Chapter 5 - cost accounting test bank
cost accounting (Al-Quds University)
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,Cost Accounting, 14e, Globa Edition (Horngren/Datar/Rajan) F
Chapter 5 Activity-Based Costing and Activity-Based Management
Objective 5.1
1) If products are different, then for costing purposes:
F F F F F F
A) an ABC costing system will yield more accurate cost numbers
F F F F F F F F F
B) a simple costing system should be used
F F F F F F
C) a single indirect-cost rate should be used
F F F F F F
D) none of the above F F F F
Answer: A F
Diff: 1 F
Terms: activity-based costing (ABC)
F F F F
Objective: 1 F
AACSB: Reflective thinking F F
2) Overcosting a particular product may result in: F F F F F F
A) loss of market share
F F F
B) pricing the product too low F F F F
C) operating efficiencies F
D) understating total product costs F F F F
Answer: A F
Diff: 2 F
Terms: product undercosting
F F F
Objective: 1 F
AACSB: Analytical skills F F
3) Undercosting of a product is most likely to result from: F F F F F F F F F
A) misallocating direct labor costs F F F
B) underpricing the product F F
C) overcosting another product F F
D) overstating total product costs F F F F
Answer: C F
Diff: 2 F
Terms: product overcosting
F F F
Objective: 1 F
AACSB: Reflective thinking F F
4) A company produces three products; if one product is overcosted then:
F F F F F F F F F F
A) one product is undercosted
F F F
B) one or two products are undercosted
F F F F F
C) two products are undercosted
F F F
D) no products are undercosted
F F F F
Answer: B F
Diff: 1 F
Terms: product-cost cross-subsidization
F F F
Objective: 1 F
AACSB: Ethical reasoning F F
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,5) Misleading cost numbers are most likely the result of misallocating:
F F F F F F F F F
A) direct material costs F F
B) direct manufacturing labor costs
F F F
C) indirect costs F
D) All of these answers are correct.
F F F F F F
Answer: C F
Diff: 2 F
Terms: activity-based costing (ABC)
F F F F
Objective: 1 F
AACSB: Reflective thinking F F
6) An accelerated need for refined cost systems is due to:
F F F F F F F F F
A) global monopolies F
B) rising prices F
C) intense competition F
D) a shift toward increased direct costs
F F F F F F
Answer: C F
Diff: 2 F
Terms: activity-based costing (ABC)
F F F F
Objective: 1 F
AACSB: Ethical reasoning F F
7) The use of a single indirect-cost rate is more likely to:
F F F F F F F F F F
A) undercost high-volume simple products F F F
B) undercost low-volume complex products F F F
C) undercost lower-priced products F F
D) Both B and C are correct.
F F F F F F
Answer: B F
Diff: 2 F
Terms: product undercosting
F F F
Objective: 1 F
AACSB: Reflective thinking F F
8) Uniformly assigning the costs of resources to cost objects when those resources are actually used in a
F F F F F F F F F F F F F F F F F
nonuniform way is called: F F F
A) overcosting
B) undercosting
C) peanut-butter costing F
D) department costing F F
Answer: C F
Diff: 1 F
Terms: product-cost cross-subsidization
F F F
Objective: 1 F
AACSB: Reflective thinking F F
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F F F F
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, 9) A top-selling product might actually result in losses for the company.
F F F F F F F F F F F
Answer: TRUE F
Diff: 2 F
Terms: product undercostingF F F
Objective: 1 F
AACSB: Analytical skills F F
10) Companies that overcost products will most likely lose market share.
F F F F F F F F F F
Answer: TRUE F
Diff: 2 F
Terms: product overcosting F F F
Objective: 1 F
AACSB: Ethical reasoning F F
11) If companies increase market share in a given product line because their reported costs are less than
F F F F F F F F F F F F F F F F F
their actual costs, they will become more profitable in the long run.
F F F F F F F F F F F
Answer: FALSE F
Explanation: The actual costs will increase because of the additional sales and the other product lines
F F F F F F F F F F F F F F F F
(which are subsidizing the undercosting of the growing product line) will suffer. The net result will be
F F F F F F F F F F F F F F F F F
the company having a lower operating income than it could have had.
F F F F F F F F F F F
Diff: 2 F
Terms: product undercostingF F F
Objective: 1 F
AACSB: Reflective thinking F F
12) As product diversity and indirect costs increase, it is usually best to switch away from an activity
F F F F F F F F F F F F F F F F F
based cost system to a broad averaging system.
F F F F F F F
Answer: FALSE F
Explanation: The potential significant differences in costs relating to the products as well as the
F F F F F F F F F F F F F F F
magnitude of indirect costs make a more refined costing system more appropriate.
F F F F F F F F F F F
Diff: 2 F
Terms: activity-based costing (ABC)
F F F F
Objective: 1 F
AACSB: Reflective thinking F F
13) If a company overcosts one of its products, then it will undercost at least one of its other products.
F F F F F F F F F F F F F F F F F F F
Answer: TRUE F
Diff: 2 F
Terms: product-cost cross-subsidization
F F F
Objective: 1 F
AACSB: Ethical reasoning F F
14) Explain how a top-selling product may actually result in losses for the company.
F F F F F F F F F F F F
Answer: If indirect costs are not properly allocated to the products, a product may appear to cost less
F F F F F F F F F F F F F F F F F F
than it actually does cost to produce. If the selling price is based on these lower costs, the selling price
F F F F F F F F F F F F F F F F F F F F
may actually be lower than the costs needed to produce the product resulting in losses for the company.
F F F F F F F F F F F F F F F F F F
Diff: 1 F
Terms: product-cost cross-subsidization
F F F
Objective: 1 F
AACSB: Reflective thinking F F
3
Copyright © 2012 Pearson Education
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cost accounting (Al-Quds University)
Downloaded by shehab sherif ()
,Cost Accounting, 14e, Globa Edition (Horngren/Datar/Rajan) F
Chapter 5 Activity-Based Costing and Activity-Based Management
Objective 5.1
1) If products are different, then for costing purposes:
F F F F F F
A) an ABC costing system will yield more accurate cost numbers
F F F F F F F F F
B) a simple costing system should be used
F F F F F F
C) a single indirect-cost rate should be used
F F F F F F
D) none of the above F F F F
Answer: A F
Diff: 1 F
Terms: activity-based costing (ABC)
F F F F
Objective: 1 F
AACSB: Reflective thinking F F
2) Overcosting a particular product may result in: F F F F F F
A) loss of market share
F F F
B) pricing the product too low F F F F
C) operating efficiencies F
D) understating total product costs F F F F
Answer: A F
Diff: 2 F
Terms: product undercosting
F F F
Objective: 1 F
AACSB: Analytical skills F F
3) Undercosting of a product is most likely to result from: F F F F F F F F F
A) misallocating direct labor costs F F F
B) underpricing the product F F
C) overcosting another product F F
D) overstating total product costs F F F F
Answer: C F
Diff: 2 F
Terms: product overcosting
F F F
Objective: 1 F
AACSB: Reflective thinking F F
4) A company produces three products; if one product is overcosted then:
F F F F F F F F F F
A) one product is undercosted
F F F
B) one or two products are undercosted
F F F F F
C) two products are undercosted
F F F
D) no products are undercosted
F F F F
Answer: B F
Diff: 1 F
Terms: product-cost cross-subsidization
F F F
Objective: 1 F
AACSB: Ethical reasoning F F
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,5) Misleading cost numbers are most likely the result of misallocating:
F F F F F F F F F
A) direct material costs F F
B) direct manufacturing labor costs
F F F
C) indirect costs F
D) All of these answers are correct.
F F F F F F
Answer: C F
Diff: 2 F
Terms: activity-based costing (ABC)
F F F F
Objective: 1 F
AACSB: Reflective thinking F F
6) An accelerated need for refined cost systems is due to:
F F F F F F F F F
A) global monopolies F
B) rising prices F
C) intense competition F
D) a shift toward increased direct costs
F F F F F F
Answer: C F
Diff: 2 F
Terms: activity-based costing (ABC)
F F F F
Objective: 1 F
AACSB: Ethical reasoning F F
7) The use of a single indirect-cost rate is more likely to:
F F F F F F F F F F
A) undercost high-volume simple products F F F
B) undercost low-volume complex products F F F
C) undercost lower-priced products F F
D) Both B and C are correct.
F F F F F F
Answer: B F
Diff: 2 F
Terms: product undercosting
F F F
Objective: 1 F
AACSB: Reflective thinking F F
8) Uniformly assigning the costs of resources to cost objects when those resources are actually used in a
F F F F F F F F F F F F F F F F F
nonuniform way is called: F F F
A) overcosting
B) undercosting
C) peanut-butter costing F
D) department costing F F
Answer: C F
Diff: 1 F
Terms: product-cost cross-subsidization
F F F
Objective: 1 F
AACSB: Reflective thinking F F
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F F F F
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, 9) A top-selling product might actually result in losses for the company.
F F F F F F F F F F F
Answer: TRUE F
Diff: 2 F
Terms: product undercostingF F F
Objective: 1 F
AACSB: Analytical skills F F
10) Companies that overcost products will most likely lose market share.
F F F F F F F F F F
Answer: TRUE F
Diff: 2 F
Terms: product overcosting F F F
Objective: 1 F
AACSB: Ethical reasoning F F
11) If companies increase market share in a given product line because their reported costs are less than
F F F F F F F F F F F F F F F F F
their actual costs, they will become more profitable in the long run.
F F F F F F F F F F F
Answer: FALSE F
Explanation: The actual costs will increase because of the additional sales and the other product lines
F F F F F F F F F F F F F F F F
(which are subsidizing the undercosting of the growing product line) will suffer. The net result will be
F F F F F F F F F F F F F F F F F
the company having a lower operating income than it could have had.
F F F F F F F F F F F
Diff: 2 F
Terms: product undercostingF F F
Objective: 1 F
AACSB: Reflective thinking F F
12) As product diversity and indirect costs increase, it is usually best to switch away from an activity
F F F F F F F F F F F F F F F F F
based cost system to a broad averaging system.
F F F F F F F
Answer: FALSE F
Explanation: The potential significant differences in costs relating to the products as well as the
F F F F F F F F F F F F F F F
magnitude of indirect costs make a more refined costing system more appropriate.
F F F F F F F F F F F
Diff: 2 F
Terms: activity-based costing (ABC)
F F F F
Objective: 1 F
AACSB: Reflective thinking F F
13) If a company overcosts one of its products, then it will undercost at least one of its other products.
F F F F F F F F F F F F F F F F F F F
Answer: TRUE F
Diff: 2 F
Terms: product-cost cross-subsidization
F F F
Objective: 1 F
AACSB: Ethical reasoning F F
14) Explain how a top-selling product may actually result in losses for the company.
F F F F F F F F F F F F
Answer: If indirect costs are not properly allocated to the products, a product may appear to cost less
F F F F F F F F F F F F F F F F F F
than it actually does cost to produce. If the selling price is based on these lower costs, the selling price
F F F F F F F F F F F F F F F F F F F F
may actually be lower than the costs needed to produce the product resulting in losses for the company.
F F F F F F F F F F F F F F F F F F
Diff: 1 F
Terms: product-cost cross-subsidization
F F F
Objective: 1 F
AACSB: Reflective thinking F F
3
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