10) The expenses associated with the use of clean rooms in the production of computer hard
drives are ________ costs.
A) prevention
B) inspection
C) internal failure
D) external failure
11) The expenses associated with disposal of defective products are ________ costs.
A) prevention
B) inspection
C) internal failure
D) external failure
12) In addition to identifying and dealing with defective products before they reach customers,
quality management is concerned with initiating process changes that will reduce the number of
defective units produced. All other things held constant, a decrease in the number of defective
units will increase throughput by
A) increasing productive capacity.
B) increasing productive processing time.
C) increasing yield.
D) increasing all components of throughput.
13) Describe five threats in the production cycle and the applicable control procedures used to
mitigate each threat.
14) Discuss two measures that can address the threats of inefficiencies and quality controls
problems.
15) Identify one control that can be used to mitigate the threat of poor product design that results
in excess costs.
A) production planning systems
B) analysis of warranty and repair costs
C) encryption
D) insurance
16) Identify one control that can be used to mitigate the threat of under-production.
A) production planning systems
B) analysis of warranty and repair costs
C) encryption
D) insurance
17) The risks associated with over-production are likely of greatest concern to which company
below?
A) a cereal manufacturer
B) a manufacturer that produces designer clothing
C) a manufacturer of printer paper
D) a mailbox manufacturer
18) To control for risks associated with the threat of inventory loss, who should have primary
responsibility for work-in–process inventories?
A) a factory supervisor
B) the inventory stores department
C) purchasing
D) the receiving department
19) The acronym “RFP” stands for what?
A) Request for Project
B) Request for Processing
C) Request for Proposal
D) Request for Purchase
20) The VP of Manufacturing at Roshanak Incorporated wants to buy a new die cast machine for
production. The die cast machine is expected to cost around $1,000,000. Which document will
most likely be used to solicit bids from suppliers?
A) RFP
B) eVoice
C) RFJ
D) RFB
14.3 Explain how a company’s cost accounting system can help it achieve its manufacturing
goals.
1) Which objective listed below is not a cost accounting objective for the production cycle?
A) Provide information for planning, controlling, and evaluating the performance of production
operations.
B) Provide cost data about products used in pricing and product mix decisions.
C) Collect and process the information used to calculate inventory and cost of goods sold
amounts that appear in the financial statements.
D) Provide tests of audit control functions as part of the AIS.
2) Which type of information below should not be maintained by the AIS in accounting for fixed
assets?
A) identification/serial number
B) cost
C) improvements
D) market value
3) Detailed data about reasons for warranty and repair costs is considered an applicable control
used to mitigate the threat of
A) underproduction.
B) overproduction.
C) poor product design.
D) suboptimal investment of fixed assets.
4) What is the primary drawback to using a volume-driven base, such as direct labor or machine
hours, to apply overhead to products in a traditional cost accounting system?
A) The cost accountant may not fully understand how to track direct labor or machine hours.
B) It is difficult for an AIS to incorporate such a measurement into its system.
C) It is difficult for an ERP to incorporate such a measurement into its integrated system.
D) Many overhead costs are incorrectly allocated to products since they do not vary with
production volume.
5) ________ identifies costs with the corporation’s strategy for production of goods and services.
A) Activity-based costing
B) Job-order costing
C) Process costing
D) Manufacturing costing
6) In an Activity-Based Costing (ABC) system, a cause-and-effect relationship is known as a
A) cost stimulator.
B) overhead stimulator.
C) cost driver.
D) cost catalyst.
7) What does the first term in the throughput formula, productive capacity, represent?
A) the maximum number of units that can be produced given current technology
B) the percentage of total production time used to manufacture a product
C) the percentage of “good” units produced given current technology
D) the percentage of “bad” units produced given current technology
8) ________ are incurred to ensure that products are created without defects the first time.
A) External failure costs
B) Inspection costs
C) Internal failure costs
D) Prevention costs
9) ________ are associated with testing to ensure that products meet quality standards.
A) External failure costs
B) Inspection costs
C) Internal failure costs
D) Prevention costs
10) The cost of a product liability claim can be classified as a(n)
A) prevention cost.
B) inspection cost.
C) internal failure cost.
D) external failure cost.
11) Elif Package Delivery determines the cost per delivery by summing the average cost of
loading, unloading, transporting, and maintenance. What costing approach does Elif Package
Delivery use?
A) job-order
B) unit-based
C) process
D) activity-based
12) Elif Package Delivery determines the cost per delivery by averaging total cost over the
number of deliveries. What costing approach does Elif Package Delivery use?
A) unit-based
B) job-order
C) process
D) activity-based
13) Elif Package Delivery calculates the cost per delivery by identifying variables as cost drivers,
and allocating overhead accordingly. What costing approach does Elif Package Delivery use?
A) job-order
B) activity-based
C) unit-based
D) process
14) In activity-based costing, expenses associated with the purchase of health care insurance for
employees are ________ overhead.
A) batch-related
B) product-related
C) company wide
D) expenditure-based
15) In activity-based costing, the expenses associated with planning and design of new products
are ________ overhead.
A) batch-related
B) product-related
C) company wide
D) expenditure-based
16) At the end of each production run, preventive maintenance is done on the assembly line. The
expenses associated with this maintenance are ________ overhead.
A) batch-related
B) product-related
C) company wide
D) department-based
17) Which of the following is not a benefit of activity-based costing?
A) lower cost
B) better decisions
C) improved cost management
D) identification of cost drivers
18) What types of data are accumulated by cost accounting? What is the accountant’s role in cost
accounting?
19) What role does the AIS play in the production cycle?
20) What are the two major types of cost accounting systems and what are the differences
between the two?
21) Discuss the criticisms of traditional cost accounting methods.
22) What is activity-based costing (ABC)? How does it compare with the traditional costing
methods? What are the benefits of activity-based costing?
23) Traditionally, what did manufacturing firms use to track the amount of time a worker spends
on each specific task?
A) job-time ticket
B) barcoded ID card
C) clock punchcard
D) RFID chips
24) Manufacturing overhead is best described as
A) costs that cannot be traced directly to specific jobs or processes.
B) costs that are economically feasible to trace directly to specific jobs or processes.
C) costs that are not economically feasible to trace directly to specific jobs or processes.
D) costs that management has decided not to trace directly to specific jobs or processes.
25) Identify the cost below most likely to be classified as manufacturing overhead.
A) production workers’ pay
B) raw materials used in production
C) insurance
D) none of the above
26) True or False: ERP systems make it easier for an organization to implement an activity
based costing approach.
27) Which of the following is not proposed to be an advantage of activity-based costing?
A) better product mix decisions
B) better product pricing decisions
C) less complex than traditional cost systems
D) none of the above
28) True or False: Implementing a modern costing approach often results in short-term declines
in profitability.
14.4 Discuss the key decisions that must be made in the production cycle and identify the
information required to make those decisions.
1) Discuss the role the accountant can play in the production cycle.
2) Identify the role below that accountants can play in the production cycle.
A) participate in product design
B) perform cost analysis
C) help an organization choose an inventory control system
D) all of the above
3) Why might an organization find it most beneficial to involve accountants in product design?
A) because generally at least 65% of product costs are determined in the design stage and
accountants can help minimize product costs
B) because accountants are generally able to improve the quality of new products
C) because involving accountants in product design boosts firm morale
D) because accountants are generally able to identify what consumers want in a new product