Question : 31. Which of the following statements true regarding a cost driver? A. Once : 1291686

31. Which of the following statements is true regarding a cost driver? A. Once a particular cost driver has been used for an activity, it may not be used again.B. Employees should never be made aware of the cost drivers for their department.C. There may be more than one potential cost driver for a particular activity.D. Choosing the wrong cost driver should not impact the determination of a product’s cost.

32. Which of the following statements is false regarding cost drivers? A. A particular cost driver may be used for more than one activity.B. If employees know the cost driver(s) for their department, it may motivate them to be more efficient.C. The selection of a cost driver should be based on the correlation it has with direct materials used in the production process.D. The best cost driver for a particular activity may be different from one company to the next.

33. Which of the following would be the least likely cost driver for an activity such as the usage of factory supplies? A. Machine hoursB. Number of engineering hoursC. Direct labor hoursD. Number of units produced

34. Which of the following would be the least likely cost driver for an activity such as the repair and maintenance of factory equipment? A. Machine hoursB. Direct labor hoursC. Number of units producedD. Number of new product designs

35. Which of the following would be the least likely cost driver for an activity such as product testing? A. Number of shipments receivedB. Number of testsC. Hours of testing timeD. Number of change orders

36. Which of the following statements comparing traditional and activity-based costing (ABC) is false? A. Traditional systems are generally less accurate than ABC systems.B. ABC and traditional systems often produce different product cost information.C. ABC systems focus on activity costing while traditional systems focus on volume costing.D. ABC systems are generally less expensive to implement than traditional systems.

37. Which of the following statements comparing traditional and activity-based costing (ABC) is true? A. ABC systems eliminate cross subsidies.B. Traditional systems eliminate cross subsidies.C. ABC and traditional systems often produce similar product cost information.D. All of the above are true.

38. Which of the following statements is true regarding cross subsidies? A. They occur when factory workers are trained to work on many different machines.B. They occur when high-volume products are assigned more than their fair share of overhead costs.C. They occur when high-volume products have more direct material and direct labor costs than overhead costs.D. They occur when more than one cost driver can be determined for a particular overhead cost item.

39. What would one expect to occur when cross subsidies are eliminated with the use of activity-based costing (ABC)? A. That lower-volume products pick up more of their fair share of overhead costs.B. That higher-volume products pick up more of their fair share of overhead costs.C. That lower-volume products will be determined as being unprofitable.D. That higher-volume products will be determined as being unprofitable.

40. Aunt Lucy’s CandiesAunt Lucy’s Candies sells standard and premium chocolate candies through its catalog business. Many of the candies are sold in bulk to other companies. Last year, the company incurred $400,000 in overhead costs. After implementing activity-based costing (ABC), the company’s controller identified the following information: 

Activity

Allocation Base

Proportion of Overhead Cost

Purchasing

Number of purchase orders

30%

Processing

Number of units

50%

Sales

Number of sales orders

20%

The number of activities for standard and premium candies is as follows: 

Standard

Premium

Number of purchase orders

6,000

4,000

Number of units

400,000

100,000

Number of sales orders

2,000

3,000

Refer to the Aunt Lucy’s Candies information above. What is the overhead rate for the processing activity? A. $0.92 per unitB. $1.44 per unitC. $0.40 per unitD. $0.72 per unit