MULTIPLE-CHOICE QUIZ

Complete each of the following statements by circling the letter of the best answer.

1. The activities that are performed each time a batch is produced are:
a. batch-level activities.
b. facility-level activities.
c. process-level activities.
d. product-level activities.
e. unit-level activities.
2. In a functional-based cost accounting system, which of the following activity drivers is used
to assign fixed overhead costs to products?
a. batch-level activities
b. facility-level activities
c. process-level activities
d. product-level activities
e. unit-level activities
3. In a “pure” ABC system, which of the following would not be assigned to products?
a. batch-level activities
b. facility-level activities
c. process-level activities
d. product-level activities
e. unit-level activities

4. Which of the following would be classified as a product-level activity?

a. plant management
b. production scheduling
c. engineering changes
d. material handling
e. machine hours

5. Which of the following would be classified as a batch-level activity?

a. plant management
b. process engineering
c. engineering changes
d. material handling
e. machine hours

6. Which of the following is a true statement?

a. If nonunit-based overhead costs are a large proportion of overhead costs, the use of
nonunit-based drivers will cause large distortions in product costs.
b. If nonunit-based overhead costs are a small proportion of overhead costs, the use of
nonunit-based drivers will cause large distortions in product costs.
c. Nonunit-based activity drivers are factors that are proportional to the number of
units produced.
d. If products consume the nonunit overhead activities in the same proportion as unit
overhead activities, using a traditional overhead assignment method will cause costs
to be distorted.
e. If products consume the nonunit overhead activities in the same proportion as unit
overhead activities, using a traditional overhead assignment method will not cause
costs to be distorted.

7. Consumption ratios are:

a. the activities performed every time a batch is produced.
b. the proportion of each activity consumed by a product.
c. necessary for unit-level activities but not for batch- or product-level activities.
d. factors that cause costs to change as the level of activities change.
e. none of the above.
 8. An activity-based costing system is one that:
a. traces costs to activities and then to products.
b. traces costs to resources and then to activities.
c. traces activities to costs and then to resources.
d. traces products to activities and then to resources.
e. uses a single plantwide rate for allocating overhead costs to products.

9. A homogeneous cost pool is one that:

a. does not change over time.
b. needs many activity drivers to be allocated to a cost object.
c. has only one type of material assigned to it.
d. can be explained with a single activity driver.
e. can be used only by the dairy industry.

10. Which of the following statements is incorrect regarding ABC and service industries?
a. Since service organizations do not have inventories, product costing (and thus ABC)
will not be necessary.
b. The output is more easily defined for a service organization than for a
manufacturing organization.
c. Activities in a service organization tend to be more standardized than activities in a
manufacturing organization.
d. Since the output of a service organization is consumed when produced, there will be
no batch-level activities.
e. None of the above statements are correct.

11. “Inspection of the first unit produced” is what type of activity?

a. batch-level
b. facility-level
c. process-level
d. product-level
e. unit-level

12. “Extruding plastic parts” is what type of activity?

a. batch-level
b. facility-level
c. process-level
d. product-level
e. unit-level