Students Name: Section 1 Multiple Choice: 20 Points 1. An example of a unit leve

Question

Students Name: Section 1 Multiple Choice: 20 Points 1. An example of a unit level process in an activity based cost system would be? a. Product design b. Executive office cleaning c. Equipment set-up d. Providing power to run equipment 2. An advantage of activity cost pools is that it? a. Accumulates costs relating to a single activity b. Accumulates costs relating to only multiple activities c. Accumulates costs relating to break even activities d. Accumulates costs relating to margin of safety activities 3. Traditional cost systems tend to over-cost standard stanchions which result in? a. Reporting higher profit margins for a product b. Reporting lower profit margins for a product c. Reporting only the break-even margins for a product d. Reporting only the negative profit margins for a product

Explanation / Answer

1) Unit level activity is an activity performed on each product/service. At this level, the cost drivers will be volume based since the amount of activity is directly proportional to the number of units produced.
Ex: Direct materials. labor, machine maintainence
Product design: Product level activities
Executive office cleaning: Facility level activities
Equipment setup: Batch level activities.

SO, the answer is Option D

2) Cost pool is the accumulation of costs related to a particular activity.
Ex: Machine maintainence: $72000.
So, the answer is Option A

3) When a product is over-costed, it results in inflated(increased) costs and deflated(reduced) profit margins.
So, the answer is Option B

4) Allocted common fixed costs are general fixed costs allocated to a specific product and donot form part of profitability analysis as they are not differential costs.
So, the answer is Option D

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