Comprehensive Managerial And Cost Accounting Concepts For Business Decision- Making Certified Testbank: Real Questions, Answers, And Explanations Elite Exit Exam Prep – 100% Accuracy & Success Guarantee The Master Key: Full Exam Repository & De

What is the total amount of indirect factory wages if product design consumes 40% of indirect factory wages and receives $200,000? A. $300,000 B. $400,000 C. $500,000 D. $800,000 Correct Answer: C Rationale: Total indirect factory wages = $200,000 ÷ 40% = $500,000. Which reports help companies channel resources into the most profitable growth opportunities? A. Cash flow reports B. Product and customer profitability reports C. Payroll reports D. Inventory reports Correct Answer: B Rationale: These reports identify the most profitable products and customers. In activity-based costing, first-stage allocation assigns costs to activity cost pools from: A. Revenue B. Direct labor C. Overhead D. Sales commissions Correct Answer: C Rationale: First-stage allocation distributes overhead costs into activity pools. If the activity rate is $65 per order and there are 120 orders, what overhead cost is assigned? A. $6,500 B. $7,200 C. $7,800 D. $8,400 Correct Answer: C Rationale: $65 × 120 = $7,800. Employees estimate time spent on activities so that: A. Payroll can increase B. First-stage allocations become more accurate C. Taxes decrease D. Production increases Correct Answer: B Rationale: Time estimates improve allocation accuracy. Activity-based costing applies overhead costs to products during the ______ stage allocation. A. First B. Preliminary C. Second D. Final Correct Answer: C Rationale: Second-stage allocation applies activity costs to products. A company uses 15% indirect labor for customer relations, 30% for order size, and 35% for product design. What percentage is used for customer orders? A. 10% B. 15% C. 20% D. 25% Correct Answer: C Rationale: 100% − (15% + 30% + 35%) = 20%. The final step in implementing ABC is to: A. Identify activities B. Allocate labor C. Prepare management reports D. Compute sales revenue Correct Answer: C Rationale: Final reports provide useful management information. A company has Customer Service costs of $200,000 for 25,000 calls and Product Development costs of $300,000 for 20,000 hours. What are the activity rates? A. $10 per call and $12 per hour B. $8 per call and $15 per hour C. $5 per call and $20 per hour D. $15 per call and $8 per hour Correct Answer: B Rationale: $200,000 ÷ 25,000 = $8; $300,000 ÷ 20,000 = $15. Activity rates are used to apply overhead costs during the ______ stage allocation. A. First B. Direct C. Second D. Initial Correct Answer: C Rationale: The second stage applies costs to products/customers. If the Customer Orders activity rate is $20 per order and a product has 400 orders, assigned overhead equals: A. $4,000 B. $6,000 C. $8,000 D. $10,000 Correct Answer: C Rationale: $20 × 400 = $8,000. The Product Design pool contains $200,000 with 1,600 designs. A customer requiring 7 designs is assigned: A. $750 B. $800 C. $875 D. $950 Correct Answer: C Rationale: $200,000 ÷ 1,600 = $125 per design; $125 × 7 = $875. A product’s profitability is measured by its: A. Sales volume B. Product margin C. Inventory turnover D. Market share Correct Answer: B Rationale: Product margin reflects revenues minus associated costs. A company has activity rates of $300 per order and $500 per design. A customer places 4 orders and requires 10 designs. Assigned overhead equals: A. $5,000 B. $5,700 C. $6,200 D. $7,000 Correct Answer: C Rationale: (4 × $300) + (10 × $500) = $1,200 + $5,000 = $6,200. The most common reports prepared using ABC data are product and customer ______ reports. A. inventory B. profitability C. payroll D. audit Correct Answer: B Rationale: ABC commonly supports profitability analysis. A company has sales of $750,000, product costs of $360,000, and net operating income of $215,000. Unassigned overhead equals: A. $145,000 B. $160,000 C. $175,000 D. $190,000 Correct Answer: C Rationale: $750,000 − $360,000 − $215,000 = $175,000. The profit from a product is called the: A. contribution ratio B. product margin C. gross turnover D. break-even point Correct Answer: B Rationale: Product margin measures product profitability. Customer margin equals individual customer sales minus individual customer: A. discounts B. taxes C. costs D. assets Correct Answer: C Rationale: Customer margin reflects profitability after costs. True or False: Activity-based costing can be used for process improvement. A. True B. False C. Only in manufacturing D. Only in retail Correct Answer: A Rationale: ABC identifies inefficiencies and waste. Benchmarking is based on comparing: A. Employee salaries B. Performance within the same industry C. Taxes across countries D. Inventory levels only Correct Answer: B Rationale: Benchmarking compares best practices and performance. To reconcile ABC product margin to net income, managers should: A. Add inventory costs B. Subtract overhead not assigned to products C. Ignore fixed costs D. Increase revenues Correct Answer: B Rationale: Some overhead is excluded from product costs. Customer sales minus direct materials, labor, and overhead costs equals customer: A. inventory B. turnover C. margin D. liabilities Correct Answer: C Rationale: Customer margin measures customer profitability. If some products are overcosted and others undercosted, the errors will generally: A. Increase profits B. Offset each other in inventory and cost of goods sold C. Eliminate overhead D. Reduce revenues Correct Answer: B Rationale: Total costing errors balance overall.