LA CONSOLACION COLLEGE TANAUAN

Accountancy Department

MANAGEMENT ADVISORY SERVICES

Activity-Based Costing

Quiz No. 6

NAME: REYES, JANELLA PATRIZIA R. DATE: ________________

SECTION: ______________________ SCORE: ______________

Directions: Choose the letter of the best answer. Please provide your solution, if necessary on a
separate sheet. Erasure are not allowed.

1. Lebanon manufactures two versions of a product. Production and cost information show
the following:

Model A Model B
Units produced 100 200
Material moves 10 40
Direct labor hours per 1 2
unit

Under ABC, the materials handling costs of P100,000 allocated to a unit of Model A is:

a. P10
b. P200
c. P133
d. P400
B (20,000/100=200)
2. Iran Manufacturing produces three products. Production and cost information show the
following:

Model F Model A Model Q

Units produced 1000 3000 6000
Direct labor hours 2000 1000 2000
Number of inspections 20 30 50

Using ABC, the inspection costs of P50,000 allocated to each unit of Model F would be

a. P5.00
b. P10.00
c. P20.00
d. Some other number
B (50,000 *.2=10,000/1000=10)
3. Zaire Company is preparing its annual profit plan. As part of its analysis of the profitability
of individual products, the controller estimates the amount of overhead that should be
allocated to the individual product line from the information given as follows:
 Wall Specialty
Mirrors Windows
Units produced 25 25
Material moves per product line 5 15
Direct labor hours per unit 200 200
Budgeted materials handling costs P50,000

Under a costing system that allocated overhead on the basis of direct labor hours, the
materials handling costs allocated to one unit of wall mirrors would be

a. P500
b. P1,000
c. P2,000
d. P5,000
B (50,000 *.5 = 25000/25=1000)
4. Under ABC, the material handling costs allocated to one unit of wall mirrors would be

a. P500
b. P1,000
c. P2,000
d. P5,000
A (50000*.5/20/25=500)
5. A company allocates overhead to jobs in process using direct labor costs, raw materials
costs, and machine hours. The overhead applications for the current year are:

100% of direct labor

20% of raw materials
P117 per machine hour

A particular production run incurred the following costs:

Direct labor P8,000

Raw materials P2,000
A total of 140 machine hours were required for the production run

What is the total cost that would be charged to the production run?
a. P18,000
b. P18,400
c. P24,780
d. P34,780
C (140*117=16380+8000+400=24780)
6. Afghanistan Company uses ABC to compute product costs for external. The company
has three activity centers and applies overhead using predetermined overhead rates for
each activity center. Estimates costs and activities for the current year are presented
below for the three activity centers:

Estimated Activity Cost Expected Activity

Activity 1 P61,387 2,300
Activity 2 P34,076 2,800
Activity 3 P69,075 2,500

Activity costs and activities for the current year were as follows:
 Actual overhead cost Actual activity
Activity 1 P61,387 2,300
Activity 2 P34,076 2,800
Activity 3 P69,075 2,500

The amount of overhead over or under-applied for Activity 1 during the year was closest
to:

a. P271.90 over-applied
b. P271.90 under-applied
c. P5.00 over-applied
d. P5.00 underapplied
O (SAME AMOUNTS OF ACTUAL AND BUDGETED)
7. An objective of activity-based management is to
a. Eliminate the majority of centralized activities in an organization
b. Reduce or eliminate non-value activities incurred to make a product or provide a
service
c. Institute responsibility accounting system in decentralized organization
d. All of the above
B
8. cA tool that focuses on manufacturing process and seeks to reduce or optimize the
activities performed within the process is
a. Process value analysis
b. Re-engineering
c. Bench marking
d. None of the above
A
9. A non-value adding cost is
a. Usually direct to a product
b. The same as discretionary costs
c. Unavoidable
d. Not essential to manufacturing a product
D
10. A value-added employee in a construction firm would be
a. An accountant
b. A secretary
c. A painter
d. All of the above
C
11. Waste is another name for
a. Non-value added-costs
b. Idle costs
c. Trash costs
d. All of the above
A
12. Which of the following is typically regarded as a cost driver in traditional costing
practices?
a. Number of order processed
b. Number of customers served
c. Number of transactions processed
d. Number of direct labor hours worked
D
13. Activity-based costing (ABC)
a. Requires identification of cost drivers
b. Is used only in just-in-time operations
c. Applied only to discretionary fixed costs
d. Does not help to identify activated as value-adding or non-value adding
A
14. A company using activity-based costing
a. Tries to identify cost drivers
b. Allocated all costs to individual products
c. Looks for the activity with which total costs are most closely associated
d. Is probably using the JIT philosophy
A
15. The term cost driver refers to
a. Any activity that can be used to predict cost changes
b. The attempt to control expenditures at a reasonable level
c. The person who gathers and transfers cost data to the management accountant
d. Any activity that causes costs to be incurred
D
16. The principal reason for using more than one rate to apply overhead is
a. To keep individual rates low
b. That overhead costs are driven by more than one activity
c. That such rates recognize the seasonal nature of some costs
d. To simplify recording
B
17. The numerator in computing a predetermined overhead rate is
a. Budgeted manufacturing overhead cost
b. Actual manufacturing overhead cost
c. Budgeted activity
d. Fixed manufacturing overhead cost
A
18. The denominator in computing a predetermined overhead rate is
a. Budgeted manufacturing overhead cost
b. Actual manufacturing overhead cost
c. Budgeted activity
d. Fixed manufacturing overhead cost
C
19. A predetermined overhead rate cannot be used
a. If a company does not budget its overhead costs
b. By a company that uses job order costing
c. In a multi-product company
d. By a highly automated company where labor is a minor part of the product costs
A
20. The term cost driver refers to
a. Any activity that can be used to predict cost changes
b. The attempt to control expenditures at a reasonable level
c. The person who gathers and transfers cost data to the management accountant
d. Any activity that causes costs to be incurred
D