AE 313
PRELIMS QUIZ 1
09082022
1. [S1] Traditional management involves focusing on
the resources and capabilities of the firm to
minimize costs and maximize production. [S2]
Modern strategic management concepts focus
more on changes in the external environment and
how business entities can adapt to these changes.
A. Only S1 is true
B. Only S2 is True
C. Both statements are true
D. Both statements are false
8. Machine set-up is an example of:
A. Batch level activity
B. Unit level activity
C. Facility level activity
D. Product level activity
9. S1: ABC involves a two-stage allocation in which
overhead costs are first assigned to departments
and then to jobs on the basis of direct labor hours.
S2: In ABC, facility level costs should not be
included in product costs for internal
2. Generally, firms will price a product more
management reports that are used for decision
competitively at which stage of the product’s lifee
making. However, companies frequently include
cycle?
facility level costs in product costs to meet
A. Product introduction
external reporting requirements.
B. Growth
A. Only S1 is true
C. Maturity
B. Only S2 is True
D. Decline
C. Both statements are true
D. Both statements are false
3. This stage of the product life cycle is evidenced by a
sharp decrease in the production and sale.
10. If substantial batch-level or product-level costs
A. Product introduction
exist, then overhead allocation based on a
B. Growth
measure of volume such as direct labor-hours
C. Maturity
alone:
D. Decline
A. is a key aspect of the activity-based costing
model.
B. will systematically overcost high-volume
4. One aspect of integrity requires:
products and undercost low-volume
A. Performance of professional duties in
products.
accordance with applicable laws.
C.
will systematically overcost low-volume
B. Avoidance of conflict of interest.
products and undercost high-volume
C. Refraining from improper use of inside
products.
information
D. must be used for external financial reporting
D. Maintenance of an appropriate level of
since activity-based costing cannot be used
professional competence.
for external reporting purposes.
5. Which ethical standard is most clearly violated if a
management accountant knows of a problem that
could mislead users but does nothing about it?
A. Competence
B. Objectivity
C. Confidentiality
D. Integrity
6. An activity-based costing system is one that:
A. Traces costs to activities and then to products
B. Traces products to activities and then to
resources
C. Traces costs to resources and then to activities
D. Traces activities to costs and then to resources
7. The following are benefits of ABC except:
A. Better management decisions
B. More control over manufacturing overhead costs
C. Elimination of all arbitrary cost allocations
D. More accurate cost data
PROBLEM SOLVING:
Problem 1
Problem 2
Swagg Jewelry Corporation manufactures custom jewelry. In the past, Swagg has been using a traditional
overhead allocation system based solely on direct labor hours. Sensing that this system was distorting costs and
selling prices, Swagg has decided to switch to an activity-based costing system using three activity cost pools.
Information on these activity cost pools are as follows:
Activity Cost Pool
Estimated Activity
Estimated Overhead Cost
Labor related
8,000 direct labor hours
P40,000
Machine related
12,500 machine hours
50,000
Quality control
800 inspections
12,000
Job #309 incurred P900 of direct material, 30 hours of direct labor at P40 per hour, 80 machine hours, and 5
inspections.
a. What is the cost of the job under traditional costing?
b. What is the cost of the job under activity-based costing?
Problem 3