• If only one or two overhead cost pools are used,

a.	it will be easy to determine which products or services are creating the most costs.
b.	overhead created by a specific product will be assigned to all products.
c.	the reduction in cost accumulation and allocation time will raise company profits.
d.	allocations should be made using only unit-based cost drivers.

• A cost accumulation system should most likely be reevaluated when a company has

a.	automated one or more production processes.
b.	introduced new products to its customers.
c.	had its industry deregulated.
d.	all of the above.

• Engaging in which of the following will result in radical changes being made to an organization's processes?

a.	Continuous improvement
b.	Benchmarking
c.	Reengineering
d.	Mass customization

• Use of activity-based costing and activity-based management requires

a.	the creation of an environment for change in an organization.
b.	elimination of all non-value-added activities in an organization.
c.	that company processes be automated and the use of direct labor be minimal.
d.	each process be fully mapped and all activities be identified as value-added or non-value-added.

• Which of the following is most likely to make the implementation of ABC/ABM slow and difficult?

a.	The inability of all employees to understand the computations involved in ABC.
b.	A lack of involvement by or support from upper management.
c.	The need for dual costing systems.
d.	An inability to eliminate all business-value-added activities.

• Activity-based costing and generally accepted accounting principles differ in that ABC

a.	does not define product costs in the same manner as GAAP.
b.	cannot be used to compute an income statement, but GAAP can.
c.	is concerned only with costs generated from automated processes, but GAAP is concerned with costs generated from both manual and automated processes.
d.	information is useful only to managers, while GAAP information is useful to all organizational stakeholders.

• If activity-based costing is implemented in an organization without any other changes being implemented, total overhead costs will

a.	be reduced because of the elimination of non-value-added activities.
b.	be reduced because organizational costs will not be assigned to products or services.
c.	be increased because of the need for additional people to gather information on cost drivers and cost pools.
d.	remain constant and simply be spread over products differently.

The goals and objectives upon which an annual profit plan is based should be limited to:

a. financial measures, such as net income, return on investment, and earnings per share

b. quantitative measures, such as growth in unit sales, number of employees, and manufacturing capacity

c. qualitative measures of organizational activity, such as product innovation leadership, product quality levels, and product safety

d. a combination of financial, quantitative, and qualitative measures

For the past 12 years, the Jolt Company has produced the small electric motors that fit into its main product line of dental drilling equipment. As materials costs have steadily increased, the controller of the Jolt Company is reviewing the decision to continue to make the small motors and has identified the following facts:

1. The equipment used to manufacture the electric motors has a book value of $150,000.

2. The space now occupied by the Electric Motor Manufacturing Department could be used to eliminate the need for storage space now being rented.

3. Comparable units can be purchased from an outside supplier for $59.75.

4. Four of the people who work in the Electric Motor Manufacturing Department would be terminated and given eight weeks of severance pay.

5. A $10,000 unsecured note is still outstanding on the equipment used in the manufacturing process.

Which of the items above are relevant to the decision that the controller has to make?

a. 1, 2, 4, and 5

b. 1, 3, 4, and 5

c. 1, 3, and 4

d. 2, 3, and 4