BADM 2710 CH5

Assignment of overhead costs to activity cost pools occurs in stage ________ of ABC costing. (Enter only one word per blank.)

1

Identification of cost drivers for each activity cost pool occurs in stage _________ of ABC costing. (Enter only one word per blank.)

2

A characteristic of an event or activity that results in the incurrence of costs is a cost ______.

driver

A system that uses multiple cost pools and assigns costs to products in accordance with the amount of the activity used by the product line is a(n) ______-costing system.

activity-based

With a traditional volume-based costing system, there is a tendency to overcost ______ products.

high-volume, standard

Direct labor is not the best cost driver for a cost related to the purchasing raw materials because the purchasing activity is a(n) ______.

batch activity and direct labor is a unit-level activity

The steps in stage two of ABC costing are ______.

computation of total unit activity cost for each product line identification of cost drivers for each activity cost pool

A characteristic of an event or activity that results in the incurrence of costs is a(n) __.

cost driver

To calculate total unit cost in an activity-based system requires ______.

direct labor per unit overhead activity cost per unit direct materials per unit

With a traditional volume-based costing system, there is a tendency to undercost ______.

low-volume, complex

Increasing automation, coupled with sophisticated real-time information systems, ______.

provides the data needed to implement highly accurate product costing systems

The degree of correlation is the ______.

relationship between the consumption of an activity and the consumption of the cost driver

An activity that must be done for each item produced is a(n) __-level activity.

unit

Labor-hour-based product-costing systems where labor hour are related closely to the factory volume are also called ______-costing systems.

volume-based throughput-based

The steps in stage one of ABC costing are ______.

assignment of costs to appropriate cost pool identification of cost pools

A pool rate of $3.00 per machine hour means that ______.

each machine hour used by a product should cost $3.00

An important factor in the move toward ABC system is ______.

increasing automation makes information more available

Volume-based costing is also called ______-based costing. (Enter only one word per blank.)

Blank 1: throughput

Costs such as heating and cooling, property taxes, and insurance on the factory are examples of ______.

facility-level activities

Factors influencing the movement from traditional to ABC costing include all of the following except ______.

high reliance on labor to produce products

Costs of setting up machinery for a new production run ______.

is a batch-level activity

Identification of a proper cost driver can result in all of the following except ______.

lower system implementation costs

Engineering design cost is an example of a(n) ______ level activity.

product-sustaining

Traditional product-costing systems may not work well when a company ______.

relies only on unit-based costs drivers manufactures a diverse set of products

Product costs can be distorted by using ______.

single cost pool only unit-level cost drivers the same cost driver for all activities

Widely varying consumption ratios result from ______.

product line diversity

One way to identify differences between products is to compare the _______ ratio of each activity cost pool used by the products. (Enter only one word per blank.)

Blank 1: consumption

The classification of activities into levels is called a(n) ____ ___. (Enter only one word per blank.)

Blank 1: cost Blank 2: hierarchy

Activities required in order for the entire production process to occur are referred to as ______-level activities. (Enter only one word per blank.)

Blank 1: facility

The cost per unit of the cost driver for a particular activity cost pool is called the _______ _______. (Enter only one word per blank.)

Blank 1: pool Blank 2: rate

Activities that are necessary to support entire product lines, but are not performed every time a new unit or batch is produced are _____-_____ level activities. (Enter only one word per blank.)

Blank 1: product Blank 2: sustaining

An activity that must be done for each item produced is a(n) _____-____ activity. (Enter only one word per blank.)

Blank 1: unit Blank 2: level

Product costs are most likely to be distorted when using a(n) ________-based product-costing system. (Enter only one word per blank.)

Blank 1: volume

True or false: The total unit product cost is calculated by adding total direct materials and total direct labor costs and dividing by the number of units produced.

False Add direct materials per unit + direct labor per unit + overhead activity costs per unit.

True or false: The classification of activities into unit-level, batch-level, product-sustaining-level, and facility-level activities is called activity-based costing.

False This is a component of activity-based costing called a cost hierarchy.

The first stage in an ABC system is to ______.

identify significant activities and assign overhead costs to each activity

One factor driving the movement toward ABC is ______.

more product diversity

Volume-based product-costing systems have difficulty assigning overhead costs accurately if ______.

there is a large proportion of non-unit-level activities products differ significantly in the way they use activities