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
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
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
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
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
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
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
A characteristic essential for successful implementation of ABC is:
a link to how people are evaluated and rewarded.
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