BUS5111 Applied Managerial Accounting Units 5-8 Test Bank —
ABC, Relevant Costs, Capital Budgeting, and Performance
Course:
BUS5111 Applied Managerial Accounting — University of the People (UoPeople)
Level:
MBA
Year:
2025/2026
Format:
Comprehensive Test Bank — 60 Q&A with Verified Answers
BUS5111 Units 5-8 Test Bank
60 Questions with Verified Correct Answers | 100% Complete Solutions
Question 1 — Unit 5:
Traditional costing systems often distort product costs by overcosting high-volume products and
undercosting low-volume products. Which of the following is the primary reason for this
distortion?
A) High-volume products typically require more direct labor hours.
B) Traditional systems allocate all overhead costs based on volume-related measures like direct
labor hours.
C) Low-volume products are generally more complex to manufacture.
D) Traditional systems ignore direct material costs when calculating total product cost.
Answer: B
Explanation:
Traditional costing systems use volume-based allocation bases, which implicitly assume that
overhead costs are driven by production volume. This leads to over-allocating overhead to high-
volume products and under-allocating to low-volume, complex products that consume a
disproportionate share of non-volume-related overhead.
,Question 2 — Unit 5:
Alpha Corp. manufactures two products. Product X is standard and produced in high volumes,
while Product Y is customized and produced in small batches. If Alpha switches from traditional
costing to Activity-Based Costing (ABC), what is the most likely impact on the reported unit costs?
A) Product X's unit cost will increase, and Product Y's unit cost will decrease.
B) Both products' unit costs will increase.
C) Product X's unit cost will decrease, and Product Y's unit cost will increase.
D) Both products' unit costs will remain the same, but total overhead will decrease.
Answer: C
Explanation:
High-volume standard products generally subsidize low-volume custom products under traditional
volume-based costing. Shifting to ABC reassigns overhead based on actual activity consumption,
lowering the cost of standard products and raising the cost of complex, low-volume ones.
Question 3 — Unit 5:
Within an Activity-Based Costing hierarchy, setting up a machine for a production run is classified
as which type of activity?
A) Unit-level activity
B) Batch-level activity
C) Product-level activity
D) Facility-level activity
Answer: B
Explanation:
Machine setup is performed each time a batch of products is produced, regardless of the number
of units in the batch. Therefore, it is classified as a batch-level activity, and its costs should be
allocated based on the number of setups or setup hours.
Question 4 — Unit 5:
Which of the following activities would be considered a product-level activity in an ABC system?
A) Inspecting individual finished goods
B) Processing purchase orders for raw materials
C) Designing a new product prototype
, D) Heating and lighting the manufacturing plant
Answer: C
Explanation:
Product-level activities relate to specific products and must be carried out regardless of how many
batches or units of the product are manufactured. Designing a prototype supports the existence of
the product line itself, making it a product-level activity.
Question 5 — Unit 5:
Scenario: Beta Tech identifies its customer service department costs as $500,000. It processes
10,000 standard queries and 2,500 complex technical queries. ABC analysis determines that
complex queries consume three times more resources than standard queries. What is the
allocated cost for a single complex technical query?
A) $20.00
B) $40.00
C) $50.00
D) $85.71
Answer: D
Explanation:
First, find the equivalent standard queries: 10,000 + (2,500 3) = 17,500 equivalent standard
queries. The cost per standard query is $500,,500 = $28.57. A complex query costs three
times this amount, which is $28.57 3 = $85.71.
Question 6 — Unit 5:
In implementing an Activity-Based Costing system, what is the critical first step a managerial
accountant must take?
A) Assign costs to activity cost pools
B) Identify and define the activities, activity pools, and activity measures
C) Calculate the activity rates
D) Allocate costs to cost objects
Answer: B
Explanation:
The foundation of ABC is accurately identifying the activities that consume resources. Without
properly defining activities and selecting appropriate cost drivers (activity measures), the
ABC, Relevant Costs, Capital Budgeting, and Performance
Course:
BUS5111 Applied Managerial Accounting — University of the People (UoPeople)
Level:
MBA
Year:
2025/2026
Format:
Comprehensive Test Bank — 60 Q&A with Verified Answers
BUS5111 Units 5-8 Test Bank
60 Questions with Verified Correct Answers | 100% Complete Solutions
Question 1 — Unit 5:
Traditional costing systems often distort product costs by overcosting high-volume products and
undercosting low-volume products. Which of the following is the primary reason for this
distortion?
A) High-volume products typically require more direct labor hours.
B) Traditional systems allocate all overhead costs based on volume-related measures like direct
labor hours.
C) Low-volume products are generally more complex to manufacture.
D) Traditional systems ignore direct material costs when calculating total product cost.
Answer: B
Explanation:
Traditional costing systems use volume-based allocation bases, which implicitly assume that
overhead costs are driven by production volume. This leads to over-allocating overhead to high-
volume products and under-allocating to low-volume, complex products that consume a
disproportionate share of non-volume-related overhead.
,Question 2 — Unit 5:
Alpha Corp. manufactures two products. Product X is standard and produced in high volumes,
while Product Y is customized and produced in small batches. If Alpha switches from traditional
costing to Activity-Based Costing (ABC), what is the most likely impact on the reported unit costs?
A) Product X's unit cost will increase, and Product Y's unit cost will decrease.
B) Both products' unit costs will increase.
C) Product X's unit cost will decrease, and Product Y's unit cost will increase.
D) Both products' unit costs will remain the same, but total overhead will decrease.
Answer: C
Explanation:
High-volume standard products generally subsidize low-volume custom products under traditional
volume-based costing. Shifting to ABC reassigns overhead based on actual activity consumption,
lowering the cost of standard products and raising the cost of complex, low-volume ones.
Question 3 — Unit 5:
Within an Activity-Based Costing hierarchy, setting up a machine for a production run is classified
as which type of activity?
A) Unit-level activity
B) Batch-level activity
C) Product-level activity
D) Facility-level activity
Answer: B
Explanation:
Machine setup is performed each time a batch of products is produced, regardless of the number
of units in the batch. Therefore, it is classified as a batch-level activity, and its costs should be
allocated based on the number of setups or setup hours.
Question 4 — Unit 5:
Which of the following activities would be considered a product-level activity in an ABC system?
A) Inspecting individual finished goods
B) Processing purchase orders for raw materials
C) Designing a new product prototype
, D) Heating and lighting the manufacturing plant
Answer: C
Explanation:
Product-level activities relate to specific products and must be carried out regardless of how many
batches or units of the product are manufactured. Designing a prototype supports the existence of
the product line itself, making it a product-level activity.
Question 5 — Unit 5:
Scenario: Beta Tech identifies its customer service department costs as $500,000. It processes
10,000 standard queries and 2,500 complex technical queries. ABC analysis determines that
complex queries consume three times more resources than standard queries. What is the
allocated cost for a single complex technical query?
A) $20.00
B) $40.00
C) $50.00
D) $85.71
Answer: D
Explanation:
First, find the equivalent standard queries: 10,000 + (2,500 3) = 17,500 equivalent standard
queries. The cost per standard query is $500,,500 = $28.57. A complex query costs three
times this amount, which is $28.57 3 = $85.71.
Question 6 — Unit 5:
In implementing an Activity-Based Costing system, what is the critical first step a managerial
accountant must take?
A) Assign costs to activity cost pools
B) Identify and define the activities, activity pools, and activity measures
C) Calculate the activity rates
D) Allocate costs to cost objects
Answer: B
Explanation:
The foundation of ABC is accurately identifying the activities that consume resources. Without
properly defining activities and selecting appropriate cost drivers (activity measures), the
