na^h* 7 tnllerra) ,'(,nt,.

7^u t"l*t /+)

"
t'..
L
ReSA *?4e Ret*m ScAe( at /fun4'tt4aiqtfuararyrr*rrt Senaarz

MS-08;
ACTIVITY-BASED
COSTING
& BALA}*EDSCOREGARD
ACTIVITY-BASED co5TING(A B c)-isa s y s t e ma t ic c o s t in o me t h 3 . d ^ t h a t t wa |
factory d costs and other indirect costs to products.ABC can-providemore accurateilata-6r rtn I
usinq.multiplF cost dri vers reflect more accuratelythe causesof incurred costs. utel
oi PIr
costs are allocatedto products by using a single
activity or Cost driver - uSuallylabpr houl In some accountingliterature, triditional costing is also
calledpeanut- butter costffi-
.Under ABC, factory overheadcosts are altocdtedto productsusing severalactivitiesor cost drivers
that arb etosely'relbtedwith the incurrenceof specificfactory overhead costs.
STEPSIN IMPLEMENTING ACTIVITY-BASED COSTING
1. Identify cost drivers (activities),cost poolsand activity centers.
. A cost driver is the particular activity thatgg1t5ggJbej^qgg[gnte of certain cc.t".
. A cosf pool il.g-glggpji.Cggl5 usually increasedor decreasedby a similar cost driver.
. An activity center is a unit of organization that performs a set of tasks. It is part of the
production process for which management wants a s€parate reporting of the costs of the
activity involved, Level of activity centers can be classlfiedinto four general categories:
A Unit-level activities performed each time a unlt is produced.
g Barch-levelactivities performed each time a batch of goods is handled or processed.
q Product-level activities performed to support production (sates) of.lpecific produJqttype.
m Facility-levelactivities performed to sustain a facility's manufacturingprocess'
2. Calculatepredetermip,e!ovgrjrqadrates for each identified activity. (
Predeterminedoverhead rate = estimated overhebd costs + estimated activity levet
NOTE:Estimatedfiguresare used becauseactualfiguresare not yet known at the staft of the period.
3. Alloceteoverheadcoststo the productson the basisof predeterminedoverheadrates.
f ln ,o-*ary. ABC is a'two-stage'allocation proGto. First, overhead costs are traced to adjvities; thca,

ACTMYY-3A3GD t{ANAGllfGt{T (AB}f) - integrates ABC with other concepts such as Totat Qudity
Managernent(TQM) and target costing to produce a management"sy;tem-th?fi'strives for excellence
through cost reducliQnand continuous process improvement. An impol'.tantEooLof ABM is to reduce or
' eliminate non-value.addedactivities and costs:
?l*p9A.VALUE-ADD€Dactivities are necessary activities that incur costs but''increase the perceived
value of a particular product to the customer.txample:#ElHjlgllslglt modiflcatio.n
.
NoN-VALUE-ADDEDactiVitiesareoperationsthatareeithe7(t)@or--"
(2) neqessary,bqt inqfficientand improvable.Example:rework of defectiveunitr 'Ud1fEAJuIAI/
-
BALANCTD SCORTCARD- is an approach to gerformq?cF-m.casu[ementthat combines traditional financiat
measures vntfi non-finatrcid pevformance meEffi.-EltreEfiZlfianbgement rs a performance evaluation
technique
thatis basedsolelyontraditional
financiat.?113i
pJBSeggIIyEs + 6h f*4 lAl**urhl
' Foug of rHEMLANCED scoREcARD (cLlF)
' 1) FINANCtrAL p€rcp€cti\re - fircasuresreflectingfinanciafperformance. j.'. '
. :. ' !'lis, " fxainnles:profit, returnon investment(RoI),reveriuegrowth
2)"CtJSTOtvlER perspective - measures havinga directimpacton customers, , ''l:.
Exarnples:custornersatisfaction,customerretention,marketshare,customercompluints
& GROwtH persBective- measuresdescrlbingthe company ernpfoyeerslearning'curve.
3) LEARNI|TIG
' Exampbs: employeesatisfaction,employeeturnover,training and recredtion
4) INTERNALBUSINESSPROCES9ES perspective- measuresshowingkey businessprocessesperformance.
Examples: rnanufacturingfficle efficielcy, product quality, productivity measures,throughput
COMPONENTS OFBALANCED SCORECARD
uftAr- STRATFGIC 'OBJECTIVES l:- u statement of what the strategy must achieve and what is criticat to its
.\ success.
uo^r - STRATEGIC INITIATTyES- key action programs required to achieve strategic objectives.
. Lr, l. lEtlORMAllCE MEASQRES - describehow successin achievingthe strategy will be me?sured.
thd it* [L/ BASELINE PERFORMANCE - the current level of performancefor the performancemcesure.
TARGETS - the level of performanceor rate of improvementneededin the perforrnani6-qg$ggg.
nW
{v -- f'
f Stntegic obJectivesfocus on WHATis to be achieved. Strategicinitiativesfocus on HOW it will be achieved.
Performancemeasures, basetineperformanceand targets relite to how it will be MEASURED.
ReSA -76e Reu,iewS€/riol al /4eas'4la,t#l MS.(}8
ACTIVITY.BASEDCOSTING& BALANCEDSCORECARD t

EJEBEISES:ACf,IVII:gASEDeQSll$l-E.g-SAl=AlgC-F-D*5-C-8BEC-,ABD
i. Activity Lcvels

. dctivityis unit-level(UL),batch-level(BL), product-level

(PL),facility-level
(FL):
A) Equipmentsetupsfi,
,t B) PlantsupervisionSl,
C) Primecostsht
D) PackinsanotEipprns tL$01
-.
Ei Heatini, lishtine'anjsllurity fl,
* fl Designing,changingand advertisingff
G) Productorder processingSL

2. Traditional Costing vs. ABC

Vios,Companylncurs P 800,000 in manufacturingoverheadcosts. The company has been aflocating
overheadto individualproduct lines basedon direct labor hours
Lhc

A) Traditional costing (based on direct lelbor hours) , 4A@ ,oe9

B) Activity-basedcosting(ABC) {l9s fit D
(Adapted: Managerial Accounting by Louderback, et.at.)
3. lppme*ianoForerfrcrrt€o6ts
A)..City Company uses a predetermined overhead rate baed on'direct-labqtlE4{r_sto applrrnanufaeturing
;'overheadto jobs. Estimatedand actual data for direct labor:and manufacturingoverheadlast year are
as follows:

6(ctuo * ti
,,.' Directlabor h.ours 600,000 hrs.- 550,00Ohrs.> Gtt OAIO s.Wnoid
fi.ilI- I'qFrr " e 'l.h.l
What was the manufacturingoVerheadfor Vios Companyfor last year? i .
a. Over-appliedby F 40,000 c. Over-appliedby P 20,000 an
b. Under-appliedby P 40,000 ,X Under-appliedby P 20,0O0 tpt;d w
B) Lancer Company us€s activity-based costing to compute product costs foi external reports. The
company has three activity centers,and applies overhead uslng'predeterminedoverheadjar${or eegh
.activity center. Estimated costs and activities for the current year are presented below for the three
actrvrty
- centers:
Estimaled Ov_erhead CpSt EstimatedActivity
Activity 1 P 6L,387 2,300
Activity 2 P 34,076 2,800
Activity 3 P 69,075 2,50O

Actual costs add activiti€s for the current year were as follows:
Astlra!_Ojqglheallgqsj Aqt_ualActiv_ity
Activty 1 P 61,392 2,290
Activity 2 P 33,941 2,795
Activity 3 P 69,080 1,340
r i' : ' i. i- , l ' ::.
1 :. ',i .'

What was the amoiJntof overheadappliedfor Activity 2 during the year?

!\l :
y''e 74.15 over-applied c. P 135.00over-applied
' b. P 74.t5 under-applied d. P 135,00under-applied .' ,i,tirf

C) The most commontreatment of under.appliedand over-appliedoverheadcosts is to closeit out to

, ',a. Work irr process g Cost of goodssold . i,
...,
b. Retained earnings d. Fi ni shed goods

P age2of4pages
@)
'iJ---/
 Duringthe most

Inspectiontime 1 day
Processtime 2 days
Movetime 3 days
Queuetime 4 days
Wait time 5 days
. REQUIRED:
ftttt+,t+)1. How long in days is the manufacturingcycletime or throuqhputtime? l,C Afi|f
---'
illo 2. What is the manufacturingcycleefficilncy ratio? 7o/ J ,.=..7
tlto 3' what percentageof the productiontime ii spgnt on non-vatue-added activities?V"'/, )''"'
lt 4. How long in days is the deliverycycle time?\5I

: (Adapted: Managerial Accounting by Garrison, et.at.)

qEuvESYCYCLE
Receiptof Order Start of Production Shipment of Goods
a
5
Wait Time
Z I 7
ProcessTime + InspecdiveTime Move Time + Qu#uriru

ManufacturingCycleTime (ThroughputTime)
5. Quality Costq
A) What are the four categoriesof quality costs?
lo
k tau'1t\' d1P^r'"tf
a. Internal failure,externalfailure,carryingand orderingcosts
jrrrp* 6hrr
,fu Prevention,appraisal,internalfailure,and externalfailure costs
c. Productliability,warranty,appraisal,and training costs
- :ld'-s
f,ttt alat Ckk" r'^(
d. Training,testinE,failure,and conformancecosts
-1an;cgY.,.n ' t^k4la,'d.(r*r
B) Conformance cos.!s,rJlfff.f;dJ9.*gL..l"-.tive productsfrom fattinginto the handsof customers,are
-compospd
-;:::::i-;---E;
mposFoor of Fht
rvY* fr .tu6b:
----''-'.-,-a4"'6f,oAi4i"
,-*1'" rq
.f a;- Preveftion
" - 'b. -Frevqlt!9n and
?nd apBraisaf
appraisal costs
coSts c. Appraisatand internal failure costs
Pr€ventionand interndffailure costs d. Internal and externalf"lri" .ort.
C) Non-conforn-lancecosts, incurred because defects are produced despite efforts to avoid them, are
composedof
a. Preventisnand appraisalcosts c. Appraisaland internal failure costs
. b' Preventionand internal failure costs F krternal and external hilure costs
t' br/*'' d4;"'
6. productMty lrlcecurcs
. - Mirage company manufactures a singrletype of bracelet being sold for p 25 per unit. The foilb/urlrg
'informationwas made available:
201.2
Unit sales(P.25 per unit) 60,000
Z*A13
64,000
%a^
Material usaqe 75,000 pounds 89,600 poundsq
f uatertal.o"i P 7.2A per pound P 6.80 per pouhd
Laborhours 10,000hours 10,847 hourb
fLabor cost P 30 per hour P 32 per hour
A) The opprational partiat produciivity of DIRECTMATERIAL for (1) 2012 and (2) 2OI3 are
G) 0.800 (2) 0.7t4 ('.ol7t' c. (1) 6.000 (2) 5.900
F
' b. (1) 0.111(2) 0.105 d, (1) 0.200 (2) 0.184
B) The operationalpartial productivityof DIRECTtiBOR for (1) 2012 and (2) 2 0 1 3a re
a. (1) 0.800 Q) a.714 (1) 6.000 (2) s.e00 b"rt"
J.I
b. (1) 0.111 (2) 0.10s d. (1) 0.200 (2) 0.184 i
r+7
c) The financialpartiaf productivityof DIRECTMATERIALfor (1) 2Ot2 and(2) 2013 are
a., (1) 0.800 (2) 0.7L4 c. (1) 6.000 (2) s.900 - t,o/
\r
( 1 )0 . 1 1 1(2 )0 .1 0 s' -
,E d. ( r i 0.200izj o.r e+ /+r xt.t
D ) The financialpartialproductivityof DIRECTl-ABoRfor (1) 2or2 and (2) 2013 are
a. (1) 0.800 (2) o.7I4 c. (i) 6.000 (2) s.900 e"a/
b. (1) 0.111 (2) 0.10s tt10.200 izl o.req /qslr)D
/
E) Thetotalproductivity for 2012as measured
in both (1) unitsand (2) salespesosare(f)
o - .07 (2)
t42s p 1,78s7 c (2 ) p o . L t 2 7
(r) 0 . 0 0 4 s 1 0
'/ b. (\1
1 ) 0.06 6e19 (2) p 1.6730 9 )p L.7sB7
d . (t ) o . 0 7 L 2 4 (2

,tit,.t ( ur,'htfn 4.a,'4^l)

Page 3 of4 pages
.@.,,
t pnt (fi't*v,,U )
 ReSA - 74e kuitrp S/4oal a{ 4ccnurtta"rccy MS-09
ACTIVIW-BASEDCOSTING& BALANCED
SCORECARD

7. lilarketingl Eff€ctiveness
AccentCompanyitplanmng,to sell 1,600 units at P 25 contributionmargin per unit (estimatedmarket
size for the year was 32,000 'units). At the end of the period, the cgrnpianysold 3.000 units at P 35
contributionmargin per unit (actualtotal market size was determinedto be 100,000units).

REQUIRED:Computethe following: Ar r\:) - $aB)ft'l U) = Bsrlul'

IrratrtJiu (froon
1. Salesvolume variance ?iCN"1r{ A ( :.-i,,
y2. Marketsizevariance
*Cr.[ L3, Marketshare varianee.gtq@F {.c !-r' na'htrttt't.( 9t,.- 5/'XtO6nrV)' /s'*)
Eb6g)tl

$ltv\P_:UgTXEBEI-S.E_S(1&U_E_OBI:A!SE_ilvlu!IPl=E_c.t!8I-QE_)
1. Sedan Company producbs two products in a single factory, The following production and cost
information has been deterrnined'
*_**rf _1*{6Hgdc1_G4
Production 10,000 2,000
Materiafmoves (total) 100 tcln 40 . l*o
Producttests (tota|)
Direct labor hoursh";@ gq lml
5
Thecontroller ,o,u,oufilul a o* p {38boo, p t40,oo0of whichretatesto material
hasdetermined
moves, P 150,000 relates to testing and the remainder is related to labor time. Under activity-based
costing{ABC),what would.theoverheadcost per unit be for ModelF1? I

a. P 40.00 c.. P 24.00 .,,l.ri,r i.t(

,f P 29.s0 d. P 12.00 . ":
2. Activity-based costing (ABC) can be gppl,iedto manufacturing overheads only; it-fs not dpplicabte to
sellingand administrativeoverheads.(f) ? (,.
{ 3. A major objective of activity-basedmanagement (ABM) is to reduce or eliminate value'acibedactivities.
' -f 4. Move time and storage time are examples of non-value-addedactivities that cah*6'eeliminated without
deterioration of product quality, pefformanceor perceivedvalue to the customers.
5. What is the most important purpo5eof a balancedscorecard?
a. Developstrategy c. Developcause-and-effect linkages
y. Measureperformance d. Set priorities
6. Which-efttr€ f0tlot ling is not one of the four perspectivs of the batanced scorecard?
F Investment in resourcesperspective c. Cu*omer perspective
A 'b. Learningand growth percpective d. Financialperspective
\ 7. Which question corres@nds to a balanced scorecard measure based on 'internal business processes'
perspective?
a .)ow do customerssee us? - r1..qfdr6*.
6. How do we look to the firm's ownslrs-?{irvu, .'1
' In which activitiesmust we excel? ..:
r'
/a. How,can we continuallyimprove and createvalue? lir.,.-'.J'J.l'aryr
L Processtime + inspectiontime + move time + queuetime (during $ro{uction process)=
a. Wait time ,( Throughput time !u*t'4<riv -ta* i
b. Detiverycycletime "r''d. Leadtime I r' /
9. What is thd correct formula for manufacturingcycle effhiency (MCE)ratio?
a. Non value-addedtime + Throughputtime \
Value-addedtime + Throughputtime
"(
c. Value-addedtirne + Delivery cycle time
. *flh d. Throughputtime + Deliverycycletime
fr\wt 10. It considers direct materials as the only variable cost of production process, and treats all the other
I , costs-ofproductionas relativelyfixed expenses.
t' lnroughput accounting c. Processvalue analysis
-r 'b. Backflush costing d. No such thing
.\,(f,F
-.
\W" 11. Throughputcontributionis equal to
r'
Sates* material costs . c. Sales - convirsion costs
t,6-
:.- b. Sales- materialand labor costs d. Sal€s- materialand conversioncosts
- " ' 12. A quality cost incurredto detect individualunits that do not conformto specifications is an exampleof
a. Preventioncost c.' Internal failure cost
/ eppraisalcost /ln*p,r(,r, ' d. Externalfailure cost
7 tZ. E{ternal failure costs re$ult from identificationof defects during the appraisal process. Such costs
T includescrap,rejectedproducts,rework and downtime.
i f +. It is generallybetter to incur internaffailure coststhan to incur externalfailure costs.
15. Whichamongthe followingscenariosis considered as counter-productive?
a. Same outputs, fewer inputs c. Moreoutputs,fewer inputs
b. More outputt same inputs
f Fgwerout'puts,same inputS

Page4of4pages
 ReSA Review School, Inc. - \n
z 735g8O7 I 09104391320
17343g8g l.Og23gt24t2U0916,+3838e+g.icdbner@hotmait.om
MANAGEMENT SERVICES A. Lee
auizzer: Ivt908
ACTIVITY.BASED
COSTIT{G& BAI.AIIGED
SCORECARD
Sources:CMA/ClA/RPCPA/AlCPAlvarbus
test banks

1. An objectiveof activity-basedmanagernentis to
C a. Eliminat€the maiorttyof cenhalizedactivitiosin an organizatbn
b. Instituteresponsibifityaccountingsystemsin decentralizedoqanizations
c. Reduoe or eliminate non-valusadded activitics incuned to make a prodrrc{or provide a
servrt;e
d. Allof the above

2. A tool that focuses on rnanuf;acturingprocesgee and sscks to reduce or optimize the acfiviti.ls
perfonned within the prccers b
A a. . Processvalueanalysis c. Bencimating
b. b,ongingerir€ d. lt{oneof Eteaborre

. 3. A non-value.adding
cost is
D a. Usnlly direct to a product c. Uncvdd.ble
b. The same as a dbcretitrnarycoet d. Nst ecrantbl to manufacfuringa product
4. A value-addedempbyee in a consffuctionftrm would bc:
C a. An acounbnt c. A painter
h A secretary d. All dthe &vc
5. W*te'is anofrrernarnebr
A a. Non-valusaddedosts c. Tr€h costs
b. ldb costl d. AHof$Gabore
6. Non-vdue addcd coots include:
D a. Itfiovetime c. tnspec{kmtime
b. Sragu time (l ff| dfio above
7. 'Machinehours' is an cxampF of a (n) acilhily.
D a. Belch-level c. Prodrct{qrd
. b. Facrry-brel d. Unit-buel
S. lracfi*rcrff,p is anexrmpbof a (n1 aothrity.
A a. Bduleud c. Produc{-bvel
b. F-tity-bvll d. Unit-lwel
9. TV Adrgecment b an cxsnple d a (n) activity.
C a. Batcfrleryd ' c. FrorhrciJcrcl
b. Facility-led d. Urdt-b\rd
10. LaffBapir€ is an oxsrplc d a (n) _ totivity.
B a. B#r-bvd c. Prochrct-level
b. Fadlity-|ewl d. Unit-fcvel

11. Whidt of frte frlouttg level of cocte_shqrHnot bc irphrdcd in prodrct costs (mainlybecauseindirectto
productlinGta!fifcttt) br inbntal minagenrent reporb tffat are usedfiordecisionmitingZ
D a. Unit-lendacfifiigs 6. Produc{-lerrclactivifics
b. Batcfi-levclaE{ivities d. FaciFg-bvel activities
12. These activities arise because a companydoes fticuler typ€s of businessor maintainsa particular
product.
C a. Batch-tevelactivities c. Sustainingactivitbs
b. Faeility-sustaining activities d. Unit-levetaclivities

13. Propertytaes and insuranceis an exampleof a cost that wouldbe consideredto be

D a. Unit-level , c. Product-level
b. Batch-level d. Organization-sustaining

Page1 of8 pages

ReSA -?ie Rea*mSclout at 4cr&k4ta,t44 r MSQ-08
ACTIVITY-BASED
COSTING
& BALANCED
SCORECARD
14- Whichof thefollowingis typicallyregardedas a costdriverin traditional
costingpractices?
D a. Numberof purchaseorderprocessed c Numberof transactions processed
b Numberof customersserved d. Numberof OlrecfraOo,hourcworked
15. Activity-basecl
costing(ABC)
A a. Requiresthe identification
of costdrivers
b. ls usedonlyin just-in-time
(JtT)operations
c. Appliedonlyto discretionaryfixedcosts
d. Doesnotn6tpto identifyaciivitiesas value-adding
or non-value-adding
16 A companyusingactivity-based costing
A a. Triesto identifycost drivers
. b. Allocates allcoststo individuatproducts
c Looksfor the activitywithwhichtotalcostsare mostcloselyassociated
d. ls probablyuSingtheJIT phitosophy

17. Theterm'costdriver'refersto
D a Any ac-tivitythatcan be usedto predictcostchanges
b. The attemptto controrexpenditures at a reasonabre
revel
The personwho gathersand transferscostdatiato the management
accountant
I
d. Any activitythat causescoststo be irrcurred

18. A costpoolis
D a. All costsof a production
department
b. The materiatand laborcost usedon a particulariob
c. Over-applied overheadcosts '
or under-applied
d. ,Agroupof overheadcostsdrivenby the semeactivity

_ 19. ln ABC,preliminary.cost
allocationsassigncoststo
D a. Departments s. products
b, pr@6ses d. Activitres'
20. ln AEC,finafcost albcationsassigncoststo
C a Departments 6. products
b. Frocesses d. Activities
21. Lebanonmanufactufes $yoversionsof a product Productionandcostinformation showthe following:
ModelA Mod€lB a
Unitsproduced 100 200
Materialmoves 10 40
Directlatrorhoursper unit 1 z
_ UnderA8€, the m*rids handtingcostsof P 100,000allocatedto a unit of MoctetA is:
B a. PtO c. p333
[. P20 0 d. P400
22. lran prduces threeproducts.Productionand cost informationshowthe foltowing.
|lanufacturing ModetF Model.A ModetQ
Unib produced 1,000 3,000 6^000
Directlaborhours ?,000 1,000 Z,OOO
Numberof inspections 2A 30 S0
UsingAFC,,theinspe0tion costsof P 50,000allocatedto eachunitof ModelF woutdbe
-
B a. P S.00 c. p 20.00
b P 10.00 d. Someothernumber
23. A companyusingactivity-based overheadrates
D "Will
a. usually'have
higherbudgetvariancesthanone usrnga singterate
b. Will usuallyhavehighervotumevariancesthanone usinga slrlglerate
c. cannotcomputefixedand variablecomponents of overh-ead
colt
d' Shdutdhavqbetterinfornationfor planninganocontroitn"non" a iingtti;rate
"ring
24' The resourceutilizedby a givenproductdividedby the totalamountof the resourceavailable
is calted
.F. ,. 3: Aclivitydriver c. Costobject
' ' b. Consumption ratio d Sustaining activity
 ReSA - 74e Reaea' Sl4nat ( Accaaataac? : , *. MSQ-08
ACTIVITY-BASED
COSTING& BALANCED
SCORECARD

Inc'produces
svria isasforrows:
""it#llu"tion
T:';.:':t"q#
Directlaborhours 4,000 2,000 4,000
Numberof setups 100 1S0 ZS0
' Theconsumption
ratiofor the numbeiof setupswouldbe:
YouYou
B ?: 4A%-20% - 4AYo. c. 10o/o
- i}o/o -6}0/o
b z0% _?0%- soo/o d. some othernumbers

26. liaq Companyuses activi$-basedcostingto determineunit productcosts br extemalreports. The

companyhas two products-Aand B. The annualproduction and salesof ProductAjaJ0p00 unitsand
cjf ProductB is {;L0!,units, There are three overheadactivitycenters,with estimatedoverheadcosts
andexpectedactivityas follows:
ActiVityCqnteir., EstimatedOverheadCosts ProductA activity Pro<hrctB activ.jlv
ActivityI P 25,000 150 100
. Activity2 P 65,000 800 200
Activity3 P 90,000 1,000 2,000
The overheadcost per unit of ProductA underactivity-based costingis closestto:
B a . P 6.00 c. P 1.50
b. P 9.70 dl'r? d. P 3.00

27. NorthKoreaCompanyproducesthreeproductswith the folfowingproductionand costjnformation:

MddA ModetB ModetC

3l]ll:,1:"'1?T$"
Numberofsetups
i:333
100
!:333
150
li.'tr
250
b@
600 tc@
Numberof shipments 200 225 2TS ?Oo @

overhead p
zo1,3oo,lnsinJiDn n "Kr' e0,000
"or,r,5llf"T:i"*r:FH:r3'f'-fiippins::r"
Whatwould "no
be the per unit overheadcostfor Mdef C if activity-hsed costingwere used?
A a. P 5.00 c. P 122.64
b. P 16.25 d- . Sormothcr number

Items28 and 29 are basedon thq fo[owinqinfiormation

Zaire Companyis preparingits annualprofitplan.As part of its anatysrsof the profitabilityof individual
products,the controllerestimatesthe amountof overheadthat shouldbe allocatedto the individualproduct
finesfrom,thc inforqa9gngivenas fiollows: -,.: .
Wall Minors SpecialtvWindows
25 25.
$:'8tr'T:[: perproducnine s 1s
Directlaborhouisper unit 2OO 200
Budgetedmatreriabhandlingcosts P 50,000

28. Undera costingsystemthat atlocatesoverheadon the basis of direct labor hours,the materials
hand.ling
costsallocatedto one unitof wall mirors uould be
. B a. P 5OO c. P 2,000
b. P1,000 , d. p5,o00

' 29. UnderABC,the materialshandlingcostsalfocatedto one unitof wall mrrrorswouldbe

A al P 500 c. P 1,500
b. P 1,000 d. P 2,500.

30. The principalreasonfor usingmorethanone rateto applyoverheadis

B a. To keepindividualrateslow
b. Thatoverheadcostsare drivenby morethanone activity
c. Thatsuchratesrecognizethe seasonalnatureof sometosts
d. To simplifyrecordkeeping

3'1.The useof activity-based

costingnormallyresultsin
A a. Greaterunitcostsfor low-volume productsthanis reportedby traditionalproductcosting
b. t-gwerunitcostsfor low-volume pioductsthanis reporteoby iraditionalpioOuct -
c. Decreased setupcostsbeingchargedto volumeproducts "oiting
d. Equalizing setupcostsfor all productlines
 ,*
ReSA -74e Raiial Sclto( ol lfuAu"dan4q MSQ-08
ACTIVITY-BASEDCOSTING & BALANCEDSCORECARD

32. SomaliaCorporationhas used a traditionalcost accountingsystemto apply qualitycontrolcosts

uniformlyto all productsat a rate of 15o/o
of directlaborcost Monthlydirectlaborcost for its main
productis P 30,000. In an attemptto distributequality controlcost more equitably,Somalia is
considering ABC.The rnonthlydatashownbelowhavebeengatheredfor the mainproduct.The three
activitiesare (1) incomematerialsinspection,(2) in-processinspection,and (3) productcertification.
Costsare to be allocatedto eachactivityon the basisof costdrivers.
Activitv
(1) Numberof typesof materials P 12pertype 12types
(2) Nuinberof units P 0.14per unit 17,500units
(3) Numberof orders P 77 per unit 30 orders
The monthlyqualitycontrolcostassignedto the mainproductusingABC is
D a. P 150perorder c. P 4A4lowerthanusingthe traditional
system
b. P 4,500 .d. P 404 higherthanusingthe traditional
system

33. Assigningoverheadto jobs usinga predeten-nined

overheadrateis calfed
A a. Applying c. Productcosting
b. Budgeting d, Job-ordercosting

34. A companyallocatesoverheadto jobs in processusing direct labor costs, raw materialcosts,and

1 machinehours. Theoverheadappl.ication
ratesfor [he cuirentyearare

;it:2::^r"::,m:
P 117permachinehour

,Aparticularproductionrun incurredthe followingcosts:

Directlabor,P 8,000
, Raw materials,p 2,000
A totalof 140machinehourswere requiredfor the productionrun

What is thd tdal cost that would be ohergd to thc.pndro*irrrun?

D a. P 18,000 c. P 24,780
b. P 18,400 d. P u,78A /

35. AfghanistanComp{nyusesABC to computeproductcostsfor externalreports The corqpanyhas three

activity centers anu apples overheadusing predeterminedoverheadrates for",€achactivity center,
Estimatedcostsand activitiesfor the cunentyear are presentedbelowfor the threeactivityqenters
Estimatedoverheadcost ExQgctedactivitv
Activityl P61,387 2,300
Activity2 Piy',or6 i:;;, & (q
Activity3 P 69,075 2,500
t? \?
Actualcostsand activitiesfor the currentyearwere as folkrws: X7 +t7
Moffi@ I
Activity, "5#*
Activity2 P33,941 Z]gs
ctivity3 P69,080 1,340
Tlre amountqf orerheedoveror under-appHed
for Activity1 duringthe year was closestto:
B a. ,P271.P0over-applied c. P 5.00over-apptied
, b. P 271.96qnder-applied d, P 5.00under-apptied

36. The apprcpriaternethodfor the dispositionof under-applied

or over-appliedfactoryoverhead
D a. ls to costof goodssoldonly
b. ls to finishedgoodsinventoryonly
c. ls apportioned to costof goodssoldandfinishedgoodsinventory
d. Dependson the significance of the amount

37. Predetermined overhead.rates

are basedon activitymeasuredby
A . a. Budgetedoverheadcost and budgetedactivity
b. Bpdgetedoverheadcostand actualactivity
c,' Actualoverheadcostand budgetedactivity
d. Actualoverhead costand actualactivity
 ReSA -7ne ReraaoSclaot al ,ftrqtadatcL MSQ-08
ACTIVITY-BASED
COSTING& BALANCEDSCORECARD ,,ft
38. The numerator in computing a predetermined overhead rate is
A a. Budgetedmanufacturingoverh€adcost c. Budgetedactivity
b. Actualmanufacturing
overheadcost d. Fixedmanufactdring
overheadcost
39. The denominatorin computinga predeterminedoverheadrate is
C ? Budgeted manufacturingoverhead cost c. Budgptedactivig
. b, Actualmanuf;ac{uring
overheadcost d. Fixedmanufacturing
overheadcost
40. A predetermined overheadratecannotbe used
A a. lf a cornBanydoes not budget its overheadcosts
b. By a companythat usesjoborder costing
. c. In a multi,productcompany
d. By a highlyautomatedcompanywherelaboris a minorpartof.pnidrct cost
( f.!-
'$ 41. Angolaappliesoverheadbasedon direct labor cost. lt had budgetedfactoryoverfied of p 500,000
J
and budgeteddirect labor of P 250,000. Actual overheadwas P 52g,OO0 whin tne actual labor cost
was P 270,000. Overheadwas
A a. Over4pfbrl by P 15,000 c. Orcr-appliedby p 2S,0OO
b. Over-appliedby P 20,000 d. Under-appticdby p 2O,O0o
42. SudanCompanyappliesowrhead at P 4 per nracfiinehour. DuringMarch,it worked10,OOO
hoursand
over-appliedovarhd by P 3,000. Actual overheadwas
C a., P4i|,000 c; P 37,000
b. P 40,000 d. P 35,000
43. Rwanda Cunpny applbs overhead at P I per diect labof hour, of which p 3 is variat*e ordhead.
Budgeteddirect labor hourcwere 90,000. Budgretedfixed owrftead was
B a. P 270,000 c. F 720,000
b. P 450,000 d. P 810.frp
44. SaharaCompanyapplledoverheadat P 6 pcr dhect bbor hour. In trlarc*r,Saharaircuned oreilread of
P 144,000. Urtder-appliedorerheed.wasP 6,000. I'hr nrerrydlrect hbor hoursdid Saharawork?
a. 25.,@ s A3,O0O A,
b. 24,ooo d. 22,ooo
!, ,(.lry. ,.,,rT*,il
45. Machinehours used.to set the-predetermincd
ovcrtrcadrate *ere s0,o'4, aatla'nour€''r$ec +,Oqq,*srillr,\!
and oreiltead3pplbd ms P 120,000.BuOgeUdov€rheedfur the yaarwas 'y - -
A YStt'- '
a ? 1t5?W--,, ,c. p 120,000 tf[r\, ,. :n. -_
b. P 118,000 p ir / L) v* .,,'-u
; (6l,,
d. 125,000 1}**
..,]'
46. Aflgola epdies q,srhead begcd on direct lebor cost, lt had budgetedfactory owrhead of p 500,@0
and h'4c*ld ditect lsbor of P 250,@0. Acttst crerheed vnasp 525,000wirib Ureactual labor cost
w* P 270,000-.Olortrad was ! --t
A a. Over-applkl by I 1O,OOO j]
c. olrcr-am[ed by p 2S,O0O f ,.
. b. Over-applM by P 20,000 d. Uncler-aiptied6y R ZO,O$ A " li
, ,, {.i,)
( l, ' r'

CubaCornpanimmufrctral dlc Foduct. tts bulget tt --rr

lntl operatingreeuttsbr2013 are:
units
sotd 1mffi
' Unitconfibutbn margin P B.0O p 10.00
Unit te$ing prbe P 20.00 P 21.@
Industry-volutne tvasestimate<fto be 1,5m,000unitsat SrRli$9Jk bu<tgetwas prepared. Actuatindustry
volumefurtheperiodwas2,@0,000units.
15Vtn"l 1r.;i nS
47. The marketsjze varianceis Ar A D
D a. P 160,000U c. p 240,000U l,\ '' (
b. Pso,doou - (e<,I-
,{;t;o:od;
/"
48. The marketsharevarianceis S C, ff
A / e 1 6 0 ,000u c . P 2 4 O , O 0 0 U
/b. P 80,000F d. P 240,000F
'
4g./Thesafes quantityvarianceis , [N Jr,
B 4," P 160,000 U c. P 80,000U ,lt, !
6 . P80 ,000F d. P160.000F r-

P ag e 5 o f S p a g e s
ReSA - 74c Rataal Slioa( a( 4am,taual
ACTIVITY-BASEDCOSTING & BALANCEDSCORECARD

performance
50. A reportthat measuresfinancialand non-financial measuresfor variousorganization
units
in a singlereportis calleda(n)
A a. Balancedscorecard c. lryibalanced
scorecard
b, Financialreportscorecard d. Unbalanced scorecard

51. Whatis the mostimportantpurposeof a balancedscorecard?

B a. Developstrategy c. Developcause-and-effect
linkages
b. Measureperformance d. Set priorities

52. Whichof the followingis not one.ofthe four perspectivesof the balancedscorecard? .
A a. Investment in resourcesperspective c. Learningand grovnth perspective
b, Customerperspective d. Financialperspective

53. Customer-satisfaction
measuresare examoleof:
B a. Goal-congruence approach c. Financialrepgrtscgrecardapproach
b. Balancedscorecardapproach d. lnvestment successapproach

54. ln the balaneedscorecardframework,a surveyof employeeeatisfactionis apotentialmeasurein which

of the four perspectives?
D a. Financial c. Internal:businessprocesses
b. Customer d. Learningandgrowth

55. Performance measurement

consideredas financialratherthan non-financial
measuresincludesall of
g, except:
the follorrlin
C a. Returnon investment . c. Customersatisfaction
b. Economicvalued-added d. Profitmargln

56. Whichof the followhgis an exampleof an efficiencyrneasure?

C a. The rateof absenteeism
b. Thegoalof becominga leadernranufacturer
c. . The numberof insuranceclams processedps{ day- r i1..[,, ,. oj' 'nr,.r
d. The rateof customercomplaints : !

57. Whtch of the following performancemeasureswould be part of those used for internal busincsc
processesperspective? ,
A a. Cycletime .c. Hoursof,lrainingper employeer
b .Em p lo yeesatisfaction'*d'custome rre t e n t io n 1 , l

58. Throughpnttime consistsof:

D a. Processtime.
' b. Inspectiontirne and rnovetirne.
c. Process.tirne,inspectiontime,and movetime.
d. Processtlme,inspection time,movetime,andqueuetime.

cycleratiois a measureof
59. Manufacturing
c a. Bofth;e;k c. Efficiency
b. Effectiveness d. Quality

60. Whichof the folbwingrepresents

value-added
timein the manufacturing
cycle?
D a. Inspdcliontime. c. Movetime.
b. Quetretime. d. Processtime.

Itemq6:l to 64 af.qEa$edon the followinqinformation

'
ChinaManufqcturing Corporationhas the followinginformation:
Movingtime 8 days
, Inspgctiontime 2 days
Processing time: 10days
Storagetir,ne 30 days

61. Whatis the totalamountof value-added

time?
A a. 10days c. 40 days
. b. 30 days d. 50 days
 ReSA -7ie Re*n, Sclod o/ r*ar44da*c? MSQ-08
ACTIVITY-BASED
COSTING
& BALANCED
SCORECARD

62. Whatis the fotalamountof non-Value-adde'd

time?
a. 10days c. 40days
b. 30 days d, 50 days

63. What is the product'scycletime?

' a. 10 days c. 40days
b. 30 days d. 50 days

64. What is the manufacturing

cycleefficiency(MCE)?
c a. 25.0o/o c. 20.4o/o
b. 90.0% d. 60.0%
SOLUTfON:MCE= value-addedtime + productcycletime = 10 * 6O= 20o/o

t 65. Leadtime minusproductiontime is equalto

c a. ldb time c. Non value-addedtinrc
b. Storagetime d. Valuedded time

66. The four categorbs of costs associatedwith productqual'ftycosts are

B a. Extemalfiailure,intbmalfrailure,prevention,anb camtng
b. Extemalfaifure,intemalfiailure,preventidr,ard appraisal
c. $demef failu,le,internalfaifure,haining,anOappraisat
d. Warranty,t'oOua fability,training,and'appraiiil

67. The quality costs that are incured determine whsth€r partbular. unib of product meet guality
strandardsare -to
A a. Appraisalcosts c. lntemalfiEilure
cosb
b. Pr€'\rontl0ncostb d. Extemalfailurecosts
t
-* 68. The qualrtycoststhat are incunedwhen the cornpanydehrminesthat specilicunita not
do meetquafity
-\ standardsare
C a. Appfiaisalcosts c. f;Fm*fefttre coib
b. Prcwntion oS (t. tr5n*&lftorta
69. The qualitycosts that are incunedrvfiena unit of eroefgctffi to pGrfirrmto custqn€r expecilltionsare
-
D a. Appfabal coets e. Internaifailurecosts
b. Prurenttrn
costs d. " Externalfailure
mb
*1 70. Theebt of dlryr$ng of dtftcftre-unfrsmlH b€c|aosisd a$a(n):
/;'l'
'c a. Prewntivccost c. Inbmal frilure coCt
b. Apprebanoot d. ExFrnalfbilurccost
71. The coc*(f stalistbd $-6try control in a proeftrctqurttycoet oystemis ca$gorized as a(n)
D a. fntemalfailurecoat c. Extemalfailurecost
b. Trainir€ ooct d. Appraisafcost
*.1

Y_ 72. Examplesof ttD,slaFrtt d trrnrufition incftrdea{ of ttp fohving, excq1t:

' D a. Tuitbn fee br ouhpurc€d employeebaining
b. Addifionsl-tshranoc controls for maehinery
e. Depr6c*rtbn of *hainkp room
d. An annud tr6rd froisbuffit rswor{<rate

73. The cost o-fsc€p, fetroilq and toolingchangresin a productqustinyc6t systernis categorizedas a{n)
C a. Trainirg qoet c. tnternaltatirrc ooci
b. Extemalfailurcost d. Preventkfr cct
74. The cost of processingcustomercomplaints
D a. Appraisalmsts c. Internaffailurecosts
b. Preventioncosts d. Externalfailurecosts

t*' As preventioncoeb ilrcrebse;othercostsof qualig generafly

a. Anenot afbcted
b. tncrease,Uuia slonro p"c"
c. Decrease
d. Change,.butthedireAioncannotbe predic,ted
 ReSA -7k Ra/&q,Scn4o(a{.4ana'tarcq MSq:gg
ACTIVITY-BASED
cosTING& BALANCED
SCofiEcARD
.,
X
1: , 1 \ 76. An increasein appr:aisalcostsin a qua{ityimprovemerlt
programwouldusuallyhavethe followinginitial
.effectson internaland 6xternalfailurecosts:
lntern?lHure costs -E8endl-raflslsl$
a Increase Increase
b Increase Deerease
c . Ebcrease lncrease
d Decrease Decrease
1\7r The key diffiereitce(s)'between
internalfailurecost and externalf;aifurecost is (are).
c a. \,vhenthe cost happens ) c. Bothwhenand wherethe cost happns
b. wfiere the cost happens d. whetherthe cost happens
78. Qualilygo€treportsusuatlydo not consider
B ,E: Extemalfbilurecosts c. lnternalfailurecosts
b., dpportmity costs d. Appraisalcosts
bI
79. All of the folfowlngwouldgenerallybe includedin a cost,of-qualityreport,except
D a. Warantyctaims c Suppiierevatuations
b. DesiEnengineering d. Lostcontributionmargin
80, Managementof a companyis attemptingb'build a reputationas a wurld-ciass'manufacturer of quality
products Whichof the fottowingmeasureswouldnot be usedby the firm to measurequatity?
a. The percentageof shipmentsretumedby customersbecaused poorquality-
b. The nuntber:of partsshippedper day
c. The n$inberof defectivep3rts per million \
d. The percentrage of productspassingqualityteststhe lirst time

8 1 . Forrowins
areitems
ilcruded companv
fqrthetast
month:
i.:H::'ltffi:tr10*o;T3,l3;*ussia

A e. Preventioncostis P 130.000 c-. failurecost is P 20,000

b.. 'Appraisat
costis P 25,000' 'd. €xtemal
lnternalfailure
costis P 105.000

s Tfreprlriar! reasonfor adoptingTQMwas to achieve

a. Gr;ater custdner satisfaction c. Reduced delivery charges ._
b. Reduced(bliverytime Greater employee participaibn

\ 83. The ultimatetest of a qualityproductor serviceis

a. \,\thetherthepfoduct b abli to reducetheconforrnancecosrs
b \ Jtretherthe produc(isable to reducethe non-confonnance costs
c. tllhettrer the producris allb to reducethe conformianceand non-conformancecosts
d. whetfier ille productyndetsorpxceedsthe custorners,expectatio

84. Qualityis achFvedmoreeconomicailyif the companyfocuseson

B a. Appraibalcosfs c. Intemalfailurecosts
b. Prcventioncosts d. Externalfaifure
iosts
85. Qualitycost indicessre ofien used to measureand anatyzethe cost of maintaininga given level of
quality.Oneexampleof a qualitycostindex,whichusesa -Oirect
fbborbase,is computedas:

euatity =
qostindex x 1oo
#f##-
noquaritv
rherorrowl un"#oo
-':::;; "'
:"":';:"* H:" o
Appraisatcosts p6,000 p5,000
Internalfailure
co.sts P 12,000 p 1b.000
Externalfailurecosts P 14,000 p 11,000
Directtaborcosts p 90,000 p 100,000
Baseduponthesecostdata,the qualitycostindex
a. Decreased4 pointsfr:omMayto June c. Increased10 pointsfromMayto June
b. Was unchanged fromMayto June d. Decreased10 pointsfromMayto June