ACCT 2101 Chapter 5 Learn Smart

To calculate total unit cost in an activity based system requires ______.

- direct materials per unit - overhead activity cost per unit - direct labor per unit

The steps in stage two of ABC costing are ______.

- identification of cost drivers for each activity cost pool - computation of total unit activity cost for each product line

The steps in stage one of ABC costing are ______.

- identification of cost pools - assignment of costs to appropriate cost pool

Traditional product costing systems may not work well when a company ______.

- manufactures a diverse set of products - relies only on unit-based costs drivers

A value added activity is ______.

- necessary to production - performed efficiently

Non-value added activities can be ______.

- necessary, but inefficient and improvable - unnecessary and dispensable

When implementing an ABC system, identifying a company's significant activities ______.

- should create an activity list broken down to the most fundamental level practical - is called activity analysis

Product costs can be distorted by using ______.

- the same cost driver for all activities - single cost pool - only unit leve cost drivers

Volume-based product costing systems have difficulty assigning overhead costs accurately if ______.

- there is a large proportion of non-unit-level activities - products differ significantly in the way they use activities

Labor hour based product costing systems where labor hour are related closely to the factory volume are also called ______ costing systems.

- volume-based - throughput-based

Determining the root causes and what triggers activities is called . (Enter only one word per blank.)

Blank 1: activity Blank 2: analysis

The use of ABC information to support an organization's strategy, improve operations or manage costs is called - management. (Enter only one word per blank.)

Blank 1: activity Blank 2: based

A company's expenditures on IT or accounting is an example of a(n) - - activity. (Enter only one word per blank.)

Blank 1: business Blank 2: value Blank 3: added

One way to identify differences between products is to compare the ratio of each activity cost pool used by the products. (Enter only one word per blank.)

Blank 1: consumption

The proportion of an activity consumed by a particular product is called the . (Enter only one word per blank.)

Blank 1: consumption Blank 2: ratio

The classification of activities into levels is called a(n) . (Enter only one word per blank.)

Blank 1: cost Blank 2: hierarchy

Activities required in order for the entire production process to occur are referred to as level activities. (Enter only one word per blank.)

Blank 1: facility

Continuous and gradual cost reduction is the meaning of costing. (Enter only one word per blank.)

Blank 1: kaizen

Assignment of overhead costs to activity cost pools occurs in stage of ABC costing. (Enter only one word per blank.)

Blank 1: one or 1

Identification of activity cost pools occurs in stage of ABC costing. (Enter only one word per blank.)

Blank 1: one or 1

The cost per unit of the cost driver for a particular activity cost pool is called the . (Enter only one word per blank.)

Blank 1: pool Blank 2: rate

A set of linked activities is called a(n). (Enter only one word per blank.)

Blank 1: process

The focus on the causes of activities and the evaluation of these activities is the view of an ABC system. (Enter only one word per blank.)

Blank 1: process

Activity analysis that looks at a set of linked activities to determine the cause of a non-value added activity is called analysis. (Enter only one word per blank.)

Blank 1: process Blank 2: value

Activities that are necessary to support entire product lines, but are not performed every time a new unit or batch is produced are - level activities. (Enter only one word per blank.)

Blank 1: product Blank 2: sustaining

One way of picturing the relationship between ABC and ABM is in terms of the - ABC model that shows how costs can be repurposed to provide insight into the cost and effectiveness of the processes. (Enter only one word per blank.)

Blank 1: two Blank 2: dimensional

Identification of cost drivers for each activity cost pool occurs in stage of ABC costing. (Enter only one word per blank.)

Blank 1: two or 2

An activity that must be done for each item produced is a(n) - activity. (Enter only one word per blank.)

Blank 1: unit Blank 2: level

Product costs are most likely to be distorted when using a(n) -based product costing system. (Enter only one word per blank.)

Blank 1: volume

True or false: Identification of activities should be done at the broadest level possible.

False

True or false: The classification of activities into unit-level, batch-level, product-sustaining-level and facility-level activities is called activity based costing.

False

True or false: The total unit product cost is calculated by adding total direct materials and total direct labor costs and dividing by the number of units produced.

False

True or false: An activity may be valued-added in some situations and non-value added in other situations.

True

Traditional product-costing systems distort product costs by using ______.

a single, volume-based cost driver

Direct labor is not the best cost driver for a cost related to the purchasing raw materials because the purchasing activity is a(n) ______.

batch activity and direct labor is a unit level activity

With a traditional volume-based costing system, there is a tendency to undercost ______.

low-volume, complex

An activity that is unnecessary and dispensable is a(n) ______.

non-valued added activity

Widely varying consumption ratios result from ______.

product line diversity

Engineering design cost is an example of a(n) ______ level activity.

product-sustaining

Which of the following is a customer value added activity?

technical support for a cell phone

Volume-based costing is is also called based costing. (Enter only one word per blank.)

throughput

An activity that must be done for each item produced is a(n) __ level activity.

unit

The concept that improvement is the goal and responsibility of every worker from the CEO to manual laborers, in every activity, every day, all the time is the basis of ______ costing.

kaizen

Non-value added costs should be highlighted in ______.

activity center cost reports

A system that uses multiple cost pools and assigns costs to products in accordance with the amount of the activity used by the product line is a(n) ______ costing system.

activity-based

The use of ABC information to support an organization's strategy, improve operations and manage costs is called _______ management.

activity-based

Activity analysis and evaluation involves all of the following except ______.

assignment of costs to activities

Storage time is the time ______.

during which items are held before further processing or shipment

A pool rate of $3.00 per machine hour means that ______.

each machine hour used by a product should cost $3.00

Costs such as heating and cooling, property taxes and insurance on the factory are examples of

facility-level activities

With a traditional volume-based costing system, there is a tendency to overcost ______ products.

high-volume, standard

The cost assignment view of the ABC system uses all of the following except ______.

identification of events that trigger activities

The first stage in an ABC system is to ______.

identify significant activities and assign overhead costs to each activity

The second stage in an ABC system is to ______.

identify the cost driver for each activity cost pool

Categorizing the ways in which time is spent in a production process is one approach cost-management analysts find helpful in ______.

identifying non-value added activities

The time spent ensuring the product is of high quality is called ______ time.

inspection

Costs of setting up machinery for a new production run ______.

is a batch-level activity