BUAD 281 Chapter 5

The steps in customer-profitability analysis include ______.

1) calculate customer related cost driver rate 2) identify customer related cost drivers 3) apply customer related cost driver rate to customer activity 4) identify customer related activities

Identification of cost drivers for each activity cost pool occurs in stage ______ of ABC costing

2

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

driver

Storage time is the time ______.

during which items are held before further processing or shipment

The use of ABC information to support an organization's strategy, improve operations or manage costs is called ________-_______ management.

activity-based

A complete listing of all activities identified and used in the ABC analysis is ______.

an activity dictionary

Activities required in order for the entire production process to occur are referred to as ________ level activities

facility

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

facility-level activities

The process of identifying the cost and use of services by customers is called _____________ ______________ analysis.

customer profitability

A "whale chart" is a common name for a ______.

customer-profitability profile

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

product-sustaining

One way of picturing the relationship between ABC and ABM is in terms of the ___________-___________ ABC model that shows how costs can be repurposed to provide insight into the cost and effectiveness of the processes.

two-dimensional

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

unit

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

unit-level

Product costs are most likely to be distorted when using a(n) ___________-based product costing system

volume

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

high-volume, standard

The customer-profitability analysis information is frequently used by management to do all of the following except ______. a) determine which product lines to eliminate b) determine the percentage of company profit generated by each customer c) determine which customers to eliminate d) educate customers to reduce costs of customer related services

A

Managers who have a good understanding of which customers are generating the greatest profit can ______. a) often change customer behaviors b) share cost savings with customers c) eliminate all special services d) make informed decisions about customer service

A, B, and D

Reasons that time-driven activity-based costing (TDABC) is used in service industries include ______. a) capacity in service industries is usually expressed in terms of time b) the focus of reporting can easily highlight unused capacity c) non-time-based activity data is usually collected in service industries, unlike conventional ABC d) resources deployed are frequently associated with the time taken to provide the service

A, B, and D

ABC costing is used in the service industry for all of the following except to ______. a) obtain more accurate information about the cost of producting services b) identify the number of products to sell to each customer c) identify value-added and non-value added activities d) improve organizational profitability

B

Direct labor is not the best cost driver for a cost related to the purchasing raw materials because the purchasing activity is a(n) ______. a) cost related to machine hours, not direct labor b) batch activity and direct labor is a unit level activity c) unit level activity unrelated to direct labor d) product-sustaining activity and direct labor is a unit level activity

B

The cost assignment view of the ABC system uses all of the following except ______. a) determination of resource costs b) identification of events that trigger activities c) assignment of resource costs to activity cost pools d) assignment of activity costs to cost objects

B

A common version of ABC that is used in the service industry is called

TDABC

True or false: An activity may be valued-added in some situations and non-value added in other situations.

True: An activity such as material movement may be necessary between departments, but unnecessary within a department.

Product costs can be distorted by using ______. a) single cost pool b) the same cost driver for all activities c) activity based cost drivers d) multiple cost pools e) only unit level cost drivers

a, b, and e

The intersection of the cost assignment view and the process view in the two-dimensional ABC model is ______.

activities

Non-value added costs should be highlighted in ______.

activity center cost reports

Categorizing the ways in which time is spent in a production process is one approach cost-management analysts find helpful in ______.

identifying non-value added activities

The process of speaking with a key employee in a support department to gather information about how time is spent is an example of ______.

interviewing

A duplicate operation ______.

is always a non-value added activity

Continuous and gradual cost reduction is the meaning of ___________ costing.

kaizen

The concept that improvement is the goal and responsibility of every worker from the CEO to manual laborers, in every activity, every day, all the time is the basis of ______ costing.

kaizen

One factor driving the movement toward ABC is ______.

more product diversity

An activity that is unnecessary and dispensable is a(n) ______.

non-valued added activity

Storyboarding is the process of ______.

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

The cost per unit of the cost driver for a particular activity cost pool is called the

pool rate

The time-driven cost driver rate is calculated based on ______ capacity.

practical

A set of linked activities is called a(n)

process

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

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

A procedure used to develop a detailed process flowchart, which visually represents activities and the relationship between activities is called

storyboarding

The purpose of an activity dictionary is to provide a list of ______.

system terminology for consistent usage

Volume-based costing is is also called __________ based costing

throughput

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

throughput-based and volume-based

The steps in stage two of ABC costing are ______.

1) identification of cost drivers for each activity cost pool 2) computation of total unit activity cost for each product line

Non-value added activities can be ______.

1) necessary, but inefficient and improvable and 2) unnecessary and dispensable

The advantages of TDABC over convention ABC are ______.

1) the system will assign costs based upon practical capacity and 2) TDABC activity is more easily tracked than the data used in conventional ABC

A pool rate of $3.00 per machine hour means that ______. a) each machine hour used by a product should cost $3.00 b) each product that uses machine hours should cost $3.00 for machine related activities

A

Costs of setting up machinery for a new production run ______. a) is a batch-level activity b) should be assigned using machine hours as the cost driver c) should not be assigned to products d) is a product-sustaining level activity

A

Traditional product costing systems may not work well when a company ______. a) has high direct labor and direct material and very low overhead costs b) relies only on unit-based costs drivers c) manufactures a diverse set of products d) only does large production runs

B and C

When implementing an ABC system, identifying a company's significant activities ______. a) is the final step b) is called activity analysis c) should create an activity list broken down to the most fundamental level practical d) should create an activity list that combines all related functions (i.e. all purchasing activities) together

B and C

Which of the following statements are true? a) Service industries cannot use ABC costing as service industries only have labor cost drivers. b) The objectives of ABC costing in service industries are no different from those in manufacturing industries. c) Activities in service industries are classified as unit level, batch level, product-sustaining level and facility level activities. d) The objectives of ABC costing in service industries are different from those in manufacturing industries.

B and C

Factors influencing the movement from traditional to ABC costing include all of the following except ______. a) more product diversity b) need for better cost information due to increasing competition c) high reliance on labor to produce products d) higher volume of multiple product lines

C

The second stage in an ABC system is to ______. a) assign overhead costs to activity cost pools b) analyze the physical flow of units c) identify high volume products d) identify the cost driver for each activity cost pool

D

Which of the following is a customer value added activity? a) salary of company's president b) legal costs of a patent c) advertising d) technical support for a cell phone

D

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

A complete listing of activities required for the production of a product or service is a(n) ______.

bill of activities

A company's expenditures on IT or accounting is an example of a(n) ________-________-_________ activity

business-value-added

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

low-volume, complex

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

product-sustaining

A graphical display of an organization's complete customer-profitability analysis is called a customer-profitability ____________ or more commonly a(n) ____________ chart.

profile and whale

Using activity-based costing to determine the activities, costs and profits associated with serving particular customers is called customer ______ analysis.

profitability