CH7

In ABC costing, the consumption of overhead resources is caused by Blank______. Multiple choice question. material purchases an activity direct labor machine hours

an activity

Costs at the batch level depend on the number of Blank______. Multiple choice question. products in a batch batches processed units produced units sold

batches processed

In activity-based costing, nonmanufacturing and manufacturing costs are assigned to products on a(n) Blank______ basis. Multiple choice question. day-to-day as needed compare-and-contrast cause-and-effect

cause-and-effect

When using a traditional absorption costing system, what type of costs are assigned to products even if the costs are not caused by the products? Multiple choice question. Manufacturing only Nonmanufacturing only Both manufacturing and nonmanufacturing Neither manufacturing nor nonmanufacturing

Manufacturing only

What level of activity is performed each time a single product item is produced? Multiple choice question. Unit-level Customer-level Batch-level Product-level

Unit level

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

exactly one Activity cost pool is a "bucket in which costs are accumulated that relate to a single activity measure in the ABC system.

Activity-based costing (ABC) is a costing method that provides managers with cost information for decisions that potentially affect capacity. True false question. True False

True: Decisions that affect capacity need cost information about both fixed and variable cost, which is provided by ABC.

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

activity

Activity based costing provides managers with information that potentially affects Blank______. Multiple choice question. only variable costs both fixed and variable costs neither fixed nor variable costs only fixed costs

both fixed and variable costs ABC provides information for decisions about capacity and therefore includes fixed as well as variable costs.

Activity rates are used to apply overhead costs to products and customers in _______________-stage allocation.

second

Simple counts of the number of times an activity occurs are ___________________ drivers.

transaction

Which of the following is NOT an ABC level of activity? Multiple choice question. Customer Organization Employee Batch Unit

Employee Activity-based costing defines five levels of activity—unit-level, batch-level, product-level, customer-level, and organization-sustaining

ABC does not assign customer-level and unused capacity costs to products. True false question. True False

False: ABC does not assign organization-sustaining and unused capacity costs to products.

Activities such as design or engineering changes for an item being produced are referred to as ____________-level activities.

Product Product-level activities are performed for specific products regardless of how many batches are run or units produced. Designing a product, advertising a product, and maintaining a product manager and staff are examples of product-level activities.

A "bucket" in which costs are accumulated that relate to a single activity measure in the ABC system is a(n) Blank______. Multiple choice question. duration driver transaction driver activity cost pool activity measure

activity cost pool

In ABC, the term cost driver is used to refer to a(n) __________ __________ because it should "drive" the cost being allocated .

activity measure

Total cost of each activity divided by the total activity is the computation of Blank______. Multiple choice question. transaction drivers cost pools activity rates allocation bases

activity rates

When using a traditional costing system, standard products often report an artificially Blank______ product margin, while custom products report an artificially Blank______ product margin. Multiple choice question. high, low low, high

low, high

Focusing on activities to eliminate waste, decrease processing time, and reduce defects is the basis of activity-based ___________

management

An example of a transaction driver is the Blank______. Multiple choice question. number of bills sent out to a customer time spent repairing equipment time spent preparing invoices number of hours spent setting up equipment

number of bills sent out to a customer The term cost driver is also used to refer to an activity measure because the activity measure should "drive" the cost being allocated. The two most common types of activity measures are transaction drivers and duration drivers. Transaction drivers are simple counts of the number of times an activity occurs, such as the number of bills sent out to customers.

In traditional absorption costing, Blank______ costs are assigned to products. Multiple choice question. only manufacturing neither manufacturing nor selling and administrative only selling and administrative both manufacturing and selling and administrative

only manufacturing

Costs that are unaffected by which products are made during a period are Blank______ costs. Multiple choice question. unit-level manufacturing overhead organization-sustaining batch-level customer-level

organization-sustaining

Activity-based costing treats organization-sustaining costs as _______________ expenses.

period

Costs incurred that are not related to number of batches run or unit produced, such as making design changes are ____________- level costs.

product

Select all that apply Which of the following items are the same under both ABC and traditional costing? Multiple select question. Net operating income Total costs Product margins Total sales

Net operating income Total costs Total sales

Select all that apply In activity-based costing, what costs are not assigned to products? Multiple select question. Organization-sustaining Sales commissions Direct labor Unused capacity

Organization-sustaining Unused capacity

Which of the following is NOT an organizational sustaining cost? Multiple choice question. Security guard wages Plant controller's salary Set-up labor wages Plant administrative supplies

Set-up labor wages Organization-sustaining costs include costs such as the factory security guard's wages, the plant controller's salary, and the cost of supplies used by the plant manager's secretary. Absorption costing systems allocate these types of manufacturing overhead costs to products even though they are unaffected by which products are made during a period. Conversely, activity-based costing systems treat organization-sustaining costs as period expenses rather than arbitrarily assigning them to products.

Unit product costs rise due to unused capacity when using Blank______. Multiple choice question. activity-based costing systems only both activity-based and absorption costing systems neither activity-based or absorption costing systems absorption costing systems only

absorption costing systems only Absorption costing systems also allocate the cost of unused capacity to products. If the budgeted level of activity declines, the overhead rate and unit product costs rise, thereby ensuring that the shrinking volume of output absorbs the increasing cost of idle capacity. In contrast, activity-based costing systems charge products only for the cost of the capacity they use-not for the 1 cost of the capacity they don't use.

Some manufacturing costs may be excluded from product costs when using Blank______ costing. Multiple choice question. traditional absorption activity-based either traditional absorption or activity-based neither traditional absorption nor activity-based

activity-based Activity-based costing assigns costs on a cause-and-effect basis. Some manufacturing costs may be excluded. Traditional absorption costing includes all manufacturing costs.

Overhead includes both manufacturing and nonmanufacturing costs under Blank______ costing. Multiple choice question. both activity-based and traditional absorption traditional absorption neither activity-based or traditional absorption activity-based

activity-based Activity-based costing includes both manufacturing and nonmanufacturing costs in overhead. Under traditional costing, nonmanufacturing costs are treated as period costs, not overhead.

Under activity-based costing, overhead includes Blank______. Multiple choice question. both direct and indirect costs only indirect non-manufacturing costs all indirect costs only indirect manufacturing costs

all indirect costs

In activity based costing another term for activity measure is Blank______. Multiple choice question. volume cost pool overhead cost driver

cost driver

The most appropriate activity measure for a cost pool consisting of the costs of resources consumed taking and processing individual customer sales is the number of Blank______. Multiple choice question. customers customer orders sales employees items sold

customer orders

A cost pool including costs to entertain clients and make sales calls is a(n) Blank______ activity. Multiple choice question. unit-level product-level customer-level batch-level

customer-level

The amount of time required to perform an activity is measured by a(n) ____________________ driver

duration

Select all that apply Activity-based management is focused on Blank______. Multiple select question. eliminating waste increasing processing time pricing decisions reducing defects

eliminating waste reducing defects Activity-based management involves focusing on activities to eliminate waste, decrease processing time, reduce defects, and lower costs.

The most appropriate activity measure for a cost pool consisting of equipment depreciation and power to run machines is Blank______. Multiple choice question. direct labor hours machine hours product designs customer orders

machine hours The Order Size activity includes the costs consumed making individual units of product, such as factory supplies, electricity to run machines, and equipment depreciation. This is a unit-level activity because each unit requires some of these resources. The activity measure for this cost pool is machine-hours.

Activity-based costing Blank______ include activities that do not relate to the number of units produced. Multiple choice question. may may not

may Activity-based costing measures are not necessarily related to the number of units produced.

Usually, traditional costing Blank______ high-volume products and Blank______ low-volume products. Multiple choice question. undercosts; overcosts overcosts; undercosts

overcosts; undercosts Traditional costing uses a volume-related allocation base and assigns more costs to high-volume products, resulting in overcosting. In contrast, it assigns fewer costs to low-volume products, resulting in undercosting.

In activity-based costing, first-stage allocation assigns ___________ costs to activity cost pools.

overhead

Unit-level activities are Blank______. Multiple choice question. proportional to the number of units produced performed for specific customers performed for each group of units related to specific products produced

proportional to the number of units produced NOT: performed for specific customers Reason: This is the definition of a customer-level activity. performed for each group of units Reason: This is the definition of a batch-level activity related to specific products produced Reason: This is the definition of a product-level activity. Unit-level activities are performed each time a unit is produced. The costs of unit-level activities should be proportional to the number of units produced. For example, providing power to run processing equipment would be a unit-level activity because power tends to be consumed in proportion to the number of units produced.

Select all that apply Customer-level activities include Blank______. Multiple select question. advertising placing purchase orders sales calls mailing catalogs

sales calls mailing catalogs Examples of Customer-level activities: Sales calls, catalog mailings, customer meetings, general tech support NOT advertising because: Advertising supports a product which makes it a product-level activity. Customer-level activities support individual customers.

Activity-based costing uses activity rates to apply overhead costs to products in Blank______ stage allocation. Multiple choice question. third first fourth second

second First-stage allocation assigns costs to cost pools.

An example of a duration driver is the Blank______. Multiple choice question. time spent preparing invoices number of employees who received training number of bills sent out to a customer number of children who attended day care orientation

time spent preparing invoices The term cost driver is also used to refer to an activity measure because the activity measure should "drive" the cost being allocated. The two most common types of activity measures are transaction drivers and duration drivers. Duration drivers measure the amount of time required to perform an activity, such as the time spent preparing individual bills for customers.

In activity-based costing, Blank______ are different from those calculated using traditional costing. Multiple choice question. sales direct labor costs product margins net operating incomes

product margins In varying systems, different costs are deducted from sales to arrive at the product margin.

All manufacturing costs are assigned to products when using Blank______ costing systems. Multiple choice question. traditional absorption both traditional absorption and activity-based neither traditional absorption or activity-based activity-based

traditional absorption