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Exam 4: Activity-Based Costing and Cost Management

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Question 61

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Using the activity-proportion method results in

A) higher cost allocations than the activity rate method.
B) lower cost allocations than the activity rate method.
C) the same cost allocations as the activity rate method.
D) higher or lower cost allocations than the activity rate method,depending on the circumstances.

E) A) and D)
F) B) and C)

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Question 62

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Which of the following involves analyzing the market and estimating what consumers will be willing to pay for a product with specific features?

A) Just-in-time inventory
B) Target costing
C) Total quality management
D) Value engineering

E) B) and C)
F) B) and D)

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Question 63

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Linden,Inc.uses a 5,000 square foot factory space that it rents for $2,500 a month for all its manufacturing activities.Linden has decided to switch to an activity based costing system,and has identified its activities as follows: Preparation and Setup,Machining,Finishing,and Quality Control.500 square feet of the factory are used for machining,while 2,000 square feet (each) are used for Preparation and Setup and Quality Control.Finishing uses 500 square feet.When assigning indirect costs to each activity,how much factory rent should be assigned to the Preparation and Setup cost pool?

Target costing involves determining what the product price must be in order to meet the target cost and still provide a profit for the company's shareholders.Target costing involves determining what the product's cost must be,given its market price and desired profit.