Question : 11) Which of the following statements about activity-based costing true? A) : 1186280

11) Which of the following statements about activity-based costing is true?

A) It does not affect cost control.

B) Indirect cost allocation bases are unlikely to be cost drivers.

C) It provides less information than traditional cost systems.

D) It provides similar results to traditional costing when one activity creates a substantial amount of total cost.

E) It provides similar results to traditional costing when different products use resources from different activities in different proportions.

12) Which of the following statements does not represent the logic of an ABC system?

A) Activity cost allocation bases are the activity cost drivers of costs in the activity cost pools.

B) A strong cause-and-effect relationship between overhead costs and the cost allocation base is essential.

C) The requirement to measure cost allocation bases of different activities used by different products is essential.

D) The overhead used by different products is not important, as it is a fixed cost.

E) A greater level of detailed information concerning costs will help organizations be more efficient.

13) In an activity-cost pool,

A) a measure of the activity performed serves as the cost allocation base.

B) the costs have a cause-and-effect relationship with the cost-allocation base for that activity.

C) the cost pools are homogeneous over time.

D) costs in a cost pool can always be traced directly to products.

E) each pool pertains to a narrow and focused set of costs.

14) How does direct cost tracing improve cost accuracy?

A) It identifies the cause-and-effect relationship between direct costs and indirect costs.

B) It identifies the cause-and-effect relationship between activities and non-activities.

C) It reclassifies costs or costs pools that vary with the quantity of a single activity cost driver as direct.

D) It makes no assumptions about the cause-and-effect relationship between direct costs and activities.

E) Because with a greater number of cost pools, it does not have to be concerned with the overhead costs used by different products.

15) Which of the following can be described as a fiduciary duty of cost assignment?

A) ABC should be implemented to ensure adequate cost control regardless of cost.

B) Department managers should select activity cost drivers that increase their chance for success.

C) Effective delegation requires management to maintain close control over processes that incur costs.

D) Managers must avoid expanding their scope beyond the functions they control.

E) Cost assignment should begin with a limited scope of activities that managers believe are critical to the success of the company.

16) Indications that a product cost system needs revision include

A) the product line consists of a products which are produced at different locations.

B) the product costing computer system does not use the latest technology.

C) the company uses a single allocation base system developed long ago.

D) prime cost represent the vast majority of product cost.

E) managers lose bids they expected to win and win bids they expected to lose.

17) Cecelia Schell is taking four clients (who are not related) on a tour of her retirement development. The clients incurred the following expenses while on the tour. All tour expenses are paid by Cecelia because she has business discounts for most of her business dealings. These expenses will be billed to the clients by Cecelia.

ExpenseAnnaJimFrankBudTotals

Bus ticket$80 $80 $80 $80 $320

Morning break8 10 16 640

Lunch24 20 28 2088

Afternoon break10 48 1032

Cecelia’s overhead 56 56 56 56 224

Totals $178$170 $188$172 $704

Required:

Compute the total average cost per client showing average indirect (overhead) and average direct (other) charges separately.

18) The plant manager has come to you, as the new management accountant, for assistance. The plant manufactures sailboards, operating two shifts per day. During March through July, a third shift is added. The company has to train new machine operators each summer as the demands for its products is very seasonal. Training always occurs on the day shift, and the plant allocates the costs of training (e.g., extra supervision required), based on machine hours. This year, the three shift managers cannot agree on who should be charged for the training. The day shift manager is angry because she has discovered that machine hours are highest on the day shift. The other two managers argue that the hours are higher due to the training, so the day shift should be charged for those costs.

Required:

Provide a recommendation to the plant manager? Include in your recommendation two options as an allocation base for training costs.