Ch. 4, 5, & 6 Connect Quizzes
False
Under absorption costing, a portion of fixed manufacturing overhead cost is released from inventory when production volume exceeds sales volume.
True
Under variable costing, all variable production costs are treated as product costs.
False
Under variable costing, an increase in fixed manufacturing overhead will affect the unit product cost.
True
Variable costing is more compatible with cost-volume-profit analysis than is absorption costing.
False
Variable costs are always relevant costs in decisions.
True
Variable manufacturing overhead costs are treated as product costs under both absorption and variable costing.
False
When a company implements activity-based costing, manufacturing overhead cost is often shifted from low volume products to high volume products, with a higher unit cost resulting for the high volume products.
False
Activity-based costing is best proposed, designed and implemented by the accounting department without requiring the time of busy managers.
False
An avoidable cost is a sunk cost that can be eliminated (in whole or in part) as a result of choosing one alternative over another.
True
A company has two divisions, each selling several products. If segment reports are prepared for each product, the division managers' salaries should be considered as common fixed costs of the products.
True
A traditional cost system is generally easier to set up and run than an activity-based costing system.
True
A vertically integrated company is less dependent on its suppliers than a company that is not vertically integrated.
True
Absorption costing treats all manufacturing costs as product costs.
False
Avoidable costs are irrelevant costs in decisions.
False
Departmental overhead rates will correctly assign overhead costs in situations where a company has a range of products that differ in volume, lot size, or complexity of production.
False
Fixed costs are sunk costs.
True
Fixed costs may be relevant in a decision.
True
If a cost must be arbitrarily allocated in order to be assigned to a particular segment, then that cost should be considered a common cost.
False
In a special order situation that involves using capacity that is not idle, opportunity costs are zero.
False
In activity-based costing, all manufacturing costs must be included in product costs.
True
In an ABC system, departmental managers are typically interviewed to determine how the departmental non-personnel costs should be distributed across the activity cost pools.
True
In the first-stage allocation in an ABC system, some costs may be allocated to a special cost pool that are not subsequently allocated to products or customers.
True
It may be a good decision to replace an asset before its original cost has been fully recovered through increased revenues or decreased costs.
True
Managing and sustaining product diversity requires many more overhead resources such as production schedulers and product design engineers than managing and sustaining a single product. The costs of these resources can be accurately allocated to products using activity-based costing than traditional costing which is based entirely on direct labor-hours.
True
Organization-sustaining activities are carried out regardless of which customers are served, which products are produced, how many batches are run, or how many units are made.
True
Segment margin is sales less variable expenses less traceable fixed expenses.
False
Segmented statements for internal use should not be prepared using the contribution format.
False
Sunk costs are costs that have proven to be unproductive.
True
The variable costs of a product are relevant in a decision concerning whether to eliminate the product.
True
To compute a product's profit or product margin, the product's sales and direct costs are needed in addition to the overhead costs computed in an activity-based costing system.