Chapter 4

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

Activity rate

Activity-based costing ______.

computes product costs in the same way as traditional costing

An activity cost pool accumulates costs for ______ activity measure(s).

exactly one

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

product

Setting up equipment, placing purchase orders, and arranging shipments to customers are all examples of ____-level activities. (Enter only one word per blank.)

Blank 1: batch

Also called organization-sustaining activities, ____-____ activities are activities that are carried out regardless of which products are produced, how many batches are run, or how many units are made. (Enter only one word per blank.)

Blank 1: facility Blank 2: level

An activity that must be done for each item produced is a(n) ____-____ activity. (Enter only one word per blank.)

Blank 1: unit Blank 2: level

Organization-sustaining activities is another term for ____-level activities. (Enter only one word per blank.)

facility

Benefits of activity-based costing include ______.

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

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

activity

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

activity cost pool

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

activity measure

Costs at the batch level depend on the number of Blank______.

batches processed

A predetermined overhead rate in an activity-based costing system is called a(n) ____ ____. (Enter only one word per blank.)

Blank 1: activity Blank 2: rate

An activity measure in activity-based costing is used as a(n) base for applying overhead costs to products and services.

Blank 1: allocation

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-cased costing is ______.

$41

____-____ activities relate to specific products and typically must be carried out regardless of how many batches or units of the product are manufactured. (Enter only one word per blank.)

Blank 1: Product Blank 2: level or sustaining

Which of the following are facility-level activities?

Property taxes on plant Paying factory insurance

In ABC, any event that causes consumption of overhead resources is a(n) ____. (Enter only one word per blank.)

activity

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

unit

A cost bucket in which costs related to a particular activity measure are accumulated is called a(n) ______.

activity cost pool

In activity-based costing an activity measure is Blank______.

an allocation base

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

False

Activity-based costing improves the accuracy of product costs by ______.

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

Usually, traditional costing Blank______ high-volume products and Blank______ low-volume products.

overcosts; undercosts