Pre-Ch 4: Activity based costing
Which of the following is NOT a benefit of activity-based costing to managers?
Managers have numerous cost pools that are identified for each major activity
ABC can be used in ________.
both service and manufacturing company
When making decisions:
some selling and administrative expenses should be assigned to products
Which of the following is not generally part of the design of an activity-based costing system?
Identifying and including all activities that cause overhead costs
Total estimated manufacturing overhead is $900,000 and total estimated activity is 30,000 machine hours. The plantwide overhead rate is $_________ per machine hour.
$30
plaster company expects to have a total cost of $400,000 in its activity pool. The total expected activity is 800 machine set ups. The activity rate is $_________ per setup.
$500
Activity-based costing improves the accuracy of products costs by:
-Using cost pools that are more homogeneous than departmental cost pools -Using a variety of activity measures to assign overhead costs to products -Increasing the number of cost pools used to accumulate overhead cost.
In the 1800's:
-costs systems emphasized simplicity -direct labor and overhead was believed to be highly correlated
Activity-based costing is most likely to be beneficial when:
-products differ substantially in batch size and the activities they require -Conditions have changed substantially since the existing cost system was established. -Overhead costs are high and increasing and no one seems to understand why. -Management does not trust the existing cost system and ignores cost data from the system when making decisions.
Implementing activity-based costing:
-should be done by a cross-functional team -requires substantial resources -requires taking employee away from other tasks
Which of the following issues needs to be considered when implementing an ABC system?
-the cost in each activity cost pool may not be strictly proportional to its activity measure -the cost of designing and implementing the system may outweigh the benefits of the system
Which of the following statements is true?
ABC may be useful to a company whose costs have changed substantially since the existing cost system was developed
A technique that attempts to assign overhead costs more accurately to products is known as :
Activity based costing
Departmental overhead rates may NOT correctly assign overhead costs in situations where a company has:
a variety of products
In ABC, any event that causes consumption of overhead resources is a(n) ________.
activity
An activity measure is a(n) ______ base in an activity-based costing system.
allocation
A predetermined overhead rate in an activity-based costing system is called ________.
an activity rate
In activity-based costing an activity measure is _______.
an allocation base
In recent years, as a percentage of total cost:
direct labor has been decreasing, whereas overhead has been increasing
Activity-based management is focused on:
eliminate waste; decrease processing time; reduce defects
Which of the following is NOT an ABC level of activity?
employee-level
The cost of implementing and maintaining an activity based costing system:
may outweigh the benefits received
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
Maintaining a product manager and staff is a(n) _________ activity.
product- level
unit level activities are _______.
proportional to the number of units produced.
The activity rate is computed by dividing the ______ by the ______.
total cost in the production-order activity cost pool; activity level in the activity cost pool
True or false: The ABC system for applying overhead works just like a job-order costing system.
true
The costs in the activity cost pools are allocated to products using activity rates and activity measures. This is part of stage _______ in allocating overhead costs to products.
two
A "bucket" in which costs are accumulated that relate to a single activity measure in the ABC system is a(n)
activity cost pool
Setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of ________-level activities.
batch