Managerial Accounting Test #3, Ch.7 and 8

What are some of the limitations of activity-based costing systems?

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

Many of the schedules in a master budget are based on a variety of management estimates and assumptions. T or F

True

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

first

A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted

income statement

ABC is generally used for BLANK reporting.

internal

Activity-based costing is not used for external reporting because BLANK

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

A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the BLANK budget.

master

Under activity-based costing, nonmanufacturing costs BLANK

may be allocated to products based on cause

The amount of goods for resale to be acquired from suppliers during the period is shown on the budget.

merchandise purchases

The amount of goods to be acquired from suppliers during the period is shown on the Blank______ budget.

merchandise purchases

In activity-based costing, first-stage allocation assigns BLANK activity , Incorrect Unavailable costs to activity cost pools. (Enter only one word per blank)

overhead

Developing goals and preparing various budgets to achieve those goals is part of the BLANK process

planning

The final step in implementing ABC is BLANK

prepare management reports

In a manufacturing company, the Blank______ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.

production

Activity-based costing only charges products for the cost of the capacity used because:

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

Because all other parts of the budget depend on it, if the Blank______ budget is inaccurate, the rest of the budget will be inaccurate.

sales

The first step in the budgeting process is preparing the BLANK budget.

sales

To calculate total sales on the sales budget, multiply budgeted sales in units by BLANK

sales price per unit

To calculate total sales on the sales budget, multiply budgeted sales in units by Blank______.

sales price per unit

Activity rates are used to apply overhead costs to products and customers in the BLANK-stage allocation. (Enter only one word per blank).

second

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

second

The cash budget includes four major sections: receipts, disbursements, the cash excess or deficiency, and BLANK

financing

In large organizations, many smaller individual budgets submitted by department heads and other responsible people comprise the BLANK budget.

selling and administrative

In large organizations, many smaller individual budgets submitted by department heads and other responsible people comprise the Blank______ budget.

selling and administrative

In a manufacturing company, the BLANK budget details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories

direct materials

A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the budget

master

More accurate estimates and higher motivation are generally the result of using a(n) BLANK budget.

participative

A manager cannot complain that the budget was unrealistic and impossible to meet when a(n) BLANK budget is in place.

self imposed

An ABC system usually BLANK a traditional cost system.

supplements

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 total activity of 20,000 development hours. Using activity-based costing, the activity rates are BLANK

$8 per customer call and $15 per development hour

Arrange the steps for implementing ABC in the correct order. (Place the first step at the top.)

1) define activities, activity cost pools, and activity measures 2) assign overhead costs to activity cost pools 3) calculate activity rates 4) assign overhead costs to cost objects 5) prepare management reports

If the activity rate for the customer order cost pool is $250 per order and the total for this cost pool is $425,000, the total number of customer orders is BLANK

1700

Why is top management support needed when ABC is implemented?

Leadership is instrumental in motivating employees to embrace ABC.

Costs of unused or idle capacity are assigned to products when using a(n) BLANK or BLANK, Incorrect Unavailable costing system. (Enter only one word per blank.)

absorption or traditional

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

activity

The first major step in implementing ABC is to identify the BLANK that will form the foundation for the system.

activity

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

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

activity cost pool

Total cost of each activity divided by the total activity is the computation of BLANK

activity rates

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

an activity

Because it is needed for the schedule of expected cash collections, the annual master budget file includes the BLANK from last year

balance sheet

A budgeted balance sheet is developed using data from the BLANK of the budget period and data contained in the various schedules.

beginning

A budgeted balance sheet is developed using data from the Blank______ of the budget period and data contained in the various schedules.

beginning

A detailed plan for the future that is usually expressed in formal quantitative terms is a BLANK

budget

Which of the following is not found in the financing section of the cash budget?

cash deficiency

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

cause and effect

Gathering feedback to ensure that the plan is being followed is referred to as

control

When creating an Excel budget and performing what-if analysis, it is generally easiest to Blank______

create the budget with a budgeting assumption tab

The most common management reports using ABC data are BLANK

customer profitability product profitability

Which of the following is needed to prepare a sales budget?

the budgeted number of units to be sold

An activity-based costing system BLANK

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

Costs that can be easily traced to individual products include BLANK

warranty repair costs sales commission shipping costs

A characteristic essential for successful implementation of ABC is:

a link to how people are evaluated and rewarded.