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Name_______________________________________
Acctg 202
Chapter 5 Examination
Choose the best answer. 

1. A transaction-based costing system:
A) adds the assigned to beginning work-in-process inventory to the current-period production costs.
B) identifies multiple cost drivers and assigns costs of activities to products based on the basis of the number of transactions they general for the various cost drivers. 
C) averages production costs over a large number of product units.
D) assigns costs to partially completed products that are transferred into one production department from a prior department.
E) none of the above.

2. An example of a product-sustaining-level cost is:
A) a machine-related activity cost pool.
B) material handling.
C) packaging and shipping.
D) a computer-aided design (CAD) system used for engineering design.
E) none of the above.

3. A transaction-based costing system:
A) adds the assigned to beginning work-in-process inventory to the current-period production costs.
B) identifies multiple cost drivers and assigns costs of activities to products based on the basis of the number of transactions they general for the various cost drivers. 
C) averages production costs over a large number of product units.
D) assigns costs to partially completed products that are transferred into one production department from a prior department.
E) none of the above.

4. Many traditional-costing systems: 
A) trace manufacturing overhead to individual activities and require the development of numerous activity-costing rates. 
B) write off manufacturing overhead as an expense of the current period. 
C) combine widely varying elements of overhead into a single cost pool. 
D) use a host of different cost drivers (e.g., number of production setups, inspection hours, orders processed) to improve the accuracy of product costing. 
E) produce results far superior to those achieved with activity-based costing. 

5. Consider the following statements regarding product-sustaining activities:
I) They must be done for each batch of product that is made.
II) They must be done for each unit of product that is made.
III) They are needed to support an entire product line.
Which of the above statements is (are) true? 
A) I only. 
B) II only. 
C) III only. 
D) I and II only. 
E) II and III only. 

6. The salaries of a manufacturing plant's management are said to arise from: 
A) unit-level activities. 
B) batch-level activities. 
C) product-sustaining level activities. 
D) facility-level activities. 
E) direct-cost activities. 

7. Activity-based costing systems: 
A) use a single, volume-based cost driver. 
B) assign overhead to products based on the products' relative usage of direct labor. 
C) often reveal under- and overcosted products. 
D) typically use fewer cost drivers than more traditional costing systems. 
E) have a tendency to distort product costs. 

8. Under a traditional-costing system, which of the following costs would likely be classified as indirect with respect to the various products manufactured? 
A) Plant maintenance. 
B) Inspection of finished goods. 
C) Utilities. 
D) Machinery depreciation. 
E) All of the above would be considered indirect costs. 

9. Vanguard combines all manufacturing overhead into a single cost pool and allocates this overhead to products by using machine hours. The company will likely find that: 
A) all of its products are undercosted. 
B) its high-volume products are undercosted. 
C) all of its products are overcosted. 
D) its high-volume products are overcosted. 
E) its low-volume products are overcosted. 

10. Homogeneity is a key issue in the selection of cost pools. In order for a cost pool to be homogeneous: 
A) all costs must be from the same department. 
B) all costs must be incurred to make only a subset of the products. 
C) all costs must be approximately the same dollar amount. 
D) the activity associated with each cost must be consumed in approximately the same proportion by each product line. 
E) all costs must relate to the same type of resource.

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