SB 4

Which of the following are facility-level activities?

Human resource hiring fairs Paying factory insurance

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

Machine setups Reason: This is an ABC batch-level cost driver

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.

All of the following are non-volume-based cost drivers except number of Blank______.

machine hours

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

manufacturing overhead cost by the number of units produced

Under activity-based costing, a degree program at a university is considered a(n)___________ -level activity.

Blank 1: service or product

Direct labor hours and machine hours are both examples of___________ based cost drivers.

volume

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

the activity rate method the activity proportion method

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

A bakery creates a new type of cake for sale. Under activity-based costing, this is an example of a Blank______-level activity.

service

Activities can be combined if they are at different levels of the ABC hierarchy (e.g., unit, batch, product, or facility) as long as the various products place similar demands on the activity cost drivers.

False

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

Activity-based management focuses on Blank______.

improving operations increasing efficiency

Activities performed to design a new type of service to be offered are Blank______-level activities.

product

Research and development is a(n) Blank______-level activity.

product

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

cost-plus pricing

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

Activity rate

Setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of Blank______-level activities.

batch

The formula to compute activity proportion is Blank______.

cost driver for product ÷ cost driver for all products

The formula to compute activity proportion is Blank______.

cost driver for product ÷÷ cost driver for all products

A cost driver that is not strictly related to the number of units produced or customers served is a Blank______ cost driver.

non-volume-based

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

total quality management

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 wants to offer a new product, but only if it can earn a 20% return on sales. If the marketing department estimates that the new product will sell for $850, what is the most the company can spend on one unit and still achieve the goal (the target cost)?

680 Reason: $850 - ($850 × 20%) = $680.

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.

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 Reason: The only thing that changes is the amount of overhead per unit.

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

activity-based

A predetermined overhead rate in an activity-based costing system is called Blank______.

an activity rate

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

cost pool

Scrapped or discarded products and rework are Blank______ costs.

internal failure

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

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 Blank______.

just-in-time

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

life cycle costs

Once Stage 2 allocation has been completed it is possible to compute total Blank______.

manufacturing overhead per product

Implementing an ABC system Blank______.

provides information for cost management

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 during the production process.

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

Storing inventory

Which of the following statements are true?

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

Indirect costs Blank______.

are not easily traced to products or services

Internal failure costs Blank______.

are preferred over external failure costs include opportunity costs from downtime

The final step in activity-based costing is Blank______.

assigning indirect costs to products or services

Costs at the batch level depend on the number of Blank______.

batches processed

Total manufacturing overhead under activity-based costing consists of all Blank______.

overhead assigned during Stage 2 allocations

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

target costing

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

the activity proportion method the activity rate method

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

Which of the following statements are true?

Appraisal costs identify defective products during the production process. Appraisal costs are also known as inspection costs

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.

Blank 1: 1200

Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine setups. The activity rate is $______per setup.

Blank 1: 500

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

Blank 1: activity Blank 2: based

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

Blank 1: value Blank 2: added

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

To ensure that activities deliver what matters to customers, the concept of the ________ ____________begins with the customer and works backward.

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

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 Blank______.

$2.10 Reason: $2,100,000 ÷ 1,000,000 = $2.10 per machine hour

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 Reason: 620 ÷ 1000 or 62% × $118,000 = $73,160 to Model XLT and 380 ÷ 1000 or 38% × $118,000 = $44,840 to Model TXT.

Blanchard, Inc., is considering introducing a new product and wants to earn a 15% return on sales. If the market price is estimated to be $200, the most the company can spend and still achieve the goal (the target cost) is $___________.

170

Improving operations and reducing costs is the focus of - __________ __________management.

Blank 1: activity Blank 2: based

The percentage of the total cost driver that is attributable to each product line is called a(n)

Blank 1: activity Blank 2: proportion

The percentage of the total cost driver that is attributable to each product line is called a(n)___________________ .

Blank 1: activity Blank 2: proportion

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

Blank 1: appraisal or inspection

A group-level activity for a service company is the same as a(n) ______-level activity for a manufacturing company.

Blank 1: batch

A local tour company offers charter buses to corporations who have conventions or meetings in the city. Under activity-based costing, renting a bus to a corporation is a(n) __________-level activity

Blank 1: group

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

Blank 1: life Blank 2: cycle

Indirect costs are also referred to as _______ costs.

Blank 1: overhead

To keep quality problems from happening in the first place, companies incur ______ costs.

Blank 1: prevention

To keep quality problems from happening in the first place, companies incur________ costs.

Blank 1: prevention

The approach to determine what costs should be in order to earn an acceptable profit across a product's life cycle is called______ ________ .

Blank 1: target Blank 2: costing