MGMT ch 7

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

an activity

An example of a transaction driver is the

number of bills sent out to a customer

True or false: When a team is created to design and implement an ABC system, it should include members that represent many different functional areas.

true

Providing power to run production equipment is generally considered a(n) _______ - activity

unit

In activity-based costing, what costs are not assigned to products?

unused capacity & organization- sustaining

Organization-sustaining activities include

preparing annual reports, heating a factory, setting up a computer network

Under activity-based costing, overhead includes

all indirect costs

Why is top management support needed when ABC is implemented?

Leadership is instrumental in motivating employees to embrace ABC.

Which costing method assigns only manufacturing costs to products?

Traditional absorption costing

A characteristic essential for successful implementation of ABC is:

a link to how people are evaluated and rewarded.

all manufacturing costs are assigned to products in traditional ______ costing systems

absorption or full

Costs of unused or idle capacity are assigned to products when using a(n)

absorption, traditional, or full costing system

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

activity

In activity-based costing, each cost pool accumulates costs that relate to a single ______ measure in ABC system

activity

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

activity cost pool

In ABC, the term cost driver is used to refer to a(n) ______ because it should "drive" the cost being allocated

activity measure

activity- based costing uses numerous ______ cost pools

activity or overhead

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

overhead includes both manufacturing and non manufacturing costs under

activity- based costing

some manufacturing costs may be excluded from product costs when using

activity- based costing

In activity based costing another term for activity measure is

cost driver

A cost pool including costs to entertain clients and make sales calls is a(n)

customer- level activity

In the 19th and 20th centuries

direct labor hours was a satisfactory overhead allocation base

The amount of time required to perform an activity is measured by a(n)

duration driver

In recent years, direct labor as a percentage of total cost began declining, which caused overhead to

increase, rise, grow

ABC is generally used for ______ reporting

internal

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

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

In the 19th and 20th centuries, cost systems relied on allocation bases such as

machine hours & labor hours

Customer-level activities include

mailing catalogs and sales calls

In a traditional cost accounting system, what type of costs are assigned to products even if the costs are not caused by the products?

manufacturing only

Activity-based costing ______ include activities that do not relate to the number of units produced.

may

under activity- based costing, nonmanufacturing costs

may be allocated to products based on cause

Compared to traditional systems, activity-based costing uses ______ cost pools and unique measures of activity.

more

in traditional absorption costing, ______ costs are assigned to products

only manufacturing

Activities that occur regardless of which customers are served, which products are produced or how many batches are run or units made are facility-level or _______ activities

organization- sustaining

Costs that are unaffected by which products are made during a period are

organization- sustaining costs

Activity-based costing treats organization-sustaining costs as

period expenses

Activity-based costing uses more cost ______ than traditional costing

pools, measures, drivers

The final step in implementing ABC is

prepare management reports

Unit-level activities are

proportional to the number of units produced

Which of the following is NOT an organizational sustaining cost? Set-up labor wages Plant controller's salary Security guard wages Plant administrative supplies

set- up labor wages

Costs that can be easily traced to individual products include

shipping costs, sales commission, warranty repair costs

An ABC system usually ______ a traditional cost system.

supplements

An example of a duration driver is the

time spent preparing invoices

Simple counts of the number of times an activity occurs are ______ drivers

transaction

Simple counts of the number of times an activity occurs are

transaction drivers

Some manufacturing costs may be excluded from product cost when using ABC.

true

True or false: In an automated environment, using traditional allocation bases based on volume may distort unit product costs.

true