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Exam 5: Activity-Based Costing and Management

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Question 71

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Consider the following statements: I.Product diversity creates costing problems because diverse products tend to utilize manufacturing activities in different ways. II.Overhead costs that are not incurred at the unit level create costing problems because such costs do not vary with traditional application bases such as direct labor hours or machine hours. III.Product diversity typically exists when a single product (e.g., a ballpoint pen) is made in different colors. Which of the above statements is (are) true?

A) I only.
B) II only.
C) I and II.
D) I and III.
E) II and III.

F) C) and D)
G) A) and E)

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Question 72

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Rosen, Inc., an appliance manufacturer, is developing a new line of ovens that uses controlled-laser technology.The research and testing costs associated with the new ovens is said to arise from a:

A) unit-level activity.
B) batch-level activity.
C) product-sustaining activity.
D) facility-level activity.
E) competitive-level activity.

F) A) and E)
G) None of the above

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Question 73

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Skyline Florists uses an activity-based costing system to compute the cost of making floral bouquets and delivering the bouquets to its commercial customers. Company personnel who earn $180,000 typically perform both tasks; other firm-wide overhead is expected to total $70,000.These costs are allocated as follows: Skyline anticipates making 20,000 bouquets and 4,000 deliveries in the upcoming year. The cost of wages and salaries and other overhead that would be charged to each bouquet made is:

Edwards Company manufactures low-cost wooden chairs and uses activity-based costing.The following information is for the month of March. Each chair consists of 4 parts and the direct materials cost per chair is $7.00. Based on the information given for Edwards Company, what is the total manufacturing cost per chair?

An example of a customer-value-added activity is final painting and polishing of the product.