Chapter #9 Pre Quiz

Activity-based costing (ABC)

A costing technique that uses a two-stage allocation process.

Departments or activities and then allocates costs to products or services

A two-stage system first allocates costs to:

The costs are assigned to activities, and then to the products based upon their use of the activities.

Activity-based costing (ABC) is a costing technique that uses a two-stage allocation process. Which of the following statements best describes these two stages?

Volume and Activities

Companies using activity-based costing (ABC) have learned that costs are a function of this

Direct Materials

First stage cost objects do NOT include:

Activity-Based Costing

For administrative services follows the same four-step procedure described for manufacturing

Activity-Based Costing

More detailed measures of costs than do plantwide or department allocation methods.

Various products are manufactured that do not pass through the same departments or use the same manufacturing techniques

Multiple (departmental) manufacturing overhead rates are considered preferable to a single (plantwide) overhead rate when: (CMA adapted)

Facility-Related Activity

Plant administration is an example of a:

Facility-Related

Plant property taxes are an example of a cost that would be considered to be:

Cost Driver x Number of Units Of Cost Driver (each product)

Product costs are computed by:

True

TRUE OR FALSE: A problem with activity-based costing (ABC) is that it requires more recordkeeping than other methods.

When used in an ABC system, the first stage assigns costs to activities.

The basic difference between a first-stage cost allocation and a second-stage cost allocation is that:

Cost Hierarchy

The classification of cost drivers into general levels of activity, volume, batch, product, and so on

Volume-Related Activity

The electricity used for production machinery would be classified as a:

Product-Related Activity

The number of services provided by an accounting firm

Time-Driven Activity-Base Costing

Time equations allow managers to adjust the times for orders with different characteristics

Traditional Product

To accumulate cost information for financial reporting

Performing 100% inspection

What activities would NOT be classified as a batch-level activity?

Setting Up Equipment

What activity would be classified as a batch-level activity?

Determine how to reduce the costs of making products by cutting activities

What is NOT a step involved in activity-based costing?

Increase; Increase

What is the typical effect on the numbers of cost pools and cost assignment bases when an activity-based costing (ABC) system replaces a traditional costing system? (CPA adapted): Cost Pools: Cost Assignment Bases:

Sales Volume

What should not be used as the allocation base in a company that appropriately uses a single plantwide rate?

Performing 100% inspection

What would NOT be a batch-related activity?

Production Runs

What would be LEAST likely to be used as an allocation base in a company that applies a single plantwide rate?

Allocations Incurred

Which account is NOT used in an activity-based costing (ABC) system?

Need-Related Activities

Which measure is NOT used by activity-based costing (ABC) systems as an allocation base for allocating overhead costs to the units produced?

Compliance Costs

Which of the following costs is NOT related to a batch-related activity?

Product; Batch

Would the following activities at a manufacturer of canned soup be best classified as volume-related, batch-related, or product-related activities? Researching New Recipes: Shipping Orders To Grocery Stores: