Question : Objective 5.8 1) Which of the following statements true of ABC : 1212091

 

Objective 5.8

 

1) Which of the following statements is true of ABC systems?

A) ABC systems provide less insight than traditional systems into the management of the indirect costs.

B) ABC systems are used by managers for strategic decisions rather than for inventory valuation in merchandising companies.

C) Service companies find great value from ABC because a vast majority of their cost structure is composed of direct costs.

D) ABC systems is valuable for pricing decisions but not for understanding, managing, and reducing costs in government institutions.

 

2) The unique feature of an ABC system is the emphasis on ________.

A) costing individual jobs

B) department indirect-cost rates

C) multiple-cost pools

D) individual activities

 

3) Which of the following is a disadvantage of an activity-based costing system?

A) It classifies some indirect costs as direct costs.

B) It assumes all costs as direct costs.

C) It needs activity-cost rates to be updated regularly.

D) It ignores direct costs of a product.

Answer the following questions using the information below:

 

Luzent Corporation has two departments, Small and Large. Central costs could be allocated to the two departments in various ways.

 

Small DepartmentLarge Department

Square footage6,75017,250

Number of employees1,120480

Sales$350,000           $1,750,000

 

4) If advertising expense of $483,000 is allocated on the basis of sales, the cost per cost driver rate would be ________.

A) $0.22 per dollar of sales

B) $0.23 per dollar of sales

C) $0.25 per dollar of sales

D) $0.24 per dollar of sales

 

5) If total advertising expense of $483,000 is allocated on the basis of sales, the amount allocated to the Large Department would be ________.

A) $407,500

B) $405,000

C) $402,500

D) $405,250

 

6) If total payroll processing costs of $64,000 are allocated on the basis of number of employees, the amount allocated to the Small Department would be ________.

A) $44,800

B) $48,400

C) $46,200

D) $45,600

7) If total payroll processing costs of $64,000 are allocated on the basis of number of employees, the amount allocated to the Large Department would be ________.

A) $18,400

B) $19,200

C) $17,800

D) $19,400

 

8) If total rent expense of $180,000 is allocated on the basis of square footage, the amount allocated to the Small Department would be ________.

A) $50,525

B) $50,625

C) $50,725

D) $50,825

 

9) If total rent expense of $180,000 is allocated on the basis of square footage, the amount allocated to the Large Department would be ________.

A) $129,175

B) $129,475

C) $129,275

D) $129,375

Answer the following questions using the information below:

 

Stark Corporation has two departments, Car Rental and Truck Rental. Central costs may be allocated to the two departments in various ways.

 

Car Rental               Truck Rental

Number of Vehicles in fleet850 430

Number of employees12575

Sales$750,000$375,000

10) If administrative expense of $62,500 is allocated on the basis of number of employees, the cost per cost driver rate would be ________.

A) $500.00

B) $312.50

C) $833.33

D) $572.50

 

 

 

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