Multiple Choice Questions
1. The receiving department employs one worker, who spends 25 percent of his time on the receiving activity and 75 percent of his time on inspecting products. His salary is $ 40,000. The amount of cost assigned to the receiving activity is
a. $ 34,000.
b. $ 40,000.
c. $ 10,000.
d. $ 30,000.
e. none of these.
2. Assume that the moving activity has an expected cost of $ 80,000. Expected direct labor hours are 40,000, and expected number of moves is 20,000. The best activity rate for moving is
a. $ 4 per move.
b. $ 1.33 per hour- move.
c. $ 4 per hour.
d. $ 2 per move.
e. none of these.
3. Which of the following is a true statement about activity- based customer costing?
a. Customer diversity does not require multiple drivers to trace costs accurately to customers.
b. Customers consume customer-driven activities in the same proportions.
c. It seldom produces changes in the company’s customer mix.
d. It never improves profitability.
e. None of the above are true.
4. Which of the following is a true statement about activity-based supplier costing?
a. The cost of a supplier is the purchase price of the components or materials acquired.
b. It encourages managers to increase the number of suppliers.
c. It encourages managers to evaluate suppliers based on purchase cost.
d. Suppliers can affect many internal activities of a firm and significantly increase the cost of purchasing.
e. All of the above are true.
5. This year, Lambert Company will ship 1,500,000 pounds of goods to customers at a cost of $ 1,200,000. If a customer orders 10,000 pounds and produces $ 200,000 of revenue (total revenue is $ 20 million), the amount of shipping cost assigned to the customer by using ABC would be
a. Unable to be determined.
b. $ 8,000 ($ 0.80 per pound shipped).
c. $ 24,000 (2 percent of the shipping cost).
d. $ 12,000 (1 percent of the shipping cost).
e. none of these.
6. Lambert Company has two suppliers: Deming and Leming. The cost of warranty work due to defective components is $ 2,000,000. The total units repaired under warranty average 100,000, of which 90,000 have components from Deming and 10,000 have components from Leming. Select the items below that represent true statements.
a. Components purchased from Leming cost $ 200,000 more than their purchase price.
b. Components purchased from Deming cost $ 1,800,000 more than their purchase price.
c. Components from Leming appear to be of higher quality.
d. All of the above are true. e. None of the above is true.
7. A forklift and its driver used for moving materials are examples of
a. Activity inputs.
b. Activity output measures.
c. Resource drivers.
d. Activity outputs.
e. Root causes.