1.

Value-added activities
A. should be reduced or eliminated.
B. involve resource usage that customers are willing to pay for.
C. add cost to a product without affecting the selling price.
D. cannot be differentiated from nonvalue-added activities.

2. All of the following are examples of non-value-added activities except

A. ordering C. receiving
B. assembling D. inspections

3. Delivery performance declines by:

A. increasing cycle time C. increasing velocity
B. decreasing cycle time D. decreasing turnover

4. Which of the following is a value-added activity?

A. Engineering design. C. Inventory storage.
B. Machinery repair. D. Inspections.

5. Which of the following is a nonvalue-added activity?

A. Engineering design. C. Inspection.
B. Machining. D. Packaging.

6. These are often referred to as activities which have direct cause-and-effect

relationship with the cost.
a. Cost center c. Cost driver
b. Activity center d. Cost monitoring

7. This refers to the underlying set of assumptions about entity and the goals,
processes, practices and values that its members shares.
a. Organizational Structure c. Organizational Form
b. Organizational Culture d. Organizational Mission

8. This is traditionally defined as relative proportion of fixed and variable

cost.
a. Cost constraint c. Cost structure
b. Cost mix d. Cost ratio
9. The firms high growth oriented subunits uses more cash than they generate.
These subunits have longer investment horizon. What type of generic
mission/life cycle stage has been demonstrated?
a. Build c. Harvest
b. Hold d. Cultivate

10. Cost management system’s short term objectives is primarily focused on:
a. Achieving profitability c. growth
b. Survival d. market share

11. Which system focuses on the management of activities with the objective of
improving the value received by the customer and the profit received by
providing this value?
A. activity-based management C. contemporary cost control
B. traditional cost management system D. standard cost system
12. An objective of activity-based management is to
A. eliminate the majority of centralized activities in an organization.
B. reduce or eliminate non-value-added activities incurred to make a product
or provide a service.
C. institute responsibility accounting systems in decentralized
organizations.
D. all of the above

13.Primary concepts under activity-based management include all of the following

except:
A. activity analysis C. activity-based costing
B. total quality management D. cost driver analysis

14. Which of the following is not a benefit of activity-based costing?

A. More accurate product costing.
B. Enhanced control over overhead costs.
C. Less costly to use.
D. Better management decisions.

15. The primary benefit of using ABC is that it provides

A. better management decisions.
B. enhanced control over overhead costs.
C. more cost pools.
D. more accurate product costing.

16. The following activity is value-added:

A. Storage of raw materials C. Moving parts from machine to machine
B. Turning a piece of metal on a lathe D. All of these

Page Company’s cost allocation and product costing procedures follow activity-
based costing principles. The following activities have been identified
and classified as being either value-adding or non-value adding as to each
product.
1. Raw materials storage activity 2 days
2. Design engineering activity 2.5 days
3. Drill press activity 3 days
4. Heat treatment activity 1.5 days
5. Quality control inspection activity 3 days
6. Issuance of purchase order activity 3.5 days
17. How are the foregoing activities classified?
Value-adding Non-value adding
A. 1, 2, 5, 6 3, 4
B. 1, 2, 4 3, 5, 6
C. 2, 4, 5 1, 3, 6
D. 2, 3, 4 1, 5, 6

18. What is the manufacturing cycle efficiency?

A. 45.16%
B. 52.18%
C. 33%
D. 75.63%
19. Sylvia Company has identified an activity cost pool to which it has allocated
estimated overhead of P1,920,000 and determined the expected use of cost
drivers per that activity to by 160,000 inspections. Widgets require 40,000
inspections, Gadgets 30,000 inspections, and Targets, 90,000 inspections.
The overhead assigned to each product is
A. Widgets P40,000, Gadgets P30,000, Targets P90,000
B. Widgets P480,000, Gadgets P360,000, Targets P1,080,000
C. Widgets P360,000, Gadgets P480,000, Targets P1,080,000
D. Widgets P480,000, Gadgets P360,000, Targets P1,080,000

Ray Manufacturing has four categories of overhead. The four categories and
expected overhead costs for each category for next year are listed as
follows:
Maintenance P510,000
Material handling 250,000
Setups 60,000
Inspection 210,000
Currently, overhead is applied using a predetermined overhead rate based
upon budgeted direct labor hours. 100,000 direct labor hours are budgeted
for next year.
The company has been asked to submit a bid for a proposed job. The plant
manager feels that obtaining this job would result in a new business in
future years. Usually bids are based upon full manufacturing costs plus
10 percent.
Estimates for the proposed job are as follows:
Direct materials P30,000
Direct labor (8,000 hours) P24,000
Number of material moves 100
Number of inspections 120
Number of setups 24
Number of machine hours 4,000
The plant manager has heard of a new way of applying overhead that uses
cost pools and activity drivers. Expected activity for the four activity
drivers that would be used are:
Machine hours 60,000
Material moves 20,000
Setups 3,000
Quality inspections 12,000

20. What is the total cost of the proposed job if Ray Manufacturing uses
direct labor hours as its only activity driver?
A. P144,000 C. P112,400
B. P136,400 D. P106,400
Gilmore Company produces two products in a single factory. The following
production and cost information has been determined:
Model 1 Model 2
Units produced 1,000 200
Material moves (total) 100 40
Testing time (total) 250 125
Direct labor hours per unit 1 5
The controller has determined total overhead to be P480,000. P140,000 relates
to material moves; P150,000 relates to testing; the remainder is related to
labor time.

21. If Gilmore uses direct labor hours to allocate overhead to each model,
what would overhead per unit be for Model 2?
A. P 158.33 C. P 950.00
B. P 400.00 D. P1,200.00

22. If Gilmore uses activity-based costing to allocate overhead to each model,

what would overhead per unit be for Model 2?
A. P158.33 C. P925.00
B. P415.93 D. P815.00

Toylandia Company manufactures two products, X-MAN and Machman. Toylandia's

overhead costs consist of setting up machines, P400,000; machining, P900,000;
and inspecting, P300,000.
Information on the two products is:
X-MAN Machman
Direct labor hours 15,000 25,000
Machine setups 600 400
Machine hours 24,000 26,000
Inspections 800 700

23. Overhead applied to X-MAN using traditional costing is

A. P600,000. C. P832,000.
B. P768,000. D. P960,000.

24. Overhead applied to Machman using activity-based costing is

A. P 640,000. C. P 832,000.
B. P 768,000. D. P1,000,000.