ACC 211 Chapter 5

Steven Co. has two products: A and B. The following is information about the assembly activity in its factory: Estimated cost Estimated activity Product A Product B Total Assembly $14,600 500 250 750 The activity rate for the Assembly Department is closest to:

$19.47

Which of the following is an example of a value-added activity?

Factory supervision

Based on real experience, it is not possible to improve environmental performance while improving economic performance.

False

Of the three cost assignment approaches, the approach suggested by Kambry is the one that best reflects the resources consumed by each wrestler.

False

Identify the first step in designing an activity-based system.

Identifying activities involved

Which of the following is true of activity-based costing?

It is used by organizations that manufacture only one product.

Which of the following best describes driver analysis?

The analysis of the factors that cause activity costs

ABC can be used to help classify customers into one of four categories based on current profitability and the potential for future profitability.

True

One way to improve Category IV customers (those with substantial future profit potential but current low profitability) is to reduce the cost-to-serve these customers by eliminating nonvalue-added activities and increasing the efficiency of value-added activities.

True

The United Nations Division for Sustainable Development recommends the use of ABC to break out environmental costs from overhead.

True

Using Carsen's suggested cost assignment method, Carsen received more pizza cost than Joseph because of size and product diversity

True

A key component of activity-based costing is:

cassigning costs and overheads to activities.

The proportion of each activity used by a product is called:

consumption ratio.

In activity-based costing hierarchy, costs that do not vary with any factor but are necessary in operating the plant are categorized as:

facility-sustaining costs.

Activity drivers are:

factors that measure the consumption of activities by products.

An important difference between activity-based costing and traditional costing is that under activity-based costing, _____.

multiple overhead rates are calculated

An example of a cost driver for a machining activity could be the:

number of machine hours.

The use of plantwide or departmental rates assumes that a product's consumption of overhead is based on:

unit-level activity.

In the activity-based costing hierarchy, costs that vary with output volume are categorized as:

unit-level costs