Inaccurate product costs can expose a company to the risk of losing market share to competitors.*

4 points

True

False

2. By defining activities and identifying the costs of performing each activity, ABC systems provide detailed information regarding how an organization utilizes its available resources.*

4 points

True

False

3. A cost accounting system should be revised when*

4 points

A) the existing cost accounting system provides information that is representative of operations.

B) the existing cost accounting system could be updated, just to keep ahead.

C) the existing cost accounting system does not produce information that reflects the way various products use scarce resources.

D) management wants to change the system, even though the information is relevant and correct.

E) a new system would be easier to understand but would not be reliable.

4. Which of the following statements is TRUE regarding activity-based costing systems?*

4 points

A) ABC systems accumulate overhead costs by departments.

B) ABC costing systems are less complex and, therefore, less costly than traditional systems.

C) ABC costing systems can be used in manufacturing firms only.

D) ABC costing systems have multiple indirect cost allocation rates for each activity.

E) ABC systems provide a greater level of detail to understand how an organization uses its common inputs differently for distinct products.

5. Which of the following is NOT an activity under an ABC system?*

4 points

A) an event

B) a task

C) a unit of work

D) a process

E) indirect cost

6. Which of the following is NOT an activity under an ABC system?*

4 points

A) designing products

B) engineering

C) setting up equipment

D) distributing products

E) customers

7. A costing system which focuses on individual event or tasks as the cost pool to be allocated is called*

4 points

A) activity-based costing.

B) direct costing.

C) job costing.

D) process costing.

E) normal costing.

8. Activity-based cost systems*

4 points

A) apply average support costs to each unit of product.

B) limit cost drivers to units of output.

C) allocate costs based on the overall level of activity.

D) generally undercost complex products.

E) highlight the different levels of activities.

9. The total cost difference between two separate alternatives in a decision making process is the net relevant cost.*

4 points

True

False

10. All fixed costs are irrelevant in relevant-cost analysis.*

4 points

True

False

11. All variable costs are relevant in relevant-cost analysis.*

4 points

True

False

12. Which of the following anticipated future costs always differ among alternative courses of actions?*

4 points

A) direct labour costs

B) historical costs

C) relevant costs

D) direct materials costs

E) indirect costs

13. Sunk costs*

4 points

A) are relevant.

B) are differential.

C) have future implications.

D) are ignored when evaluating alternatives.

E) are evaluated to determine if they are relevant or not evaluating alternatives.

14. A computer system installed last year is an example of a(n)*

4 points

A) sunk cost.

B) relevant cost.

C) differential cost.

D) avoidable cost.

E) opportunity cost.

15. Which of the following costs are never relevant in the decision-making process?*

4 points

A) fixed costs

B) historical costs

C) relevant costs

D) variable costs

E) opportunity costs

16. An example of an outsourcing process is when a computer company purchases keyboards from another company instead of producing the components internally.*

4 points

True

False

17. For one-time-only special orders, variable costs may be relevant but not fixed costs.*

4 points

True

False

18. Employee morale at Bedland Inc. is very high. This type of information is known as*

4 points

A) a qualitative factor.

B) a quantitative factor.

C) a nonmeasurable factor.

D) a financial factor.

E) a numerical factor.

19. Which of the following represents a qualitative factor?*

4 points

A) any nonfinancial factor

B) historical costs

C) relevant costs

D) the timing of variable costs

E) an outcome that cannot be measured in numerical terms

20. When choosing between two alternatives, costs that do not differ between the two alternatives can be considered to be irrelevant to that decision.*

4 points

True

False

21. If Harry Inc. doesn't use one of its limited resources in the best possible way, the lost contribution to income could be called*

4 points

A) an alternative cost.

B) a total alternative cost.

C) an opportunity cost.

D) a resource cost.

E) a constraining factor.

22. Which of the following is TRUE concerning opportunity costs?*

4 points

A) They are incorporated into formal financial accounting reports.

B) They entail cash receipts.

C) They entail cash disbursements.

D) They require accounting journal entries.

E) They are relevant for the make/buy decision.

23. The opportunity cost of holding significant inventory includes*

4 points

A) contribution margin on the extra inventory.

B) additional insurance costs.

C) additional storage costs.

D) the cost of the inventory plus the added insurance and storage costs.

E) the interest forgone on an alternative investment.

24. Decisions on product mix involving multiple products, should be based on which of the following?*

4 points

A) the variable cost differential between the products

B) the differential selling prices between the products

C) fixed cost savings

D) the amount of idle capacity

E) individual product contribution margin totals

25. Which of the following does not characterize an ABC system, as compared to a traditional costing system?*

4 points

A) smaller cost pools

B) more cost drivers

C) more homogeneous cost pools

D) focus on activities

E) less expensive to set up and maintain