ACCT Ch04 SB

True or false: ABC is designed to provide managers with detailed information about the cost of activities and is therefore not useful in providing sustainability-related information.

False

True or false: The best reason to implement an ABC system is to obtain more accurate information about the cost of products and services.

False

Which of the following is NOT a volume-based cost driver?

Machine setups

Which of the following statements are true?

Managing and reducing costs is the true benefit of ABC. Implementing an ABC system is not a trivial task.

Activity-based costing systems typically include ______ cost drivers.

both volume- and non-volume-based

In order to make good product introduction decisions in today's digital age, managers need to be able to accurately estimate ______.

life cycle costs

To calculate manufacturing overhead cost per unit using ABC, divide the total ______.

manufacturing overhead cost by the number of units produced

Inspection costs ______.

may lead to internal failure costs

A proactive approach managers use to determine what costs should be is called ______.

target costing

Indirect costs can be assigned to products or services using ______.

the activity rate method the activity proportion method

Target costing is in stark contrast to _____-_____ pricing, in which the company adds a markup to expenses required to produce the product.

Blank 1: cost Blank 2: plus

Activities that occur regardless of how many products are produced or how many batches are run or units made are _____ - _____ activities.

Blank 1: facility or company Blank 2: level or wide

The duration of a product from its infancy through its eventual decline is represented by the _____ _____ _____ .

Blank 1: product Blank 2: life Blank 3: cycle

The approach to determine what costs should be in order to earn an acceptable profit across a product's life cycle is called _____ _____ or cost planning.

Blank 1: target Blank 2: costing

An approach that aims to improve products by reducing and eliminating errors, streamlining activities, and continuously making production processes better is called _____ _____ management.

Blank 1: total Blank 2: quality

The concept of the _____ _____begins with the customer and works backward to ensure that activities deliver what matters to customers

Blank 1: value Blank 2: chain

The linked set of activities required to design, produce, and deliver products and provide aftermarket service to customers is called the _____ _____.

Blank 1: value Blank 2: chain

What types of activities are carried out regardless of which products are produced, how many batches are run, or how many units are produced?

Facility-level

Determining what a product costs and adding a markup is called ______.

cost-plus pricing

Widgets, Inc., plans to produce 8,000 widgets during the upcoming year. Each widget requires four direct labor hours at $25 per hour and $110 in direct material costs. Manufacturing overhead is assigned based on direct labor hours and is estimated to be $625,000 for the upcoming year. Compute the predetermined overhead rate per direct labor hour.

$19.53

Using an ABC system, a company has estimated overhead of $2,100,000. They expect to use 1,000,000 machine hours and 500,000 labor hours. ABC has identified this as a machine-hour related activity. The activity rate for this activity is ______.

$2.10

Adele's Attic assigns overhead to products based on direct labor hours. For the upcoming year the business plans to use a total of 25,000 machine hours and 5,000 direct labor hours. Total overhead cost is expected to be $35,000. How much overhead would be assigned to a job that used 180 machine hours and 40 direct labor hours?

$280

A company's activity rate for the general factory is $2.00 per machine hour. Product A used 3,000 machine hours and 1,000 labor hours. General factory overhead assigned to Product A is ______.

$6,000

Larson Productions LLC has an activity cost pool called product design and redevelopment. The cost driver for this pool is design hours. A total of 1,000 design hours were used, 620 for Model XLT and 380 for Model TXT. The total cost assigned to the cost pool was $118,000. Using the activity proportion method, determine how much cost should be allocated to each product.

$73,160 to Model XLT and $44,840 to Model TXT

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. The activity rates are ______.

$8 per customer call and $15 per development hour

A company assigns overhead based on direct labor costs. The predetermined overhead rate is $3.00 per direct labor dollar. A job that used a total of 20 direct labor hours ($400 in total direct labor costs) would be assigned $_____ in total overhead.

1200

SPL Enterprises assigns overhead based on number of machine hours. For the upcoming year, they plan to use a total of 250,000 machine hours and 50,000 direct labor hours. Total overhead cost is expected to be $500,000. The predetermined overhead rate per machine hour is $_____.

2 or two

Anders Inc. assigns overhead using activity proportions and has a machine setup cost pool. Last year there were 27,500 setups at a total cost of $550,000. Product R3D used a total of 8,250 of those setups and should be assigned ___ % of the total setup cost.

30 or thirty

In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver?

Activity rate

Which of the following statements is true?

An existing ABC system can report sustainability-related information.

Which of the following statements are true?

Appraisal costs are also known as inspection costs. Appraisal costs identify defective products before they get to the customer.

Which of the following statements are true?

Before implementing ABC, a company should weigh the benefits against the costs. The support of upper management is required for successful ABC implementation.

Improving operations and reducing costs is the focus of _____ - _____ management.

Blank 1: activity Blank 2: based

A technique that attempts to assign overhead costs to products based on the actions they require is called _____ - _____ _____.

Blank 1: activity Blank 2: based Blank 3: costing

A predetermined overhead rate in an activity-based costing system is called a(n) _____ _____.

Blank 1: activity Blank 2: rate

Which of the following are facility-level activities?

Paying factory insurance Human resource hiring fairs

Which of the following statements are true?

Quality training is an example of a prevention cost. Most experts believe that incurring prevention costs is the most effective way to manage quality costs.

Which of the following is NOT a value-added activity?

Storing inventory

True or false: When computing unit costs, the direct materials and direct labor costs are the same, regardless of whether ABC or a volume-based costing system is used.

True

The formula to apply overhead to products is ______.

activity rate times activity

A method that attempts to assign overhead costs based on what is required to produce products is ______ costing.

activity-based

Non-volume-based cost drivers ______.

allow more indirect costs to be allocated to products are used in ABC systems

Costs incurred to identify defective products before they get to the customer are called _____ costs.

appraisal or inspection

Indirect costs ______.

are not easily traced to products or services

The final step in activity-based costing is ______.

assigning indirect costs to products or services

At a minimum, an ABC system should have ______.

at least one non-unit-level activity cost pool

The formula to compute activity proportion is ______.

cost driver for product ÷÷ cost driver for all products

A group of similar activities that have been combined together is an activity ______.

cost pool

Activity-based management focuses on ______.

improving operations increasing efficiency

Scrapped or discarded products and rework are ______ costs.

internal failure

A just-in-time (JIT) system ______.

is used to help reduce costs is a demand-pull system

A system that pulls materials and products through the manufacturing system based on customer demand is called ______.

just-in-time

Indirect costs are also referred to as _____ costs.

overhead

The activity proportion method uses _____ to assign overhead costs to products. (Enter only one word per blank.)

percentages, %, proportions, percent, percents, or percentage

To keep quality problems from happening, companies incur _____ costs. (Enter only one word per blank.)

prevention

Activities incurred for each product produced and not dependent on the number of units or batches are _____ -level activities.

product

Research and development is a(n) _____ level activity.

product

Implementing an ABC system ______.

provides information for cost management

Internal failure costs ______.

result from defects discovered during inspection are preferred over external failures

A management system that focuses on continually improving production processes is called ______.

total quality management

The perceived value of a product or service to the customer is enhanced by _____ - _____ activities.

value added

Direct labor hours and machine hours are both examples of _____ based cost drivers. (Enter only one word per blank.)

volume