Are 119 Ch. 5
Explain the difference between the costs obtained from the traditional costing system and the ABC system. Which system provides a better estimate of costs? Why? *product do not require the same proportionate shares of the overhead of resources set up hours and component *abc considers some important differences in overhead resource requirement *provide a better picture of costs for each style( provided that the activity measure are fairly estimated
Because the products do not all require the same proportionate shares of the overhead resources of setup hours and components, the ABC system provides different results than the traditional system which allocates overhead costs on he basis of direct labor hours. The ABC system considers some important differences in overhead resource requirements and thus provides a better picture of the costs from each grooming table style, provided that the activity measures are fairly estimated.
Put the following ABC implementation steps in order: A Compute the allocation rates. B Compute the total cost of the products. C Identify the products that are the cost objects. D Select the cost allocation bases.
C Identify the products that are the cost objects D Select the cost allocation bases. A Compute the allocation rates. B Compute the total cost of the products.
ABC systems: a. highlight the different levels of activities b. limit cost drivers to units of output c. allocate costs based on the overall level of activity d. generally undercost complex products
a highlight the different levels of acitvities
43. Logical cost allocation bases include: a. cubic feet of packages moved to measure distribution activity b. machine hours to measure setup activity c. direct manufacturing labor hours to measure designing activity d. All of these answers are correct.
a. 只有第一个是符合逻辑的，allocation base 要和activity 匹配
If products are alike, then for costing purposes a. a simple costing system will yield accurate cost numbers b. an activity-based costing system should be used c. multiple indirect-cost rates should be used d. varying demands will be placed on resources
a. a simple costing system will yield accurate cost numbers
ABC systems identify __________ costs used by products. a. all b. short-term fixed c. short-term variable d. long-term fixed
a. all
Companies use ABC system information to:
a. analyze costs b. prepare budgets c. evaluate performance
A well-designed, activity-based cost system helps managers make better decisions because information derived from an ABC analysis: a. can be used to eliminate nonvalue-added activities b. is easy to analyze and interpret c. takes the choices and judgment challenges away from the managers d. emphasizes how managers can achieve higher sales
a. can be used to eliminate nonvalue added information derived from an ABC analysis
Activity-based costing (ABC) can eliminate cost distortions because ABC: a. develops cost drivers that have a cause-and-effect relationship with the activities performed b. establishes multiple cost pools c. eliminates product variations d. recognizes interactions between different departments in assigning support costs
a. develops costs drivers that have a cause and effect relationship with the activities performed
The focus of ABC systems is on: a. long-term decisions b. short-term decisions c. make-or-buy decisions d. special-pricing decisions
a. long term decision
Factories producing a more varied and complex mix of products have higher costs than factories producing only a narrow range of products because: a. more variations and complexities require more activities b. they require more engineers c. they require more direct laborers d. they buy more robotics
a. more variation and complexities require more activities
It is important that the product costs reflect as much of the diversity and complexity of the manufacturing process so that:
a. product costs will reflect their relative consumption of resources b. nonvalue-added costs can be eliminated c. there is less likelihood of cross subsidizing of product costs
ABC systems::
a. reveal activities that can be eliminated b. help control nonfinancial items such as number of setup hours c. help identify new designs to reduce costs
Different products consume different proportions of manufacturing overhead costs because of differences in all of the following EXCEPT: a. selling prices b. customers' customization specifications c. setup times d. product design
a. selling prices
. A single indirect-cost rate may distort product costs because: a. there is an assumption that all support activities affect all products b. it recognizes specific activities that are required to produce a product c. costs are not consistently recorded d. it fails to measure the correct amount of total costs
a. there is an assumption that all supprt activities affects all producets
Undercosting a particular product may result in: a. loss of market share b. lower profits c. operating inefficiencies d. understating total product costs
b lower profit
ABC assumes all costs are __________ because over the long run management can adjust the amount of resources employed. a. fixed b. variable c. committed d. nondiscretionary
b variable
Smaller cost distortions occur when the traditional systems' single indirect-cost rate and the activity-cost-driver rates: a. use the same total costs for computations b. are similar in proportion to each other c. are more different than alike d. use the same cost driver units
b. are similar in proportion to each other
Which of the following is a sign that an ABC system may be useful? a. There are small amounts of indirect costs. b. products make diverse demands on resources because of differences in volume, process steps, batch size, or complexity. c. Products a company is less suited to produce and sell show small profits. d. Operations staff agrees with accountants about the costs of manufacturing and marketing products and services.
b. differences in volume, process steps batch size or complexity
Which of the following statements about activity-based costing is NOT true? a. Activity-based costing is useful for allocating marketing and distribution costs. b. Activity-based costing is more likely to result in major differences from traditional costing systems if the firm manufactures only one product rather than multiple products. c. Activity-based costing seeks to distinguish batch-level, product-sustaining, and facility-sustaining costs, especially when they are not proportionate to one another. d. Activity-based costing differs from traditional costing systems in that products are not cross-subsidized.
b. if the firm just manufactures one product, activity based costing will result very similar to traditional costing
It ONLY makes sense to implement an ABC system when: a. ABC provides information to make better decisions b. its benefits exceed implementation costs c. ABC traces more costs as direct costs d. there is a strong cause-and-effect relationship between costs in the cost pools and their cost-allocation bases
b. its benefits exceed implementation cost
Unit-level cost drivers are most appropriate as an overhead assignment base when: a. several complex products are manufactured b. only one product is manufactured c. direct labor costs are low d. factories produce a varied mix of products
b. only one product is manufactured
Activity-based costing is most likely to yield benefits for companies with all of the following characteristics EXCEPT: a. numerous products that consume different amounts of resources b. operations that remain fairly consistent c. a highly competitive environment, where cost control is critical d. accessible accounting and information systems expertise to maintain the system
b. operations that remain fairly consistent
Which of the following is NOT a sign that a "smoothing out" costing system exists? a. Operations managers don't use the data originated by the cost system. b. Products that a company is well suited to make and sell show large profits. c. New product variations have been added, but the cost system has not been upgraded. d. The company loses bids they believe were priced competitively.
b. product that company is well suited to make and sell show large profits
Products make diverse demands on resources because of differences in all of the following EXCEPT: a. volume b. selling price c. batch size d. complexity
b. selling price
Activity-based management (ABM) includes decisions about all EXCEPT: a. pricing and product mix b. smoothing costs c. reducing costs d. improving processes
b. smoothing cost
Design of an ABC system requires: a. that the job bid process be redesigned b. that a cause-and-effect relationship exists between resource costs and individual activities c. an adjustment to product mix d. Both b and c are correct.
b. that the cause and effect relationship exists between resource costs and individual activities
Using activity-cost rates rather than department indirect-cost rates to allocate costs results in different product costs when: a. a single activity accounts for a sizable portion of department costs b. there are several homogeneous cost pools c. different activities have the same cost-allocation base d. different products use different resources in the same proportion
b. there are several homogeneous cost pools
The use of a single indirect-cost rate is more likely to: a. undercost high-volume simple products b. undercost low-volume complex products c. undercost lower-priced products d. Both b and c are correct
b. under-cost low-volume complex products
To set realistic selling prices: a. all costs should be allocated to products b. costs should only be allocated when there is a strong ause-and-effect relationship c. only unit-level costs and batch-level costs should be allocated d. only unit-level costs should be allocated
b.cost should only be allocated when there is strong cause and effect relationship
Misleading cost numbers are MOST likely the result of misallocating: a. direct material costs b. direct manufacturing labor costs c. indirect costs d. All of these answers are correct.
c indirect costs
Assume a traditional costing system applies the $60,000 of overhead costs based on direct labor hours. What is the total amount of overhead costs assigned to the standard model? a. $24,800 b. $35,200 c. $37,500 d. $22,500
c. [$60,000 / (375 + 225)] x 375 = $37,500
Under the revised ABC system, overhead costs per unit for the Sweatshirts will be: a. $1.39 per unit b. $1.60 per unit c. $2.19 per unit d. $2.47 per unit
c. $76,720 / 35,000 sweatshirts = $2.19
For service organizations that bill customers at a predetermined average rate, activity-based cost systems can help to: a. clarify appropriate cost assignments for various service activities. b. identify the profitability of various service activities. c. Both a and b are correct. d. None of these answers are correct.
c. both : clarify appropriate cost assignment for various service activities identify the profitability of various service activities.
The goal of a properly constructed ABC system is to: a. have the most accurate cost system b. identify more indirect costs c. develop the best cost system for an economically reasonable cost d. have separate allocation rates for each department
c. develop the best cost system for an economically reasonable cost
Activity-based costing systems provide better product costs when they: a. employ more activity-cost drivers b. employ fewer activity-cost drivers c. identify and cost more indirect cost differences among products d. always yield more accurate product costs than traditional systems
c. identify and cost more indirect costs differences among products
Refining a cost system includes: a. classifying as many costs as indirect costs as is feasible b. creating as many cost pools as possible c. identifying the activities involved in a process d. seeking a lesser level of detail
c. identifying the activities involved in a process.
A manufacturing firm produces multiple families of products requiring various combinations of different types of parts. Of the following, the MOST appropriate cost driver for assigning materials handling costs to the various products is: a. direct labor hours b. number of units produced c. number of parts used d. number of suppliers involved
c. number of parts used
Design costs are an example of: a. unit-level costs b. batch-level costs c. product-sustaining costs d. facility-sustaining costs
c. product sustaining cost
A PRIMARY reason for assigning selling and distribution costs to products for analytical purposes is: a. to justify a varied product mix b. that controllers are required to assign all costs when valuing inventories c. that different processes, products, and customers require different quantities of selling and distribution activities d. that all indirect costs must be assigned
c. that difference process, products and customers require different quantities of selling and distribution activities
With traditional costing systems, products manufactured in small batches and in small annual volumes may be __________ because batch-related and productsustaining costs are assigned using unit-related drivers. a. overcosted b. fairly costed c. undercosted d. ignored
c. undercosted
Greater indirect costs are associated with: a. specialized engineering drawings b. quality specifications and testing c. inventoried materials and material control systems d. All of these answers are correct. Answer: d Difficulty:
d
Dalrymple Company produces a special spray nozzle. The budgeted indirect total cost of inserting the spray nozzle is $80,000. The budgeted number of nozzles to be inserted is 40,000. What is the budgeted indirect cost allocation rate for this activity? a. $0.50 b. $1.00 c. $1.50 d. $2.00
d. $80,000 / 40,000 = $2.00
It is usually difficult to find good cause-and-effect relationships between __________ and a cost allocation base. a. unit-level costs b. batch-level costs c. product-sustaining costs d. facility-sustaining costs
d. facility sustaining
__________ costs support the organization as a whole. a. Unit-level b. Batch-level c. Product-sustaining d. Facility-sustaining
d. facility sustaining costs
Product lines that produce different variations (models, styles, or colors) often require specialized manufacturing activities that translate into: a. fewer indirect costs for each product line b. decisions to drop product variations c. a greater number of direct manufacturing labor cost allocation rates d. greater overhead costs for each product line
d. greater overhead cost for each product line
The MOST likely example of an output unit-level cost is: a. general administrative costs b. paying suppliers for orders received c. engineering costs d. machine depreciation
d. machine depreciation
A key reason for using an ABC system rather than a department-costing system is because ABC assigns indirect costs: a. using broader averages b. more simply than a department-costing system c. in a less costly manner d. to reflect differences required by different processes as well as customers
d. reflect differences required by different process as well as customers
The MOST likely example of a batch-level cost is: a. utility costs b. machine repairs c. product-designing costs d. setup costs
d. set up cost
. Traditional cost systems distort product costs because: a. they do not know how to identify the appropriate units b. competitive pricing is ignored c. they emphasize financial accounting requirements d. they apply average support costs to each unit of product
d. they apply average support costs to each unit of product
Using multiple unit-level cost drivers generally constitutes an effective activity-based cost system.
false In addition to unit-level cost drivers, an effective activity-based cost system usually uses batch-level, product-sustaining, and facility-sustaining cost drivers 不只是多用unit就effective了， 还有batch 等等
Simply because activity-based costing systems employ more activity-cost drivers, they provide more accurate product costs than traditional systems.
false When there are more activity-cost drivers, there is also more room for error, which may not result in more accurate products costs.
The UNIQUE feature of an ABC system is the emphasis on: a. costing individual jobs b. department indirect-cost rates c. multiple-cost pools d. individual activities
individual activities
An accelerated need for refined cost systems is due to: a. global monopolies b. rising prices c. intense competition d. a shift toward increased direct costs
intense competition
(41-44 will be based on this) $Activity Activity cost Activity-cost driver Supervision $100,920 Direct labor hours (DLH) Inspection $124,000 Inspections $Activities demanded T-SHIRTS SWEATSHIRTS 0.75 DLH/unit 1.2 DLH/unit 45,000 DLHs 42,000 DLHs 60,000 inspections 17,500 inspections &Under the revised ABC system, the activity-cost driver rate for the supervision activity is:
supervision activity: $100,920 / (45,000 dlh + 42,000 dlh) = $1.16 per dlh
For activity-based cost systems, activity costs are assigned to products in the proportion of the demand they place on activity resources.
true
Unit-level measures can distort product costing because the demand for overhead resources may be driven by batch-level or product-sustaining activities.
true
Under the revised ABC system, total overhead costs allocated to Sweatshirts will be: a. $ 48,720 b. $ 76,720 c. $224,920 d. None of these answers are correct.
$124,000 / (60,000 inspections + 17,500 inspections) = $1.60 per inspection x17,500 = $28,000 plus $100,920 / (45,000 dlh + 42,000 dlh) = $1.16 per dlh x 42,000 dlh = $48,720; $28,000 + $48,720 = $76,720
continue last one, What are the indirect manufacturing costs per remote control assuming an activity-based-costing method is used and a batch of 50 remote controls are produced? The batch requires 100 parts, 6 direct manufacturing labor hours, and 2.5 minutes of inspection time.
($2 x 100) + ($20 x 6) + ($3 x 2.5) = $327.50 per batch / 50 units per batch = $6.55 per unit
Products S5 and CP8 each are assigned $50.00 in indirect costs by a traditional costing system. An activity analysis revealed that although production requirements are identical, S5 requires 45 minutes less setup time than CP8.
According to an ABC system, S5 uses a disproportionately: a. smaller amount of unit-level costs b. larger amount of unit-level costs c. smaller amount of batch-level costs d. larger amount of batch-level costs c: smaller amount of batch level cost
Cost Pool Overhead Costs Activity-cost driver Materials handling, $ 45,000, 90,000 orders Machine maintenance; $300,000; 15,000 maintenance hours Setups ; $270,000; 45,000 setups Inspections ; $105,000 21,000 inspections Total support costs $720,000 Production Estimates Production units: Regular = 8,000,000 units Jumbo = 16,000,000 units Machine-hours = 200,000 mh Labor-hours = 400,000 dlh
During October, Mayan produced 700,000 regular ceramic paperweights and Mayan's production manager counted 2,000 orders; 1,000 maintenance-hours;2,000 setups; and 2,000 inspections for the regular product line. For October, Mayan's controller assigned _________ indirect costs to the regular product line. [($45,000 / 90,000) x 2,000] + [($300,000 / 15,000) x 1,000] + [($270,000 / 45,000) x 2,000] + [($105,000 / 21,000) x 2,000] = $43,000 $43000!!!!!
Misleading cost numbers are larger when unit-level assignments and the alternative activity-cost-driver assignments are proportionately similar to each other.
False Misleading cost numbers are larger when unit-level assignments and the alternative activity-cost-driver assignments are proportionately DISSIMILAR to each other.
barriers for implementing ABC for this call center.
Poor model design or poor analytical interpretation and accountability consequences may function as barriers to using ABC assignments for the call center activities. It is also important to recognize that the call volumes from this year may be an anomaly so that in an average year, the current allocation rate on sales may not be as distortive as it appears for this year.
comparing between traditional costing and ABC costing :
The costing results for SR6 under the new system depend on the adequacy and quality of the estimated cost drivers and costs used by the system
Costing systems with multiple cost pools are considered ABC systems.
The uniqueness of ABC systems is not simply multiple cost pools, but that the cost pools each relate to different activities.
Which method of allocation probably best estimates actual overhead costs used? Why?
Three activity-cost drivers because they best reflect the relative consumption of resources.
Activities Cost driver Allocation Rate Material handling Number of parts $2 per part Assembly Labor hours $20 per hour Inspection Time at inspection station $3 per minute The current traditional cost method allocates overhead based on direct manufacturing labor hours using a rate of $200 per labor hour.
What are the indirect manufacturing costs per remote control assuming the traditional method is used and a batch of 500 remote controls are produced? The batch requires 1,000 parts, 10 direct manufacturing labor hours, and 15 minutes of inspection time. traditional method: 200*10=2000 2000/500=$4 per unit
Using an ABC system, next year's estimates show manufacturing overhead costs will total $228,300 for 52,000 T-shirts. If all other T-shirt costs and sales prices remain the same, the profitability that can be expected is
[52,000 ($16(price) - $2.00 - $4.50 - $4.00)] - $228,300 = $57,700 / 52,000 = $1.11
Traditional systems are likely to undercost complex products with lower production volume.
true