Ch 5.6

6) 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 variations and complexities require more activities

3) 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) Products make diverse demands on resources because of differences in volume, process steps, batch size, or complexity.

7) 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) Products that a company is well suited to make and sell show large profits.

4) 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

2) 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 costs

1) Which method of allocation probably best estimates actual overhead costs used? Why? A) Single direct labor-hours cost driver because it is best to allocate total costs uniformly to individual jobs. B) Single direct labor-hours cost driver because it is easiest to analyze and interpret. C) Three activity-cost drivers because they best reflect the relative consumption of resources. D) Three activity-cost drivers because product costs can be significantly cross-subsidized.

C) Three activity-cost drivers because they best reflect the relative consumption of resources.

12) 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

5) 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 cost differences among products

13) ABC systems always provide decision-making benefits that exceed implementation costs. Answer: TRUE or FALSE

False

15) Simply because activity-based costing systems employ more activity-cost drivers, they provide more accurate product costs than traditional systems. Answer: TRUE or FALSE

False

14) The primary costs of an ABC system are the measurements necessary to implement the system. Answer: TRUE or FALSE

True