ACCT 202 Final Exam

one of the purposes of _________ _____________ is to predict cost behavior in response to changes in activity

cost classification

________ costs are costs that can be easily and conveniently traced to a unit of product or other cost objects

direct

what type of labor are wages paid to automobile assembly workers?

direct

what are labor costs that can be easily traced to individual units of a product?

direct labor

what type of material is a radio being installed in an automobile?

direct or raw

a fixed cost that may be altered in the short-term by current managerial decisions is a _______________ fixed cost

discretionary

Traditional cost systems tend to undercost standard products and overcost specialty products.

false

what type of accounting is concerned with reporting financial information to external parties, such as stockholders, creditors, and regulators?

financial accounting

The first major step when implementing an ABC system is ______.

identify the activities

manufacturing over head includes ___________ _______________ that cannot be easily traced to specific units of product

indirect materials and labor

what type of accounting is concerned with providing information to managers within an organization so that they can formulate plans, control operations, and make decisions?

managerial accounting

True or false: In an automated environment, using traditional allocation bases based on volume may distort unit product costs.

true

What level of activity is performed each time a single product item is produced?

unit-level

four items that measure what causes the incurrence of a variable cost are:

units produced, machine hours, miles driven, and labor hours

Which of the following is not essential for the successful implementation of an ABC system?

Top managers must design the ABC system.

In activity-based costing, the consumption of overhead resources is caused by _____.

an activity

Activity based costing provides managers with information that potentially affects ______.

both fixed and variable costs

In activity-based costing, nonmanufacturing and manufacturing costs are assigned to products on a(n) ______ basis.

cause-and-effect

a long term, cannot be significantly reduced in the short term is a ______________ fixed cost

committed

one of the purposes of __________ ______________ is to account for costs in manufacturing companies

cost classification

A cost pool including costs to entertain clients and make sales calls is a(n) ______ activity.

customer-level

what are examples of direct costs?

direct material and direct labor

An activity cost pool accumulates costs for ______ activity measure(s).

exactly one

Individual product costs calculated using ABC are not listed on ______ reports.

external

a _________ _________ is a cost that remains constant in total regardless of changes in the level of activity

fixed cost

only __________ __________ associated with operating the factory are included in manufacturing overhead

indirect costs

________________ _______________ includes all manufacturing costs except direct material and direct labor. these costs cannot be readily traced to finished products

manufacturing overhead (definition)

Under activity-based costing, nonmanufacturing costs ______.

may be allocated to products based on cause

Compared to traditional systems, activity-based costing uses ______ cost pools and unique measures of activity.

more

An example of a transaction driver is the ______.

number of bills sent out to a customer

Usually, traditional costing ______ high-volume products and ______ low-volume products.

overcosts; undercosts

In activity-based costing, first-stage allocation assigns __________ costs to activity cost pools.

overhead

The final step in implementing ABC is ______.

prepare management reports

direct material and direct labor are classified as a __________ cost

prime

The most common reports prepared using ABC data are the product and customer __________ reports.

profitability

Activity-based costing uses activity rates to apply overhead costs to products in ______ stage allocation.

second

what costs are necessary to secure the order and deliver the product and can either be direct or indirect costs?

selling costs

Which costing system does not assign selling and administrative costs to products when computing product margin?

traditional

direct labor and manufacturing overhead costs are added to __________ ________ ____________ to concert direct materials into finished goods

work in process

Total cost of each activity divided by the total activity is the computation of ______.

activity rates

Which costing system charges products only with the costs of the capacity used by those products and not with the cost of unused capacity?

activity-based

___________ costs are indirect costs incurred to support a number or cost objects. these costs cannot be traced to any individual cost object

common

a variable cost per unit is ____________

constant

direct labor and manufacturing overhead are classified as a _____________ cost

conversion

one of the purposes of _________ _____________ is to prepare financial statements

cost classification

one of the purposes of __________ _____________ is assigning costs to cost objects

cost classification

one of the purposes of ____________ ______________ is to make decisions

cost classification

In activity based costing another term for activity measure is ______.

cost driver

what are raw materials that become an integral part of the product and that can be conveniently traced directly to it?

direct materials

doe manufacturing companies, product costs include ____________ ____________ _____________ which consist of completed units of product that have not yet been sold to customers

finished goods costs

when a manufacturer sells its finished goods to customers, the costs are transferred from _____________ _____________ to ________ _____ _________ _________

finished goods, cost of goods sold

In activity-based costing, the process of assigning overhead costs to activity cost pools is ______ stage allocation.

first

In recent years, direct labor as a percentage of total cost began declining, which caused overhead to ________

increase

__________ costs are costs that cannot be easily and conveniently traced to a unit of product or other cost object

indirect

Focusing on activities to eliminate waste, decrease processing time, and reduce defects is the basis of activity-based ___________.

management

direct materials, direct labor, and manufacturing overhead are all classifications of ___________________ ___________

manufacturing costs

depreciation of manufacturing equipment, utility costs, property taxes, and insurance premiums incurred to operate a manufacturing facility are examples of:

manufacturing overhead

what is an example of an indirect cost?

manufacturing overhead

What type of activities are carried out regardless of which customers are served, which products are produced, how many batches are run or how many units are produced?

organization-sustaining

Activity-based costing uses more cost _____________ than traditional costing.

pools

___________ costs include direct materials, direct labor, and manufacturing overhead

product

Activity rates are used to apply overhead costs to products and customers in ______________ -stage allocation.

second

Simple counts of the number of times an activity occurs are drivers.

transaction

True or false: Activity-based costing can be used for process improvement.

true

Providing power to run production equipment is generally considered a(n) _____________ -level activity.

unit

product costs "____________" to a unit of product as it is __________ or manufactured and they stay attached to each unit of product as long as it _____________ in inventory awaiting sale

"attach", purchased, remains

Why is top management support needed when ABC is implemented?

Leadership is instrumental in motivating employees to embrace ABC.

A characteristic essential for successful implementation of ABC is:

a link to how people are evaluated and rewarded.

Costs of unused or idle capacity are assigned to products when using a(n) ___________ costing system

absorption

A company's total expected overhead for the year is $500,000. Two activity cost pools have been identified: Customer Service with a total cost of $200,000 and a total activity of 25,000 customer service calls; and Product Development with a total cost of $300,000 and a total activity of 20,000 development hours. Using activity-based costing, the activity rates are ______.

$8 per customer call and $15 per development hour

Select all that apply The most common management reports using ABC data are ______.

- customer profitability - product profitability

Select all that apply What are some of the limitations of activity-based costing systems?

- ABC requires substantial resources. - ABC procedures produce numbers that do not match traditional costing. - Managers and employees may resist the change to ABC.

Select all that apply Identifying the activities that will form the foundation for the system ______.

- can be time-consuming - involves a great deal of judgment - often involves interviewing employees

Select all that apply Costs assigned and/or traced when computing product margin in a traditional cost system are ______.

- direct material - direct labor - manufacturing overhead

Select all that apply Activity-based management is focused on ______.

- eliminating waste - reducing defects

Select all that apply Activity-based costing is not used for external reporting because ______.

- it is difficult to make changes in the existing accounting system - external reports are less detailed than internal reports - ABC does not comply with GAAP

Select all that apply Activity-based costing only charges products for the cost of the capacity used because:

- it results in a more stable unit product cost. - products are only assigned the costs of resources they actually use.

Select all that apply Customer-level activities include ______.

- mailing catalogs - sales calls

select all that apply: An activity-based costing system ______.

- may exclude some manufacturing costs from product costs - uses numerous overhead cost pools

Select all that apply An activity-based costing system ______.

- produces different numbers than a traditional system - is costly to maintain - requires substantial resources

Select all that apply Costs that can be easily traced to individual products include Blank______.

- sales commission - warranty repair costs - shipping costs

Select all that apply Organization-sustaining activities include ______.

- setting up a computer network - heating a factory - preparing annual reports

In ABC, any event that causes consumption of overhead resources is a(n)

activity

In activity-based costing, each cost pool accumulates costs that relate to a single ___________ measure in the ABC system.

activity

A "bucket" in which costs are accumulated that relate to a single activity measure in the ABC system is a(n) ______.

activity cost pool

In ABC, the term cost driver is used to refer to a(n) ___________ __________ because it should "drive" the cost being allocated .

activity measure

Some manufacturing costs may be excluded from product costs when using ______ costing.

activity-based

what kind of costs are all executive, organizational, and clerical costs and can also either be direct or an indirect cost?

administrative costs

Activities that occur regardless of which customers are served, which products are produced or how many batches are run or units made are facility-level or _____________ - ________________ activities.

organization-sustaining

__________ costs include all selling and administrative costs

period

____________ _____________ include all the costs that are involved in acquiring or making a product

product costs

Unit-level activities are ______.

proportional to the number of units produced

for manufacturing companies, product costs include _____________ ______________ which include any materials that go into the final product

raw materials

when direct materials are used in production, their costs are transferred from _________ ___________ to _____________ ______ ______________

raw materials, work in process

An ABC system usually ______ a traditional cost system.

supplements

a ____________ ___________ is a cost that varies, in total, in direct proportion to changes in the level of activity

variable cost

the most common cost classifications for predicting cost behavior are:

variable costs, fixed costs, and mixed costs

for manufacturing companies, product costs include ______________ ___________ ______________ which consists of units of product that are only partially complete and will require further work before they are ready for sale to the customer

work in process

once units of products are completed, their costs are transferred from _________ _________ ___________ to _______________ __________________

work in process, finished goods