Question

1. Design costs are an example of: a) unit-level costs b) product-sustaining costs c) facility-sustaining costs d) batch-level costs

2. A manufacturing firm produces multiple families of products requiring various combinations of different types of parts. Of the following, the MOST appropriate cost driver for assigning materials handling costs to the various products is: a) number of parts used b) number of suppliers involved c) number of units produced d) direct labor hours

3. A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis: a) emphasizes how managers can achieve higher sales b) is easy to analyze and interpret c) takes the choices and judgment challenges away from the managers d) can be used to eliminate nonvalue-added activities

4. ABC systems: a) reveal activities that can be eliminated b) help identify new designs to reduce costs c) help control nonfinancial items such as number of setup hours d) All of these answers are correct.

5. Undercosting a particular product may result in: a) understating total product costs b) loss of market share c) operating inefficiencies d) lower profits

6. Activity-based management (ABM) includes decisions about all EXCEPT: a) reducing costs b) pricing and product mix c) improving processes d) smoothing costs

Answer 1

Ques 1
b)Product sustaining costs
as the name suggests these costs are undertaken
to produce individual products , disregarding the no.
of units sold/produced of that product
Ques 2
a)number of parts used
as the product requires various combinations of
different types of parts , this will be the most
appropriate cost driver
Ques 3
d)can be used to eliminate non value added activities
the main purpose of ABC costing is to divide the activities
which are most crucial to a process to a particulae
product , so the overhead products are assigned to it
that particular way.
Ques 4
d)all of these answers are correct
as mentioned in que 3 , ABC costing helps to identify
the overhead activities needed for each product
specifically , so once these are identified corrective
action can be taken by management
Ques 5
d)lower profits
a product consuming more resources , if undercosted
will be charged less than it should been as it
consumes more resources, hence the profits would
be low
products consuming more resources should be
high priced
Ques 6
d)smoothing costs
As told ABC costing identifies processes , it is
up to the management to reduce the overhead
costs of each product with the identified
activities