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45. Using only unit-based activity drivers to assign nonunit-related overhead costs can cause
a. product diversity.
b. distorted product costs.
c. efficiency.
d. activity sharing.
e. None of these.
46. Activity drivers can be classified as either ____ or ____.
a. unit-level; nonunit-level
b. exact; inexact
c. inputs; outputs
d. right; wrong
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47. ____ costs in many firms represent a much higher percentage of product costs than direct labor.
a. Nonvalue-added
b. Failure
c. Overhead
d. Appraisal
e. Control
48. The activity driver for the shipping activity of Withstand Inc. is the number of orders shipped. Product A uses 30
orders, and Product B uses 70 orders. Calculate the consumption ratios for each product. (Note: Round answer to two
decimal places.)
a. 0.25; 0.75
b. 0.65; 0.35
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c. 0.30; 0.70
d. 0.20; 0.80
49. Receiving provides 12,000 receiving hours and costs $60,000 per year. What is the activity rate for receiving?
a. $14 per receiving hour
b. $5 per receiving hour
c. $4 per receiving hour
d. $4.50 per receiving hour
e. cannot be determined from this information
Chapter 5
50. Ringing Solutions produces 12,000 units of a cell phone. The production requires prime costs of $400,000, uses 2,500
machine hours, and takes 1,800 setup hours. The activity rates are $50 per machine hour and $130 per setup hour. What is
the unit cost of a cell phone? (Note: Round answer to two decimal places.)
a. $60.15
b. $40.35
c. $63.25
d. $100.65
e. $30.55
51. The moving activity of Alpha Inc. has an expected cost of $200,000. Expected direct labor hours are 50,000, and the
expected number of moves is 90,000. What is the best activity rate for moving? (Note: Round answer to two decimal
places.)
a. $4.50 per move
b. $1.33 per move
c. $4.30 per move
d. $2.22 per move
Chapter 5
52. Alpha Technology produces two products: a high end laptop under the label Excellent Laptops and an inexpensive
desktop under the label Outstanding Computers. The two products use two overhead activities, with the following costs:
Setting up equipment $3,000
Machining $15,000
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the
expected production.
Excellent Laptops Outstanding Computers
Direct Labor $25,000 $10,000
Direct Materials $20,000 $5,000
Expected Production in Units 3,000 3,000
Machine Hours 850 2,000
Setup Hours 80 75
Calculate Outstanding Computer’s consumption ratio for setup hours. (Note: Round answer to two decimal places.)
a. 0.48
b. 0.45
c. 0.90
d. 0.25
e. 0.75
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53. Alpha Technology produces two products: a high end laptop under the label Excellent Laptops and an inexpensive
desktop under the label Outstanding Computers. The two products use two overhead activities, with the following costs:
Setting up equipment $3,000
Machining $15,000
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and the
expected production.
Excellent Laptops Outstanding Computers
Direct Labor $25,000 $10,000
Direct Materials $20,000 $5,000
Expected Production in Units 3,000 3,000
Machine Hours 850 2,000
Setup Hours 80 75
Calculate the overhead cost per unit for Excellent Laptops using a plantwide rate based on direct labor costs. (Note:
Round answer to two decimal places.)
a. $9.63 per laptop
b. $22.45 per laptop
c. $4.25 per laptop
d. $7.22 per laptop
e. $7.50 per laptop
Chapter 5
54. Alpha Technology produces two products: a high end laptop under the label Excellent Laptops and an
inexpensive desktop under the label Outstanding Computers. The two products use two overhead activities, with the
following costs:
Setting up equipment $3,000
Machining $15,000
The controller has collected the expected annual prime costs for each product, the machine hours, the setup hours, and
the expected production.
Excellent Laptops Outstanding Computers
Direct Labor $25,000 $10,000
Direct Materials $20,000 $5,000
Expected Production in Units 3,000 3,000
Machine Hours 850 2,000
Setup Hours 80 75
Calculate the overhead cost per unit for each of Outstanding Computer’s computer using overhead rates based on machine
hours and setup hours.(Note: Round answer to two decimal places.)
a. $6.10 per unit
b. $3.99 per unit
c. $5.75 per unit
d. $4.88 per unit
Chapter 5
55. Witness Manufacturing produces two types of cameras: 35mm and digital. The cameras are produced using one
continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have
been used to assign costs to each activity. The overhead activities, their costs, and the other related data are as follows:
Product Machine Hours Setups Receiving Orders Packing Orders
35mm 12,000 200 300 500
Digital 12,000 450 1,200 2,500
Costs $70,000 $50,000 $10,000 $30,000
Calculate the total overhead assigned to the 35mm cameras, using only machine hours to calculate a plantwide rate. (Note:
Round the plantwide rate to two decimal places.)
a. $132,667
b. $72,333
c. $60,200
d. $75,130
e. $80,040
Chapter 5
56. Witness Manufacturing produces two types of cameras: 35mm and digital. The cameras are produced using one
continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have
been used to assign costs to each activity. The overhead activities, their costs, and the other related data are as follows:
Product Machine Hours Setups Receiving Orders Packing Orders
35mm 12,000 200 300 500
Digital 12,000 450 1,200 2,500
Costs $70,000 $50,000 $10,000 $30,000
Calculate the consumption ratio for setups on the digital cameras. (Note: Round answer to two decimal places.)
a. 0.56
b. 0.80
c. 0.45
d. 0.69
e. 0.50
57. Witness Manufacturing produces two types of cameras: 35mm and digital. The cameras are produced using one
continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have
been used to assign costs to each activity. The overhead activities, their costs, and the other related data are as follows:
Product Machine Hours Setups Receiving Orders Packing Orders
35mm 12,000 200 300 500
Digital 12,000 450 1,200 2,500
Costs $70,000 $50,000 $10,000 $30,000
Using an activity rate for receiving based on receiving orders, assign receiving costs to the 35mm cameras.
a. $1,802
b. $1,605
c. $2,001
d. $1,209
e. $4,007
Chapter 5
58. Rizzo Manufacturing produces two types of cameras: 35mm and digital. The cameras are produced using one
continuous process. Four activities have been identified: machining, setups, receiving, and packing. Resource drivers have
been used to assign costs to each activity. The overhead activities, their costs, and the other related data are as follows:
Product Machine Hours Setups Receiving Orders Packing Orders
35mm 10,000 100 200 400
Digital 10,000 250 800 2,000
Costs $60,000 $40,000 $8,000 $24,000
Calculate an activity rate for packing based on packing orders.
a. $9.00 per packing order
b. $10.00 per packing order
c. $8.00 per packing order
d. $60.00 per packing order
e. $1.20 per packing order
Chapter 5
59. A costing system that first assigns costs to activities and then to products is
a. activity-based costing.
b. job-order costing.
c. activity-based management.
d. volume based costing.
e. nonunit-level costing.
60. A list of activities accompanied by information that describes each activity is an activity ____.
a. manifesto
b. diary
c. journal
d. dictionary
e. note
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61. ____ are assigned using direct tracing and resource drivers.
a. Resources
b. Costs
c. Profits
d. Materials
e. Products
62. In an activity dictionary, types of resources consumed is an example of a(n)
a. activity sharing.
b. quality.
c. activity attribute.
d. allocation.
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63. A(n) ____ is derived from the interview process (or written survey).
a. work distribution matrix
b. activity explanation matrix
c. driver consumption matrix
d. value analysis matrix
e. tracing matrix
64. To calculate an activity rate, the ____ of each activity must be determined.
a. practical capacity
b. expenditure level
c. processing ratio
d. value
Chapter 5
65. Interviews and surveys are used to identify
a. cycle time.
b. velocity.
c. control costs.
d. costs.
e. activities.
66. ____ can help a company become more competitive by providing more accurate cost data.
a. Unit-based costing
b. Volume-based costing
c. Kaizen costing
d. Production costing
e. Activity-based costing
Chapter 5
67. A company has two inspectors, each earning a salary of $75,000. One inspector works exclusively on inspecting parts
received from outside suppliers, while the other spends 30% of her time inspecting parts and 70% of her time inspecting
final products. How much labor cost should be assigned to the activity, inspecting parts?
a. $100,000
b. $95,000
c. $75,000
d. $96,275
e. $97,500
68. Last year, Stevita Inc. shipped 3,000,000 kilograms of goods to customers at a cost of $2,400,000. If an individual
customer orders 20,000 kilograms and produces $400,000 of revenue (total revenue is $40 million), the amount of
shipping cost assigned to the customer using activity-based costing would be
a. $16,000.
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b. $8,000.
c. $24,000.
d. $4,000.
e. $60,000.
69. Rollo Company has developed cost formulas for the drivers of the following production activities:
Driver Activity Fixed Variable
Labor hours Materials -0- 20
Labor hours Labor -0- 10
Machine hours Maintenance 10,000 8
Machine hours Machining 50,000 2
Number of setups Inspections 30,000 200
Number of setups Setups -0- 300
Number of purchase orders Purchasing 75,000 3
The budgeted inspection cost for 20 setups is
a. $175,860.
b. $40,000.
c. $34,000.
d. $30,000.
Chapter 5
70. The receiving department of Owen has three activities: unloading, counting goods, and inspecting. Unloading requires
a forklift that is leased for $15,000 per year. The forklift is used only for unloading. The fuel for the forklift is $2,000 per
year. Inspection requires special testing equipment that has a depreciation of $500 per year and an operating cost of
$1,000 per year. Receiving has four employees who each have an average salary of $35,000 per year. The work
distribution matrix for the receiving personnel is as follows:
Percentage of Time
Activity on Each Activity
Unloading 25%
Counting 40%
Inspecting 35%
Calculate the cost of unloading.
a. $50,500
b. $56,000
c. $52,000
d. $54,000
Chapter 5
71. The receiving department of Owen has three activities: unloading, counting goods, and inspecting. Unloading requires
a forklift that is leased for $15,000 per year. The forklift is used only for unloading. The fuel for the forklift is $2,000 per
year. Inspection requires special testing equipment that has a depreciation of $500 per year and an operating cost of
$1,000 per year. Receiving has four employees who each have an average salary of $35,000 per year. The work
distribution matrix for the receiving personnel is as follows:
Percentage of Time
Activity on Each Activity
Unloading 25%
Counting 40%
Inspecting 35%
Calculate the cost of counting.
a. $54,000
b. $56,000
c. $52,000
d. $50,500
Chapter 5
72. The receiving department of Owen has three activities: unloading, counting goods, and inspecting. Unloading requires
a forklift that is leased for $15,000 per year. The forklift is used only for unloading. The fuel for the forklift is $2,000 per
year. Inspection requires special testing equipment that has a depreciation of $500 per year and an operating cost of
$1,000 per year. Receiving has four employees who each have an average salary of $35,000 per year. The work
distribution matrix for the receiving personnel is as follows:
Percentage of Time
Activity on Each Activity
Unloading 25%
Counting 40%
Inspecting 35%
Calculate the cost for inspection.
a. $56,000
b. $54,000
c. $50,500
d. $52,000
73. Which of the following is not a possible source of customer diversity?
a. sales support
b. order frequency
c. delivery frequency
d. geographic distance
e. Pricing
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74. Workshape Manufacturing has two classes of distributors: JIT distributors and non-JIT distributors. The JIT
distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types
of distributors purchase the same product. The customer activities and costs for the previous quarter are as follows:
Activity JIT distributors Non-JIT distributors
Sales Orders 500 30
Sales Calls 30 30
Service Calls 200 90
Average Order Size 90 1,400
Manufacturing Cost/Unit $50 $50
Customer Costs:
Processing Sales Orders $160,000
Selling Goods $155,000
Servicing Goods $195,000
Total $500,000
Calculate the activity rate for processing sales orders. (Note: Round answer to two decimal places.)
a. $330.09 per sales order
b. $525.33 per sales order
c. $275.76 per sales order
d. $301.89 per sales order
e. $342.43 per sales order