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Management Accounting

Willie Seal, University of Essex, UK
Ray Garrison, Brigham Young University, Provo, Utah, USA
Eric Noreen, INSEAD, France

Activity-Based Costing

Self-test Questions


1	Which of the following is not a feature of an ABC system (Learning Objective 1 Ch 8)
		A)	Overhead rates may be based on capacity level rather than budgeted
		B)	Allocation bases are often different
		C)	The same bases are used as in traditional costing systems
		D)	Non-manufacturing costs are often allocated to products


2	One of the following is not a unit-level activity (Learning Objective 2 Ch 8)
		A)	Assembling products
		B)	Providing power to run processing equipment
		C)	Designing made to measure suits
		D)	Advertising a product


3	One of the following is not a batch level activity (Learning Objective 2 Ch 8)
		A)	Setting up equipment
		B)	Ordering an item that is used on all products
		C)	Placing purchase orders
		D)	Arranging for delivery to customers


4	One of following is not a product level activity (Learning Objective 2 Ch 8)
		A)	Maintaining a product manager and staff
		B)	Designing a product
		C)	Dealing with a customer who orders various products
		D)	Advertising a product


5	One of the following is not a Customer level activity (Learning Objective 2 Ch 8)
		A)	Dealing with a customer who orders various products
		B)	Sales calls
		C)	Technical support
		D)	Managing the stores in a factory


6	One of the following is not an organisation-sustaining activity (Learning Objective 2 Ch 8)
		A)	Preparing annual reports
		B)	Designing a product
		C)	Maintaining the computers
		D)	Cleaning the factories


7	One of the following could be used as a basis for allocating sales order processing to customers (Learning Objective 3-5 Ch 8)
		A)	Number of sales invoices
		B)	Value of sales invoices
		C)	Wages of sales staff
		D)	Cost of each product sold


8	One of the following was the best solution to a customer who ordered small value products in small quantities each time. The total value of all the orders though, was substantial (Learning Objective 3-5 Ch 8)
		A)	Reduce the material cost of each product
		B)	Get rid of the customer
		C)	Use a computer to electronically order and therefore cut administration costs
		D)	Increase the sales commission


9	One of the following is not a reason for differences between ABC costs and traditional costs. (Learning Objective 6 Ch 8)
		A)	There has been a huge increase in non-manufacturing costs
		B)	There has been a movement towards fixed costs and away from variable costs
		C)	These has been a increase in the amount of direct labour used
		D)	There has been an increase in more modern manufacturing methods


10	One of the following is not a reason for adopting ABC costing rather than traditional costing methods (Learning Objective 7 Ch 8)
		A)	An ABC analysis can identify who is responsible for each cost
		B)	An ABC system is almost certainly more accurate
		C)	An ABC analysis can identify the ease with which a cost can be adjusted
		D)	An ABC system is cheaper to run


11	One of the following is not an advantage of ABC costing methods (Learning Objective 7 Ch 8)
		A)	Products are given costs that they don’t cause such as the cost of idle capacity
		B)	A high cost for an activity may lead to an improvement in how it is performed
		C)	ABC doesn’t place too much reliance on unit based allocation
		D)	Traditional costing systems overcost high volume products.

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