BUAD 281 - Chapter 5

the steps in stage one of ABC costing are:

- assignment of costs to appropriate cost pool - identification of cost pools

steps performed in stage two of ABC costing include:

- computation of pool rate - computation of total activity cost for each product line - computation of product cost per unit for each product line

an activity performed for a group of products rather than individual units is a ____ level activity

batch

activity analysis and evaluation involves

- identification of events that trigger activities - determination of root causes of activities - evaluation of performance measures

factors influencing the movement from traditional to ABC costing

- more product diversity - higher volume of multiple product lines - need for better cost information due to increasing competition

a value added activity is (2)

- necessary to production - performed efficiently

to calculate total unit cost in an activity based system requires:

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

non value added costs should be highlighted in...

activity center cost reports

identification of activity costs pools occurs in stage ____ of ABC costing

one

storyboarding is the process of

placing key information about departmental activities on cards and organizing the cards into the activity sequence

activity analysis that looks at a set of linked activities to determine the cause of a non-value added activity is called ___ ___ analysis

process value

an activity that must be done for each item produced is a ____ ____ activity

unit level activity

the steps in customer profitability analysis include

- calculate customer related cost driver rate - apply customer related cost driver rate to customer activity - identify customer related cost drivers - identify customer related activities

product costs can be distorted by using

- the same cost driver for all activities - a cost driver at a level different from the activity - single cost pool

the advantages of TDABC over convention ABC are

- the system will assign costs based upon practical capacity - TBABC activity is more easily tracked than the data used in conventional ABC

activities required in order for the entire production process to occur are referred to as _____ _____ _____

facility level activities

continuous and gradual cost reduction is the meaning of ____ costing

kaizen costing

an activity that is unnecessary and dispensable is a

non value added activity

volume based (throughput based) costing system

product costing system in which costs are assigned to products on the basis of a single activity base related to volume (direct labor hours or machine hours)

redesign of an existing product or testing prototypes are examples of

product sustaining level activity

customer profitability analysis is not affected by

standard product costs

a characteristic of an event or activity that results in the incurrence of costs is a cost ____

driver

the degree of correlation is ...

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

storage time is the time ...

which materials, partially completed products, or finished goods are held in stock before further processing or shipment to customers

product costs are most likely to be distorted when using a ____ based product costing system

volume

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

reasons that time-driven activity based costing (TDABC) is used in service industries include

- resources deployed are frequently associated with the time taken to provide the service - the focus of reporting can easily highlight unused capacity - capacity in service industries is usually expressed in terms of time

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 an _____ costing system

activity based

the use of ABC information to support an organization's strategy, improve operations or manage costs is called ____ ____ management

activity based management (ABM)

the concept of involving personnel from various functional areas to gather information from all facets of operations and improve credibility of decisions is the purpose of a ...

multidisciplinary team

what is an example of a customer value added activity

technical support for a cell phone

with a traditional volume based costing system, there is a tendency to undercost...

.low volume, complex products

a complete listing of all activities identified and used in the ABC analysis is

an activity dictionary

direct labor is not the best cost driver for a cost related to the purchasing raw materials because the purchasing activity is an_______

batch activity and direct labor is a unit level activity

one way to identify differences between products is to compare the ____ ratio of each activity cost pool used by the products

consumption

the focus on identification of activities that impact the cost object is part of the ____ ____ view of an ABC system.

cost assignment

the classification of activities into levels is called a ____ ____

cost hierarchy

cost of measurement relates to the

cost of obtaining the information compared to the benefit of using the information obtained

the process of identifying the cost and use of services by customers is called ____ ____ analysis

customer profitability analysis