SECTION $1--$ MULTIPLE CHOICE QUESTIONS $(4$ Points$)$

Each multiple choice question is worth $1$ point.

Which of the following statements is true of a peanut$-$butter costing system?

a$.$ A peanut$-$butter costing system typically has more homogeneous indirect cost pools.

b$.$ A peanut$-$butter costing system broadly averages or spreads the cost of resources uniformly to cost

objects.

c$.$ A peanut$-$butter costing system assumes that all costs are variable.

d$.$ In a peanut$-$butter costing system, costs of activities are used to assign costs to other cost objects such as

products or services based on the activities the products or services consume.

Nichols Inc., manufactures remote controls. Currently, the company uses a plant$-$wide rate for allocating

manufacturing overhead. The plant manager is considering switching over to an activity$-$based costing

system and has asked the accounting department to identify the primary production activities and their cost

drivers which are as follows:

The current traditional costing method allocates overhead based on direct manufacturing labor hours using

a rate of $$200$ per direct manufacturing labor hour. What are the indirect manufacturing costs per remote

control assuming an activity$-$based costing method is used and a batch of $100$ remote controls is produced?

The batch requires $450$ parts, $8$ direct manufacturing labor hours, and $10$ minutes of inspection time.

a$.$ $$10\mathrm{.}90$ per remote control.

b$.$ $$10\mathrm{.}95$ per remote control.

c$.$ $$11\mathrm{.}00$ per remote control.

d$.$ $$11\mathrm{.}05$ per remote control.

Cannady, Inc., manufactures six products. Under the company's traditional cost system using one cost driver,

Product SR$6$ costs $$168\mathrm{.}00$ per unit. An analysis of the activities and their costs revealed that three cost

drivers would be used under the new ABC system. The new cost of SR$6$ was determined to be

$$178\mathrm{.}00$ per unit. Given this change in the cost:

a$.$ SR$6$ will now command a higher sales price.

b$.$ SR$6$ has benefited from the new system.

c$.$ SR$6$ is definitely more accurately costed$.$

d$.$ the costing results for SR$6$ under the new system depend on the adequacy and quality of the estimated

cost drivers and costs used by the system.

It is important that the product costs reflect as much of the diversity and complexity of the manufacturing

process so that:

a$.$ total costs reflect market price.

b$.$ value$-$added costs can be eliminated.

c$.$ there is a greater likelihood of cross$-$subsidization of product costs.

d$.$ product$-$pricing errors are minimal.