activity-based costing (ABC) can eliminate cost distortions because ABC:
A) develops cost drivers that have a cause-and-effect relationship with the activities performed
B) establishes multiple cost pools
C) eliminates product variations
D) recognizes interactions between different departments in assigning support costs
8) Product lines that produce different variations (models, styles, or colors) often require specialized manufacturing activities that translate into:
A) fewer indirect costs for each product line
B) decisions to drop product variations
C) a greater number of direct manufacturing labor cost allocation rates
D) greater overhead costs for each product line
Answer the following questions using the information below:
Mertens Company provides the following ABC costing information:
ActivitiesTotal CostsActivity-cost drivers
Account inquiry hours $200,000 10,000hours
Account billing lines $140,000 4,000,000lines
Account verification accounts $75,000 40,000accounts
Correspondence letters $ 25,000 4,000 letters
Total costs $440,000
The above activities are used by Departments A and B as follows:
Department ADepartment B
Account inquiry hours 2,000 hours 4,000hours
Account billing lines 400,000lines 200,000lines
Account verification accounts 10,000 accounts8,000accounts
Correspondence letters 1,000 letters 1,600letters
9) How much of the account inquiry cost will be assigned to Department A?
A) $40,000
B) $200,000
C) $80,000
D) None of these answers are correct.
10) How much of the account billing cost will be assigned to Department B?
A) $14,000
B) $140,000
C) $7,000
D) None of these answers are correct.
11) How much of account verification costs will be assigned to Department A?
A) $15,000
B) $18,750
C) $75,000
D) $5,000
12) How much of correspondence costs will be assigned to Department B?
A) $800
B) $6,250
C) $25,000
D) $10,000
13) How much of the total costs will be assigned to Department A?
A) $79,000
B) $40,000
C) $112,000
D) $440,000
14) How much of the total costs will be assigned to Department B?
A) $79,000
B) $40,000
C) $112,000
D) $440,000
