ch4

Departmental overhead rates correctly assign overhead costs in situations where a company has a range of products and complex overhead costs.

False

Total cost of each activity divided by the total activity is the computation of Blank______.

activity rates

In activity-based costing, an activity measure is Blank______.

an allocation base

Which of the following are facility-level activities?

property taxes on plant paying factory insurance

Implementing activity-based costing

requires taking employees away from other tasks should be done by a cross-functional team requires substantial resources

A company incurred the following: Total manufacturing costs of $500,000, total production department costs of $300,000, and total production order costs of $275,000. It used a total of 50,000 direct labor hours, 100,000 machine hours, and 2,750 production orders were placed. Use activity-based costing to calculate the activity rate for production orders.

= $275,000 / 2,750 production orders = $100 per Order

In ABC, any event that causes consumption of overhead resources is a(n)_________ .

activity

A predetermined overhead rate in an activity-based costing system is called a(n)

activity rate

When a company has extensive product diversity and complex overhead, it is best to assign overhead using Blank______.

activity-based costing

Activity-based management is focused on

eliminating waste reducing defects

An activity cost pool accumulates costs for Blank______ activity measure(s). Multiple choice question. multiple

exactly one

When two variables move together, they are said to be negatively correlated.

false

When cost systems were developed in the 1800's, most companies Blank______.

focused on simplicity produced a small number of similar products

Activity-based costing improves the accuracy of product costs by

increasing the number of cost pools used to accumulate overhead cost using a variety of activity measures to assign overhead costs to products using cost pools that are more homogeneous than departmental cost pools

Using direct labor-hours or another volume-based cost driver to assign overhead Blank______.

may result in selling products at a loss ignores other significant causes of overhead may result in overcharging customers for products

In activity-based costing, what is calculated by dividing the total cost of each activity by its total cost driver?

Activity rate

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

Product-level

Setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of ______level activities.

batch

Using volume-based cost drivers to assign overhead when ABC is appropriate Blank______.

may lead to overpriced or underpriced goods

Using direct labor-hours or another volume-based cost driver to assign overhead

may result in overcharging customers for products ignores other significant causes of overhead may result in selling products at a loss

Activity-based costing relies

performance within the same industry

Activities related to specific products that typically must be carried out regardless of how many batches or units are manufactured are called__________ -__________ activity

product-level

Using volume-based cost drivers to assign overhead when ABC is appropriate _________ the benefits received.

the benefits received.

For decision-making purposes, the distinction between manufacturing costs and selling and administrative expenses is Blank______.

unimportant

A company assigns overhead using a plantwide rate. If total estimated manufacturing overhead is $900,000 and the total estimated activity is 30,000 machine-hours, the overhead cost assigned to a product using 12,000 machine-hours is Blank______.

$360,000 ($900,000 / 30,000) x 12,000 = $360,000

Traditional cost systems tend to undercost standard products and overcost specialty products.

F

Setting up machines, billing customers, and performing tests at a lab are all examples of a(n) Blank______.

activity

Focusing on activities to eliminate waste, decrease processing time, and reduce defects is known as

activity based management

How much of an activity is carried out is expressed by a(n) Blank______, which is used as the allocation base for applying overhead costs to products and services.

activity measure

Processing purchase orders is considered to be a(n) Blank______-level activity.

batch

A systematic approach to identifying the activities that need the most improvement is called

benchmarking

Activity-based costing

computes product costs in the same way as traditional costing

Organization-sustaining activities is another term for ___________ - level ACTIVITES

facility

When evaluating ABC product costs, managers should be particularly alert to costs that contain allocations of_____-level costs.

facility

The cost of implementing and maintaining an activity-based costing system Blank______ the benefits received.

may outweigh

Benefits of activity-based costing include Blank______.

more accurate product costs helping managers understand the nature of overhead costs helping target areas for process improvement

Organization-sustaining activities is another term for _____________ -level activities

organization

The basis of benchmarking is comparing Blank_

performance within the same industry

Designing and advertising a good are both Blank______-level activities.

product

The ABC model is useful when an organization is making decisions about how

some selling and administrative expenses should be assigned to products

A plantwide overhead rate based on direct labor hours is Blank______ appropriate.

sometimes

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

unit level

For each unit of a product, the direct material cost is $10, the direct labor cost is $15, and the manufacturing overhead is $16. The total unit product cost using activity-based costing is Blank______.

10+15+16=41

Total estimated manufacturing overhead is $900,000 and total estimated activity is 30,000 machine-hours. The plantwide overhead rate is $

30 900000/30000

Plaster Company expects to have a total cost of $400,000 in its activity cost pool. The total expected activity is 800 machine set ups. The activity rate is $

500 400000/800

if the activity rate is $65 per order with a total of 120 orders for a product, the overhead cost assigned to the product would be $__.

65x120=$7800

Which of the following statements are true?

Technology has made more complex costing systems less expensive to develop and maintain. On an economywide basis, direct labor and overhead costs have been moving in opposite directions for a long time.

When using activity rates, overhead is assigned the same way as when using plantwide or departmental rates.

True

A "bucket" in which costs are accumulated that relate to a single activity measure in the ABC system is a(n) Blank______.

activity cost pool